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Securities regulators to prohibit deferred mutual fund charges, except Ontario

Provincial securities regulators across the country are planning to ban the sale of mutual funds that pay upfront commissions to financial advisers and charge clients early withdrawal fees, with one notable exception.

The Canadian Securities Administrators, an umbrella organization for the country’s 13 securities authorities, says all regulators except Ontario’s will move to prohibit the so-called deferred sales charges early next year in the interest of “investor protection and market efficiency.”

All regulators, including the Ontario Securities Commission, will also move to ban certain advisory commissions where investors receive no advice.

Tom Hall, a spokesman for the Northwest Territories securities office, says a “fairly small subset of products” will be impacted by the change to advisory fees as investors continue to shift toward do-it-yourself online trading and exchange-traded funds.

The Canadian Securities Administrators says the two bans will span a transition period of at least two years.

The Ontario Securities Commission did not immediately respond to questions as to why it is opting not to eliminate deferred sales charges.

This report by The Canadian Press was first published Dec. 19, 2019.

The Canadian Press