Now isn’t the time to expand cost reporting: IIAC to MFDA

By Katie Keir | July 23, 2018 | Last updated on December 6, 2023
3 min read

The Investment Industry Association of Canada (IIAC) is asking the MFDA to hold off on an expansion to cost reporting for investment funds.

In April, the MFDA put forward a discussion paper on disclosing total fund costs to clients with an expansion of requirements under Rule 5.3.3 (Report on Charges and Other Compensation), with comments closing July 20. The SRO has been considering expanded cost disclosure over the last few years, in tandem with CRM2 changes.

Read: Move over CRM2: MFDA proposes total cost disclosure

It noted in its bulletin that the “majority of comments” received on a similar 2015 paper were “in support of expanding cost reporting to include total costs paid by clients, including ongoing costs of owning investment funds.”

In its July 20 comment letter, IIAC asked the MFDA to wait.

One main reason, it says, is CSA “is currently undertaking a comprehensive study on the impact of CRM2 and the Point of Sale amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure requirements.”

This study, CSA said in a 2016 release, will cover activity from 2016 through 2019 and is expected to be completed by 2021. The goal is to “measure outcomes related to investor knowledge, attitude, and behaviour, registrant practices, and fund fees and product offerings,” in relation to CRM2 and POS changes.

Read: What’s loved and loathed about CSA’s latest proposals

Another reason for the MFDA to hold off, IIAC says, is the SRO should consider that many firms—IIAC represents 120 IIROC-regulated firms—”have individually spent over $10 million dollars implementing CRM2 and, with only two years’ worth of CRM2 Reports provided to clients, its effectiveness and impact on clients has not yet been established.”

Proposing further changes now would require firms that use the types of funds covered to look again at new infrastructure, updated advisor training and client education, IIAC says.

As a result, it suggests CSA should lead any cost-reporting initiatives to ensure it’s harmonized and scaled. “CRM2 provided valuable lessons with respect to the difficulties firms experienced when the regulators finalized rules at different times and where it was not clear how exemptions and other nuances between rules would be interpreted,” the submission says.

IIAC and its members “agree with the fees outlined in the [MFDA] Paper,” in that they should be communicated to clients, the comment letter says. For this to happen, it adds, there should be “a consistent calculation methodology” for both mutual funds and ETFs, a process that would require coordination with fund manufacturers.

Further comments

IIAC supports the MFDA’s exclusion of the total expense ratio (TER) in its discussion paper, because it “would provide a level of detail that would be unhelpful and confusing to investors,” IIAC says.

In reviewing the reporting examples that MFDA illustrates (e.g., account statement, and investment fund report), IIAC also highlights what may be confusing for investors or misleading.

Read: Proactively discuss fees and your value proposition with clients

For example, including the management expense ratio (MER) percentage for each investment fund held by a client might be useful for comparison, IIAC says, but “the MER percentage displayed would be historical in nature and may not be an accurate reflection of the personal MER percentage that the client is paying.”

Further, having separate investment fund reports to review could overburden clients with information that is separate from “their personal cost or performance information,” the letter says.

There’s also CSA’s client-focused reforms, released in June, to consider, says IIAC. With those in mind, it may not be time to enhance cost reporting.

Read the full comment letter.

Also read:

How CSA’s ‘detailed and sweeping’ proposals will affect you: IIAC

Misconduct cases increase year over year: CSA report

MFDA ready to talk shop with firms, investors

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Katie Keir

Katie is special projects editor for and has worked with the team since 2010. In 2012, she was named Best New Journalist by the Canadian Business Media Awards. Reach her at