Commission changes rile Ford government

The government of Ontario Premier Doug Ford quickly pushed back Thursday against a proposal from securities regulators that would target certain embedded commissions tied to the sale of mutual funds.

If implemented, the changes "will discontinue a payment option for purchasing mutual funds that has enabled Ontario families and investors to save towards retirement and other financial goals,” provincial Finance Minister Vic Fedeli warned in a statement released Thursday.

Securities regulators, however, say the proposed changes would help provide more transparency on fund fees, as well as eliminate a source of investor-protection concerns.

Part of the proposal is intended to prohibit investment fund managers from paying upfront sales commissions to dealers. Doing so, the regulators say, would lead to the discontinuation of what is known as the “deferred sales charge option."

Under such an option, instead of paying an initial sales charge, investors could instead be forced to pay a redemption fee to the fund manager if they try to sell before a certain period, the securities regulators say.

“The upfront sales commission payable by fund organizations to dealers for mutual fund sales made under the DSC option is a key feature of that sales charge option that gives rise to a conflict of interest that can incentivize dealers and their representatives to make selfinterested investment recommendations to the detriment of investor interests,” said the notice and request for comment that was published Thursday by the Canadian Securities Administrators.

Another proposed amendment from the regulators is intended to ban trailing commissions paid to dealers (such as those who are order-execution-only) who do not make a so-called “suitability determination” with their clients.

The proposed amendments, including the elimination of some disclosure requirements, are undergoing a 90-day comment period.

However, the Ontario PC regime, led by Ford, quickly indicated they do not support the effort, which they noted had begun under the province’s previous, Liberal regime.

“Our government does not agree with this proposal as currently drafted,” Fedeli said. “We will work with other provinces and territories and stakeholders to explore other potential alternatives to ensure fair, efficient, capital markets and strong investor protections."

Since the Tories took power in Ontario in June, they have taken aim at a number of policies of the previous Liberal regime, such as the province’s cap-and-trade system.

The Ford government has also ousted a number of Liberal-era appointees.

A spokesperson for the Ontario Securities Commission, a member of the CSA and Canada’s largest capital markets watchdog, said in an email that “our Minister’s support is critically important to the OSC, and we are respectful of our Government’s authority to decide whether any rules published for comment ultimately come into effect.”