In recently published CSA Notice 31-360, the Canadian Securities Administrators (CSA) announced they are granting transitional blanket relief from certain Client Focused Reforms (CFR) in respect of sales of deferred sales charge (DSC) products in connection with mutual fund sales.
As we discussed in a previous blog post, the CSA have adopted amendments to National Instrument 81-105 Mutual Fund Sales Practices (NI 81-105) to prohibit the payment by fund organizations of upfront sales commission to dealers resulting in the discontinuation of the DSC option that will take effect in all jurisdictions on June 1, 2022. Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), known as the CFR, include enhanced conflict of interest provisions that became effective on June 30, 2021. The remaining CFR provisions are required to be implemented by December 31, 2021.
As a result of the effective date timeline for the DSC amendments to NI 81-105 and the CFR amendments to NI 31-103, the CSA recognize that there will be a period of overlap in which compliance with the CFR is required before the DSC ban takes effect. To help address any compliance issues that may arise, the CSA have granted relief from enhanced conflict of interest standards and the suitability requirement to put the client's interest first in respect of sales of DSC products during the DSC transition period. All remaining CFR and suitability requirements continue to apply to sales of DSC products and must be implemented by December 31, 2021, including relationship disclosure information obligations. The relief orders took effect on June 30, 2021 and will expire on June 1, 2022.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
