Mutual fund dealers that have reps selling syndicated mortgage securities must also be registered as mortgage brokers, regulators say.

The Mutual Fund Dealers Association of Canada (MFDA) and the Financial Services Commission of Ontario (FSCO) Wednesday issued a joint bulletin clarifying their position on fund dealers that want to deal in syndicated mortgage securities.

The bulletin notes that reps that are selling mortgage securities must sell those investments through their fund dealer. And, it indicates that the MFDA requires reps that are dually licensed (as both a mutual fund rep and as a mortgage agent or broker) to comply with the rules of both regulators (MFDA and FSCO).

As for dealers with reps in this situation, the MFDA says that, under mortgage legislation, firms must also be licensed as mortgage brokerages by FSCO. That legislation mandates that “a business that sells syndicated mortgage investments is considered to be dealing or trading in mortgages and is required to be licensed as a mortgage brokerage.”

If a dealer is not prepared to become licensed as a mortgage brokerage, then the dealer and the rep must cease offering syndicated mortgage investments, the bulletin says.