Contingency fund and SRO proposed for Mutual Fund industry

Last Friday, Hunter met with
Ontario Securities Commission
chair, David Brown, and vice chair,
Jack Geller, to propose his idea
to regulators.

Hunter envisions a tax on
trailer fees. He suggests it
should initially be set at three
basis points. It would be managed
by the Canadian Investor
Protection Fund. It would serve to
build a contingency fund to cover
loss or failure at the fund
manager level, and finance a
contingency fund covering mutual
fund dealers. Lastly, it may
fund the creation of the MFDA.

How the three BPS tax would be
split between fund companies,
dealers and unitholders is
still a mystery. Over time that
three BPS rate could drop as the
funds built up their reserves. By
flowing some of the funds to support the MFDA, that organizations funding dilemma could be solved.

Hunter suggests that the
Investment Funds Institute of
Canada could take on this role
of SRO for fund managers.
IFIC would takeover responsibility
from the securities commissions
who currently oversee them loosely
through it various national
policies.

So far neither Hunter, nor
IFIC, the MFDA or the OSC are
saying much, but it has the
support of several large fund
companies, including Mackenzie,
Investors Group, and the
bank-based fund managers.
Investors Group, and the banks,
may not pay trailers in some
cases and, therefore, would have
to agree to base their
contributions off their
revenues.

For the full story check out the
latest issue of Investment
Executive, here on the website
or in your mailbox.