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Bulletin #0692-C

For further information, please contact:

Marc Guerin
Director, Member Education
Compliance
For Distribution to Relevant Parties within your Firm

Summary of Comments and Next Steps – MFDA Bulletin #0679-C Mutual Fund Dealers Association – Client Research Project

On February 8, 2016 the MFDA published Bulletin #0679-C – Client Research Project. The public comment period ended on March 15, 2016.

A total of 13 submissions were received. A summary of comments received, MFDA comments, and next steps are attached as Appendix “A” to this Bulletin. Attached as Appendix “B” is a revised Client Position Template.

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Appendix “A”

MFDA Bulletin #0679-C Mutual Fund Dealers Association – Client Research Project

Summary of Comments Received

General Comments

Several commenters expressed general support for evidenced-based regulatory policy development but requested additional information regarding the purpose of the Client Research Project and whether data obtained would be used for any other purposes.

Data Collection and Delivery

Many commenters expressed concerns regarding the time, expense, or resources required to collect and deliver the required data. However, notwithstanding such potential challenges, many commenters, after discussions with their systems service providers, noted that they would be able to collect and deliver the required information. Estimates provided for preparation time ranged from 2 weeks to 12 months. Many commenters suggested that data delivery be done through a secure file transfer site.

Privacy

Several commenters noted that they were reviewing whether the request for data would meet existing exemptions under Privacy legislation, if it would breach internal Member privacy policies, or if additional client consent would be required. Commenters noted that potential privacy concerns might be alleviated through data anonymization. In relation to such comments, it was suggested by several commenters that greater client anonymity could be achieved by making certain modifications to the data request. For example, commenters suggested replacing the client’s date of birth with the client’s age or an age range, and providing only the client’s postal code information instead of the client’s full address.

Analysis of Data by Investor Economics (“IE”)

Some commenters requested additional information on how the data would be handled by IE, including further details regarding: access rights, encryption, retention, ownership, storage, and data destruction. Some commenters recommended that the MFDA enter into a formal agreement with IE that would set out the details of the engagement.

Requests for Clarification

Clarification was also sought on specific data fields in the data request including: how the “primary account holder” should be identified for joint accounts; the purpose of requesting Rep code and market value information; and whether data could be anonymized by the Member.

MFDA Comments

Data Request

Members noted several concerns regarding the time and resources required to complete the data request. MFDA staff recognizes that Members would appreciate flexibility and support from the MFDA. To that end, Members may complete the data request in one of two ways.

Option #1

Members may submit the requested data in a non-anonymized or “raw data” form. MFDA staff will anonymize the data once Members have transferred the completed data files to the MFDA.

Option #2

Members may submit the requested data in an anonymized form. Members choosing this option must ensure that the anonymized data submitted by them meets specifications that the MFDA has established for this project. Additional details are set out in Appendix “B”. We note that Members choosing this option may elect to submit raw data, to be anonymized by the MFDA, while also providing anonymized data for some columns of the Client Position Template.

File Format

The data is being requested in either an MS Excel or CSV file format. However, other file formats may also be acceptable. Members wishing to use another file format should contact the MFDA after receiving the data request.

Purpose of the Client Research

The data will be used to identify higher risk areas which will assist the MFDA in performing its regulatory activities, including in the examination process.

The data will also be used to gain a better understanding of the segment of the Canadian marketplace that is served by MFDA Members. This initiative will provide the MFDA with a more granular understanding of the client base of MFDA Members within specific wealth, age and geographical segmentations, as well as by dealer size. The research will then be used to assess the potential impact of policy initiatives, such as changes to the fees model for mid and mass market clients, and the long term viability of smaller dealers.

Privacy, Confidentiality and Security

Some Members indicated that they would not be able to supply client information in the level of detail requested due to concerns regarding federal and provincial/territorial privacy legislation. Detailed client information is necessary in order to perform meaningful analysis. To address privacy concerns, Members can assume responsibility for anonymizing the data, provided that such anonymization meets the specifications established by the MFDA.

No personal information will be used or disclosed by the MFDA in the course of this initiative. All data analyses will be conducted in respect of anonymized information. The MFDA has considered the comments made by some Members and, in response to such comments, has revised the data fields to ensure that the resulting aggregated data is anonymized to a greater degree. See Appendix “B”.

Data Submission to the MFDA

All information provided by Members as part of this initiative is to be delivered to the MFDA via the MFDA’s secure File Transfer Protocol (“FTP”) site. A dedicated folder for each Member will be created on the FTP site with access granted only to the Chief Compliance Officer of the Member. Once a Member has uploaded the data request to their dedicated folder, MFDA staff will transfer the files to the MFDA’s secure internal network and delete the file from the FTP site. At all times, access to the data files on the MFDA FTP site will be restricted to authorized MFDA staff.

Data Transfer to IE

Only anonymized data sets will be transferred to IE. No personal information will be disclosed to IE. The transfer of information from the MFDA to IE will follow the secure FTP process noted above.

In addition to other related matters, the safeguarding, use, retention, and disclosure of data, both during and after the engagement, will be addressed in a written agreement between the MFDA and IE.

Data Storage and Retention by the MFDA

All files received by the MFDA that contain non-anonymized information will be stored in a dedicated folder on the MFDA’s secure internal network. At all times, access to this folder will be restricted to authorized personnel, and all other MFDA security policies that apply to personal information in the MFDA’s custody or control. These files will be permanently deleted after they are no longer required for the project, and, in any event, no later than one year from the date of receipt. Files that contain only anonymized, non-personal, information will be stored in the MFDA’s normal secure internal network, again in compliance with all applicable MFDA security policies.

