On March 26, 2018, the Mutual Fund Dealers Association (MFDA) published proposed MFDA Rules 1.2 Definitions and 1.26 Continuing Education (collectively, Proposed Rules) and Proposed MFDA Policy No. 9 Continuing Education (CE) Requirements (Proposed Policy) for public comment. The Proposed Rules and Proposed Policy are intended to promote a new CE regime to further enhance MFDA members and Approved Persons’ proficiency, professionalism and industry knowledge (CE Initiative).
An “Approved Person” is an individual who is a partner, director, officer, compliance officer, branch manager or alternate branch manager, employee or agent of an MFDA member firm who:
- is registered or permitted, where required by applicable securities legislation, by the securities commission having jurisdiction, or
- submits to the jurisdiction of the MFDA.
The MFDA currently offers education, training and resources on regulatory compliance to its Members and Approved Persons. The CE Initiative will establish the MFDA’s CE requirements and minimum standards, provide oversight over CE programs taken, and provide a greater understanding of individual competencies. Members and Approved Persons will be required to meet specific CE requirements with respect to three distinct competency areas:
- business conduct;
- regulatory compliance (MFDA Compliance Credits); and
- professional development.
The proposed CE requirements are set out in MFDA Bulletin #0743-P.
Proposed Rule 1.2(1) Definitions sets out key terms and their definitions for the purpose of complying with requirements under Proposed Rules and Proposed Policy.
Proposed Rule 1.2.6 Continuing Education prescribes CE requirements for the following categories of registration:
- ultimate designated person (UDP);
- chief compliance officer (CCO);
- dealing representatives (DR); and
- branch managers (BMs).
The CE requirements are broken down into prescribed 24-month periods (each period being a, CE Cycle). Each CE Cycle requires the UDP, CCO, DRs and BMs to complete:
- 8 credits in the area of business conduct (i.e., 8 credits/CE Cycle); and
- 2 MFDA Compliance Credits (i.e., 2 credits/CE Cycle).
In addition, DRs must also complete 20 credits/CE Cycle in the area of professional development.
Proposed MFDA Policy No. 9 Continuing Education Requirements establishes the minimum standards for complying with Rule 1.2.6 as well as the criteria which determines each Member’s and Approved Persons’ CE requirements in different circumstances, such as:
- newly registered Members or Approved Persons;
- Members or Approved Persons that have recently changed their category of registration under the MFDA Rules;
- the ability of Members or Approved Persons, in specified circumstances, to reduce the CE credit requirements applicable for a given cycle; and
- requirements with respect to the evidence of completion, non-compliance, and reinstatement of Members or Approved Person’s registration.
Comparison with Similar Provisions
The proposed MFDA regimes (Proposed MFDA Regimes) are similar to those established by the Investment Industry Regulatory Organization of Canada (IIROC) and the Chambre de la sécurité financière (Chambre) CE regimes (collectively, Current CE Regimes).
The Proposed MFDA Regimes and Current CE Regimes each have a two-year program cycle, which set out the number of CE to be completed per cycle (based on each individual’s registration categories).
Mandatory CE Credits
The Proposed MFDA Regimes and the Current CE Regimes require the following CE credits to be completed based on each individual’s registration category:
|Business Conduct||Compliance Credits||Professional Development|
|Proposed MFDA Regime||x||x||x|
Under the Chambre Regime, professional development credits may be carried over to the following cycle (i.e.; professional development credits accumulated during the latter part of a cycle can be used towards the following CE Cycle).
The Proposed MFDA Regime is also adopting the carry over option; however, considerations may be subject to approval by the MFDA. In addition, similar to the Chambre’s regime, grandfathering of professional development credits will not be permitted under the MFDA requirements.
Differences between the Regimes
Accreditation of CE activity is one area of difference between the models.
The Proposed MFDA Regime permits accreditation to be done by the MFDA, Member or authorized 3rd parties. Similarly, under the Proposed MFDA Regime and the Chambre’s Regime, CE reporting involves detailed tracking of each credit obtained by a participant (see below for further details).
In contrast, the IIROC Regime allows for the accreditation of CE activity by authorized 3rd parties. Under the IIROC Regime, reporting of CE credits obtained during a CE Cycle is done by way of an attestation of compliance by the member firm.
MFDA CE Tracking System
MFDA staff intends to implement a detailed tracking system for the completion of CE credits by Members and Approved Persons and will provide ongoing access to such information (i.e.; comparable to the National Registration Database (NRD)). The MFDA is currently working on the implementation and administrative aspects and will host testing and training sessions for all users.
The comment period ended on June 20, 2018 and the MFDA has publicised the comments received, see below:
An effective date for the Proposed Rules and Proposed Policy is to be determined by the MFDA at a subsequent time.
 Professional Development credits are required under the IIROC Regime only for individuals registered as supervisors of registered representatives dealing with retail customers and registered representatives themselves.