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The Voice of Canada’s Investment Funds Industry

Media Release

IFIC CEO Responds to Release of CSA Consultation Paper on Embedded Commissions


Weigh investor benefits carefully before disrupting millions of Canadian account holders

Toronto – January 10, 2017 – Paul C. Bourque, Q.C., president and CEO of The Investment Funds Institute of Canada (IFIC), has responded to a proposal from the Canadian Securities Administrators (CSA) that would prohibit embedded commissions by reminding regulators that roughly 4.5 million Canadian households currently pay for their investment fund fees through such commissions.  The proposal was contained in Consultation Paper 81-408 that was released by the CSA today.

“Eliminating the ability of investors to pay their fees through what is known as a bundled or embedded commission could significantly disrupt access to investment advice for many investors,” said Bourque.  “Both regulators and governments should understand whether the cost of banning embedded commissions is proportionate to the regulatory objective of mitigating conflicts of interest.”

“Wealthier investors are unlikely to feel the impact of the proposed commissions ban, but many middle class investors (those with less than $100,000 in assets) who make up the largest population of investors will have to choose between paying higher fees and foregoing financial advice,” Bourque noted. “Smaller investors – those with assets less than $50,000 – may be unwilling to pay higher fees for investment advice or, if they are willing, may have difficulty finding an advisor willing to serve a small account.”

“There is solid evidence that financial advice helps Canadians build wealth,” Bourque said.  “There is also evidence from the UK that an unintended consequence of prohibiting embedded commissions is a reduction in access to financial advice.”

What is not at all clear is the extent to which Canada’s dominant model of embedded compensation is harmful. A December 15, 2016 report from the CSA identified twenty-seven compensation practices currently in use in Canada and found that, in every one of the eighteen that housed a potential for conflict, the conflicted activities are already prohibited under the existing rules.  A concurrent MFDA survey found few violations and acknowledged that the concerned firms responded to follow up by the MFDA’s Enforcement Department.  Similarly, IIROC indicated that it expects any issues it identified could be addressed through additional guidance or amendments to existing rules.

“None of the findings of these three compensation reviews support the case for a ban on embedded commissions.  If regulators have concerns about specific practices, they already have the tools they need and we encourage regulators to use them,” added Bourque.

“The industry is disappointed that the CSA has chosen not to consult on less disruptive alternatives and have limited the consultation to one option – a complete prohibition,” said Bourque.  “We appreciate the lengthy consultation period and will use that time to propose alternatives and assess the potential impacts on investors and the industry.”

About IFIC

The Investment Funds Institute of Canada is the voice of Canada’s investment funds industry. IFIC brings together 150 organizations, including fund managers, distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada’s savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canada’s mutual funds industry and its investors for more than 50 years.

About Paul C. Bourque, Q.C.

Paul Bourque assumed the position of President and CEO of IFIC on July 18, 2016 after serving as Executive Director of the British Columbia Securities Commission.  Previously, Paul was an Associate Partner with Deloitte Inc. leading the national securities and regulatory investigation practice.  He has held senior positions with a number of securities regulators and law enforcement agencies including the Investment Industry Regulatory Organization of Canada (IIROC); the Alberta Department of Justice; and the Ontario Securities Commission.  Paul is a practising member of the law societies of British Columbia and Upper Canada and a non-practicing member of the law society of Alberta.

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For further information:

Contact Sara Clodman, Senior Manager, Public Affairs, sclodman@ific.ca or 416-309-2317