The Mutual Fund Dealers Association (MFDA) says advisors should satisfy additional proficiency requirements before they may sell exchange traded funds (ETFs).
Advisors with MFDA member firms are currently permitted to sell ETFs that meet the definition of a mutual fund. However, in its proposed amendments to Policy No. 8, the MFDA argues that there are important differences between ETFs and conventional funds.
"With the exception of the Canadian Securities Course (CSC), existing courses and examinations used by Approved Persons to satisfy proficiency requirements under NI 31- 103, in respect of the sale of conventional mutual funds, do not adequately address the sale of ETFs," reads the document.
Proficiency, education, and training
As a result, the regulator wants fund dealers to ensure that each advisor who sells ETFs has "adequate proficiency, education, and training". Advisors should understand not only the characteristics, features, benefits, and risks of ETFs, but also how ETFs will be offered through their dealers (e.g., how market quotes will be obtained, the kind of information required to process trades).
The MFDA says that dealers may provide their own ETF training for advisors, or they may use one of the following third-party courses:
• Exchange Traded Funds for Mutual Fund Representatives, offered by the Canadian Securities Institute
• The Canadian Exchange-Traded Funds Course, offered by the IFSE Institute
• Exchange Traded Funds For Mutual Fund Dealers, offered by the SmartenUP Institute
The MFDA notes that the proposed proficiency requirements would not apply to the sale of conventional mutual funds that invest in ETFs.
The comment period closes on September 28, 2016.
