The CSA yesterday released a status report on their mutual fund fee consultation initiative. As we discussed last year, the CSA released a discussion paper in December 2012 identifying investor protection and fairness issues resulting from the Canadian mutual fund fee structure and soliciting feedback on the current structure.
Today's report identifies a number of key themes emanating from the consultation process from the point of view of industry and investors. According to industry stakeholders (i) there is no evidence of investor harm warranting a change of the current fee structure; (ii) a ban on embedded compensation would have unintended consequences, including with respect to reduced access to advice for small retail investors and the creation of an unlevel playing field among competing products; and (iii) the impact of domestic and international reforms should be assessed prior to moving ahead with further proposals.
From the point of view of investors, (i) embedded adviser compensation should be banned as it causes a misalignment of interests that impacts investor outcomes; (ii) investors should have, at a minimum, the true choice to not pay embedded commissions; (iii) a best interest duty for advisers should be implemented; and (iv) adviser proficiency requirements should be increased and the use of titles regulated.
The CSA also referred to the status report on the best interest duty, as a number of key messages were found to be similar to those emerging from that consultation process. According to the CSA, the similarity between the two initiatives suggests a need to coordinate policy assessments going forward, and the CSA expect to communicate any potential regulatory actions in the coming months.