Canadian securities regulators propose ban on certain embedded commissions
Posted Sep 13, 2018 12:35:36 PM.
Last Updated Sep 13, 2018 01:20:35 PM.
This article is more than 5 years old.
TORONTO – The Canadian Securities Administrators has proposed changes that would prohibit certain embedded commissions paid to dealers in a bid to address investor protection concerns.
The umbrella organization of the country’s provincial securities regulators has published a notice with its proposal, which includes banning investment fund managers from paying up-front sales commissions to dealers.
The CSA has also proposed a ban on trailing commissions to certain dealers who do not make a suitability determination, such as those that only offer trade execution.
The umbrella organization says the changes will eliminate a compensation conflict inherent in the deferred sales charge option — a fee to be paid by the investor if the investment is redeemed prior to a set amount of time — which has been criticized.
The CSA says prohibiting the upfront sales commission payments will eliminate the need for charging these redemption fees.
The notice with the proposed amendments will be open for public consultations until Dec. 13.
