Ban Announced On Mutual Fund Deferred Sales Charges And Certain Trailing Commissions

The Canadian Securities Administrators (CSA) announced a final decision to prohibit certain types of embedded commissions for publicly offered mutual funds:

1. The payment of upfront sales commissions by fund organizations to dealers will be prohibited. The intended effect of this ban is to discontinue sales charge options that involve such payments, such as all forms of the deferred sales charge option, including low-load options (collectively, the DSC option). The DSC option ban will not be adopted in Ontario, but will be published for adoption by all the other Canadian provinces and territories (participating jurisdictions) in early 2020.
2. Trailing commission payments by fund organizations to dealers who do not make a suitability determination, such as order-execution-only (OEO) dealers will be prohibited. The CSA had examined, by way of public consultations and commissioned studies, the option of discontinuing all forms of embedded commissions, but determined