This regulatory exemption is viewed as VERY controversial. It also seems to
throw cold water over the SRO's attempts at investor protection. Another POS
issue that new Regs will have to deal with.We can all expect a rise in
investor complaints very soon. With all due respect,I think it reflects
badly on the entire mutual fund industry.And Berkshire in particular has no
track record of adequate supervision and won't win any awards for their
treatment of cinvestor complaints.
One month the MFDA tries to teach Berkshire a lesson; the next they're
rewarded with a regulatory exemption. Makes no sense to us.
Ken K
Email from a reader Just read about the OSC's toxic decision to allow
recently MFDA sanctioned Berkshire to rebate DSC penalty fees so they can
switch the funds they sold them to funds operated by their new parent.
Incroyable !. Our securities commissions have actually designed this DSC
commission rebating practice so that the s/he financial advisor is the one
who actually signs and dispenses their own personal / private operating
company corporation cheque to the client. . AND who's actually required to
audit the practice of previously illegal DSC commission rebating to ensure
clients:
· receive a DSC commission rebate cheque?
· receive a cheque with 100% of their deserved DSC commission rebate?
· receive no more than 100% of their deserved DSC commission rebate cheque,
i.e. the financial advisor doesn't use this process to reimburse clients for
market losses?
· report all DSC commission rebate amounts, client names and their SIN
numbers to the Canada Revenue Agency?
Proposed text for next Fund OBSERVER
Is the OSC acting in the public interest by allowing rebating? [ Ans NO!]
For some reason the CSA/OSC have granted regulatory exemption relief to
Berkshire dealers (Berkshire was recently fined $500,000 by the MFDA for
deficient supervision of rogue rep Ian Thow) that allows its reps to pay DSC
commission rebates to clients that switch into funds within the Manulife
family, subject to certain conditions.
The decision gives Berkshire Investment Group Inc. and Berkshire Securities
Inc. relief from the part of the NI81-105 sales practices rule that wisely
prohibits sales reps from paying commission rebates to clients that switch
into proprietary funds, but allows reps to pay rebates for switches between
third-party funds.
The regulators granted relief from the rebate provision provided several "la
la land" unenforced and never audited by securities regulators conditions
are met.
· The cost of the rebate must be borne by the sales rep (a "professional"
advisor?), and not the firm.
· Clients must be advised that any rebate offered in connection with a
switch into Manulife funds will be available to them regardless of whether
the redemption proceeds are re-invested in a Manulife proprietary fund or a
third party fund.
· The rebate must not be conditional upon the purchase of units of a
proprietary fund.
· Reps must not be subject to quotas or incentives to recommend house funds.
· And, God help the trusting client, the amount of the rebate must be
determined by the sales rep and the client.
What the heck has this got to do with providing investment advice? Another
Assante in the making?
http://www.oscbulletin.carswell.com/bb/ ... htm#2_1_18
"Payment of commission rebates by the Filers and by their sales
representatives benefit the client so that the client does not incur costs
in switching from one fund to another." Really ! This unholy exemption
practically invites fund churning and other shenanigans and causes undue
tax issues for clients . SAVE us from the regulators. This unholy exemption
practically invites fund churning and other shenanigans and causes undue
tax issues for clients . SAVE us from the regulators.