The Investment Dealers Association of Canada has completed a review to ensure that segregated funds contracts processing at member firms remains in compliance with IDA regulations, while at the same time adhering to the legal and regulatory provisions of the Insurance industry.

The review was undertaken done jointly by a sub-committee of the Canadian Life and Health Insurance Association and the IDA.

The IDA says that although there will be some changes to the manner in which manufacturers will process segregated funds contracts as a result of review, the conclusions reached were that these changes will be transparent to member firms from the processing perspective, whether the trades are for Registered or non-Registered accounts.

This means that manufacturers will continue to accept trades entered through FundSERV on a nominee basis, and report the accounts and positions on all FundSERV files as Account Designation 2, Broker Nominee.

As well, members may continue to display segregated funds contract positions on their client statements on a Nominee basis. An IDA Financial Compliance Notice, originally published on December 22, 1998, set out the circumstances in which members would be permitted to report segregated fund contracts on client statements. That notice specifically avoided addressing legal and regulatory implications that might arise from marketing or administering the distribution of segregated fund contracts, which are contracts of life insurance, through a member.

The IDA says that it has reviewed the operation of the notice with the CLHIA and have determined that its regulatory objectives can be met with further clarification of matters addressed in the notice that will better reflect the legal and regulatory provisions applicable to these products.

The principles include: segregated fund contracts are life insurance contracts between the insurer and the client, and that they are contracts of life insurance and as such are not “securities”. Nevertheless, because firms and clients want consolidated statements, the IDA will permit reporting of segregated fund transactions on client statements under certain conditions, laid out in the notice.