MFDA reaches deal with Quebec regulators

(April 15, 2003) After more than a year of talks, the Mutual Fund Dealers Association has reached a co-operative agreement with regulators in Quebec. Under the terms of the deal, the MFDA, Bureau des service financiers (BSF) and the Chambre de la securité financière will work together to supervise fund dealers with operations in Quebec.

The agreement means that mutual fund firms operating both in Quebec and other provinces won’t be forced to split their companies into two separate corporations.

The three organizations will share information and work to avoid regulatory duplication. The MFDA and BSF will conduct joint inspections of firms with head offices in Quebec. Companies that comply with BSF rules relating to business conduct and sales practices will be deemed to be MFDA compliant. The MFDA will refer any complaints relating to business practices in Quebec to the BSF.

“It’s very positive,” MFDA president Larry Waite told Advisor.ca, adding that the agreement still needs final approval from provincial regulators.

There are 38 fund companies operating in Quebec, including 13 with head offices in the province.

On other issues, Waite revealed that the MFDA is well into its compliance review phase, which began in November. Approximately 25 reviews have been conducted at dealers across Canada, he said in an interview. Most of the deficiencies compliance officers have found have been minor, such as sloppy account documentation and compliance manuals that need tweaking, Waite said. “We’re giving them time to turn that stuff around.”

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“We’re not being received with open arms, but we’re being received very professionally and everyone has been very co-operative,” he added.

Last week, the MFDA issued a reminder notice on account transfers, noting that written client consent is required for all transfers and that negative confirmations are not permitted. “There was some confusion and we were getting a lot of calls,” Waite says. “But there’s no change, it’s just more of a clarification.”

The banning of bulk transfers has been a controversial topic among advisors in past years, but Waite thinks that has changed.

“It’s privacy legislation as well as securities law that prohibits the transfer of accounts without the client’s consent,” he said. “It was really a non-issue, but it was a very hot topic in our road show, but I think people are coming round now.”

The MFDA now has 198 members, representing about $210 billion in assets under management. About 19 applications have yet to be completed, Waite said.

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Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(04/15/03)

Doug Watt