The Canadian Securities Administrators yesterday
released a discussion paper intended to solicit
feedback on the structure of mutual fund fees in
Canada. In addition to providing an overview of the
current mutual fund fee structure, the paper
identifies investor protection and fairness issues resulting
from the current structure, and also considers the potential
regulatory options available to the CSA to address the
Specifically, the paper considers such issues as the lack
of investor understanding of fund costs, potential conflicts of
interest at the mutual fund manufacturer and advisor levels, the
potential for cross-subsidization of commission costs, alignment of
advisor compensation and services, and the potential for low-cost
options for do-it-yourself investors.
In response to the identified issues, the CSA state
that they may consider a number of potential regulatory
changes, including: (i) establishing a minimum level of
ongoing services that advisors would have to provide investors in
exchange for payment of trailing commissions; (ii) requiring a
standard class for DIY investors with no or reduced trailing
commissions; (iii) requiring that the trailing commission
component of a mutual fund's management fee be unbundled and
charged and disclosed as a separate fee; (iv) setting a
maximum limit on the portion of mutual fund assets that could be
used to pay trailing commissions to advisors; and
(v) implementing additional standards or duties for
Also of note, the impact of any potential regulatory changes
could affect stakeholders outside the mutual fund industry.
Specifically, the CSA state that while the paper focuses on
mutual funds, the regulatory changes may also eventually
capture investment funds and comparable securities
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