Mutual fund dealers that employ reps as agents are required to provide the Mutual Fund Dealers Association with a sample copy of their agency agreement, says the MFDA in a notice to members

These agreements must comply with the requirements set out in the MFDA rules, ensuring that the regulatory principles of effective supervision and liability of the firm to the client that exist in the employer/employee relationship are observed in the principal/agent relationship.

The MFDA says that it recognizes the desire for flexibility in structuring their business relationships and has not prescribed a specific agency agreement. However, MFDA staff must be satisfied that agency agreements are in compliance with its rules.

The onus is on the firm to satisfy MFDA staff that the regulatory requirements of principal/agent relationships have been sufficiently addressed in these agency agreements.

Many of the agency agreements of MFDA applicants that have been in use prior to their MFDA membership application will require amendments. In order to assist, MFDA staff has prepared an override acknowledgement for use by firms and reps.

The MFDA also requires all members to provide a certificate signed by an officer or director certifying that its agency agreements are in compliance.