Ontario government disagrees with CSA’s proposed ban on DSC commissions

By Donna Glasgow | September 14 2018 11:30AM

Vic Fedeli, Ontario’s Minister of Finance, says his government does not agree with the Canadian Securities Administratorsproposed amendments to ban the deferred sales charge (DSC) option. Ontario says it will work with other provinces and territories and stakeholders “to explore other potential alternatives.”

In a statement issued Sept. 13, Fedeli underlined that the CSA and OSC's proposed amendments “result from a process initiated under the previous government and, if implemented, will discontinue a payment option for purchasing mutual funds that has enabled Ontario families and investors to save towards retirement and other financial goals. Our government does not agree with this proposal as currently drafted.”

Reduces viable investment choices

The Independent Financial Brokers of Canada (IFB) applauded the government’s stance. The IFB is concerned that the elimination of embedded commissions, including DSCs, would reduce viable investment choices that are suitable for some consumers.

In a statement, IFB Executive Director, Nancy Allan, said, “Minister Fedeli has opened the door to a review of the DSC ban, and IFB looks forward to working with Ontario’s Ministry of Finance to find solutions that protect the investing public and also encourage a competitive and efficient market.”

The IFB advocates for a principal-based approach to compensation, combined with targeted prescriptive measures for specific higher-risk situations. “This kind of approach would be better positioned to endure over cyclical and evolving markets, while at the same time preserving choice for the investor,” says Allan.

Consumer’s right to choice

Advocis, the Financial Advisors Association of Canada, also welcomed the Finance Minister’s statement, praising him for standing up “for the consumer’s right to choice when it comes to financial advice.”

“Our intention as an association is to ensure Canadians have equal access to trusted financial advice,” said Greg Pollock, President and CEO of Advocis, who added that the government’s announcement shows that it “shares that vision, and intends to work alongside stakeholders to protect consumers.”

In a statement, Advocis notes that the 80 per cent of Canadian households have less than $100,000 in total investible assets. “Restricting access to professional financial advice would make it harder for the public to save, invest and achieve their financial goals…Minister Fedeli’s statement reinforces his commitment to ensuring fair, equal access to financial services will continue to be made available to consumers within Ontario,” says Advocis.

A significant departure

Law firm Osler, Hoskin & Harcourt, also commented on the Ontario Finance Minister’s statement. “The Government of Ontario’s public criticism of the Proposed Amendments is a significant departure from historical practice that has involved the securities regulators pursuing policy consultation with limited input from the government of the day,” observed the law firm.

It added that this public criticism raises “interesting issues relating to the functioning of the OSC and Canada’s established process for national securities rulemaking.”

The law firm also observed that in Ontario, “the Minister of Finance has discretion to approve or reject any rule proposed by the Ontario Securities Commission (OSC) or return it to the OSC for further consideration.”

The proposed amendments, which were issued Sept. 13, can be consulted on CSA members' websites. A 90-day public comment period will close Dec. 13, 2018.