Separate but similar proposals are being prepared by the Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada aimed at increasing transparency and disclosure in the client-advisor relationship, particularly when it comes to conflicts, costs and the performance of their investments.

The mutual fund industry applauds more openness and clarity for investors through better disclosure and plain language material. Such initiatives lead to better-informed consumers and better servicing of client needs.

The IDA’s proposed client relationship model comes at the same time as other regulators contemplate the same kinds of disclosure and account opening initiatives — pointing to the need for harmonization among the various players to ensure investors receive a consistent regulatory framework along all channels. (See page 10.)

In this example, for instance, the IDA and MFDA proposals are being released separately, as opposed to jointly. The IDA was the first out of the gate in late February with its proposals for its members. The MFDA is expected to release its document in May after the comment period for the IDA proposal is closed. Stakeholders, such as Investment Funds Institute of Canada, will get a chance to comment on the IDA rules; and we expect the MFDA to take those comments into consideration so the IDA and MFDA versions side with each other. Then, the Canadian Securities Administrators will have the final say through its approvals of these rules governing client-advisor relationships in the IDA and MFDA worlds. Rules that are closely aligned will provide investors with a regulatory framework that is consistent across the IDA and MFDA channels.

The CSA has its own proposals for client-relationship disclosure in its latest iteration of NI 31-103 (Registration Reform). The proposed rule has many of the same general principles as the IDA’s CRM proposal. These include providing relationship disclosure information, (including disclosing all service fees and charges and a description of the types of products and services offered by the dealer) as well as identifying and responding to conflicts of interest, suitability and account performance reporting. Although the CSA’s proposals are meant for those not under SRO authority, again, it is important to keep in mind the needs of investors so as not to create different service standards depending on where they deal with their advisors.

The point-of-sale initiative, spearheaded by the Joint Forum of Financial Market Regulators, is another set of proposed rules and regulations on disclosure. In IFIC’s October 2007 submission on the proposal, we noted our support for enhanced disclosure on pricing and compensation arrangements — but also pointed out that the most useful way and time to discuss this is at account opening when the client is forming his/her relationship with the advisor. IFIC recommended to the Joint Forum that the POS initiative be considered in the context of, and aligned with, CRM. We stated to the Joint Forum that the two initiatives share similar objectives with respect to improving the understanding of clients regarding fees and the service levels they can expect from the relationship. The IDA’s CRM proposal does not indicate consideration of the interaction of overlapping POS and CRM disclosure requirements. In our view, continuing to consider the two initiatives separately risks introducing serious duplication, administrative complexity and, worst of all, consumer confusion.

It is a positive situation when every level of regulator and SRO wants to ensure greater disclosure and transparency. Still, this multi-tiered disclosure exercise points to a need for harmonization among similar rules in the investment funds industry.

Whether it’s complaint handling, prospectus filing or CRM, IFIC encourages all regulators to integrate their proposals — to remove complexities and differences, make good systems work more effectively and efficiently, and most importantly, to give consumers a consistent experience across related products.

Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.