On June 4, 2021, the Mutual Fund Dealers Association of Canada (MFDA) published Account Transfers – Summary of Comments (Bulletin), summarizing the comments that the self-regulatory organization received in response to MFDA Consultation Paper on Account Transfers (Consultation Paper) and providing its own comments in further response. The Consultation Paper was published last year to solicit feedback from stakeholders with an objective of improving the process by which client accounts are transferred between investment firms. Although the scope of the discussion in the Bulletin is mostly limited to the MFDA’s regulatory jurisdiction, namely the MFDA member firms, it may potentially have broader implications for the investment industry generally.
Summarizing the comments received, the MFDA noted that some of the common causes for delays or troubles in effecting account transfers included the following:
- Reliance on manual processes due to the absence of a commonly used electronic transfer mechanism;
- Defects and deficiencies in the transfer processes, or “Not in Good Order” transfers commonly arising due to the lack of uniformity in the transfer forms and the use of paper forms;
- Client retention efforts by firms;
- Different internal transfer policies at firms and lack of transparency regarding appropriate contact information;
- Firms having different standards regarding signatures, such as the requirement for wet signatures on original paper forms; and
- Inherent challenges associated with certain transfers and accounts such as registered accounts and products that cannot be transferred through FundServ such as GICs.
Among the various actions that the MFDA proposed to take to address some of the above issues were amendments to the MFDA Rules that would further establish transfer timelines and standards for MFDA member firms, in addition to the current principle-based rule on account transfers. As such rules would not be binding on non-MFDA member firms, the MFDA undertook to raise the matter of transfer timeframes with other regulators and industry associations.
Some commenters noted the importance of the MFDA and the Canadian Securities Administrators (CSA) coordinating a regulatory response to paperless initiatives and the need for a cost-efficient automated process and suggested that an industry task force be established to come up with a standardized approach for all industry participants.
Since any initiative, including in the area of automated processes, would be limited to mutual fund dealers if tackled by the MFDA alone, and because the issues raised in the Bulletin are likely to have common relevance for industry participants generally, it is reasonable to expect that the MFDA may attempt to engage other regulators and industry stakeholders on the relevant discussions, or that other regulators, such as the CSA, may show interest in adopting similar initiatives and coordinating with the MFDA and other regulators.
If you have any questions about the Bulletin, or require assistance with issues involved in client account transfers (regardless of whether you are a MFDA member firm or not), please do not hesitate to contact any member of our team.
June 30, 2021