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Quebec regulator scraps planned mutual fund SRO

By Alain Thériault | October 27 2007 06:06PM

In September, the curtain fell on the Quebec financial markets regulator’s (the Autorité des marches financiers or AMF) proposal to create a self-regulatory organization (SRO) in charge of overseeing the mutual fund sector in that province. Cause of death: the inability to reach a consensus.

In a statement announcing the end of the SRO project, the AMF launched a new project: the second consultation on the regulation of the mutual funds sector.

The AMF’s new proposal supports the status quo in the industry structure: representatives would continue to be regulated by the Chambre de la sécurité financière (CSF), and fund companies by the AMF. However, the AMF would put a new department in place to supervise firms. The biggest changes would affect rules and costs.

The proposal foresees that firms and representatives would be subject to the Mutual Fund Dealers Association of Canada’s (MFDA) rules after a two-year transition period. However, the AMF recommends that only the MFDA rules compatible with regulations in Quebec should apply.

The increased administrative load for the AMF under this scenario would propel costs for small firms significantly higher.

For instance, the new proposed rates for firms with two representatives and $175 million in assets under management would balloon from $636 to $2,911, a staggering 457% rise. Firms with 50 representatives and $400 million in assets under management will have to disburse $21,100 as opposed to $15,900, for a 132% increase.

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