OSC works with ministry of finance on DSCs

By The IJ Staff | November 21 2018 09:30AM

Photo: Freepik

The Ontario Securities Commission (OSC) is actively working with the Ontario government to determine the future of deferred sales charges (DSCs) in the province.

Back in September, Vic Fedeli, the province’s finance minister, said his department disagreed with a recent proposal by the Canadian Securities Administrators, which includes the OSC, to ban DSCs on mutual funds and on the payment of trailer fees to discount brokerages.

But Debra Foubert, director of compliance and registrant regulation with the OSC, told an Advocis symposium in Toronto on Tuesday that the OSC is working with the ministry.

“The support of the minister is very important to the OSC,” said Foubert. “We respect the decision of the minister … [and] we are actively working with the ministry of finance staff to understand their position.

“The value of the consultation period is that we get all information – we get industry perspective … We are still working closely with the ministry staff and we’ll see after the consultation period what happens.”

MFDA and OBSI continue to receive DSC complaints

Foubert said both the Mutual Fund Dealers Association (MFDA) and the Ombudsman for Banking Services and Investments (OBSI) still receive complaints about DSCs from investors despite a major drop in the number of the investments.

“While there is a trend to eliminate DSCs it doesn’t appear to be going fast enough for clients impacted by it currently.”

Dennis Tew, head of national sales for Franklin Templeton, said many DSCs have gone by the wayside.   Tew said at one time, 98% of the company’s business was in DSCs, but that quickly evolved into no-load and low-load products. As a result, DSCs at Franklin Templeton are now at about 8%-12% of all sales.

But Tew said DSCs can still be the right investment for some clients and advisors.

“It can be a solution. It can fit suitability requirements and I think rather than an outright ban on it regulators should have looked at DSC on a suitability basis. It’s probably not for an 80-year-old [investor] but for young professional advisors trying to get a business going, for those trying to give support to their clients, I think it can be a suitable investment.”