The Mutual Fund Dealers Association of Canada (MFDA) has issued a bulletin, giving nominee brokers notice that new rules from the Canada Deposit Insurance Corporation (CDIC) Act will take effect in April 2022.
“The MFDA expects member to comply with all legislative requirements applicable to them. Affected members should therefore be working to ensure that they fully implement the new CDIC Act requirements by April 30, 2022,” the MFDA states in Bulletin #0862-M.
Changes to the CDIC Act will impact how deposits held by brokers and dealers at CDIC member institutions on behalf of their clients – in nominee-name – are covered by the CDIC in the event that a member institution fails. “Central to these changes are several new requirements that brokers and dealers must meet to ensure that the deposits they hold for clients remain protected.”
The CDIC’s proposed Nominee Broker Deposit Compliance Framework includes the introduction of a dedicated nominee broker portal for compliance-related communication between brokers, dealers and the CDIC. The MFDA’s bulletin further states that “brokers/dealers will be required to use the portal to submit to CDIC all required information, including annual attestations and key data uploads needed for testing purposes, as well as for calculation and reimbursement of deposit insurance if a CDIC member institution were to fail.”
The CDIC says it is currently in the process of “socializing” the core elements of the compliance framework with industry stakeholders to build awareness regarding its supervisory approach and to work with the broader broker community to ensure strong engagement when the new rules take effect. “The Act provides CDIC a variety of tools to address on-compliance and escalate issues appropriately to bring stakeholders into compliance to ensure deposit protection,” the CDIC states on its website. “Materiality of compliance deficiency will drive the use of escalation tools,” they write.
