A number of policy proposals that are being put forward for approval at the Mutual Fund Dealers Association of Canada’s annual general meeting on Dec. 4 are rubbing some members the wrong way and causing them to question their role in the organization.

“These proposed changes represent a ‘thin edge of the wedge’ and will encourage the MFDA to reduce the role of members in governance and policy development and to increase the MFDA’s power over salespeople’s insurance and other non-mutual fund activities,” says Ken Parker, vice president of compliance and finance with Calgary-based Portfolio Strategies Corp.

One of the major concerns is the proposed change to By-Law No. 1 and the definition of “public director.” The proposed change will permit individuals who are currently ineligible to act as public directors to qualify for the positions. These include: current federal or provincial government employees; current members of the House of Commons or provincial legislatures; and those who provide services to the MFDA, a member’s protection fund or a member firm itself.

“This would allow someone who is getting paid by the MFDA to be appointed as a public director,” says Mark Kent, president of Portfolio Strategies. “That could be a huge conflict of interest.”

The proposed amendments would also change the terms of office and maximum tenure for all MFDA directors to four terms of two years each, from two terms of three years each. That would increase the total maximum years to eight from six. With some current directors already at their term limit, Kent says this is another way for them to re-appoint each other for additional terms, thereby entrenching themselves further, while blocking the entry of any new blood .

In addition, the MFDA has also proposed a wording change from “nomination” of potential directors by members to “recommendation,” which Kent says is highly inappropriate and furthers denies members a voice in the election process.

The MFDA states that the purpose of the changes is to align its governance standards with the practices of other self-regulatory organizations in Canada, as well as to provide greater flexibility in member representation by the implementation of two-year terms. Says Ken Woodard, the MFDA’s director of communications and membership services: “The MFDA believes that industry uniformity is helpful and that the model, which treats industry and public directors in the same way, is sound from a governance point of view.”

Merlin Chouinard, president of Saskatoon-based Sentinel Financial Management Corp., is unable to make it to the AGM, but has already sent his proxy vote to a fellow member. He also has similar concerns about the proposals and feels that members have little, if any, say in the changes that occur.

“To call the MFDA an SRO is an oxymoron, it is a ridiculous presumption,” he says. “There is nothing having to do with members regulating themselves through this organization. There is no real respect for the membership.”

Chouinard says that it is going to take all members to come together and start “pushing back” against what he sees as an outrageous regulatory culture.

Another change that has caught the attention of many — and not just members — is the amendment to Rule 1.1.7, which deals with approved persons business and trade names. The MFDA has proposed that any trade name used by an approved person — whether it’s used in connection with member business or not — will require prior notification and MFDA approval.

The SRO has put the change down as a housekeeping amendment that is not required to be published for comment, which makes it difficult for non-members to stay on top things, says Susan Allemang, director of regulatory affairs at Mississauga, Ont.-based Independent Financial Brokers of Canada.

Although the IFB’s members are not part of the MFDA, many of them operate as approved persons who work for the dealers. As a result, they share members’ concerns regarding the changes to prior notification to the MFDA for approved persons.

“Many of our members hold more than one licence; and we are concerned that the MFDA continues to propose changes that require people who are doing non-securities-related business to get their pre-approval as opposed to just filing the information with the dealer,” Allemang says, adding that the IFB has notified its members about the proposal and is encouraging them to get in touch with the dealers to discuss the upcoming vote.

@page_break@The MFDA states that the amendment was prompted by a request for clarification by members and that it does not change how the outside business activities of approved persons are regulated. IE