Canadian securities regulators adopt ban on deferred sales charges


Vancouver – The securities regulatory authorities of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nunavut, Northwest Territories and Yukon (the Participating Jurisdictions, or we), after extensive research, analysis, and consultations with the investment industry and investor advocates, are today adopting rules that will lead to the end of deferred sales charges (DSC) on mutual funds.

The rules, which take effect on June 1, 2022 in all provinces and territories except Ontario, will prohibit fund organizations from paying upfront sales commissions to dealers. Those payments give dealers an incentive to sell mutual funds that impose redemption fees to investors if they sell their holdings before a certain period of time.

“This decision was motivated by important investor protection concerns,” said Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers. “Upfront sales commissions create conflicts of interest and impose liquidity constraints that harm investors. This compensation bias incentivizes dealers to recommend a product that may not be in the best interest of investors and has led to suboptimal investor outcomes.”

We considered alternatives to the DSC ban, including regulating sales through a series of restrictions, but concluded they only partially mitigated the investor harms we identified and none dealt with the conflicts of interest inherent in the DSC option, or the harmful lock-in feature imposed on investors. With ample evidence of investor harm, especially for the most financially vulnerable investors, and no evidence of any benefits, we see no reason to preserve the DSC option.

Many investment fund companies and dealers have already transitioned away from this problematic compensation model as it no longer meets investors' needs and reasonable expectations. Innovation has opened significant new avenues for serving smaller accounts at an affordable cost. Investors today have access to a wide variety of funds, including no-load mutual funds and exchange traded funds, regardless of account size.

Mindful of the impact of the ban on dealers who sell mutual funds with DSCs, the Participating Jurisdictions are providing a significant transition period of almost two and a half years to allow dealers to adjust their business models. During this transition period, dealers will be allowed to sell these mutual funds, and the redemption fee schedules on those holdings will be allowed to run their course.

Until the ban takes effect, the Participating Jurisdictions will grant relief to dealers, with respect to the DSC feature, from the enhanced conflicts of interest requirements that will take effect on December 31, 2020 following the adoption of the client focused reforms. During that time, dealers will still need to comply with conflicts of interest requirements that are currently in effect under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

As announced on December 19, 2019, the CSA plan to publish later in 2020 amendments to prohibit the payment of trailing commission payments by fund organizations to dealers who do not make a suitability determination, such as order-execution-only (OEO) dealers.

The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.

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For Investor inquiries, please refer to your respective securities regulator. You can contact them here This link will open in a new window.

For media inquiries, please refer to the list of provincial and territorial representatives below or contact us at [email protected].

For more information:

CSA member name

Point of contact

Phone number

Autorité des marchés financiers

Sylvain Théberge


Alberta Securities Commission

Hilary McMeekin


British Columbia Securities Commission

Brian Kladko


Financial and Consumer Affairs, Authority of Saskatchewan

Shannon McMillan


Financial and Consumer Services Commission, New Brunswick

Sara Wilson


Government of Prince Edward Island, Superintendent of Securities

Steve Dowling


Manitoba Securities Commission

Jason (Jay) Booth


Nova Scotia Securities Commission

David Harrison


Nunavut Securities Office

Jeff Mason


Office of the Superintendent of Securities, Newfoundland and Labrador

Renée Dyer


Office of the Superintendent of Securities, Northwest Territories

Tom Hall


Office of the Yukon, Superintendent of Securities

Rhonda Horte


Ontario Securities Commission

Kristen Rose