Suitability and know-your-client (KYC) issues, the second phase of the client relationship model (CRM2) and cybersecurity are among the top priorities for the Mutual Fund Dealers Association of Canada (MFDA) in 2017, according to a bulletin the self-regulatory organization (SRO) published on Wednesday that reviews 2016 and lays out some of its plans for the year ahead.
In terms of compliance priorities, the notice indicates that suitability and KYC issues will continue to be the SRO’s primary focus in compliance exams. At the same time, the MFDA will continue assessing firms’ compensation practices and internal controls to manage compensation-related conflicts.
Similarly, the MFDA will be scrutinizing fee-based accounts with a view to ensuring that firms have “adequate internal controls to properly administer these accounts, accurately calculate fees and ensure that no double-dipping occurs.”
This year’s round of compliance exams will also include specific testing focused on the new cost and performance reporting requirements under the CRM2 reforms. The MFDA notes that it also plans to examine the compensation disclosure of firms that have affiliated fund managers.
The MFDA will also be stepping up its efforts to ensure that mutual fund dealers have adequate cybersecurity measures in place. In the notice, the SRO reports that it has retained a cybersecurity consultant to carry out a risk assessment survey that will assess dealers’ preparedness to address cybersecurity risks and potential incidents.
The questionnaire, which will be mandatory, will be issued to dealers in March and all firms will receive a report regarding their preparations as well as provide guidance on possible risks.
In terms of enforcement, the MFDA’s bulletin indicates that the SRO commenced and concluded a record number of disciplinary proceedings during 2016. It notes that signature falsification issues remain a priority for enforcement.
On the policy front, the MFDA’s bulletin says that the SRO’s efforts to develop a new continuing education requirement for financial advisors are also a priority.
Finally, the MFDA will also publish a report in the year ahead setting out the results of a client research project that it carried out last year, and the SRO says it’s planning additional investor education efforts, including webcasts and publishing materials.
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