CRM2, the “incredibly detailed” set of regulations aimed at the disclosure of fees and other reporting rules for the mutual fund industry, will slowly, but almost surely wend its way over to the insurance side, a lawyer told a seminar of the Independent Financial Brokers of Canada (IFB) on Tuesday.
“We have not seen the end of the impact of CRM2,” said Rebecca Cowdery, a partner at Borden Ladner Gervais LLP and a well-known lawyer in the mutual fund industry. “The insurance regulators are musing about expanding CRM2-type disclosure to the distribution of insurance and especially segregated funds.”
Cowdery said insurance regulators are not in a hurry to implement any type of CRM2 disclosure for insurance products and nothing has been said publicly. But she said dually-licensed advisors who will be following CRM2 regulations when it comes to mutual funds, will inevitably be asked by clients to reveal the same details for their insurance products.
CRM2 regulations, which are being phased in over three years, introduce new requirements for reporting to clients about the costs and compensation of their mutual fund investments and the content of their accounts. The first phase went into effect July 15, 2014, and when the final phase kicks in beginning July 15, 2016, firms must provide an annual report on all charges and other compensation as to the amount dealers are paid for the products and services they provide.
It’s not unusual that similar products are regulated the same. For example, regulators are now asking those in the exchange-traded fund (ETF) industry to produce a type of plan summary similar to the mutual fund industry’s Fund Facts documents, but with added information applicable only to ETFs.
However, Cowdery said that while mutual fund Fund Facts must be delivered to the client prior to purchase of a mutual fund as of May 30, 2016, regulators are not proposing that the ETF document s be delivered pre-trade.