General Counsel, Corporate Secretary and Vice President, Policy
MSN - 0011
Nov 28, 2001
MFDA Staff Notices are intended to assist Members and their Approved Persons in the interpretation, application of and compliance with requirements under MFDA By-laws and Rules. Notices make reference to these requirements and set out MFDA staff's interpretation of how to comply with these requirements. Notices may also include best practices or guidance.
As part of the application process for membership in the MFDA, mutual fund dealers (referred to herein as “Members”) that employ Approved Persons as agents are required to provide a sample copy of their agency agreement(s). The agency agreement(s) must comply with the requirements set out in MFDA Rule 1.1.5 (Business Structures – Agents) and contain, among other things, terms which reflect the provisions of paragraphs (a) to (j), inclusive, of Rule 1.1.5. These requirements are intended to ensure, among other things, that the regulatory principles of effective supervision of the Approved Person and liability of the Member to the client that exist in the employer/employee relationship are observed in the principal/agent relationship.
MFDA staff recognizes the desire of its Members and their Approved Persons for flexibility in structuring their business relationships and have not prescribed a specific agency agreement for use by its Members. However, MFDA staff must be satisfied that Member agency agreements are in compliance with the requirements of Rule 1.1.5. Specifically, these agreements must not omit the provisions of paragraphs (a) to (j) of Rule 1.1.5 and/or contain terms that are inconsistent with or contradict MFDA Rules. The onus is on the Member to satisfy MFDA staff that the regulatory requirements of principal/agent relationships have been sufficiently addressed in these agency agreements.
Amendments to Agreements
The agency agreements of many MFDA applicants have been in use prior to their MFDA membership application. Most of these agreements will require amendments. Some Members have chosen to prepare new agreements that are intended to comply with MFDA Rules. Other Members may wish to amend their agency agreements for that purpose.
In order to assist Members in that regard, MFDA staff has prepared an “Override Acknowledgement for Agent’s Agreement“ (the “Override Acknowledgement”), attached as Schedule A, for use by Members and each Approved Person with whom an agency agreement exists: (i) confirming that the agency agreement(s) comply with the requirements of the By-laws and Rules of the MFDA; and (ii) amending the agency agreement(s) as necessary to ensure compliance.
Evidence of Compliance for Agency Agreements
As a minimum, all Members must provide a certificate signed by an officer or director of the Member certifying that its agency agreements are in compliance with Rule 1.1.5. The form of certificate should be substantially in the form of Schedule B hereto. Where, upon review of the agency agreement, MFDA staff is not satisfied that the agreement complies with the provisions of Rule 1.1.5, or that the agency agreement is relatively complicated, MFDA staff will require the Member to:
- amend the agency agreement to comply with MFDA Rules (which may include the use of an Override Acknowledgement in the form provided); and/or
- rovide MFDA staff with a legal opinion in the form prescribed (attached as Schedule C hereto).
The purpose of the legal opinion is to ensure that careful consideration has been given to the requirements of the MFDA Rules and, where amendments are being made to existing agreements, that such amendments are effective and consistent to ensure that the amended agreements comply with MFDA Rules.
This Notice is intended to describe the expected requirements for most agency agreements. However, MFDA staff retains the discretion to determine what evidence will be required from the Member in order to satisfy MFDA staff that such agency agreements are in compliance with MFDA Rules.
With respect to future agency agreements, MFDA staff strongly encourages Members to include language addressing the specific matters set out in paragraphs (a) to (j), inclusive, of MFDA Rule 1.1.5.
MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Override Acknowledgement for Agent’s Agreement
The parties referred to below have entered into the Agreement(s) described in connection with the distribution by the Agent on behalf of the Member of financial products including mutual funds. The purpose of this Acknowledgement is to confirm that such Agreement(s) comply with the requirements of the By-laws and Rules (the “Rules”) of the Mutual Fund Dealers Association of Canada (“MFDA”) and to amend the Agreement(s) as necessary, to ensure such compliance.
