Ontario throws wrench into mutual-fund reforms

Ford government opposes regulators' plan to eliminate DSC.

Rudy Luukko 18 September, 2018 | 5:00PM

The much maligned and increasingly unpopular deferred-sales-charge option for mutual funds, which was about to be eliminated, has been rescued by the Ontario government. In so doing, the majority Conservative government led by Doug Ford opposes not only its own Ontario Securities Commission, which played the lead role in crafting mutual-fund reforms. It also rejects the unanimous agreement of the Canadian Securities Administrators, representing regulators across Canada.

On Sept. 13, the CSA released, for a 90-day comment period, its final position paper on how the DSC would be phased out, and how all forms of embedded fund commissions would be banned for discount brokerages. It was the culmination of a six-year process of research and consultations. This high-profile national initiative first made headlines with the December 2012 release of a CSA paper that was highly critical of embedded mutual-fund commissions that, like the DSC, are paid by fund companies to salespeople out of the management fees.

Last week's CSA announcement was swiftly superseded, in the form of a brief statement from Ontario Finance Minister Vic Fedeli, whose responsibilities include overseeing the OSC. "The CSA and OSC's proposed amendments result from a process initiated under the previous government and, if implemented, will discontinue a payment option for purchasing mutual funds that has enabled Ontario families and investors to save towards retirement and other financial goals," Fedeli said. "Our government does not agree with this proposal as currently drafted."

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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