Heading into its third cycle of sales compliance examinations, the Mutual Fund Dealers Association of Canada has issued a notice alerting its members to the sorts of deficiencies it commonly finds in these reviews.

According to the bulletin published Wednesday, MFDA staff have started the third round of sales compliance examinations, which include increased focus on high risk areas such as leveraging and the sale of exempt securities, as well as the corrective action taken to address previously identified deficiencies.

The bulletin focuses on a few of the most commonly identified deficiencies from the second round of examinations and provides guidance regarding best practices and MFDA staff expectations for corrective action. The list of most common deficiencies includes: inadequate trade supervision, incomplete KYC information, discrepancies between the KYC information in the back office system and the client file, failure to maintain evidence of client instructions, inadequate product due diligence, an inadequate branch review process, suitability, and leverage suitability.

It notes that it is particularly important to implement best practices where a deficiency has been identified on a repeated or pervasive basis, and advises firms to carefully review their prior examination reports to ensure corrective action has been taken.