The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) says that the implementation of the second phase of the Client Relationship Model (CRM2) rules shouldn’t hold up more substantial regulatory reforms.

In comments on the Mutual Fund Dealers Association of Canada’s (MFDA) proposed version of the CRM2 rules, which aim to enhance disclosure of investment performance and costs, FAIR Canada argues that the implementation of other reforms should not be put on hold while CRM2 is being implemented.

“Disclosure alone will not address the serious, systemic issues that have been identified (that is, high costs to investors (in particular, high mutual fund fees), poor product recommendations and lack of effective price competition),” it says. “Accordingly, waiting for the CRM2 proposals to be implemented and further waiting to monitor and assess the effects of the CRM2 proposals before moving on with other needed reforms would be unjustified and will impose real costs on Canadian consumers.”

FAIR notes that it supports the CRM2 proposals themselves as a way of improving transparency, but stresses that all firmsshould besubject to the samerequirements, regardless of whether they belong to a self-regulatory organization, or are directly regulated by a securities commission. “This will allow consumers to meaningfully compare the reports they may receive from different firms no matter which regulator directly oversees each firm,” it says.

Additionally, FAIR Canada recommends that the pre-trade disclosure of investment costsshouldbe delivered in dollar amounts, rather than percentage terms. It also says thatthe disclosureshouldbe in plain language, and that it should cover all investments in a client’s account (as current MFDA rules require), not just securities.

FAIR says that limiting disclosure to securities goes against the spirit of CRM2. “If the proposed amendment is made, an MFDA [rep] could sell a segregated fund or other investment product on a deferred sales charge basis, for example, without having to disclose this fact to the client prior to the sale. Currently, they must do so. Reducing the amount of such important disclosure should not be sanctioned by the MFDA,” it says

Finally, FAIR also says that the MFDA should consolidate its CRM2 requirements into a single rule for easier understanding, by both clients and dealers.