Lawyers advising mutual fund dealers are bracing for more regulatory change in the wake of a report commissioned by Canada's securities regulators. The report points to a widespread conflict of interest that may come at the expense of clients.
In particular, the report by the Canadian Securities Administrators (CSA) finds that mutual funds sold by affiliated dealers tend to underperform, while those with trailer fees – regardless of past performance – tend to enjoy higher sales.
"It is an impressive amount of quantitative work that has been undertaken," says Ron Schwas of Wildeboer Dellelce LLP. "It is going to be interesting to see the firefight that breaks out between the industry participants around whether or not the data supports the strength of the conclusions that they have in the executive summary."
Lexpert managing editor Tim Wilbur reports on investment industry regulation at www.lexpert.ca.