National Bank presents its recommendations on mutual funds
A few days before the Public Finance Committee began holding public hearings on the mutual funds sector, National Bank presented several recommendations intended to maintain the balance between investor protection and development of the industry.
At a press briefing, Michel Tremblay, Senior Vice-President – Personal Banking and Wealth Management, indicated from the outset that the mutual fund industry generally has a very good track record. He added that increasing the number of regulations would result in higher costs for the majority of investors and would therefore be counter-productive. He stated that it would be better to harmonize Quebec’s legislative and regulatory initiatives with those of the other Canadian securities regulators.
Charles Guay, Senior Vice-President – Mutual Funds, stated that expanding the role of the external auditors of mutual funds would provide added protection for investors. He proposed establishing a minimum level of relevant experience for auditors and requiring mutual funds to rotate audit firms after a certain number of years. Currently, mutual funds retain the same auditors unless specifically authorized to change firms by the securityholders.
National Bank also recommended that the Autorité des marchés financiers (AMF) supplement their current staff with personnel who have a greater knowledge of products, financial markets, operations and distribution. The Bank further proposed that the AMF be given the power to return misappropriated funds and fraudulently or unlawfully acquired gains to investors without going before the civil courts. Mr. Guay added that higher minimum fines and longer jail terms are needed as a deterrent.
Charles Guay pointed out that information for investors is still overly legalistic, voluminous and unclear. He stressed that greater efforts should be made to simplify disclosure and present information in layman’s terms so that investors have a clearer understanding of the investment products they purchase.
To ensure the viability of the industry, “the regulatory environment should not be unduly increased. The existing framework is adequate; its potential simply needs to be maximized,” added Mr. Guay. In a brief presented to the Public Finance Commission, National Bank opposes separating roles on the basis that it would increase costs and would not necessarily be beneficial for investors. The Bank is, however, in favour of mandatory registration for mutual fund managers, as long as it does not add to the burden of the majority who are already registered in other areas of the financial products sector.
Read the summary of National Bank's recommendations. [Details]
About the National Bank of Canada
National Bank of Canada is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. The National Bank offers a full array of banking services, including retail, corporate and investment banking. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. National Bank has close to $109 billion in assets and, together with its subsidiaries, employs 17,183 people. The Bank’s securities are listed on the Toronto Stock Exchange (NA:TSX). For more information, visit the Bank’s website at www.nbc.ca.
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