Point-of-sale will streamline business: Regulators

By Steven Lamb | October 2, 2007 | Last updated on October 2, 2007
3 min read

The Canadian mutual fund industry deserves the trust of investors, and current regulatory proposals should only be seen as fine-tuning of a healthy system, according to a panel of regulators.

Speaking at the 2007 IFIC Annual Leadership Conference, British Columbia Securities Commission chair Doug Hyndman described the current “torrent” of regulatory reforms as a case of playing catch-up with an industry that has evolved more rapidly than the rules that govern it.

The proposed point-of-sale disclosure document, in particular, should not be seen as a criticism of the industry, said Bill Rice, chair of the Alberta Securities Commission. Rather, the proposal is an attempt to improve a single issue regarding investor understanding.

“The point-of-sale document will open opportunity for investors to deal with a greater variety of products,” Rice said. The two-page disclosure document would make it easier for advisors to explain a fund to the investor, and should actually free up more of the advisor’s time, he said.

“The reality is that investors don’t read complex disclosure documents,” said David Wilson, chair of the Ontario Securities Commission. “We’ve tested this fund-facts document with investor groups and salespeople, and the feedback we’ve been getting is very positive. They love it.”

Wilson points out that IFIC itself calls for investors to make fully informed decisions, and he suggests that the proposed point-of-sale disclosure document would give investors the information they need, when they need it.

Wilson scoffed at the suggestion that the document would add excessive complexity to the process of selling a mutual fund.

“I don’t think it should be that complex — when you deal with an investor who is writing a cheque for $5,000 or $40,000 — to give them a two-page document describing what you as the salesperson are recommending,” Wilson says. “That shouldn’t be a complex process for a very sophisticated industry that has $700 billion in investor savings. It doesn’t sound complex to me.”

In fact, it could save a lot of paper for the industry as well, as the proposal would see a detailed prospectus delivered to only those investors who request it.

“I can’t believe that in this electronic age we can’t find a solution that will get the information into the hands of the investor before they have to make a decision,” said Hyndman.

IFIC’s own research has found that the public wants more concise information regarding their mutual fund investments. “Investors are demanding more clarity and less volume in the information that they receive,” said IFIC president and CEO Joanne De Laurentiis. “We do have some grave concerns about the rigid delivery requirements suggested in the proposal, as these, we do not believe, meet investor needs.”

Specifically, she says IFIC is concerned that some of the language that the proposal prescribes would be more confusing for investors.

“My number one priority is to build upon the improvement we’ve already carried out in collaboration with regulators,” said De Laurentiis. “We want to continue to make progress in becoming involved earlier in the rule-making process, well before regulators are sending us rules and asking for comment.”

Incoming chair of IFIC and president and CEO of PEAK Financial, Robert Frances, urged IFIC members to become more involved in regulatory reform, participating in debate and helping to craft new rules.

“The industry and the regulators have a collective responsibility not just to satisfy each other or come to a consensus about the best way forward,” said Frances. “We have a joint duty of care to make certain that the financial services system functions efficiently and effectively for the ultimate end user — the investor.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com


Steven Lamb