The Mutual Fund Dealers Association is proposing to bring in a rule that will permit the use of consolidated account statements.

The rule would allow the delivery of statements or other documents that include information regarding transactions executed, or assets held by or through, entities other than the dealer, provided certain disclosure requirements are met.

The current rule only allows account statements for the assets held at the relevant firm, but some dealers want to be able to deliver consolidated statements.

The MFDA says consolidated reporting raises a number of regulatory concerns. “It may lead to confusion over which entity a client is transacting business with and which regulatory authority has jurisdiction. Clients may be unaware that the dealer is relying on third parties with respect to information provided regarding transactions executed or assets held by or through entities other than the dealer.”

The proposed rule will allow dealers to provide consolidated account statements as long as they comply with certain disclosure requirements. The requirements are intended to ensure that clients know which products are held by or sold through the dealer, and which products may be eligible for coverage by the MFDA investor protection plan (once it is operational). Clients must also be informed that the dealer cannot verify the accuracy of information provided about the products it does not distribute or hold.

The proposed rule was added to the final version of the MFDA rules submitted to securities commissions in Alberta, British Columbia, Ontario and Saskatchewan as part of the MFDA’s revised application for recognition as a self-regulatory organization on Dec. 15, 2000. As a condition of recognition, the commissions have suspended the rule so it can be published for comment for a minimum of 30 days.

The MFDA board has approved the proposed rule. But it is required to publish it for comment so that the OSC staff may consider the issues. Comments are due within 30 days.