In a consultation paper released on October 1, 2010, the Autorité des marchés financiers (AMF) describes its proposal for harmonizing the regulation of mutual fund dealers operating in Québec with the regulation of those dealers in other jurisdictions in Canada. The AMF’s consultation is the latest step in the AMF’s commitment to address the different regulatory regimes that currently apply in Québec and in the other jurisdictions in Canada.
In its consultation paper the AMF confirms that it will maintain regulatory jurisdiction over mutual fund dealers operating in Québec, with discipline and professional development of mutual fund representatives being retained by the Chambre de la sécurité financière (CSF). The Mutual Fund Dealers Association of Canada (the MFDA) will not be recognized as a self-regulatory organization for mutual fund dealers and their representatives in Québec. However, the AMF is committed to adopting those parts of the MFDA’s regulations that are compatible with Québec legislation and regulations to ensure appropriate harmonization and a minimized regulatory burden for those firms carrying on business in Québec and in other jurisdictions in Canada. Its goal is to bring about harmonized regulation in the ways described in the consultation paper by September 28, 2011.
Comments are due on the AMF’s proposals described in its consultation paper Consultation on the Harmonization of Mutual Fund Distribution Regulations [available here] by November 30, 2010.
The AMF proposes to adopt the provisions of the MFDA’s by-laws, rules and policies (MFDA regulations) provided that it considers such provisions to be compatible with Québec legislation and regulations. The AMF lists those MFDA rules and policies that it deems incompatible with Québec regulations, which means that the current Québec rules relating to those rules and policies can be expected to govern. Examples of “incompatible” requirements include those relating to bonding and insurance, training programs, regulation of financial planning activities, course requirements for trading partners, directors, officers and compliance officers, and complaint handling.
In addition, the AMF will not change certain fundamental Québec-specific legislation and rules, including:
- Representatives will continue to be required to be members of the CSF and to pay annual dues;
- The CSF will continue to maintain its authority with respect to discipline and compulsory professional development of representatives;
- Dealers will continue to be required to pay dues to the Fonds d’indemnisation des services financiers (Financial Services Compensation Fund); and
- Dealers and their representatives will continue to be required to subscribe to a Québec-based liability insurance plan.
As part of its consultation, the AMF published a useful administrative version of the MFDA regulations in which the rules deemed incompatible with the Québec legislation and regulations are highlighted [available here]. The balance of the MFDA regulations would be adopted by the AMF, subject to certain transition periods designed to lessen the burden on mutual fund dealers already operating in Québec.
The AMF proposes to issue as AMF notices, those MFDA notices that pertain to the MFDA regulations that will be adopted in Québec to ensure appropriate comparability in administration of the applicable regulations. The AMF also will analyze future amendments to the MFDA regulations to determine whether these amendments should also be adopted in Québec.
Notwithstanding the goal of having substantially similar regulatory systems, because the MFDA regulations adopted in Québec would be administered by the AMF, the AMF recognizes the potential risk of varying interpretations or applications. In its consultation paper, the AMF indicates that it will, together with the CSF, work with the MFDA to minimize that risk. In addition, the AMF proposes to discuss with the MFDA how compliance reviews of dealers operating in Québec and elsewhere in Canada could be coordinated with the goal of minimizing the operational impact borne by those dealers.