With the emergence of fund dealers that are able to trade in exchange-traded funds (ETFs), the Mutual Fund Dealers Association of Canada (MFDA) is planning to develop proficiency standards in this area.
In a bulletin outlining its 2015 Compliance and Member Education Priorities, the MFDA says it has established a working group to examine the question of proficiency requirements for trading in ETFs.
“Transacting in ETFs is very different than trading in non-exchange traded mutual funds,” it says, adding that, as a result, reps that want to trade in ETFs may require additional proficiency. And, the regulator indicates that it will developing those standards. It doesn’t give any timeline for the initiative.
The MFDA has also established a working group to help it develop a continuing education (CE) requirements for fund reps. “The MFDA will establish a CE requirement to harmonize industry practices and create minimum standards designed to update [reps’] skills and knowledge,” it says in the notice.
Before that requirement is established, the MFDA indicates that a discussion paper will be issued to obtain input on the proposed program. It notes that the CE requirements imposed by other accreditations will will be reviewed in the development of the MFDA’s requirements “to avoid unnecessary duplication”.
Among the other initiatives detailed in the notice, the MFDA says that it will hold its second summit on seniors issues in October; it plans to continue monitoring dealers’ fee arrangements as there’s an increasing move toward fee-based accounts; and it says that it will be focusing on pre-trade disclosure in its compliance reviews, particularly the new requirements regarding disclosure of deferred sales charges (DSCs) and trailer fees, and it will be looking at the extent to which dealers are using the new Fund Facts documents to meet their disclosure obligation.
Fund dealers trading in DSC funds will also be the target of a compliance sweep, the notice indicates, to assess suitability of DSC trades. “Staff will ask [dealers] to submit trading data and will focus on redemptions resulting in redemption charges and DSC purchases that may be unsuitable given the client age and time horizon,” it says.
Additionally, in 2015, MFDA staff will review firms’ policies and practices to ensure know-your-client (KYC) information is current when making recommendations and performing suitability assessments.