|Name of Agreement(s):||
|Amendments (if any):||
The Parties acknowledge and confirm that the Agreement(s) referred to above is intended to be made and be effective in compliance with the Rules from time to time in force including, without limitation, the provisions of Rule 1.1.5. The Agreement(s) shall be deemed to include the terms specified in paragraphs (a) to (j) inclusive of such Rule 1.1.5 and the Agreement(s) is amended accordingly with such incidental amendments to the Agreement(s) as may be necessary to conform to the context and wording thereof. Notwithstanding the foregoing, in the event of any inconsistency between the terms of the Agreement(s) (or any agreements, documents or understandings between the Parties related thereto) and the terms deemed to be included therein in accordance with Rule 1.1.5, the terms of the respective paragraphs (a) to (j) inclusive of such Rule 1.1.5 shall prevail. Any such inconsistent terms of the Agreement(s), documents or understandings shall be deemed to be severable and deleted with the intent that the Agreement(s) shall be construed, complied with by the Parties and enforced in a manner that gives full effect to the terms of paragraphs (a) to (j), inclusive, of Rule 1.1.5.
Note for completion: If there is insufficient room on the form to describe all Agreements, please attach a schedule with the further information.
MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Certificate Regarding Agent’s Agreement between Members and Approved Persons
The undersigned, a duly authorized director and/or officer of:
(name of Member), hereby certifies that:
- He/she has read the forms of agreements, and amendments thereto, (together the “Agreement(s)”) which are attached to this certificate as Schedule(s) and is familiar with their use by the Member with its Approved Persons who are agents of the Member.
- To the best knowledge of the undersigned, the Agreement(s) is the only form of Agreement(s) used by the Member in appointing Approved Persons as its agents in accordance with MFDA Rules.
- The Agreement(s) complies with the requirements of the By-laws and Rules of the MFDA and, without limitation, includes the terms which are referred to in paragraphs (a) to (j), inclusive, of MFDA Rule 1.1.5 and there are no terms or provisions of such Agreement(s) (or, to the best knowledge of the undersigned, any agreements, documents or understandings between the Member and its Approved Persons who are parties to the Agreement(s)) that are inconsistent with the terms referred to in such paragraphs (a) to (j), inclusive, of Rule 1.1.5
DATED: ●, 20●
MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Counsel’s Opinion Regarding Agent’s Agreement between Members and Approved Persons
[Letterhead of Counsel]
Mutual Fund Dealers Association of Canada
121 King Street West
Attn: Director of Compliance
Re: [Name of Member] and Mutual Fund Dealers Association of Canada – Agent’s Agreements
We are counsel to [name of Member] (the “Member”) in connection with the membership of the Member in the Mutual Fund Dealers Association of Canada (“MFDA”) and compliance by the Member with the By-laws and Rules (the “Rules”) of the MFDA in appointing Approved Persons as agents of the Member. In this regard we have examined the following forms of documents (collectively, the “Agreements”):
- [Describe agency agreement], a copy of which is attached to this letter as Schedule ●; and
- [Describe any amendments to the agency agreement], a copy of which is attached to this
letter as Schedule ●.
In connection with this opinion we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Agreements and such other documents, proceedings and records of the Member and have made such investigations of fact and law as we have deemed relevant or necessary. In such examination and, in giving this opinion, we have assumed the authenticity of all documents submitted to us and the conformity to originals of all documents submitted to us as copies.
We are solicitors qualified to practise law in the Province of ●, Canada and, accordingly, no opinion is expressed herein as to the laws of any jurisdiction other than the Province of ● and the laws of Canada applicable thereto.
In providing this opinion we have not reviewed any copies of the Agreements as executed and delivered between the Member and any Approved Person as an agent of the Member. The enforceability of the Agreements as between the Member and any such Approved Person as an agent and the compliance of such an Agreement with the Rules of the MFDA will depend on the actual circumstances pertaining to the Member and such Approved Persons.
Based on, and relying on and subject to, the foregoing, we are of the opinion that the Agreements are in compliance with the Rules of the MFDA including, without limitation, paragraphs (a) to (j), inclusive, of Rule 1.1.5, and no provision or term of the Agreements are inconsistent with the provisions of such paragraphs of Rule 1.1.5.
This opinion is intended solely for the use of the MFDA to whom it is addressed and only in connection with the acceptance of the Member as a member of the MFDA, and should not be relied upon by any other person or for any other purpose, nor quoted from or referred to in any other document without our prior written consent.
Yours very truly,