Canadian securities regulators haven't made up their minds on whether to ban payments by mutual-fund companies to salespeople, according to a senior Ontario Securities Commission official.
"No decision has been made to proceed with a ban on embedded commissions," John Mountain, director of the OSC's investment funds and structured products branch, told a panel discussion at the annual Investment Funds Institute of Canada conference on Sept. 29.
Mountain also told IFIC delegates that the regulators' position paper on fund fees is to be released in late December, but before Christmas. "You can expect to see a concept document, an aspirational statement."
He added that while the Canadian Securities Administrators is trying to be respectful of the research it has conducted into embedded fund commissions, it is also seeking a "reasoned discussion" with everyone who would be affected by a ban.
Mountain acknowledged that proposals to ban fund-company payouts to brokers and dealers are contentious, "even internally" within the Canadian Securities Administrators, representing regulators in all provincial and territorial jurisdictions across Canada. He said CSA members have agreed to publish the concept document scheduled for release in December, "but that's the only place there has been complete agreement."
Among those remaining to be convinced is fellow panelist David Linder, executive director of the Alberta Securities Commission. Linder says investors should have a say in how their advisors are compensated, and he is "not necessarily in the camp" of those who favour banning embedded commissions.
Efforts to implement a ban have been led by the OSC, whose chair Maureen Jensen spoke to a business audience earlier this week about how pay-related conflicts of interest have been detrimental to the outcomes of fund investors. Jensen said it was up to the industry to propose alternatives to eliminate conflicts of interest.
Meanwhile, IFIC remains adamantly opposed to a ban. IFIC chair John Adams told the conference that there are biases in any compensation structure in any industry. "Regulators need to assess how serious this conflict is before they decide to cast the industry and investors into uncharted waters," said Adams, CEO of Primerica Life Insurance Co. Canada, whose operations include one of Canada's largest mutual-fund dealers.
Adams called on regulators to develop and implement solutions that eradicate conflicts "without taking extreme measures that would negatively impact investor choice, access and affordability."
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