The Mutual Fund Dealers Association today issued a notice to clarify the obligation of service providers and carrying dealers to provide information to the MFDA regarding activities performed for fund dealers.

Firms and reps may outsource administrative services provided the requirements of the rules are met, including the requirement that the services themselves do not constitute securities related business or duties or responsibilities that are required to be performed by the firm or rep.

Fun dealers may also enter into an introducing/carrying dealer arrangement with another MFDA member. The services provided by the carrying dealer may include order execution, clearing and settlement, custody of funds and securities and maintenance of books and records.

In order to perform its regulatory oversight and supervisory functions, the MFDA says it is critical that it have access to books and records of service providers and carrying dealers relating to activities they provide for MFDA members. It says the MFDA must be able to obtain promptly, on request, any books and records pertaining to the business of MFDA members that are in the possession of the service provider or carrying dealer.

The MFDA reports that it may request information of the carrying dealer or service provider irrespective of whether it may also be available at the introducing dealer or the firm engaging the services under a service arrangement. Also, unless the MFDA specifically requests that the member not be advised, the recipient of the request may notify the introducing dealer or the firm engaging the services under a service arrangement of the MFDA’s request for books and records pertaining to its business.

http://www.mfda.ca/notices/MR-0036.pdf