Canadian securities regulators say that they are generally happy with the performance of the Mutual Fund Dealers Association of Canada, but they do want to see some changes to its compliance operations, particularly in the Prairie region.

The Canadian Securities Administrators have released the results of their latest oversight review of the MFDA. The report details a variety of recommendations from the regulators, the MFDA’s response to those recommendations, and the CSA staff’s reaction to those responses.

The report does not include a review of the MFDA’s governance policies and processes, as the British Columbia Securities Commission is in the midst of a hearing to assess its’ governance. Once that hearing has concluded the CSA will release a separate report on the self-regulatory organization’s governance.


As for the rest of the MFDA’s operations, the CSA review concludes that they are satisfied that “the MFDA operated in the public interest with a focus on protecting the investing public”, and that it is largely in compliance with its recognition orders.

“The MFDA’s compliance and policy departments continue to guide its maturing membership towards a culture of compliance and are reasonably responsive to emerging industry trends,” it says. The report finds that the MFDA’s enforcement department “has acted decisively against misconduct”, and that the case outcomes and the sanctions it handed down have been “reasonable”.

It also says that the MFDA’s financial compliance group is able to mitigate risks to protect the investing public; that the MFDA’s processes are generally “efficient, effective, consistent, and fair”; and, that it has adequate staffing, resources, and training in place.

The report does make a number of recommendations for changes at the SRO however, particularly in the compliance department of its Prairie office, and its financial compliance unit. Recommendations include increasing the number of branch reviews, both in the Prairie region and in New Brunswick and Nova Scotia; rethinking compliance benchmarks; and, improving compliance procedures and enforcement referral processes in the Prairie office.

In particular, the report suggests that the MFDA sends too many cases to enforcement that could be resolved faster through compliance; and that cases take too long to get referred to enforcement.

“The MFDA should reconsider its current procedures and decrease the time that elapses between compliance identifying the referable issues and making the formal referral to enforcement,” it says.

The MFDA defends its compliance practices and enforcement referral process in the report, noting that, “In many cases, issues are referred to enforcement due to their seriousness and the expectation that compliance processes and follow-up may be insufficient to address the issues… However, this does not mean that compliance does not still attempt to resolve the issues with the member as quickly as possible in the interim while enforcement action is being taken.”

It adds that less serious cases aren’t referred until compliance has completed its work, and that it believes that it is “ineffective” to refer issues to enforcement on a piecemeal basis during a compliance exam, as the exam may uncover other issues along the way.

Among the less urgent recommendations, the review also advises that the MFDA should continue to improve communication in the policy development process; should clarify the benchmarks for issuing sales compliance, and financial compliance, examination reports; among other things.

Larry Waite, president and CEO of the MFDA, says, “When you consider the number of jurisdictions and people involved in this review, I feel it is a very balanced and positive report which speaks to the dedication and professionalism of all MFDA staff.”

He also complimented the BCSC staff who coordinated the review, noting that they “had a very difficult task” and “deserve a lot credit for the quality of the report”.

IE