Securities regulator urged to move forward with full-throated declaration on DSC restrictions
As the COVID-19 pandemic continues to underscore the risks of DSC mutual funds to senior investors who are likely to need emergency liquidity, an investor advocacy group is calling on the Ontario Securities Commission (OSC) to announce its long-awaited decision on proposed restrictions on the DSC in the province.
“It’s been over eight months since the OSC received comments on proposed restrictions on the sale of toxic DSC mutual funds but no decision has been announced,” Kenmar Associates said in a recent letter, referring to a 90-day consultation that the commission launched in February last year.
While other provinces have expressed their support for a total ban of DSC mutual funds, the OSC proposed to only limit their sale within Ontario. Among its suggested restrictions was a prohibition on the sale of mutual funds to investors who are at least 60 years old. It also floated a hardship exemption that would relieve investors from having to pay early redemption fees on DSC funds in case their money had to be redeemed due to critical illness, permanent disability, or death of the client.
“While all the input from investors and investor advocacy groups supported a total ban, they were reluctantly willing to give the DSC restrictions a nod,” Kenmar said.
The longer the OSC stays silent on its decision, the letter said, the more harm will come to vulnerable seniors who were made to improperly invest in DSC funds.
With more seniors being forced to tap into their savings and investments due to unforeseen pandemic expenses, the risks of elderly investors being hit with early redemption fees from DSC funds have risen precipitously. A senior who loses investment capital to DSC penalty charges can’t recover it, Kenmar noted, unless they return to the workforce. Penalty charges incurred within a RRIF account, the letter added, cannot be offset against capital gains to reduce taxes.
“If the restrictions proposed are announced, we expect, based on the comment letters received, a significant number of fund manufacturers would just give up and cease to offer the DSC option,” the letter said.
The OSC’s final word on the proposals, Kenmar added, would give advocates direction on how to structure their campaign against harmful DSC sales moving forward. That declaration could also spur the new Minister of Finance to change the government’s position and support an outright ban.
“As proposed, the restrictions would not come into effect until June 1, 2022, leaving seniors and vulnerable investors exposed to the full force of 7-year redemption schedules up to June 2029,” Kenmar said. “We call on the OSC to be transparent and release their conclusions. That would be acting in the public interest and clear evidence of regulatory leadership.”
Follow WP on Facebook, LinkedIn and Twitter
