The MFDA has issued a notice providing guidance on the use of trading authorizations.

The MFDA’s rules allow firms and reps to accept limited trading authorizations from a client to facilitate trade execution. The rule requires that a form of limited trading authorization be completed and approved by the compliance officer or branch manager and retained in the client’s file.

The MFDA has not previously prescribed a form of limited trading authorization for accounts other than individual accounts. Although IFIC has produced a form, and in response to comments from industry participants, IFIC has issued a new version of that form.

The new version of the form will be the prescribed limited trading authorization for joint accounts, the MFDA says. MFDA members are expected to implement the April 2005 version of the form for joint accounts by April 1, 2006.

For individual accounts, MFDA members may continue to execute trades for individual accounts under the old version of the form for existing accounts, although it cautions that these versions may not offer members the same benefits of the April 2005 version and certain fund companies may reject trade instructions transmitted under the authority of the earlier versions of the form. “Members are therefore encouraged to have the April 2005 version of the form executed by clients.” And, it notes that in Quebec, all trades after April 1, 2006 must be executed under the authority of the April 2005 version of the form.

For new individual accounts opened after May 1, 2005, any limited trading authorization must use the new form.