FAIR Canada submitted a comment letter to the CSA on July 7, 2010 about the recently published scholarship plan initiative. Although FAIR Canada applauded the CSA for undertaking this initiative, it had a number of substantive comments, including strengthening the suitability requirement so that salespeople are required put their clients’ best interests first.

Executive Summary

1. Plan Summary

FAIR Canada recommends that:

(a) a clearer discussion about fees, particularly upfront fees, be mandated;

(b) certain specific comments within the Sample Plan Summary be changed in order to give Plans a clear indication that language MUST be unambiguous where it may negatively affect an investor’s interest;

(c) the Plan Summary mandate simple disclosure of the financial performance of the Plan; and

(d) the Plan Summary and the Prospectus (and the advice provided by salespeople) recommend consultation with salespeople about alternative education savings plans.

2. Scholarship Plan Prospectus

(a) The additional disclosure we recommend including in the Plan Summary, with respect to upfront disclosure of fees, sales charges, enrolment fees or other fees which may be refunded, should accompany the disclosure proposed in Item 15 of Part C of Form 41-101F3.

(b) We recommend adding disclosure to the Prospectus regarding alternatives to scholarship plan investments.

3. Format and Delivery of Plan Summary and Scholarship Plan Prospectus

FAIR Canada recommends that the CSA require:

(a) physical delivery of the Plan Summary and Prospectus, together with an explanation of what each document is, before the sale or investment; and

(b) that all financial data contained in the Prospectus be made available for download via the World Wide Web in XBRL (eXtensible Business Reporting Language) format.

4. Comments regarding the Proposed Second and Third Phases of the CSA Initiative

(a) The reformulated version of National Policy 15 should require that all salespeople confirm that they have explained all of the information in the Plan Summary to the investor, including the availability of other types of education savings plans, and for the investor to confirm his/her understanding of that information.

(b) As part of the explanation described above, the CSA should require that salespeople make specific representations to investors about the potential unsuitability of scholarship plans for some investors.

(c) The suitability standard should be strengthened to meet the problems identified in the HRSDC Report, to require that salespeople act in their clients’ best interests when offering scholarship plan products.

(d) We recommend that, in order to align the interests of investors and salespeople , the CSA consider substantively regulating fees. One option is to limit the extent to which contributions are used to pay enrolment fees in any one year.

(e) With respect to the proposed third phase of the initiative, we support requiring scholarship plan dealers and salespersons to become members of an SRO, as we believe that this could lead to increased oversight and supervisions.