The Canadian Securities Administrators (CSA) recently issued CSA
Consultation Paper 81-408 – Consultation on the Option of
Discontinuing Embedded Commissions (the Paper). While the CSA has
not yet made a decision on banning embedded commissions, the Paper
outlines the various investor protection and market efficiency
issues the CSA believes embedded commissions raise. These include
creating conflicts of interest, limiting investor awareness of
dealer compensation costs as well as distorting incentives for
dealers.
If adopted, a ban on embedded commissions would bring about
substantial changes to the investment funds industry that the CSA
believes will lower fees and increase competition among fund
managers. Given the potential magnitude of these changes, the CSA
has launched a 150-day consultation period for public comment on
the Paper. The Paper contemplates that a ban on embedded
commissions, if adopted, will apply to structured notes and all
"investment funds" as
