Ontario advisors join petition campaign over MFDA start-up costs

(December 10, 2002) Hundreds of financial advisors in Ontario have joined a lobbying campaign to persuade provincial governments to pay the tab for launching the Mutual Fund Dealers Association.

The Federation of Independent Mutual Fund Dealers (FIMFD) launched the petition drive in October, although it has pressed the issue of MFDA start-up costs for more than two years. The FIMFD asked Ontario’s independent mutual fund representatives to write to their members of their legislature and/or Finance Minister Janet Ecker to urge them to support the position that provincial governments — not dealers and advisors — should pay the start-up expenses.

Securities commissions backed a $12 million line of credit for the MFDA so it could get it on its feet. That loan is now being repaid from the fees charged to MFDA members.

“We’ve been getting a terrific response [to the campaign],” said FIMFD chair George Aguiar of Toronto, in an interview today with Advisor.ca. (Click here to comment on MFDA costs.)

“I’ve spoken to better than 200 advisors over the last two months and I’ve received over 300 letters from advisors to their provincial politicians and to the Minister of Finance Janet Ecker,” he explained.

The Federation does not object to the existence of the MFDA or the requirement that dealers fund the current operations of the new self-regulatory organization. Aguiar said the MFDA is a professional and accessible organization. However, the FIMFD says dealers should not have to pay the costs of launching an organization created by securities regulators.

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Aguiar argues that MFDA costs should be paid from the fee surpluses generated by securities commissions. The FIMFD has raised concerns about how the rising costs of regulation will affect the profitability of dealers and advisory firms.

“For the most part, the start-up cost issue was new to [many advisors]” prior to the FIMFD’s campaign, said Aguiar. Also, many advisors knew little about the background of the MFDA.

“From the communication that I’ve had from a lot of advisors, many of them were under the impression that the MFDA was a dealer initiative,” he added.

One by-product of the lobby campaign, said Aguiar, has been the education of advisors about this regulatory issue, to the point where relations improved between some advisors and dealers. “I think it has eased a little bit of the tensions that advisors have been feeling, that these costs were imposed by the dealers, when in fact… these costs are being pushed by regulators.”

Advisor support for the cause may have increased but the FIMFD has not been able to meet with Ecker to discuss MFDA costs.

“We’ve had a devil of a time trying to get in front of [Ecker] at this point,” said Aguiar. “We want to send the message out there that advisors are the constituents of this government and that this is an important issue.”

The governments of Alberta and British Columbia are also being lobbied, given their leadership in launching the MFDA. While B.C. and Alberta indicated certain flexibility in offsetting the MFDA costs, Aguiar said Ontario appears to be the stumbling block. Ontario would bear the biggest share of the costs.

The FIMFD represents 39 independent dealers with more than 14,000 advisors and over $75 billion of assets under administration.

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A discussion about who should pay the costs to start the MFDA has begun in the Advisor.ca Talvest Town Hall. To share your views, send a message to the “Free For All” forum of the Talvest Town Hall.

Filed by Jim MacDonald, Advisor.ca, jmacdonald@advisor.ca.

(12/10/02)