Next Steps

The MFDA expects to issue a mandatory data request to Members in June 2016.


Appendix “B”

Client Position Template – Notes

Cell Note #

Cell Name

Format

Anonymization Notes

Cell Notes

OPTION #1

1

Street Number

NUMERIC

Will be anonymized into a Household ID.

 

2

Street Name

ALPHA-NUMERIC

Will be anonymized into a Household ID.

 

3

Unit/Apt

ALPHA-NUMERIC

Will be anonymized into a Household ID.

 

4

City

ALPHA

   

5

Province

ALPHA

   

6

Postal Code

ALPHA-NUMERIC

Will be anonymized to the Forward Sortation Area code only.

May be presented in a single or dual column format (e.g. ABC123 or ABC 123)

7

Primary Account Holder Birthdate

DATE

Will be anonymized to an Eldest Account Holder Age.

 

8

Joint Account Holder Birthdate

DATE

Will be anonymized to an Eldest Account Holder Age.

The Joint Account Holder’s date of birth/age is not a mandatory field.

9

Account Number

ALPHA-NUMERIC

Will be anonymized into an Account Number ID.

This is the account number associated with the Account Type. Not a product account number.

10

Account Type

ALPHA

Will be anonymized into an Account Type ID.

Examples include OPEN/RSP/RIF/TFSA/RESP/SDRSP/LIRA

11

Rep Code

ALPHA-NUMERIC

 

If no Rep Code is assigned to an account, please insert “N/A” or some other similar notation.

12

Investment Product Code

ALPHA-NUMERIC

 

Including all investment products.

13

Investment Product Market Value

CURRENCY

 

Market value to be reported in the currency in which the position is reported on the client account statements.
Can be provided in dollars.

OPTION #2

14

Household ID

ALPHA-NUMERIC

A unique ID that replaces Street Number, Street Name, Unit/Apt.

All client accounts under the same household have the same Household ID.

15

Forward Sortation Code

ALPHA-NUMERIC

Replaces Postal Code.

 

16

Eldest Account Holder Age

NUMBERIC

Replaces Primary and Joint Account Holder Birthdate.

The age of the eldest account holder on the account.

17

Account Number ID

ALPHA-NUMERIC

A unique ID that replaces Account Number.

All positions held in the same account will have the same Account Number ID.

18

Account Type ID

ALPHA-NUMERIC

Replaces Account Type with either OPEN or REGISTERED.

All Non-Registered accounts (for tax purposes) are OPEN. All registered accounts (for tax purposes), including RESPs, are REGISTERED.

Client Position Template

Option #1 – Raw Data Set

Field Name

Street Number

Street Name

Unit/Apt

City

Province

Postal Code

Primary Account Holder Birthdate

Joint Account Holder Birthdate

Account Number

Account Type

Rep Code

Investment Product Code

Investment Product Market Value

 

Address

 

Data Type

NUMERIC

ALPHA-NUMERIC

ALPHA-NUMERIC

ALPHA

ALPHA

ALPHA-NUMERIC

DATE

DATE

ALPHA-NUMERIC

ALPHA

ALPHA-NUMERIC

ALPHA-NUMERIC

CURRENCY

Cell Notes:

1

2

3

4

5

6

7

8

9

10

11

12

13

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

 

123456

RSP

R001

ABC123

$8,675.73

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

 

123456

RSP

R001

CBA4322

$13,725.25

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

1970-12-03

565656

JOINT

R001

GIC

$5,235.32

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

1970-12-03

565656

JOINT

R001

ABC123

$9,250.88

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

 

987654

OPEN

R001

CBA4322

$15,760.25

Example

121

King St. W.

1000

Toronto

ON

M5H 3T9

1972-03-01

 

987654

OPEN

R001

SEG1234

$3,125.50

Client Position Template

Option #2 – Anonymized Data Set

Field Name

Household ID

City

Province

Forward Sortation Area

Eldest Account Holder Age

Account Number ID

Account Type ID

Rep Code

Investment Product Code

Investment Product Market Value

Data Type

ALPHA-NUMERIC

ALPHA

ALPHA

ALPHA-NUMERIC

NUMERIC

ALPHA-NUMERIC

ALPHA

ALPHA-NUMERIC

ALPHA-NUMERIC

CURRENCY

Cell Notes:

14

   

15

16

17

18

     

Example

Household ID#1

Toronto

ON

M5H

44

Account Number ID#1

REGISTERED

R001

ABC123

$8,675.73

Example

Household ID#1

Toronto

ON

M5H

44

Account Number ID#1

REGISTERED

R001

CBA4322

$13,725.25

Example

Household ID#1

Toronto

ON

M5H

45

Account Number ID#2

OPEN

R001

GIC

$5,235.32

Example

Household ID#1

Toronto

ON

M5H

45

Account Number ID#2

OPEN

R001

ABC123

$9,250.88

Example

Household ID#1

Toronto

ON

M5H

44

Account Number ID#3

OPEN

R001

CBA4322

$15,760.25

Example

Household ID#1

Toronto

ON

M5H

44

Account Number ID#3

OPEN

R001

SEG1234

$3,125.50