Section 5.2 of National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) regulates mutual-fund sponsored conferences. Paragraph 5.2(b) requires that the selection of participating dealers’ representatives to attend such an event be made exclusively by the participating dealers, uninfluenced by any member of the organization of the mutual fund. As noted in the December 2016 edition of the Investment Funds Practitioner (Article), published by the Ontario Securities Commission (OSC), paragraph 5.2(b) enables participating dealers to maintain better supervisory control over their representatives and reduces the potential conflicts that might arise between the duties owed to clients by representatives and the benefits provided by fund managers to those representatives. The Article also states that fund managers should:
- Contact a participating dealer’s head office to request its involvement in the selection of representatives to attend the mutual fund-sponsored conference and ask that the dealer distribute the conference invitation to its representatives;
- Ensure that the opportunity to attend the conference is available to all representatives;
- Ensure that the conference is widely advertised (e.g. in the adviser section of the fund manager’s website and/or through widely known industry publications); and
- Ensure that attendance is filled in a manner (such as first come, first served) that doesn’t influence the selection of representatives.
Although the Article doesn’t contemplate the use of social media channels like LinkedIn, we think that paragraph (c) supports the view that advertising the conference on the fund manager’s LinkedIn page as well as its website is an appropriate medium for widely advertising the event to market participants.
The Article is a few years old, but we believe the advice remains relevant. We also note that section 5.2 of NI 81-105 is not affected by the proposed amendments announced in September 2018.