Regulators may not have made up their minds yet on whether to ban embedded commissions, but they said they know one thing for sure: the status quo cannot remain.
Maureen Jensen, chair and chief executive officer of the Ontario Securities Commission (OSC), told a packed audience at a special round table meeting in Toronto held Sept. 18 that the Canadian Securities Administrators (CSA) is reviewing the more than 140 comment letters it has received on the subject.
Jensen said one of the biggest problems facing regulators across the country is the concern of conflicts of interest that can arise when an advisor suggests a mutual fund with embedded compensation. But she said regulators have also heard arguments that doing away with this kind of compensation can have unintended consequences, especially for those with modest means. While she said there is no “perfect solution,” she also said the current model “isn’t working for investors in the way they deserve.”
Capping or standardizing commissions
During the round table, members of the industry were asked to provide comments on three topics: capping or standardizing trailing commissions; discontinuing or bringing in additional standards for using the deferred sales charge purchase option and enhancements to disclosure and choice for investors.
Regulators will now take some more time to review all the comments with the goal of having recommendations ready by the spring.
“I want to be clear,” said Jensen, “that if there is no viable alternative, banning embedded commissions remains an option.”