By James Langton

(February 6 – 14:50 ET) – The Mutual Fund Dealers Association was born today at 12:40 ET in Ontario.

MFDA chief operating officer Larry Waite says that the Ontario Securities Commission just informed him that the MFDA has just been recognized as a self-regulatory organization in Ontario. Recognition is expected to come later this week in British Columbia and early next week in Alberta. Waite also just learned that Saskatchewan is set to recognize the MFDA on February 16.

It’s also expected that later this week the OSC will propose a rule to the outgoing Ontario finance minister, Ernie Eves, making MFDA membership mandatory for fund dealers in Ontario.

It’s still not clear if Eves can approve the rule or if it will have to wait for his successor. But once that rule is approved, dealers will have some time, likely 75 days, to apply to join the MFDA, with the prescribed fees.

The exact timing of dealer applications remains uncertain due to the previously announced resignation of Eves. It’s expected that dealers will have to start applying by the end of April, with all the applications due in by the end of May. Dealers will have to include non-refundable application fees of $1,500 for introducers, $3,000 for level 2 & 3 dealers and $5,000 for carriers. However these fees will be offset against future MFDA fees.

Dealers will have another year to actually join. This rule is the only element of the MFDA that requires ministerial approval. The OSC has the power to recognize the MFDA.

The MFDA’s rules don’t formally apply to dealers until they have joined the MFDA, but since most of its rules mirror existing legislation dealers are expected to be in compliance. The MFDA will impose increased capital requirements, fees for both the MFDA and a new contingency fund, and new operating and administration rules for dealers.

Waite has not yet received the final terms and conditions of recognition, but he is expecting that the three-year transition period for the preservation of personal corporations will remain. There was talk that regulators were going to an 18-month transition period to appease Western regulators that more ardently oppose use of these structures.

The MFDA will also be required to make changes to its governance structure to establish its independence, so that the Investment Dealers Association and the Investment Funds Institute of Canada won’t be able to appoint board members.

The next step for the MFDA is a board meeting on February 23 to formally approve the rules, but as they have been recognized by regulators this is a mere formality.