TORONTO, Dec. 19, 2019 (GLOBE NEWSWIRE) — FAIR Canada welcomes the announcement today from the Canadian Securities Administrators (CSA) that all Canadian securities regulators will ban trailing commissions paid by mutual fund organizations to dealers who only execute orders and do not provide advice, such as discount brokers.
We also support the announced ban in all jurisdictions except Ontario on upfront sales commissions paid by mutual funds to dealers, which will lead to the end of the Deferred Sales Charge (DSC) and associated redemption fees.
DSCs are a form of embedded commission (paid at the point of sale) the needs to be prohibited. They are rife with conflicts of interest, target the most vulnerable investors and there is strong evidence of mis-selling. Even the securities industry associations that advocate on behalf of dealers support a ban on DSCs and admit there are problematic conflicts of interest.
Over time the financial industry will move to a more consumer friendly fee structure. Leading financial institutions have already decided to stop selling DSC mutual funds and more will come on board over time. We believe that in time the elimination of DSCs will encompass all of Canada, including Ontario.
FAIR Canada has actively advocated against these forms of imbedded commissions in mutual funds for many years. Imbedded commissions harm market efficiency and investors. These reforms will improve financial outcomes for Canadians.