NI 31-103: Cost Disclosure and Performance Reporting - Recap

1. NI 31-103: Cost Disclosure and Performance Reporting - Recap June 7, 2012 Share the tools

2. Summary • History and Regulatory Confusion • Cost Disclosure Proposals • Performance Reporting Proposals • IFIC September 2011 Submission • IFIC Call to Action Share the tools

3. History and Regulatory Confusion • MFDA and IIROC engaged since 2004, at the CSA’s direction, to develop rules for the implementation of the Client Relationship Model (CRM) • MFDA Rule 5.3.5: Performance Reporting • Result of 4 years of extensive stakeholder consultations • Approved by CSA in 2010 • At the time was required to be implemented by June 2012 Share the tools

4. History and Regulatory Confusion (cont.) • CSA 31-103 amendments followed in June 2011 with additional, more detailed provisions superseding MFDA 5.3.5. • The MFDA has suspended its cost disclosure and performance reporting rules at the request of the CSA • Lack of regulatory coordination will cost the industry and investors -unnecessary systems builds and delay in implementing the right level of cost disclosure and performance reporting Share the tools

5. Cost Disclosure – Proposals • Delivery of Deferred Sales Charge Disclosure at Point of Trade (s. 14.2 (3.1) (b) • creates a point of sale requirement with systems implications • not appropriate to insert point of sale requirements here - the concept of POS delivery is being addressed in NI 81-101 – POS Stage 3 • Disclosure of Aggregate Charges (s. 14.2 (4.1) (b) (c)) • Requires an annual aggregation of operating charges and transaction fees • Operating charges include account fees • Transaction fees include sales commissions, switch fees, short term trading fees Share the tools

6. Cost Disclosure – Proposals (cont.) • Disclosure of Fixed Income Dealer Compensation (s. 14.2 (4.1) (d)) • Fixed income products require only a text disclosure saying that dealers received a fee • Disclosure of Fees Paid to Registered Firm (s. 14.2 (4.1) (e)) • Requires an annual aggregation of other fees such as referral fees • Disclosure of DSC Charges(s. 14.2 (4.1) (f)) • Requires annual disclosure of securities that may be subject to DSC Share the tools

7. Performance Reporting – Proposals • Net Amount Invested • net amount invested over the life of the account • change in value for the 12 month period • change in value since inception • Increased storage requirement - information going back to inception date • presentation in text and table format • increased data storage and statement redesign issues • MFDA 5.3.5 provides the right amount of information that investors want and are willing to pay for. Share the tools

8. IFIC Submission- September 2011 • IFIC Submission outlines the industry’s high level concerns with the proposals: • Regulatory confusion – CSA and MFDA rules conflict and industry pays • Cost disclosure requirements – mislead clients and treat mutual funds unfairly in comparison to other financial products • Performance reporting requirements - go beyond investors needs or wants Share the tools

9. IFIC Call to Action • IFIC provided the following members to its members • IFIC Submission • IFIC Matrix • Template Letter • The previous submission Deadline was September 23, 2011 • 78 submissions were filed with the CSA • 28 member responses in support of the IFIC position • 16 responses by advisors in support of the IFIC position Share the tools