The Mutual Fund Dealers Association of Canada (MFDA) will be placing a heavier emphasis on establishing reciprocal disciplinary standards toward dual-licensed advisors who sell mutual fund and insurance, according to Shaun Devlin, senior vice president, member regulation, enforcement, with the MFDA, who spoke at the Association of Canadian Compliance Professionals’ annual conference in Toronto on Monday.
Specifically, Devlin updated the audience of compliance officers about the self-regulatory organization’s (SRO) efforts to work with the Financial Services Commission of Ontario (FSCO).
“Many of you have told us from time to time your concerns in this area and we share them,” said Devlin, “in terms of the potential for arbitrage because the level of enforcement [from] the insurance regulators is not necessarily equal to the securities regulators.”
Devlin referred to a report that Ontario’s auditor-general published in 2014, which identified 69 dually-licensed individuals whom the MFDA disciplined while FSCO did not discipline any of those same individuals.
The MFDA and FSCO signed a memorandum of understanding in 2014, which has so far involved the sharing of information but not necessarily much in terms of reciprocal discipline. However, the MFDA is looking to change that.
These efforts include a discussion with FSCO on the importance of reciprocal discipline in areas outside of theft or fraud, which are areas in which FSCO tends to focus its disciplinary actions, said Devlin. There’s less focus from Ontario’s insurance regulator on topics such as outside business activities and borrowing from clients.
The MFDA is also looking to assist FSCO in preparing for disciplinary hearings and has offered the services of its own investigators and counsel in order to work toward a common standard of enforcement, according to Devlin.
These efforts come about as the industry awaits a final report from a three-member Expert Advisory Panel that Ontario’s Ministry of Finance established concerning FSCO’s mandate, which is likely to come this spring.
Much support for Ontario expert panel’s recommendations
Other initiatives on which the MFDA is moving forward include the mandating of continuing education (CE) requirements. Member firms can expect a draft proposal concerning a CE program by the end of this year, said Karen McGuinness, senior vice president, member regulation, compliance, at the SRO.
McGuinness also announced the MFDA’s plans on making greater use of advisor input in the future. This idea was inspired by a group of experienced advisors who provided their feedback on particular MFDA projects, including the “mystery shopping” exercise that was launched in 2013. Consultations with these advisors led to discussions on day-to-day issues they faced; although McGuinness did not define those problems, she said the advisors had good ideas on how to address them.
“Our intent is to develop an ad hoc group of senior advisors to talk about these day-to-day issues with a view to ultimately creating best practice guidance,” McGuinness explained.
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