MFDA responds to Advocis

(February 6, 2004) A letter-writing and postcard campaign on client account transfers, organized by Advocis, has generated a response from the MFDA.

In a statement released yesterday, the MFDA said its board of directors has received a “number” of identical letters dealing with clients and account transfers, as well as postcards on the same topic.

The MFDA says it has responded directly to the letter writers, but has also decided to publish its response on its Web site, rather than reply to the postcards.

The Advocis-sponsored letter calls on the MFDA to amend its “bulk transfer” rule to allow for an easier client transfer process when an advisor changes dealers. The current rule makes it difficult for advisors to take clients with them when they move, said Beverly Brooks, Advocis’s vice-president of public affairs, in an interview earlier this month.

“The current MFDA rules do not recognize the [advisor/client] relationship,” the letter states. “In fact, they infer that the client’s account and the relationship are the property of the dealer. This is not the case. The account belongs to the client and should be treated as such.”

The MFDA’s response suggests that no rule changes are currently being considered. The MFDA’s Greg Ljubic says that the transfer provisions are intended to protect the interests of both clients and MFDA members. “It should be noted that the MFDA rules do not refer to the so-called ownership or goodwill value of a client account. That is considered by the MFDA to be a commercial matter to be settled between members and approved persons.

“With respect to a client account and its assets, the member is responsible to the client and has no basis for dealing with the assets without written authorization or consent of the client,” Ljubic says in his letter.

One advisor has already commented about the MFDA’s response in the Talvest Town Hall: “The MFDA’s response is laughable at best and if anything it shows that we as the “small” independent advisors can present a strong argument and have power in numbers.” Do you agree with this advisor? Share your thoughts and opinions about this issue with your fellow advisors in the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com