The Mutual Fund Dealers Association of Canada (MFDA) is planning a series of compliance projects in the year ahead, including an examination of dealers with fund manager registrations, looking at cost sharing agreements, service arrangements, and reps selling syndicated mortgages.
In a bulletin issued today, the MFDA indicates that it is planning several special projects in addition to its routine compliance exam work, this year.
For one, it’s going to carry out on-site financial exams of all MFDA firms that are also licensed as investment fund managers (IFM). “The purpose of the review is to understand the nature and extent of activities that members perform under the IFM license so as to ensure that MFDA financial requirements and regulatory processes adequately reflect [firms’] operations,” the MFDA notes.
It’s also going to be examining reps’ sales of syndicated mortgages. In the bulletin, the MFDA reports that it has “identified concerns” with reps selling syndicated mortgages. So, the regulator says its compliance staff will be reviewing dealers’ referral arrangements with mortgage brokers and reps that are dually licensed as mortgage brokers, “to determine the nature of the activity performed under the mortgage broker license and to assess whether such arrangements comply with [MFDA] requirements…”
Additionally, the regulator says that it will be taking a closer look at cost sharing agreements between dealers and related firms. “Related parties can impact the financial viability of MFDA members and it is important that cost sharing agreements are sufficiently detailed and accurately reflect the costs incurred by the MFDA member,” it says; adding that it will be examining these agreements and may issue guidance in this area as a result.
Finally, the MFDA will also be assessing all of the material service arrangements that dealers have with other firms to determine if there is any impact on dealer compliance, or if they raise any investor protection concerns. “The review will be focused on service providers that are involved in trade execution, settlement, custody and client reporting,” it says.