MFDA Rule 5.3.5, which was approved by the recognizing Canadian Securities Administrators (“CSA”) jurisdictions in July 2010 and by MFDA Members in December 2010, prescribes performance reporting requirements for MFDA Members. The Rule is currently subject to a transition period expiring on June 3, 2012 to allow Members sufficient time to develop and implement systems to ensure that the information required under Rule 5.3.5 is provided to clients.
On June 22, 2011, the CSA published for comment proposed amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) and the Companion Policy to the Instrument. The proposed NI 31-103 amendments are further to the work of the CSA’s implementing the Client Relationship Model and, if adopted, would introduce new performance reporting requirements and additional requirements in respect of existing cost disclosure under the Instrument.
Subsequent to the publication of the proposed amendments to NI 31-103, MFDA staff as well as industry representatives, including the Investment Funds Institute of Canada, expressed concern to the CSA regarding potential inconsistencies between the proposed amendments to NI 31-103 and the requirements of MFDA Rule 5.3.5. Members have also expressed concerns regarding the need to potentially undertake two sets of costly systems and statement changes to meet requirements under MFDA Rule 5.3.5 by June 2012 and requirements under NI 31-103 once implemented. In response to these concerns, the CSA has recommended and requested that the MFDA take steps to suspend implementation of MFDA Rule 5.3.5 on performance reporting pending harmonization with CSA performance reporting standards that are ultimately adopted. Accordingly, in response to the CSA request, MFDA staff intends to recommend the suspension of the June 2012 implementation of Rule 5.3.5 to the MFDA Board of Directors at the next scheduled meeting on November 29, 2011. Members will be advised of the Board’s decision on this matter immediately thereafter.