(December 20 – 10:00 ET) – The Mutual Fund Dealers Association has published its final application for recognition on its Web site.
The first proposal received 427 comment letters. Based on those comments the MFDA has finalized its rules, which were approved by its board on December 8, and submitted to the provincial regulators for final recognition as a self-regulating organization.
Recognition as an SRO is expected to come in the third week of January, although regulators are still working out when membership will become mandatory.
On the personal corporations issue the MFDA has not adopted the 25% limit proposed by the Canadian Securities Administrators, but it has introduced a three-year transition period. During this transition period dealers will be able to continue paying commissions to unregistered corporations, while the CSA decides whether to allow these structures or not.
The MFDA will allow reps to use their own trade names provided certain conditions are met such as prior approval by the dealer. It is also introducing transition periods for the proficiency requirements, for example allowing a two-year transition period for the experience requirement for branch managers.
The fee model remains the same although it will now only count mutual funds (including money market funds), not segregated funds.
The minimum capital levels for Levels 2 and 3 dealers have been reduced from $75,000 and $125,000 to $50,000 and $75,000 respectively, with a one-year transition period for Level 1 dealers and a three-year period for Levels 2, 3, and 4 dealers.
The MFDA says an industry committee will be formed — after the association is recognized — to get more input on current account transfer practices in order to develop explicit transfer procedures.
The MFDA believes client transfers should be allowed only with client authorization in writing, but firms will be able to apply for exemptions allowing bulk transfers in certain circumstances, including reps that establish their own firm within two years after the MFDA is recognized.
The MFDA also proposes to establish a committee after recognition to review errors and omission insurance issues, with a view to developing specific recommendations for its members.
The MFDA is proposing that non-securities related financial planning should not have to flow though the dealer, but will be subject to the MFDA requirements for “dual occupations”, with two additional requirements:
- the dealer and the MFDA must have access to financial plans that are prepared on behalf of clients; and
- the dealer must ensure that the rep has satisfied any proficiency requirements imposed by the regulators.
-IE Staff