OEO dealers and fund organizations to be exempt from OEO trailer ban to facilitate rebates and process client transfers
The Canadian Securities Administrators (CSA) has unveiled temporary exemptions that would allow industry stakeholders affected by an order-execution-only (OEO) trailer ban to “implement an investor-centric transition away from mutual fund series with trailing commissions.”
Following an industry consultation, the Ontario Securities Commission (OSC) has published temporary exemptions aimed at facilitating the ban in the province, the CSA said in a statement. Other CSA jurisdictions are expected to publish their own exemptions in the form of blanket relief orders.
“OEO dealers and fund organizations will be exempted from the OEO trailer ban to facilitate dealer rebates of trailing commissions to clients holding mutual funds in OEO dealer accounts and process client transfers,” the CSA said.
Under the terms and conditions of the exemptions, clients will receive dealer rebates in cases where switches to an equivalent or substantially similar mutual fund series or class within the same fund isn’t possible, and where a management fee rebate of the trailing commission is also not available.
Starting on June 1, OEO dealers and fund organizations will also be exempted from the OEO trailer ban for up to 45 days after acceptance of a client-initiated transfer of mutual funds to facilitate such transfers.
Clients of OEO dealers who are affected will also receive communications about how their holdings will be impacted. Those client communication plans will be outlined in the upcoming blanket orders, the CSA said.
The local blanket order enacting the temporary exemptions will come into force on June 1, the CSA said, the same day when the OEO trailer ban will take effect. The blanket order will expire on November 30, 2023.
“While all jurisdictions will have the same effective date of June 1, 2022, some jurisdictions will not set an expiry date on their local blanket order at this time and instead revoke their blanket order at a future date,” the CSA said.
