In the planned consultation the CSA will be proposing to prohibit the payment of trailing commissions to dealers, such as discount brokers, who do not make a suitability determination (presumably, this is equivalent to banning the offering of products such as mutual funds with embedded commissions being paid to dealers, including discount brokers, for services they cannot and knowingly will not provide). This can be likened to Health safety regulators consulting on whether poison should be prohibited from retail grocery shelves. Consulting on such an obvious case of financial assault on investors is disrespectful of retail investors. The CSA should be ashamed to admit that for well over a decade hundreds of millions of dollars have needlessly been diverted from the retirement savings of Canadians despite numerous pleas from consumer groups.
The CSA has not yet addressed the enabler of these abusive trailer payments, the mutual funds. The mutual funds are knowingly reducing fund assets by paying discount brokers (sometimes even related parties) for nothing. These assets aren’t some intangible collection of cash. They are the retirement savings of millions of Canadians. Are there provisions in NI1-107 that exempt funds from protecting unitholder assets? If not, why isn’t the CSA prosecuting those entities for a breach of fiduciary duty? Why must investors have to resort to Class Actions for such an in-your-face attack on their life savings?