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Ontario eyes shutting down CSA’s proposals

Just as the Canadian Securities Administrators (CSA) published the second set of proposed amendments that would discontinue the deferred sales charge (DSC) option and trailing commissions, the new Ontario government said it intends to quash them.

Ontario’s ministry of finance announced its opposition with the proposed approach. In a statement, the provincial finance minister Vic Fedeli said the payment option has enabled Ontario families and investors to save toward retirement and other financial goals.

“Our government does not agree with this proposal as currently drafted,” he said.

CSA’s recent notice outlined proposed amendments that would disallow investment fund managers from paying upfront sales commissions to dealers as well as prohibit trailing commissions to dealers who do not make a suitability determination, such as order-execution-only dealers. With these changes, all form of the deferred sales charge option (the DSC option) will be discontinued, enabling more transparent fees on the discount channel.

“These proposed amendments, together with enhanced registrant conduct requirements proposed under our Client Focused Reforms, comprise the CSA’s policy response to the investor protection and market efficiency concerns examined in our consultations on embedded commissions,” CSA chairperson Louis Morisset said.

CSA aims to eliminate a compensation conflict which is believed to be inherent in the DSC option, giving rise to investor protection concerns. The regulator said these proposals will eliminate the need for charging redemption fees to investors, effectively discontinuing the DSC option.

Furthermore, the said changes would entail dealers negotiating and charging directly to clients any upfront sales commissions for mutual fund purchases.

To read the recent notice, click here.