Answer: Members of the Mutual Fund Dealers Association of Canada (MFDA) are registered as mutual fund dealers with the relevant securities regulatory authority as well as holding membership with the MFDA. Registered mutual fund dealers can sell “mutual funds”, as that term is defined in the securities laws of the relevant Canadian jurisdictions. Some mutual funds are qualified for sale to the public under a prospectus (Public Mutual Funds) that meets the requirements set out in National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101). Other mutual funds are sold in reliance upon an exemption from the prospectus requirement (Private Mutual Funds).

Although the terms of an MFDA Member’s registration permit it to sell Private Mutual Funds, to do so an exemption from the prospectus requirement also must be available. For example, the purchaser must meet the criteria for the accredited investor or some other prospectus exemption. In practice, many of an MFDA Member’s existing and potential clients might be retail investors who do not meet the criteria to invest in Private Mutual Funds.