Mutual fund reps may be in for some added scrutiny by the Mutual Fund Dealers Association of Canada (MFDA) in 2018, according to compliance priorities published on Tuesday.
The MFDA will target a sample of reps with an additional review that will examine issues such as suitability for senior investors, and reps with books that have high concentrations of risky assets, the self-regulatory organization (SRO) says in a bulletin.
This review, which will be carried out in addition to the normal compliance exam process, will be informed by data collected by the SRO as part of special research project that was published in May 2017.
In the coming year, the MFDA will also consider whether to follow up on that research effort in order to update the data captured during that exercise, and “to obtain additional data derived from the new performance and charges and compensation reports,” the bulletin says.
Other compliance issues that the MFDA plans to focus on as part of its ordinary compliance exams in 2018 include:
> dealer compensation and incentive practices;
> dealer policies and controls designed to ensure that eligible clients are placed into fund series with lower management expense ratios (this follows from several settlements between provincial regulators and large financial firms in connection with alleged systematic client overcharging); and
> compliance with the Client Relationship Model requirements.
In terms of CRM2 compliance, the MFDA plans to work with other regulators and industry participants to possibly further expand cost reporting.
Additionally, the SRO will consider whether plans to work with firms, particularly smaller firms, to ensure that they have adopted adequate cybersecurity practices.