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BULLETIN #0711-P
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Ken Woodard

Director, Communications & Membership Services

(416) 943-4602

kwoodard@mfda.ca

BULLETIN #0711-P

12 January, 2017

Policy

Request for Comments on the Development of Continuing Education Requirements

The MFDA is issuing the attached Consultation Document to solicit additional feedback from Members, Approved Persons, and other interested parties on the development of Continuing Education (CE) requirements for Approved Persons of MFDA Members.

Comment is specifically sought on the content of proposed new Rules 1.2 (1), 1.2.6, and proposed new Policy No. 9. Please submit your comments in writing on or before April 28, 2017. Comments should be addressed to the attention of:

Ken Woodard
Director, Membership Services & Communications
Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
kwoodard@mfda.ca

 

MFDA Consultation Document

CONSULTATION DOCUMENT RESPECTING THE DEVELOPMENT OF CONTINUING EDUCATION (CE) REQUIREMENTS

Background

On June 22, 2015, the MFDA published, for a 90-day public comment period, a Discussion Paper on the development of Continuing Education (CE) requirements for Approved Persons of MFDA Members (see Bulletin #0644-P). The purpose of the Discussion Paper was to solicit detailed feedback from all stakeholders regarding the development and implementation of such requirements (e.g. appropriate components of CE requirements, and related implementation considerations). The comment period expired on September 21, 2015 and 21 submissions were received. On December 1, 2015, the MFDA published a summary of comments received (see Bulletin #0666-P), and indicated that these comments would be considered in the development of draft requirements, which would subsequently be issued for consultation and public comment in accordance with the MFDA’s regular Rule development process.

Additional Stakeholder Consultation

The development and implementation of CE requirements for the approximately 83,000 Approved Persons of MFDA Members across Canada is significant and a considerable undertaking. This initiative will have material operational and administrative impacts on Members, Approved Persons, and the MFDA. In recognition of these considerations, the MFDA is engaging in this additional advance consultation with stakeholders in an effort to ensure that any requirements ultimately adopted in this area achieve the desired regulatory objectives in a manner that is as cost-effective and efficient as possible.

Proposed New Rules, Policy and Related Matters

Based on input received to date, MFDA staff has developed proposed Rules and a Policy respecting CE. These proposed MFDA regulatory instruments are summarized under Part I below, and attached as Appendix “A” and “B” to this Consultation Document. Other matters related to the administration of the MFDA Continuing Education Program, but not specifically addressed in the proposed Rule and Policy, are outlined under Part II.

Part I – Proposed New Rules and Policy

  • Proposed New Rule 1.2 (1) (Definitions): sets out definitions of key terms, including “continuing education program”, and “MFDA Compliance Credit”;
  • Proposed New Rule 1.2.6 (Continuing Education): establishes requirements respecting the number of business conduct, professional development, and MFDA compliance credits to be completed by dealing representatives, chief compliance officers, ultimate designated persons, branch managers, and addresses other related matters;
  • Proposed New Policy No. 9 (Continuing Education Requirements for Approved Persons of MFDA Members): sets out minimum standards respecting continuing education requirements for Approved Persons of MFDA Members including: credit requirements, component content, delivery of continuing education content to Approved Persons, accreditation of continuing education activities, reporting requirements, and non-compliance.

Part II – Related Matters

This section outlines ideas and concepts being considered to address the various administrative matters related to the MFDA’s Continuing Education Program.

MFDA Compliance Credit

MFDA Staff will publish a continuing education activity representing at least 1 MFDA Compliance Credit at least annually. The format of this content will likely be a webcast and access will be provided via a designated education portal or by other means acceptable to the Corporation. Access will require full payment of associated fees as determined by the Corporation. (e.g. $10 plus applicable taxes per MFDA Compliance Credit for each Approved Person)

Application for Accreditation

An application process will be developed for accreditation requests. A process similar to the one outlined below is being considered:

  1. Complete and submit an Accreditation Application Form and all requested information including:
    1. A description of the training activity, its pedagogical framework, the topic areas that are dealt with in the training activity, and the number of credits in each category being sought;
    2. A copy of the training activity material (either electronic or hard copy);
    3. The duration of the activity;
    4. A document setting out the objectives of the activity;
    5. The method for assessing successful completion of the activity; and
    6. Whether the applicant intends to submit bulk activity completion reports for this activity on behalf of Members and Approved Persons.
  1. A preliminary estimate of credits and fees will be completed to determine if the number and category of credits will be fewer or more than the credits being requested. Where the preliminary assessment results in an estimate that is materially higher are lower than the application form, the Applicant must acknowledge and accept the estimate before the accreditation process will proceed. [Note: applicable fees schedule still to be determined]
  1. The Corporation must grant or refuse recognition and then inform the applicant of its decision in writing. Where an application is granted, the Corporation will advise the applicant of the following:
    1. The number and category of credits awarded for successful completion of the recognized activity;
    2. An accreditation reference number;
    3. The eligibility period for the training activity.
  1. If the training activity materials or content are incomplete, or otherwise deficient in any respect, the Corporation will decline the application and notify the Applicant. In such instances no invoice will be issued. The Applicant may choose to re-submit an amended application to the Corporation.
  1. The Corporation may terminate or otherwise revise its recognition of an activity at any time if it becomes aware that the activity being provided is different from the activity that was recognized. In such instances, the Corporation will inform the applicant of its intention to terminate or revise its recognition of the activity and allow the applicant to submit a written reply prior to the termination/revision taking effect. After considering any submissions made by the applicant, the Corporation will notify the applicant of its final decision.
  1. Recognition of an activity is valid for a period not exceeding 24 months from the date of recognition or from any other date deemed appropriate by the Corporation (such as the date the activity was first held). At the end of that recognition period, an applicant who wishes to renew the recognition must submit a new application to the Corporation.
  1. Applicants must inform the Corporation of any change in any of the elements listed in paragraph 1, above. This notice must be accompanied by payment of the fees determined by the Corporation to be applicable for the processing of a notice of change.
  1. Where applications are granted recognition, an invoice will be issued to the Applicant. The final payment is due within 30 days of the invoice date.
CE Activities

For a CE activity to qualify, it must be a structured activity where attendance is tracked, the CE content is accredited, and delivery of the CE content and evidence of completion has been documented (where applicable).

Structured activities may include Member in-house training; seminars/conferences; and education courses/webinars (either on-line or classroom setting).

Activities that would not qualify include reading the newspaper or other publications and informal meetings at the Member or elsewhere.

CE Tracking System

The MFDA will maintain a CE Tracking System that will be accessible by Approved Persons and Members. The system will track all participants and their credits required and obtained (including exemptions and extensions). Each participant will be assigned a unique identification number. The CE system will also track all accredited continuing education activities, including the period of eligibility and details of the CE credits awarded for completion. The CE system will also be used to facilitate CE related communications with Members and Approved Persons including status reports, and notifications of non-compliance.

Extension and Exemption Requests

The CE Tracking System will facilitate a process for Approved Persons and Members to make extension and exemption requests. In the more common instances, where feasible, MFDA Staff will automate the process for filing and reviewing such requests. Other extension and exemption requests may require a more in-depth review by MFDA Staff.

Reporting Credits

Completed credits reports may be filed by Approved Persons, their Member, or a third party education provider. Access to the system will be granted via a log-in identification and password. MFDA Staff will develop a process for creating log-in information and passwords for each user of the system.

Completed credit reports will require the filer to provide certain information including:

  • The unique identification number of the Approved Person (where a Member or third party is the filer)
  • The accredited CE activity being reported as completed
  • Date and proof of completion;

The CE system will facilitate bulk reporting of credits completed by Members and education providers.

Next Steps

Following the close of the comment period and consideration of comments received, the MFDA will finalize, bring forward, and publish for comment its Rule/Policy proposals in this area in accordance with the MFDA’s regular Rule development process.


Appendix “A”

Proposed New MFDA Rules 1.2 (1) (Definitions) 1.2.6 (Continuing Education)

Rule 1.2

  1. Definitions. For the purposes of this Rule and Policy No. 9,
    1. “continuing education program” or “CE program” means the MFDA’s Continuing Education program. The CE program consists of three components:
      1. business conduct;
      2. professional development; and
      3. MFDA compliance.
    2. “Business Conduct Credit” means a continuing education activity, recognized by the Corporation, consisting of one hour of training in a business conduct topic area;
    3. “cycle” means any 24-month period beginning on December 1st of an odd-numbered year;
    4. “MFDA Compliance Credit” means a continuing education activity recognized by the Corporation as qualifying under the MFDA compliance component of the CE program;
    5. “Professional Development Credit” means a continuing education activity, recognized by the Corporation, consisting of one hour of training in a professional development topic area.

