Major Initiatives in FY2018

Approved Person Education and Proficiency

The development and implementation of Continuing Education ("CE") requirements is a significant undertaking which will materially impact Members, Approved Persons, the MFDA and other industry participants. In recognition of the scope of this project, staff engaged in a multi-stage advance consultation with stakeholders to ensure that any requirements ultimately adopted achieve the desired regulatory objectives in a manner that is as cost effective and efficient as possible. On March 22, 2018, the MFDA published for comment proposed MFDA Rules 1.2, 1.26 and proposed new MFDA Policy No. 9 (Continuing Education Requirements) to establish CE requirements for Members and Approved Persons and minimum standards for complying with such requirements. The CE proposal includes the development of a detailed tracking and reporting requirement for CE credits obtained by Approved Persons. Going forward, the MFDA will proceed with documenting system requirements, assessing potential vendors and developing and implementing a CE tracking and reporting system.

Member Education and Outreach

In FY 2018, MFDA staff presented at 20 Member, industry association and other regulatory events on various topics including cybersecurity; senior investors; suitability; supervision; know-your-client (KYC) information; outside activities; branch review programs; the Deferred Sales Charge Sweep Report; CE; the Client Relationship Model - Phase 2 ("CRM2") implementation; and MFDA regulatory priorities.

The MFDA held a Risk Management Conference on October 27, 2017 at the Toronto Region Board of Trade. The Conference provided managers and senior compliance professionals with insights and information on various risk management areas most relevant to Members’ operations. Risk management topics covered at the Conference included systemic risk, cybersecurity, new advisors and products, errors and omissions insurance and anti-money laundering.

MFDA Member Regulation Forums were held in person in spring 2018 in Vancouver, Calgary, Toronto and Montreal and provided updates on current compliance, enforcement and policy activities. In fall 2017, MFDA staff hosted a Member Regulation Forum via webcast.

Investor Outreach and Education

In FY 2018, MFDA staff held meetings with investor advocates and organizations involved in investor engagement, outreach and the protection of vulnerable persons. These outreach meetings provide individuals and organizations an opportunity to dialogue with MFDA staff and share views on issues affecting Canadian investors.

During the year, MFDA staff presented to the OSC Investor Advisory Panel on the MFDA Client Research Project, the MFDA Suitability Research Paper, complaint handling issues and signature falsification. MFDA participated in an OSC Investor Office tele-town hall, along with staff from the Investment Industry Regulatory Organization of Canada and the Ombudsman for Banking Services and Investments for Financial Literacy Month. Topics discussed by the MFDA included the role of the MFDA, investor protection and working with an advisor.

MFDA published a number of Investor Bulletins that focused on:

  • seniors’ issues dealing with the importance of putting in place a power of attorney and the risks of borrowing to invest;
  • investment fraud; and
  • providing investors with key information to help them become a more informed investor including information on suitability and the importance of keeping KYC information up-to-date, as well as information on the complaints process.

Expanding Cost Reporting Project

In 2015, the MFDA issued a consultation paper in respect of expanding the requirements under Rule 5.3.3 (Report on Charges and other Compensation) and the implications of doing so. The majority of comments received were in support of expanding cost reporting to include total costs paid by clients, including ongoing costs of owning investment funds. However, commenters suggested the MFDA wait until Members issued Reports on Charges and Other Compensation to clients before considering whether further amendments were necessary. In light of these comments, in 2017, MFDA staff performed a review of certain Members’ Report on Charges and Other Compensation (see Bulletin #740-C: CRM2 Report) and identified areas for potential policy development, such as expanding cost reporting.

In order to promote further discussion in respect of expanding cost reporting, MFDA staff issued another Discussion Paper on Expanding Cost Reporting on April 19, 2018 (see Bulletin #748-P). The comment period expired on July 20, 2018.

2018 MFDA Client Research Project

The 2016 MFDA Client Research Project provided the MFDA with valuable information and insight into Members’ business, their Approved Persons and their clients. In order to support our ongoing compliance efforts, the MFDA is conducting a second Client Research Project and in June 2018 issued a mandatory data request to its Members. The MFDA will be collaborating with the Autorité des marchés financiers to obtain data for all clients residing in the province of Québec.

Collaboration with Other Regulators

Financial advice provided by MFDA Members and their Approved Persons spans multiple regulatory regimes, in particular, insurance. Collaborating and harmonizing with other regulators is crucial to ensuring consistent investor protection across financial sectors. In FY 2018, MFDA staff entered into Memoranda of Understanding ("MOU") with the Alberta and British Columbia Insurance Councils. Each MOU allows the organizations to cooperate by sharing information, as permitted by law, and when it is in the public’s interest to do so. The types of information to be shared include information relating to the discipline of dually licensed individuals and licensing decisions made by the Insurance Councils regarding MFDA Approved Persons. In addition, the MOUs allows for joint investigations of the same person(s) by the Insurance Councils and the MFDA.

Policy Instruments

Significant policy instruments issued in FY 2018 include the following:

  • New MFDA Rule 2.13 (Disclosure of MFDA Membership) and Policy No. 10 Disclosure of MFDA Membership. MFDA Rule 2.13 requires the MFDA logo to be included on the front of each account statement and on the Member’s website followed by the web address of the official website of the MFDA. The Rule and Policy are subject to a transition period and will become effective on January 1, 2019.
  • New MFDA Policy No. 8 Proficiency Standard for Approved Persons Selling Exchange Traded Funds (“ETFs”) The Policy establishes minimum proficiency standards for Approved Persons trading in ETFs and is intended to satisfy requirements under MFDA Rule 1.2.3 (Education, Training and Experience). The Policy came into effect on July 20, 2017.
  • MFDA Staff Notice (MSN-0066) Signature Falsification - The Notice reviews background information on signature falsification and outlines actions that should be taken by Members and Approved Persons to detect, address and prevent it. The Notice applies to situations where Approved Persons have created, possessed or used documents such as KYC forms, trade forms and cheques which have been pre-signed or on which client signatures have been falsified through other means.