On December 3, 2014, MFDA Members approved MFDA Rule 5.3.3 (Report on Charges and Other Compensation) which requires Members to provide each client with an annual summary of charges paid by the client and compensation received by the Member, as specified under the Rule, during the 12 month period covered by the report except that the first report delivered after a client has opened an account may cover a period of less than 12 months. MFDA Rule 5.3.3 comes into effect on July 15, 2016 (see MFDA Bulletin #0623-P – Approval of Phase 2 CRM2 Amendments).
While the new requirements of Rule 5.3.3 are not currently in effect and Members are in the process of implementing changes to comply with the new requirements, MFDA staff has received feedback from Members, Approved Persons and other stakeholders to consider expanding the requirements under Rule 5.3.3 to require disclosure of other costs of owning investment funds that are not paid to the Member, such as management fees, fund operating costs, redemption fees and short term trading fees. Accordingly, the MFDA is seeking feedback from all stakeholders in respect of expanding the requirements under Rule 5.3.3 and the implications for doing so. This consultation is preliminary in nature and is intended to promote further dialogue on the issues raised. The MFDA has not formulated a position in respect of expanding the requirements under Rule 5.3.3 and will be sharing the results of this consultation with other securities regulators. Responses to the questions below would be appreciated.
- Is the current proposed disclosure of dealer compensation sufficient for clients to make informed decisions or should disclosure be expanded?
- What types of investment products should be subject to expanded disclosure?
- Specifically, how could the expanded disclosure be reported in a way that clearly and effectively communicates the information to clients and is consistent with other product disclosure (e.g. Fund Facts Document)? What are the various options and alternatives?
- What is the impact to the industry in expanding current requirements? Please specifically comment on operational or implementation issues such as system requirements, transition periods, etc.
Please submit your comments in writing on or before March 10, 2016. Individual submissions received will not be made public but a summary of the comments will be published at a later date.
Comments should be addressed to the attention of:
Director, Membership Services & Communications
Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9