MFDA proposes new alt fund proficiency rule

The Mutual Fund Dealers Association of Canada (MFDA) is proposing new proficiency requirements for representatives and dealers that sell alternative mutual funds.

The self-regulatory organization (SRO) proposes a new policy that would set proficiency standards for dealing in alt funds (both hedge funds and liquid alts) and would replace the requirements imposed under the provincial regulators’ existing rules.

In 2018 the Canadian Securities Administrators (CSA) established a new regulatory regime for alt funds that sought to facilitate greater distribution to retail investors. That regime retained proficiency standards for selling alt funds in CSA rules, on the basis that these funds can be more complex than traditional mutual funds.

However, after recognizing that the existing requirements “significantly limited retail investor access to alternative mutual funds,” the regulators issued orders earlier this year that expanded the courses that qualified under the CSA rules — to make it easier for fund dealers and reps to comply with the proficiency requirements.

The proposed new MFDA rules would adopt requirements that are consistent with the regulators’ orders, while aiming to ensure that alt funds are sold subject to “appropriate proficiency requirements.”

It’s expected that the CSA would repeal its rules in this area once SRO rules are in effect.

The comment period on the proposal runs until Jan. 24.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.