Major Initiatives in FY 2020

In 2019, as part of the MFDA Member Outreach initiative, independent consultants held focus groups and one-on- one interviews with Members to assist the MFDA in understanding issues facing Members, including the impact of regulatory requirements on them, where Members may require additional guidance, and other issues which may be particular to their operations or business models. In September 2019, MFDA staff issued Bulletin #0792-M MFDA Member Outreach Initiative which summarized the background and objectives of the MFDA Member Outreach Initiative, the process used to solicit feedback from Members, the key themes identified during the consultations, and relevant MFDA initiatives. Some of the actions to be taken as a result include 1) supporting the Rule Review Project; 2) continuing to take steps to enhance the transparency of the MFDA’s compliance approach; and 3) supporting Members in their Compliance efforts through guidance and collaboration.

Over the past year, MFDA staff continued to move forward with development and implementation of Continuing Education (“CE”) requirements for Approved Persons of MFDA Members. On September 26, 2019, staff of the Recognizing Regulators issued a Notice of Approval/Non-Objection to proposed new MFDA Rule 1.2 (Definitions) and 1.2.6 (Continuing Education) and Policy No. 9 Continuing Education (CE) Requirements. The proposed new Rules were approved at the 2019 Annual General and Special Meeting of Members. There are two remaining areas of the CE initiative to finalize: (i) the accreditation standards; and (ii) system development of the MFDA CE reporting and tracking system (CERTS).

On July 19, 2019, Member Education staff issued for comment a consultation paper on the CE accreditation standards. MFDA staff engaged in extensive outreach, both before and after issuing the consultation paper, with stakeholders including Members, industry associations and education providers. MFDA staff reviewed the comment submissions made in response to the July 2019 Discussion Paper and, in March 2020, published for comment proposed amendments to Policy No. 9 to reflect the comments received in respect of the CE accreditation process.

In FY 2020, MFDA staff presented at 27 Member, industry association, investor advocate and other regulatory events on various topics including: The MFDA Special Report, MFDA regulatory priorities, total cost reporting, seniors, supervision, branch review programs, CE, Know-Your-Client (KYC) information, suitability, promotional activities, signature falsification and cybersecurity.

In fall 2019, MFDA staff hosted a Member Regulation Forum via webcast. MFDA staff provided Members with updates on compliance, enforcement and policy activities, including: the status of proposed MFDA Rule and By-Law amendments; ongoing CSA initiatives regarding CSA Client Focused Reforms; alternative funds proficiency; promotional activities and MFDA priorities.

In furtherance of the goals of “Innovate” and “Update” under the 2018-2022 Strategic Plan, the MFDA initiated a review of MFDA regulatory requirements to ensure that the current MFDA regulatory framework remains appropriate, relevant, and will facilitate responsible innovation in the industry through the use of emerging technology and business models. MFDA staff is reviewing all aspects of its Rulebook, including Policies, Notices and Forms. As a result of Member feedback and staff internal review, MFDA staff has already identified areas where changes will be considered including supervisory structures, and books and records requirements.

MFDA Members have been implementing new technology to offer new products, such as exchange-traded funds and services such as electronic reporting, signatures, onboarding and advisory services to clients. While the adoption of new technology allows Members to increase efficiencies, it must be done in a manner that protects investors and addresses risks.

In FY 2020, the MFDA implemented an Innovation Outreach initiative designed to encourage Members to discuss proposed technology or operational changes with MFDA staff prior to implementation. (See MFDA Bulletin #0754- M). Through this process, MFDA staff has provided Members with guidance regarding compliance and regulatory requirements, as well as suggestions on how to address particular issues.

The MFDA has undertaken extensive consultation on the expansion of cost reporting to include certain costs that are not captured by current CRM2 reporting requirements, such as total investment fund management fees and operating costs. As part of this consultation, in 2018, MFDA staff issued a consultation paper that included examples of how expanded cost reporting could look. In 2020, based on comments received, MFDA staff commenced development of a research project relating to investor understanding and awareness of the fees they pay and the adequacy of the cost disclosure they receive.

Supporting Members in their effort to address cybersecurity risks continued to be a focus for the MFDA. In 2018, MFDA staff commenced a Cybersecurity Assessment Program (CAP). MFDA intends to expand further on the work carried out under CAP and will perform a second survey of the membership. The new mandatory survey will allow the MFDA to assess whether there has been any improvement given our prior initiatives and ascertain if Members have taken additional measures given COVID-19. Members will be provided a report of the results, a comparison of their results to the membership and applicable peer group and guidance from the cybersecurity consultant who will perform the work.

The COVID-19 pandemic has created additional cybersecurity concerns, including those that result from the need for Members to work from home. In response, MFDA staff issued Bulletin #0816-M Cybercriminals Currently Exploiting the COVID-19 Pandemic and worked with a consultant to develop a cybersecurity webinar focusing on these concerns and outline best practices to mitigate these concerns. This webinar was presented on May 20, 2020 and had over 700 attendees.

The MFDA has also developed educational materials and webcasts relating to Cybersecurity and intends to provide further guidance on this issue. Going forward, MFDA will consider the best way for Members to engage with various industry organizations that routinely hold sessions with providers and experts to discuss their services and how to implement them in Member operations.

In FY 2020, 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.

The MFDA held its third Seniors Summit on October 30, 2019 at the Toronto Region Board of Trade. The Seniors Summit provided Members with guidance and updates on topics related to best serving and protecting seniors.

MFDA staff published a number of Investor Bulletins in 2019. Investor Bulletins focused on issues such as, know-your-client, understanding risk, suitability and information on mutual fund fees. The MFDA also provided guidance to Members on practices that they may consider implementing to assist in the protection of seniors and vulnerable clients, specifically: (1) requesting clients name a Trusted Contact Person; and (2) placing a temporary hold on transactions where there are reasonable concerns regarding financial exploitation of a client or a client’s mental capacity.

In 2019, the MFDA participated in the International Organization of Securities Commissions World Investor Week initiative with the aim to highlight the importance of investor education.