With the Canadian Securities Administrators’ client-focused reforms (CFRs) set to be implemented by the end of the year, the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) are proposing revisions to their suitability guidance.
Among other things, the CFRs aim to raise dealer conduct standards, including requiring firms to put clients’ interests first when meeting their suitability obligations.
In its proposed guidance, IIROC spells out how it interprets the phrase “put the client’s interest first”; details ongoing know-your-client (KYC) expectations; and sets out how dealers can meet their enhanced suitability obligations under the CFRs. It also aims to explain how suitability rules apply to different business models, discusses different approaches to KYC data collection, and provides examples of the information dealers may want to collect based on their business model, service offering and clients.
The MFDA’s proposed revisions merge its existing suitability guidance with CFR guidance “to ensure that MFDA guidance in this area continues to reasonably reflect the understanding of the MFDA and the business/business models of [fund dealers], while being consistent with similar guidance under securities legislation,” the self-regulatory organization said in a bulletin.
The revisions remove know-your-product guidance from the suitability guidance and into its own publication. Guidance on specific issues covered in other MFDA compliance bulletins is also removed to “make the notice more readable, and to keep its length reasonable,” it said.
The proposals are out for a 60-day comment period ending August 20.