IIAC asks regulators to defer making a decision on expanding cost reporting

By The IJ Staff | July 23 2018 09:45AM

Ian Russell

The Investment Industry Association of Canada (IIAC) asked Canada’s securities regulators on July 20 to postpone making a decision on expanding cost reporting requirements for investment funds until the overall impact of the second phase of the Client Relationship Model (CRM2) and other regulatory initiatives have been properly assessed.

“Canada’s securities regulators should hold off making any decision on mandating further cost reporting until the Canadian Securities Administrators (CSA) completes its comprehensive study on the impact of CRM2 and the Point of Sale amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure requirements,” says Ian Russell, IIAC president and CEO. “CRM2 was a costly initiative, with many IIAC member firms spending more than $10 million apiece on implementation. With only two years’ worth of CRM2 reports having been provided to clients thus far, the initiative’s effectiveness has yet to be determined.”

The IIAC’s comments are in response to a recent discussion paper issued by the Mutual Fund Dealers Association of Canada (MFDA) seeking feedback from industry stakeholders on the potential implications of expanding cost reporting requirements to include costs currently not reflected on fee and performance reports investors receive from their investment dealer firms, notably the Management Expense Ratios (MERs) for mutual funds and ETFs.

“It is also imperative that formal research be conducted on the costs, as well as the material benefits to clients, of any contemplated change to cost reporting requirements, as any modifications to cost reporting under CRM2 would require extensive systems and operational changes,” says the IIAC in a statment released July 20.