The Mutual Fund Dealers Association of Canada is cautioning its members to retain evidence that they’ve made proper disclosure to clients.

The MFDA today issued notice (MR-0064) that aims to clarify the obligations of dealers and reps with respect to maintaining evidence that required disclosures have been provided to clients in line with MFDA rules.

“Through compliance examinations performed to date, MFDA staff has noted that some members and approved persons are not maintaining evidence that required disclosures have been provided to clients. In these cases, members and approved persons do not have an adequate audit trail evidencing compliance with MFDA rules,” it warns.

The obligations to disclose certain information to clients are a fundamental part of several MFDA requirements including rules dealing with: conflicts of interest, referral arrangements, dual occupations, client complaint information, leveraging risk disclosure, and other disclosure requirements contained in provincial securities legislation, including the obligation to deliver a prospectus.

“Maintaining evidence that required disclosures have been provided to clients, including evidence of delivery by mail, is an important internal control which provides an audit trail for members to assess compliance on an ongoing basis and in the event of a complaint or dispute,” it says.

Sufficient documentation may include: signed client acknowledgements evidencing receipt of required disclosures; or, copies of disclosure documents in client files along with detailed notes of client meetings and discussions evidencing that the disclosure has been provided. In order to ensure that all clients receive required disclosures, members may also elect to incorporate certain required disclosures into their new account application form, it notes.

MFDA staff also reminds dealers and reps that they are expected to maintain evidence of these required disclosures for seven years.