The Mutual Fund Dealers Association of Canada issued a mandatory questionnaire to its members today seeking information on the extent and nature of their involvement in the sale of exempt securities, deposit instruments and referral arrangements.

Exempt securities include hedge funds, private placements, and limited partnerships. Deposit instruments include the principal protected notes that have been used to sell hedge funds, among other things.

The MFDA says that the results of the questionnaire will be used to identify potential regulatory concerns, aid in policy development, and assist the MFDA Investor Protection Corporation Working Group in assessing risk to the fund, determining coverage limits and evaluating its fee assessment methodology.

The MFDA says that it is also coordinating its efforts with the Ontario Securities Commission, which is beefing up its oversight in this area through its so-called Limited Market Dealer Initiative. The OSC is also surveying all registered LMDs, and will be conducting focus groups of some dealers, with on-site reviews slated for September. It has pledged to issue an industry report in 2006, documenting the results of the reviews and recommending changes (if any) to the existing legislation that applies to LMDs.

MFDA members who are also licensed as LMDs will not receive the OSC survey; instead, they are required to complete the MFDA’s questionnaire.

Responses to the questionnaire are to be submitted by no later than August 12.