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Canadian regulators consider ban on mutual fund trailer fees

Published 2016-06-29, 12:46 p/m
© Reuters. Canadian regulators consider ban on mutual fund trailer fees

TORONTO, June 29 (Reuters) - Canadian securities regulators
are considering major changes to the way mutual funds are sold
in Canada, possibly banning "trailer fees" and other charges
paid to financial advisers selling the products.
The Canadian Securities Administrators, a group of the
nation's provincial securities regulators, said on Wednesday
that current industry practices raised issues about investor
protection that suggested a need to consider change.
Trailer fees, which have already been banned in Britain and
Australia, are commissions that mutual fund managers pay
financial advisers when they sell the funds to investors.
Consumer groups say the commissions have grown over the
years while investors often do not understand them or even know
they exist. Previous studies have suggested a link between the
payments and sales of mutual funds by financial advisers,
despite their higher costs compared with exchange-traded funds.
The CSA, which exists to harmonize regulation of capital
markets in Canada, said it would publish a consultation paper on
the fees by this fall, followed by a four-month consultation
period when affected parties can respond.
The group is considering that the fees be scrapped and that
investors pay directly for advice instead.


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