The Mutual Fund Dealers Association (MFDA) suggests that member firms pay particular attention to how they handle deferred sales charge (DSC) fees, know your client (KYC) information, intermediary arrangements, and the way services are advertised and marketed to seniors.
In Bulletin #0631-C, which was released last month, the MFDA highlighted several compliance issues and priorities that it says dealers should bear in mind when supervising advisors.
As of July 15, 2014, if an investment is being sold on a DSC basis, advisors are obliged to disclose both the applicable fee schedule and any trailing commissions to the client. The MFDA says its staff will be reviewing dealers' policies and practices to make sure they are complying with this rule, and that they are also using the Fund Facts document to meet their disclosure obligations.
The MFDA also says it wants to make sure that KYC information has not only been collected, but kept up to date. "In 2015, staff will review Member policies and practices to ensure KYC is current when making recommendations and performing suitability assessments," reads the bulletin.
Last year, the MFDA asked members to perform a reconciliation of the assets held in intermediary client accounts and to investigate and report any exceptions. This year, the regulator intends to follow-up with members to ensure that appropriate action has been taken.
Finally, the MFDA says it continues to be focused on protecting seniors, and that dealers' compliance activities should consider issues which may affect older investors and other vulnerable clients. "In particular, titles and advertising and marketing materials that target seniors should be subject to thorough review to ensure they are not misleading," says the MFDA.