Rule 1.2.6

1.2.6 Continuing Education (CE).

  1. Compliance with CE Requirements. Each Member and Approved Person shall comply with requirements respecting continuing education, as set out under this Rule and Policy No. 9;
  2. Dealing Representative. Every Approved Person who is registered as a dealing representative under Canadian securities legislation must complete 10 Business Conduct Credits, 20 Professional Development Credits and 2 MFDA Compliance Credits, every cycle;
  3. Chief Compliance Officer, Ultimate Designated Person and Branch Manager. Every Approved Person who is not registered as a dealing representative, and who is registered as a chief compliance officer or ultimate designated person under Canadian securities legislation, or designated by the Member as a branch manager or alternate branch manager under MFDA Rules, must complete 2 MFDA Compliance Credits every cycle.
  4. Accreditation. The Corporation shall only recognize continuing education activities that have met the requirements as prescribed under Policy No. 9.
  5. Books and Records.
    1. Members or Approved Persons must maintain, for a 24-month period following the end of any cycle, supporting documents to evidence completion of credits for that cycle. Evidence may be in the form of a certificate, attendance record, test results, or other notice of completion issued by the provider;
    2. Notwithstanding the requirement under subsection (i), Members and Approved Persons are not required to maintain documents to evidence completion of credits where a third party service provider: (1) facilitates the delivery of accredited CE content in accordance with requirements under this Rule and Policy No. 9; (2) maintains records related to the completion of CE credits by the Approved Persons; and (3) submits such records to the Corporation on behalf of such Approved Persons.
  6. Reporting. Members and Approved Persons must provide reporting to the Corporation, as prescribed under Policy No. 9.
  7. Non-compliance
    1. An Approved Person who fails to comply with the prescribed credit requirements respecting continuing education, as set out under this Rule and Policy No. 9 shall not act as an Approved Person of a Member until such time as the Corporation has determined that the prescribed credit requirements have been met;
    2. Each Member shall be liable for and pay to the Corporation fees, levies, or assessments in the amounts prescribed from time to time by the Corporation for the failure of the Member or an Approved Person to comply with the requirements of this Rule or Policy No. 9.

Appendix “B”

Proposed New MFDA Policy No. 9
(Continuing Education Requirements for Approved Persons of MFDA Members)

MFDA POLICY NO. 9

CONTINUING EDUCATION REQUIREMENTS FOR APPROVED PERSONS OF MFDA MEMBERS

Purpose

This Policy establishes minimum requirements regarding continuing education credits that Approved Persons are required to obtain, and report to the MFDA, pursuant to Rule 1.2.6.

PART A
APPLICATION

MFDA Rule 1.2.6 (b) and (c) outlines the CE credit requirements for dealing representatives, chief compliance officers, ultimate designated persons, branch managers and alternate branch managers for each cycle.

Notwithstanding the provisions under Rule 1.2.6 (b) and (c), in certain circumstances outlined below, an Approved Person may be exempt from the satisfying the requirements under Rule 1.2.6 (b) and (c) or may satisfy the requirements for each CE component under Rule 1.2.6 (b) and (c) on a pro-rata basis.

  1. New Approved Persons
    1. 1.1 An Approved Person who is in their first cycle,
      1. must satisfy the requirements under Rule 1.2.6(b) or (c), except that a new Approved Person;
        1. may satisfy the requirements for each CE component under Rule 1.2.6(b) or (c) on a pro-rata basis using the formula below if their date of registration falls within months 13-22 of that cycle:
          Total Number of Component Credits Required = A x B/24

          where

          A = the total number of months remaining in the cycle, including the month of registration; and

          B = the total number of credits required for the CE component in a full cycle (i.e. 10 for business conduct, 20 for professional development, and 2 for MFDA compliance); and

          The Total Number of Component Credits Required is rounded up to the nearest credit.

