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AMF – Draft Regulation re DSCs in Segregated Funds
Letter Summary:
Draft Regulation respecting the prohibition on charging certain fees from holders of individual variable insurance contracts relating to segregated funds.
Overview of the Council’s Comments:
The Council strongly supports banning deferred sales charges (“DSCs”) and other forms of upfront commissions in segregated fund contracts. We would also strongly recommend that the AMF evaluate a potential ban on the “advisor chargeback” option for segregated funds.
Our key comments are summarized below:
- We agree that DSCs are inconsistent with the objective of supporting the fair treatment of clients.
- We believe DSCs and other types of upfront compensation create conflicts between consumers and advisors, incentivizing advisors to sell products that provide them with the highest compensation rather than the most suitable products for their clients.
- We also believe the advisor chargeback option carries the same conflicts as other upfront compensation structures for advisors.