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ARTICLE · 08 OCTOBER 2018

Mutual Fund Embedded Compensation: The Expected, The Dramatically Unexpected And What's Next?

Borden Ladner Gervais LLP
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As expected, on September 13, 2018, the Canadian Securities Administrators (the CSA) published draft rules intended to implement the policy direction reached earlier this year on mutual fund fee reform ...

CanadaCorporate/Commercial Law
Rebecca Cowdery
Rebecca Cowdery
Lynn McGrade
Lynn McGrade
Jason Brooks
Jason Brooks
Kathryn Fuller
Kathryn Fuller
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As expected, on September 13, 2018, the Canadian Securities Administrators (the CSA) published draft rules intended to implement the policy direction reached earlier this year on mutual fund fee reform, also known as the "embedded compensation" project. The draft rules are written as amendments to National Instrument 81-105 Mutual Fund Sales Practices, together with related amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure and National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

The draft rules are intended to have two primary effects once adopted:

  • Mutual fund managers will no longer be able to pay dealers any form of sales commission at the time of acquisition of mutual fund securities. This is intended to wipe out the "deferred sales charge", "low load" and "level load" methods of acquiring mutual funds. Instead clients will agree with their dealer and individual advisor, whether or

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