        2. is not required to satisfy the requirements under Rule 1.2.6(b) or (c) if their date of registration falls within the 23rd or 24th month of that cycle.
  2. Returning Approved Persons.
    1. 2.1 A returning Approved Person who has been previously registered as a dealing representative, chief compliance officer or ultimate designated person, or has been previously designated as a branch manager or alternate branch manager:
      1. must obtain their outstanding credits, if any, from the immediately preceding cycle; and
        1. may satisfy the requirements under Rule 1.2.6(b) or (c) on a pro-rata basis using the formula set out in section 1.1(i)(a) above, if their date of registration falls within months 13-22 of the cycle in which they have returned, and
        2. is not required to satisfy the requirements under Rule 1.2.6(b) or (c) if their date of registration falls within the 23rd or 24th month of the cycle in which they have returned.
  3. Change in Registration.
    1. 3.1 An existing Approved Person who ceases to be registered as a dealing representative, chief compliance officer or ultimate designated person, or ceases to be designated as a branch manager or alternate branch manager, for a period of time during the cycle;
      1. must satisfy the requirements under Rule 1.2.6(b) or (c), except that an Approved Person who ceases to be registered for a period of time that does, in aggregate, exceed 12 months may satisfy the requirements under Rule 1.2.6(b) or (c) on a pro-rata basis using the formula set out in section 1.1(i)(a).
  4. Exemptions.
    1. 4.1 Prior to the end of a cycle, an Approved Person may apply to the Corporation for an exemption from requirements under Rule 1.2.6 and this Policy, where that individual was absent or on leave, during a cycle, for a period of at least 4 consecutive weeks due to, but not limited to, personal illness or injury, or reasons relating to the family or parents of the Approved Person, or jury/witness duty.
    2. 4.2 Where an exemption has been granted under this subsection, the Approved Person may be permitted to:
      1. reduce the number of business conduct credits required by 1 credit for every 8 consecutive weeks that the Approved Person is absent or on leave;
      2. reduce the number of professional development credits required by 1 credit for every 4 consecutive weeks that the Approved Person is absent or on leave; and
      3. reduce the number of MFDA Compliance Credits required by 1 for every 6 consecutive months that the Approved Person is absent or on leave.
  5. Extensions.
    1. 5.1 Prior to the end of a cycle, an Approved Person may apply to the Corporation for an extension to the timeline requirements Rule 1.2.6 and this Policy, provided that:
      1. the chief compliance officer or ultimate designated person of the Member:
        1. approves the delay in completing credit requirements;
        2. advises the Corporation of the reasons for the delay;
        3. agrees to a new date by which all outstanding credits will be obtained by the Approved Person;

        and

      2. the Corporation determines that the extension is appropriate, in the circumstances.

PART B
COMPONENT CONTENT

This section sets out minimum standards for continuing education content. These standards should be considered in the context of what is reasonable continuing education content based on the Approved Person’s roles and responsibilities and the Member’s operations. Members should have procedures for identifying appropriate training topic areas for its Approved Persons.

  1. Business Conduct.
    1. 6.1 A single Business Conduct Credit consists of 1 hour of training in at least one of the following topic areas:
      1. Ethics;
      2. MFDA Rules and Policies and Member’s policies and procedures for complying with the Rules and Policies; and
      3. Relevant legislation and their application.
    2. 6.2 For each cycle where an Approved Person is required to obtain at least 8 Business Conduct Credits, a minimum of 1 and maximum of 3 credits must be content regarding ethics.
    3. 6.3 Ethics related content refers to content that examines ethical principles and moral or ethical problems that arise in a business environment, including the principles under Rule 2.1.1. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.
    4. 6.4 Other business conduct topics include, but are not limited to:
      1. Conflicts of interests;
      2. Personal financial dealings;
      3. How the securities administrators and self-regulatory organizations regulate securities industry participants;
      4. Regulatory developments that affect Member operations;
      5. Disclosure of information to clients;
      6. Documentation standards;
      7. Know-Your-Client and suitability;
      8. Leverage suitability;
      9. Anti-money laundering laws and regulations and related Member policies and procedures;
      10. Privacy legislation;
      11. Cyber-security; and
      12. Complaint handling.
  2. Professional Development
    1. 7.1 A single Professional Development Credit consists of 1 hour of training in at least one of the following topic areas:
      1. Industry knowledge and the Member’s business;
      2. Product knowledge;
      3. Financial planning;
      4. Retirement planning;
      5. Investment strategies and asset allocation;
      6. Client management techniques;
      7. Technology changes;
      8. Economics, Accounting, and Finance;
      9. Tax planning;
      10. Estate planning; and
      11. Insurance.
  3. MFDA Compliance
    1. 8.1 The 2 MFDA Compliance Credits must be obtained by completing continuing education activities specifically designated by the Corporation under this component.

PART C
DELIVERY STANDARD

This section sets out the minimum standard for Approved Persons to obtain CE credits. Members may choose to provide the content through their own training initiatives, however, credits in many of the general topic areas may also be obtained through other education providers or the educational component of industry events.

