The Mutual Fund Dealers Association of Canada is proposing a by-law amendment to protect its associated contingency fund from possible legal actions by former members.

In today’s OSC Bulletin, the MFDA is proposing amendments that would give the MFDA Investor Protection Corp., and its staff, the same legal shelter as the MFDA.

It notes that the IPC currently isn’t covered by the MFDA by-law that provides protection for the regulator, its board, committee members, officers and staff from legal action and proceedings by members, reps, and others under its jurisdiction. Also, the MFDA IPC does not have direct jurisdiction over MFDA members and relies on the MFDA and, to a certain degree, provincial securities legislation to ensure compliance with the MFDA IPC requirements.

It is proposing amendments so that the fund, its board, committee members, officers, employees and agents, enjoys the same protection as the regulator, so their work is not constrained by threat of legal action. Additionally, it is proposing that certain key requirements requirements imposed by the fund should be specifically provided for in the by-laws.

“The proposed amendments will also provide that member obligations to the MFDA IPC are clear and can be enforced through the MFDA. The effect of the amendments will assist both the MFDA and MFDA IPC in their mandates of protecting customers of MFDA members in the public interest. The ability of the MFDA IPC to ensure that its risk management and customer protection objectives can be met is consistent with MFDA’s regulatory objectives,” it says.

The MFDA board approved the proposed amendments on March 5, they are now out for comment until September 24.