FAIR Canada welcomes the MFDA's Discussion Paper's attempt to improve cost reporting requirements and the level of client understanding of their total costs of investing.
FAIR Canada supports disclosure that lets investors know prospectively what the costs will be, what costs they have actually incurred (regardless of the type of investment or registrant) and the cumulative impact of the actual costs on investment returns. FAIR Canada believes investors would be best served by eliminating conflict of interests rather than by more fulsome disclosure of the costs of conflicted compensation. The absence of conflicts of interest should be the goal.
Any expansion of disclosure must ensure that (i) the expanded disclosure is tested by an appropriately qualified independent third party with investors (and this testing is made public) to ensure it is meaningful, comprehensible and in their best interest.
With the CSA Client-Registrant Reforms inclusion of cost as an element of suitability, it will be important for there to be disclosure of total costs prior to a client engaging with a firm and prior to a firm recommending an investment product.
We urge the CSA, MFDA and IIROC to benchmark to leading jurisdictions, and to test proposed disclosure with investors so that disclosure is in the best interests of investors. "How" costs are disclosed should be given as much consideration as "what" costs are disclosed. Quality, simplicity and comprehensibility need to be key considerations as well as likely impact on investor decision-making and behaviours.
We believe that consideration of expanded cost disclosure is in its formative stages as regulators need to reflect on the policy goals of expanding cost disclosure, the optimal means of achieving these goals and consider factors such as what the impacts will be of the CSA's Reforms to Enhance the Client-Registrant Relationship as well as the CSA's Mutual Fund Fee Reforms. The focus should be on the best interests of investors, and improving investor protection and investor outcomes.
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