MFDA proposes minimum proficiency standards for reps to sell ETFs

Currently, MFDA dealers and reps are permitted to sell ETFs that meet the definition of a mutual fund. “However, there are important differences between ETFs and conventional mutual funds,” the MFDA notes in the proposals. The existing courses and exams that mutual fund reps take do not adequately address trading in ETFs.

Therefore, the MFDA is proposing a new rule that would require reps to meet new proficiency standards when dealing in ETFs; and the self-regulatory organization would require dealers to meet minimum requirements in terms of training their reps. Dealers that trade in ETFs must have appropriate policies and procedures regarding their sale.

Under the proposed rule, reps must receive specific training on dealers’ policies and procedures that deal with advising and transacting in ETFs, and the rule sets out the minimum requirements that this training must address.

In addition, reps must receive training specifically for ETF products, which may come from courses offered through independent providers or via training offered by their dealers. In either case, that training must meet minimum requirements set out in the rule.

The ETF-specific training must cover issues such as how market quotes will be obtained; the types of trades accepted and the information required for each trade; the disclosure required for each transaction; how evidence of trade instructions and disclosures will be maintained; and how orders will be processed.

The proposals indicate the effective date for the new rule, if it’s approved, will be determined in the future by the MFDA. The proposed rule is out for comment for 90 days until Sept. 28.

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