The Conseil des fonds d’investissement du Québec (CFIQ), the Quebec arm of the Investment Funds Institute of Canada (IFIC), along with IFIC, have both submitted responses to the Canadian Securities Administrators (CSA) staff notice and request for comment on the creation of a new self-regulatory organization and investor protection fund.
In its submission to the Autorité des marchés financiers (AMF) and the CSA, the CFIQ says coordination between regulators and the Chambre de la sécurité financière (CSF) is needed to avoid duplication of tasks and fees. They add that Quebec dealer’s fees should be the same as those being paid in other jurisdictions.
Notably, they say the CSA has left insufficient time to properly consult the industry and stakeholders on the changes being made.
“To further improve the implementation of the new SRO in Quebec, both during the transition period and the permanent phase, this letter raises several issues. It is crucial that the benefits that are expected for investors and the industry through the creation of the new SRO be achieved in Quebec the same way as elsewhere in Canada,” they write.
“The 45-day consultation period was not sufficient for the scope of these consultations. We are aware that the CSA is planning to launch the new SRO January 1, 2023. However, we encourage the AMF and the CSA to provide longer consultation period in the future.”
In addition to duplicate fees, particularly in Quebec where they say mutual fund dealers will be unfairly subject to costs that dealers outside of Quebec would not incur, they also call out complaint handling, inspections, commission sharing and the incorporation of representatives, along with proficiency requirements.
“We believe that it is inappropriate to require a person registered in the category of dealing representative, mutual fund dealer in a dual-registered firm, to complete the Conduct and Practices Handbook Course (CPH) in the absence of compelling policy rationale,” they write.
“For large dealers, the 270-day limit does not allow enough time for all of their representatives to complete the CPH. Unjustified differences in training requirements could encourage people to switch from a dual-registered firm to a mutual fund dealer (regulatory arbitrage). More importantly, we see this proficiency proposal as a major barrier to mutual fund dealers becoming dual-registered firms.”
They add that the CPH is intended for Investment Industry Regulatory Organization of Canada (IIROC) approved persons and that the existing IFSE Canadian Investment Funds course is perfectly suited for mutual fund dealer representatives.
They add that under the new oversight approach proposed, the voices of members will be limited, resulting in the loss of self-regulation. They also add that this reduction in self-regulatory authority does not achieve the right balance.
More, they point out that it could take 18 months to come into compliance with CSA rules requiring the new SRO’s name be included in systems and documentation, but point out that the new SRO does not yet even have a name that can be included in documents, as required.
In its submission to the CSA, meanwhile, IFIC in its capacity as a national representative, also addresses proficiency requirements and recommends that firms be allowed to maintain current references to the various regulatory bodies currently in existence until the new names of the SRO and the new investor protection fund are finalized. They also call for the CSA to clarify the new account interim documentation rules and clarify the circumstances in which the new SRO mutual fund dealer rules will apply to dual-registered dealers.
