Notice of Commission Approval – Amendments to MFDA Rule 2.2 Client Accounts), Policy No. 2 Minimum Standards for Account Supervision, Rule 2.8 (Client Communications) and Rule 5.3 (Client Reporting) – Mutual Fund Dealers Association of Canada (MFDA)

Market Regulation Document Type
MFDA rule review

 
The Ontario Securities Commission has approved the Mutual Fund Dealers Association of Canada (MFDA)'s amendments to MFDA Rule 2.2 (Client Accounts), Policy No. 2 Minimum Standards for Account Supervision, Rule 2.8 (Client Communications) and Rule 5.3 (Client Reporting) (the Amendments). In addition, the Alberta Securities Commission, Saskatchewan Financial Services Commission, Manitoba Securities Commission, New Brunswick Securities Commission and Nova Scotia Securities Commission have approved or not disapproved, and the British Columbia Securities Commission has not objected to, the Amendments (together with the OSC, these are the Recognizing Regulators).

The Amendments will:

  • require that investors are provided with certain fundamental information at the time an account is opened, which will help to ensure that clients are aware of the role and responsibilities of MFDA member firms (Members) and what to expect as far as services and costs
  • clarify the duty of Members and approved persons to assess the suitability of investments in each client account when various triggering events occur
  • clarify the responsibilities of Members and approved persons in discharging their suitability obligations
  • require Members to provide certain information to clients on an annual basis with respect to the performance of the client's account at the Member
  • clarify the Member's supervisory requirements regarding client communications that disclose a rate of return

Staff of the Recognizing Regulators remind Members that the Amendments are only a first step towards developing comprehensive performance reporting requirements, and that the Canadian Securities Administrators are currently working together with the MFDA and the Investment Industry Regulatory Organization of Canada to develop harmonized requirements for enhanced cost disclosure and performance reporting requirements.

The Amendments were published as proposals for public comment on June 13, 2008 at (2008) 31 OSCB 6157, and a revised version was published for further public comment on April 24, 2009 at (2009) 32 OSCB 3577 (re-published to correct a drafting error on May 8, 2009 at 32 OSCB 3983). A blacklined copy of the Amendments, showing the changes to MFDA Rule 2.2, Policy No. 2 Minimum Standards for Account Supervision, Rule 2.8 and Rule 5.3 is published in Chapter 13 of this Bulletin, together with the MFDA's summary of the comments received on the proposal and the MFDA's responses to those comments.