Nearly a quarter of the mutual fund representatives surveyed at Ontario branches of five of Canada’s largest banks could not identify the correct definition of a management expense ratio (MER).
To be fair, most of their answers to the survey were correct: 86% answered at least five of six knowledge questions correctly and 95% answered at least four. But the one-quarter — 23% to be precise — still matters.
The MER reflects a fund’s management fees and operating expenses. Those costs reduce investors’ returns. A representative who cannot explain an MER cannot properly explain what a mutual fund costs.
The regulators recommended that the bank-affiliated dealers examine their training programs and correct deficiencies.
A separate review by the Canadian Securities Administrators and the Canadian Investment Regulatory Organization (CIRO) found weaknesses in training at some firms. In some cases, firms relied on third-party training that was insufficient, inaccurate or not tailored to the firm’s operations.
The regulators reminded firms that outsourcing training did not outsource responsibility for its quality. They also told firms to consider assessing whether representatives understood the training and cited a quiz with a minimum pass mark above 75% as an effective practice.
That finding does not mean third-party training is generally deficient. It does raise a broader question as CIRO harmonizes its continuing education rules: should the minimum standard for demonstrating learning depend on who delivers the course?
CE reform
Under CIRO’s Phase 2 proposal, a continuing education activity may be delivered by the dealer, CIRO or an outside provider. If the dealer delivers it, the dealer must assess the participant’s “knowledge and understanding.” The rule does not impose that same assessment duty on the dealer when an outside provider delivers the course.
The distinction rests on no principled basis, and it is already written into the continuing education rules now governing investment dealers. Phase 2 would carry it into the harmonized regime that will also govern mutual fund dealers. The change therefore matters to a much larger population: mutual fund dealers account for more than twice as many registered representatives as investment dealers.
The distinction does not leave outside courses uniformly unchecked — some are. Some providers test participants themselves, and a provider may submit a course to CIRO for accreditation. The dealer must still decide whether a course qualifies for credit, verify completion and keep the required records. CIRO adds a further layer, prescribing one to three hours of mandatory continuing education each year on topics of its own choosing for both dealer channels.
Those are meaningful safeguards. What they do not settle is the minimum standard itself, which still depends on who delivers the course. A dealer-delivered course must include an express assessment of knowledge and understanding. An externally delivered course may include one, but the proposed rule does not require the dealer to establish that it does.
There are sensible reasons not to prescribe a single test for every course: a seminar, a workshop and a case-based session do not call for the same assessment, and no dealer should repeat a test the provider already administered. But those are arguments about method, not standard. None of them explains why a representative who takes an outside course should have to demonstrate less than one who takes the dealer’s.
No duplicate work
CIRO can address the distinction without making dealers duplicate work. A dealer delivering its own course could continue to assess participants directly. For an outside course, the provider’s documented assessment could satisfy the requirement.
CIRO-accredited courses could be treated as meeting the standard where the accreditation process includes an appropriate assessment. The rule would remain flexible about method while becoming consistent about the outcome.
The consultation record shows why clarity matters. Four submissions addressed the assessment provision. Three asked CIRO to confirm a narrow reading, with two arguing that assessment need not mean a test. A fourth asked what a dealer should do when testing is impractical.
Those comments do not establish that firms oppose assessing learning. They show that the proposed wording leaves a practical question about what assessment requires and when it applies.
Comments closed July 15. CIRO is considering the submissions and aims to publish final rules before the second half of 2027, with the harmonized regime proposed to start Jan. 1, 2028. That gives CIRO an opportunity to make the standard clearer before it becomes common to both dealer channels.
The objective should be straightforward. Continuing education credit should mean more than attendance, without forcing every course into the same format. The rule should require a documented way of establishing knowledge and understanding while allowing the dealer, provider or accreditation process to supply it.
CIRO has until 2028 and one decision to make: whether continuing education credit means the same thing in both dealer channels. If the answer depends on who taught the course, the regime is not harmonized — it is merely combined.
Newcom Media Inc., owner of Investment Executive, also owns continuing-education website CE Corner.