  1. 9.1 For a CE activity to qualify, it must be a structured activity where attendance is tracked, the CE content is accredited, and delivery of the CE content and evidence of completion has been documented (where applicable).

PART D
ACCREDITATION

This section sets out the minimum requirements for applications requesting accreditation of continuing education activities.

  1. 10.1 Accreditation of the continuing education activity is required prior to the CE credits being available for reporting to the Corporation.
  2. 10.2 Accreditation applications must be submitted to the Corporation, [or to a third party designated by the Corporation], no later than the last day of the cycle during which the activity was first held or offered. However, applications should be submitted prior to, or as early as possible after, the date on which the activity is first held or offered.
  3. 10.3 Applications may be submitted by Members, Approved Persons or other parties, including education providers, mutual fund companies and industry associations.
  4. 10.4 Each continuing education activity granted recognition by the Corporation will be assigned an eligibility period during which the CE credits will be recognized. Only CE credits obtained during the assigned eligibility period may be used to satisfying the requirements under Rule 1.2.6.

PART E
REPORTING

This section sets out the minimum requirements for notifying the Corporation of the completion of CE credits.

  1. 11.1 Credits obtained during any cycle may only be used to satisfy the prescribed credit requirements of that cycle or a previous cycle, where an Approved Person has outstanding requirements from that previous cycle.
  2. 11.2 Members and Approved Persons must file reports of completed CE credits no later than 10 business days following the end of the cycle.
  3. 11.3 Members, Approved Persons and other eligible parties must use the CE tracking system designated by the Corporation to file reports of completed CE credits.

PART F
ASSESSMENTS

This section set out the processes for assessing compliance with the requirements under Rule 1.2.6 and Policy No. 9.

  1. 12.1 The Corporation may, at its discretion, conduct a review of the records to be retained by the Member and Approved Persons in respect of the CE credits reported to the Corporation.
  2. 12.2 In such instances, the Approved Person and Member shall be notified, in writing, by the Corporation of the continuing education activities being reviewed and will have 15 days to submit to the Corporation any documents and information requested as part of the assessment.
  3. 12.3 Failure by a Member or Approved Person to submit adequate evidence to support the CE credits reported may result in the rejection by the Corporation of the reported CE credits associated with that continuing education activity which may result in non-compliance for the Approved Person with the requirements under Rule 1.2.6 for that cycle.

PART G
NON-COMPLIANCE

This section set out the processes for addressing instances of non-compliance with the requirements under Rule 1.2.6 and this Policy.

  1. Notification and Fees
    1. 13.1 Where the Corporation has determined that an Approved Person has not met the requirements for any given cycle, as prescribed under Rule 1.2.6 and Policy No. 9, the Corporation shall notify the Member and Approved Person of the non-compliance determination no later than 45 days following: (i) the end of the cycle, or (ii) the completion of an assessment of the records maintained by the Member and Approved Persons where a rejection by the Corporation of reported CE credits has resulted in non-compliance for the Approved Person;
    2. 13.2 Where the Corporation has determined that an Approved Person has not met the reporting requirements as prescribed under Rule 1.2.6 and Policy No. 9, the Corporation may impose a fee of $500 on the firm that was the Approved Person’s sponsoring Member;
    3. 13.1 Where the Corporation has determined that an Approved Person has not met the prescribed credit requirements for any given cycle, as prescribed under Rule 1.2.6 and Policy No. 9, the Corporation may impose a fee of $2,500 on the firm that was the Approved Person’s sponsoring Member;
    4. 13.4 Members will have 30 days from the date of notification to pay the fee in full to the Corporation.
    5. 13.5 Where the Corporation has determined that an Approved Person has not met the prescribed credit requirements for a given cycle, the Corporation shall notify the Approved Person and the Approved Person’s sponsoring Member that the Approved Person shall not act as an Approved Person of a Member until such time as the Corporation has determined that the prescribed credit requirements have been met.
  2. Reinstatement
    1. 14.1 Where the Corporation has provided notification to an Approved Person and the Approved Person’s sponsoring Member pursuant to paragraph 13.5 above, the Member and Approved Persons may file CE credit reports for that cycle for review by the Corporation.
    2. 14.2 Where the Corporation subsequently determines that the Approved Persons has met the prescribed credit requirements for that cycle, notification will be delivered to the Approved Person and the Approved Person’s sponsoring Member stating that the Approved Person is in compliance with the requirements under Rule 1.2.6 and Policy No. 9.

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