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Bulletin #0594-C

For further information, please contact:

Karen McGuinness
Senior Vice President, Member Regulation, Compliance
2014 Compliance Initiatives

2014 Compliance Initiatives

In addition to performing compliance examinations and other Member oversight activities, the MFDA Compliance Department will, from time to time, undertake projects in specific areas.  Some of the Compliance initiatives that will be conducted in 2014 are highlighted below.

Investment Fund Manager Sweep

In 2014, Compliance staff will be performing on-site financial examinations of all MFDA Members licensed as an investment fund manager (“IFM”).  The purpose of the review is to understand the nature and extent of activities that Members perform under the IFM license so as to ensure that MFDA financial requirements and regulatory processes adequately reflect Member operations.

Cost Sharing Agreements with Related Parties

Cost sharing agreements between Members and related parties will be a focus of financial examinations performed in 2014.  Related parties can impact the financial viability of MFDA Members and it is important that cost sharing agreements are sufficiently detailed and accurately reflect the costs incurred by the MFDA Member.  Further analysis of these agreements will be conducted, which may result in additional guidance being issued in the future.

Syndicated Mortgages

As noted in Bulletin #0583-P (Transactions by Approved Persons in Syndicated Mortgage Securities), MFDA staff has identified concerns with the sale of syndicated mortgages by Approved Persons.  Compliance staff will be reviewing Member referral arrangements with mortgage brokers and Approved Persons dually licensed as mortgage brokers.  The purpose of this review will be to determine the nature of the activity performed under the mortgage broker license and to assess whether such arrangements comply with requirements under MFDA Rule 1.1.1.

Service Arrangements

Compliance staff will be performing an assessment of all material service arrangements that Members have with other parties to determine if the activities of the service provider impact Member compliance with regulatory requirements or give rise to any investor protection concerns.   The review will be focused on service providers that are involved in trade execution, settlement, custody and client reporting.