PMAC Supports the CSA’s Consultation on Option of Discontinuing Embedded Commissions

Toronto, ON – January 10, 2017 – The Portfolio Management Association of Canada (PMAC) applauds the CSA for taking a bold step forward in its release of CSA Consultation Paper 81-408 – Consultation on the Option of Discontinuing Embedded Commissions (the Consultation) that announces a thorough consultation on the option of discontinuing embedded commissions in mutual funds. The industry has been anticipating and preparing for a possible move to direct pay arrangements for several years and the CSA signaled the intent to move in this direction earlier this summer with the release of CSA Staff Notice 81-327 – Next Steps in the CSA’s Examination of Mutual Fund Fees. “The CSA is clearly proceeding cautiously and thoughtfully to ensure they have a full appreciation of both the positive and negative consequences of moving to direct pay arrangements before making a decision. PMAC applauds this approach which should pave the way for a Canadian-focused solution which carefully considers all potential impacts on investors and the industry”, says PMAC President, Katie Walmsley. “The extended 150 day comment period and proposed roundtables will be beneficial to all,” adds Walmsley.

Michael Mezei, PMAC Board Director and President of Mawer Investment Management, a large Canadian investment management firm, notes that “Avoiding embedded commissions is not new. Traditional investment counsel/portfolio managers follow the long-standing practice of charging fees to clients directly with these fees being clearly established from the onset of the relationship and reported when fees are deducted from a client’s account. We believe that clients’ interests are best served by full transparency to help them understand what they are paying for, and the more quickly we can move in this direction across business models, the better off investors and the industry will be.”

The Consultation notes that critics of moving toward direct pay arrangements have argued that it may be too soon to discontinue embedded commissions in light of the many other changes happening with securities regulation and that there may be a risk that lower wealth investors will not be able to afford advice if fees are charged directly. While PMAC understands these concerns, Ms. Walmsley supports the CSA’s view that discontinuing embedded commissions could be complementary to recent reforms and proposals. PMAC looks forward to participating in this important discussion.

About PMAC

Portfolio Management Association of Canada (PMAC) represents more than 230 asset management firms that manage more than $1.5 trillion in assets. Members manage portfolios for private individuals, foundations, universities and pension plans. As one of the largest and fastest growing investment industry associations in Canada, PMAC operates coast-to-coast in English and French language markets. PMAC employs a collaborative information-sharing business model and advocates on behalf of its members to securities regulators and government agencies. PMAC represents investment management firms registered to do business in Canada as portfolio managers. The Association’s mission is to advocate the highest standards of unbiased portfolio management in the interest of investors served by members.

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