Beginning on June 1, 2022, OEO trailer ban comes into effect.
On September 17, 2020, the Canadian Securities Administrators (CSA) adopted final rules that implement a trailing commission ban (OEO trailer ban) to prohibit the payment of trailing commissions by fund organizations to dealers who do not make a suitability determination, such as order-execution-only (OEO) dealers.
On March 18, 2022, the CSA announced temporary exemptions published by the Ontario Securities Commission (OSC) aimed at facilitating the OEO Trailer Ban in Ontario. Other CSA jurisdictions anticipate publishing exemptions in the form of local blanket orders shortly. No equivalent IIROC relief is required with the exception of the trade confirmation exemption noted below.
Links to these local blanket orders will be added as they become available.
As per the CSA Blanket Orders, OEO Dealers are required to send trade confirmations to clients promptly for all funds that have been switched to a non-trailer bearing version. If any firm is unable to promptly deliver trade confirmations to clients, the firm will be required to apply to IIROC for exemptive relief. The conditions of that exemptive relief are outlined in the template provided below.
The exemption order is conditional on the applicants complying with all of the following provisions:
- The exemption order is limited to switch transactions effectuated in compliance with any applicable blanket exemptive relief related to the National Instrument 81-105 Mutual Fund Sales Practices trailing commissions ban issued by the relevant Canadian Securities Administrators member regulators.
- The applicants shall send personalized communications to the affected clients as set out in any applicable blanket exemptive relief related to the National Instrument 81- 105 Mutual Fund Sales Practices trailing commissions ban issued by the relevant Canadian Securities Administrators member regulators.
- Upon request, the applicants shall provide IIROC with a copy of communications sent to clients.
- The applicants must have controls in place to monitor compliance with the exemption order.
- The applicants shall provide IIROC with a monthly progress report on achieving compliance with the exemption order.
- This exemption will expire on June 1, 2022.
CSA Local Blanket Orders:
- OSC (Ontario)
- BCSC (BC)
- ASC (Alberta)
- FCAA (Saskatchewan)
- MSC (Manitoba)
- AMF (Quebec)
- NSSC (Nova Scotia)
- FCSC (New Brunswick)
- The Office of the Superintendent Securities (Prince Edward Island)
- Office of the Superintendent of Securities Service Newfoundland and Labrador (Newfoundland and Labrador)
- Office of the Yukon Superintendent of Securities (Yukon)