With the Canadian Securities Administrators (CSA) planning to propose a ban on the practice of mutual funds paying trailer fees to discount brokers, the Investment Industry Regulatory Organization of Canada (IIROC) is suspending its recent guidance on the issue.
In a notice published Tuesday, IIROC announced the suspension a portion of the guidance it issued back in April.
That guidance called for discount brokerage firms to make funds available that do not pay trailers. Where such funds do not exist, IIROC the guidance directed firms to rebate the portion of the trailer that was meant to compensate dealers for advice.
In June, the CSA announced it plans to propose rule changes that would bar funds from paying trailers to discount brokers. The CSA has said that it will publish its proposals in this area next month.
As a result, “there exists a degree of regulatory uncertainty for [discount brokerage] firms. In light of this uncertainty, we think the suspension of our expectation … that firms take a specific course of action is appropriate,” IIROC states in Tuesday’s notice.
“The CSA’s rule development process provides further opportunity for meaningful input from all registrants and other industry stakeholders on this important issue and once it is completed, we will align our requirements with theirs,” it adds.
The Canadian Foundation for the Advancement of Investors (FAIR Canada), an investor advocacy group, criticized IIROC’s decision.
“Fair Canada is disappointed that IIROC, a public interest regulator, has suspended its April 2018 guidance,” says Frank Allen, executive director FAIR Canada, in a statement.
The investor advocacy group is “dismayed that IIROC cites the upcoming CSA rule proposal prohibiting the payment of trailing commissions to online brokerage firms (discount brokerages) as the reason for the suspension.”