The Mutual Fund Dealers Association of Canada (MFDA) is putting client performance reporting from fund dealers under the microscope.
In a bulletin to the industry, the MFDA set out its compliance priorities for the year ahead, highlighting a focus on dealers’ reporting to clients.
The self-regulatory organization noted it’s currently conducting a targeted examination of firms’ performance reports “to assess whether performance data was accurately reported to clients.”
In its notice, the MFDA said firms should “carefully review and test their annual performance reporting…. Where unexpected or unusual returns are identified, it is important for [dealers] to investigate such instances to identify the specific cause and determine the extent of any issue.”
Recently, the British Columba Securities Commission (BCSC) also said its compliance work has found shortcomings in client performance reporting among the firms it oversees directly.
Among other things, the BCSC found firms that didn’t provide clients with required reports, reports that didn’t include required information, and firms that failed to oversee the production of these reports by third parties.
Apart from performance reporting, another key issue for the MFDA is the distribution of alternative funds.
In January, the Canadian Securities Administrators issued blanket relief designed to make it easier for fund reps to qualify to deal in liquid alternative funds.
For firms that distribute alt funds, the MFDA said that “in addition to examining [dealers’] product due diligence practices and performing suitability testing, we will also be assessing compliance with the blanket relief orders.”
The introduction of continuing education (CE) requirements is also a focus for the MFDA this year.
In particular, it will be seeking CSA approval for proposed accreditation standards and completing the development of its tracking system, known as CERTS.
“CERTS system testing is currently underway and policy development is in the final stages of completion,” it said. “Once the accreditation standards and CERTS system are finalized, there will be a transition period before the CE requirements come into effect.”
Other initiatives in 2021 include a cybersecurity survey and another client research request to industry firms.