FAIR Canada
FAIR Canada Newsletter

September 2012

FAIR Canada Supports the CSA's Proposed Cost and Performance Reporting Requirements

FAIR Canada recently made a submission to the Canadian Securities Administrators ("CSA") in support of proposed cost disclosure and performance reporting requirements. Reform is required because consumers need to be provided with essential information so that they can answer two basic questions about their investments: (1) What did I pay? and (2) How did my investments perform?

 

FAIR Canada agrees with the provision of aggregate performance reporting and information on charges and compensation (ultimately paid by consumers) as it will assist retail investors in understanding basic facts about the cost and performance of their investments.

 

Disclosure of Amount of Embedded (Trailing) Commissions

 

We fully support a requirement for registered firms to disclose any trailing commissions (in dollars) that they have received which is charged to the investor through the management fee ("MER") in respect of mutual funds. Retail investors have a very low awareness of trailing commissions and do not understand the extent to which such commissions diminish their investment returns. It is thus essential that this information be provided in a clear, plain language and meaningful manner so that investors can make an informed assessment. In FAIR Canada's view, the requirement to disclose the amount of trailing commissions is absolutely essential in order to provide meaningful cost disclosure to retail investors, and is a de minimis step given more far-reaching reforms which are underway in other jurisdictions.

 

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FAIR Canada sees major improvements in new Fund Facts proposal

 

FAIR Canada has provided positive comments on several improvements the CSA has proposed to the Fund Facts document in Stage 2 of its Point of Sale initiative. Improvements include:

  • a requirement to confirm whether trailing commissions are paid to advisors;
  • language informing investors of the potential for conflicts of interest resulting from trailing commissions;
  • the addition of the worst three-month return to the 'Performance' section;
  • stronger warning language about the risks of investing in mutual funds;
  • the inclusion of historical GIC performance as a benchmark; and
  • the addition of a requirement to include up to four of the main risks of the fund.

 

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Consumers Council of Canada Supports Single, Regulated Independent Dispute Resolution Service

 

In a recent report about Canada's banking dispute resolution system, the Consumers Council of Canada ("CCC") supports a single, regulated independent dispute resolution service for banking-related complaints in Canada. The CCC examines recent proposals from the federal Department of Finance and the Financial Consumer Agency of Canada (the "FCAC"), and concludes that consumers deserve the best available process for dispute resolution now, and therefore all banks should be required to participate in the Ombudsman for Banking Services and Investments ("OBSI") at this time. In addition, regulatory change in this area will require a lengthy and detailed process, with much public input, to achieve fair outcomes for consumers. 

 

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Fiduciary Duty Fight Heats up in the U.S. 

 

The U.S. based Institute for the Fiduciary Standard recently announced 'Fiduciary September', an initiative with events occurring throughout September, which aims to add fiduciary duty to policymakers' agenda. The initiative seeks to encourage policymakers and industry participants to apply and uphold the fiduciary standard for investment advice.

 

Click here to read the full story. 

 

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