The Ontario Securities Commission has scheduled a hearing to consider an application made by the Independent Financial Brokers of Canada for a review of the OSC’s decision approving the proposal of the Mutual Fund Dealers Association of Canada to amend it by-laws “regarding suspensions in certain circumstances”.

A bylaw adopted last year allows the Mutual Fund Dealers Association of Canada to suspend or terminate the registration of a mutual fund salesperson under various circumstances.

The MFDA initially published the proposal for comment in October 2006. According to the MFDA, “the proposed amendments will enhance the ability of the MFDA to protect investors in circumstances where it is not reasonable or practical to proceed by way of a regular disciplinary hearing.” It allows the suspension of a license ex parte — or without notice — to the person affected.

The IFB sent a letter of response outline several concerns with the proposal in November 2006. Specifically, the IFB was concerned that the proposal allows the MFDA to suspend a license when it “receives information regarding the incapacity of the person, by reason of mental or physical illness, or other infirmity or addiction to or excessive use of alcohol or drugs.”

The IFB argues that the new rules allow the mutual fund regulator to take enforcement action against individual advisors behind closed doors, without giving them prior notice, and on grounds that are loosely defined and open to broad interpretation.

In addition, the IFB argues that the consultation process on the by-law amendments was not widely publicized amongst MFDA members or advisors. “These sweeping new powers — and the manner in which they were enacted — are symptomatic of the secretive and combative style of governance that has become the MFDA’s signature,” the IFB said in a statement.

The IFB applauded news that the OSC had scheduled the hearing on the matter, which is set to take place on June 5 in Toronto.

“IFB sees this as an important step in protecting the rights of mutual fund advisors to defend themselves, and in requiring that any actions brought against them by the MFDA are open and transparent,” the organization said.

IE