What Is the Mutual Fund Dealer's Association?
The Mutual Fund Dealers Association (MFDA) is a self-regulatory organization that oversees the Canadian mutual fund industry as it relates to the sale of mutual funds and exempt fixed-income products to retail investors. The Mutual Fund Dealer's Association (MFDA) was created in 1998, in response to the rapid growth of the mutual fund industry in Canada.
Understanding the Mutual Fund Dealer's Association (MFDA)
The Mutual Fund Dealers Association (MFDA) formed in 1998 as a non-profit corporation at the behest of the Canadian Securities Administrators (CSA). The self-regulatory organization (SRO) is recognized, as of 2018, by eight out of 10 provincial securities commissions in Canada. Its formation followed a period that saw a ten-fold increase in the size of the Canadian mutual fund industry in the late 1980s.
The MFDA’s stated goal is to regulate the operations of its member dealers to maintain public faith in the Canadian mutual fund industry. As an SRO, its implicit motivation is to minimize regulation by the government. A 12-member board of directors, with six so-called public directors and six industry directors, oversees MFDA operations.
By its own account, the MFDA regulates 91 mutual fund dealers, representing more than $500 billion of mutual fund assets under administration (AUA) and more than 80,000 sales personnel, as of 2018. The MFDA claims its members financially advise more than half of all Canadian households.
The Authority of the MFDA
As a self-regulatory organization, the MFDA falls under the supervision of the CSA but has the freedom to set and enforce regulations beyond the minimums defined by the law. In the eight provinces which formally recognize the MFDA, all except Newfoundland and Labrador and Québec, mutual fund dealers must be members of the MFDA to legally operate. In Québec, the MFDA works cooperatively with the Autorité des marchés financiers (AMF). In Newfoundland and Labrador, an application for formal recognition is pending as of 2018.
A Key Initiative from the MFDA’s 2018-2022 Strategic Plan
One way the MFDA intends to increase public confidence in the Canadian mutual fund industry is through the education of its members. Included in the MFDA’s 2018-2022 Strategic Plan is a key initiative to impose a continuing education requirement on MFDA advisers who, unlike life insurance agents and financial planners, do not currently need to earn continuing education credits to maintain their license in Canada.
This will bring MFDA members more in line with the members of several other Canadian regulatory bodies, such as the Investment Industry Regulatory Organization of Canada (IIROC), by requiring a number of professional development credits on a two-year cycle. Many such credits will likely overlap with the credit requirements of related industry self-regulatory organizations, but the MFDA has pledged to work to avoid unnecessary duplication.