Question

Q7. In your own words, briefly describe how mutual funds are regulated in Canada. Assume that this response is being sent to your clients in as part of a news letter. Your response must be original work and inline with the course content.

Answer 1

Regulation of Mutual Fund Industry in Canada:The Canadian mutual fund industry is highly regulated. Several organizations exist to make sure everyone in the industry follows similar rules and standards and acts to protect investors. These organizations govern everything from how and when information about a fund must be given to investors, to the standards advisors must meet.

a.Securities commissions:Each province and territory has its own securities commission, which is a government agency that regulates the distribution and sale of mutual funds and other securities in that province or territory.

People who sell or give advice about mutual funds must be registered with the provincial securities commission in each province where they want to sell mutual funds.

Firms that act as investment fund managers must also be registered with their securities commissions, as do firms and individuals that act as portfolio managers. Before they can register, they must meet certain educational and experience requirements.

b.Canadian Securities Administrators:Each of the provincial and territorial securities commissions is also a member of the Canadian Securities Administrators (CSA), an umbrella group that works to improve and establish some consistency when it comes to regulating Canada’s capital markets. However, you’ll still find some differences in securities laws across the provinces and territories.

c.Self-regulatory organizations:In most provinces, mutual fund dealers are regulated by the Mutual Fund Dealers Association of Canada (MFDA). All mutual fund dealers in these provinces must be a member of the MFDA.

Investment dealers are regulated by, and must be members of, the Investment Industry Regulatory Organization of Canada (IIROC).

Unlike the securities commissions, the MFDA and IIROC are not government agencies. They’re supervised by the securities commissions but can also impose rules that are higher than the minimum standards set by securities laws. They also have the authority to investigate complaints and take enforcement action when necessary.