The Nova Scotia Securities Commission is requesting comment on an application from the Mutual Fund Dealers Association for recognition as a self-regulatory organization — an application that raises several regulatory issues.

The commission is specifically seeking comment on whether it should mandate membership in the MFDA as a condition of registering a mutual fund dealer. Assuming MFDA membership is made mandatory for mutual fund dealers, it also seeks input on the deadline to comply. The date suggested in the proposed rule is June 30, 2002.

The commission notes that its local rule allowing incorporated salespeople requires that a dealer employing an incorporated salesperson be a member of a recognized SRO, which has embraced the incorporated salesperson concept and is responsible for oversight of the dealer’s supervisory obligations. But, it says, the MFDA has not embraced the incorporated salesperson concept.

“Consequently in its present form the incorporated salesperson rule, were it adopted by the commission, would have no practical application to mutual fund dealers and their sales forces even if the MFDA is recognized as an SRO.” Even if it dropped the SRO requirement, national dealers will still be required to belong to the MFDA. The commission seeks input on resolving this issue.

It also proposes to allow registration of independent contractors, and seeks comment on how the MFDA may affect this. “The commission, as of June 1, 2001, has rule making authority which, if exercised, would permit an independent contractor to be registered as a salesperson of a dealer. In turn this could permit the independent contractor’s affiliated company within the meaning of the incorporated salesperson rule to be registered. Similar considerations [as those affecting incorporated salespeople] apply with respect to a rule permitting the registration of independent contractors.”

The commission is also considering eliminating local supervision for non-resident registered salespersons employed by IDA member firms with an office in Nova Scotia. It wants to know whether the same treatment should be extended to MFDA member firms in Nova Scotia if the MFDA is recognized as an SRO.

Interested parties are invited to make written submissions with respect to the application, and the commission will consider written submissions received by October 12, 2001.