Press Release: AIMA Canada Recommends New MFDA Proficiency Standard

Published: 30 January 2020

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The Alternative Investment Management Association (AIMA) in Canada today releases a proposal recommending a new proficiency standard that would allow MFDA member firms to distribute alternative mutual funds in Canada.

AIMA Canada has long advocated for liquid alternatives to become broadly available in Canada. In 2019, the Canadian Securities Administrators (CSA) adopted significant amendments to NI 81-102 that introduced alternative mutual funds to the Canadian retail market.  Currently, however, they are available only through IIROC advisors as a result of existing proficiency standards for dealers.

AIMA Canada is advocating for alternative mutual funds to be accessible by MFDA advisors. To ensure adequate proficiency among both MFDA approved persons and supervisors, AIMA Canada is recommending that a phased development of proficiency standards be considered by Canadian securities regulators.

If adopted, MFDA member firms would have the option to choose from either acceptable independent course material that is already available in the marketplace - notably, the CAIA designation, CAIA Fundamentals certificate course and CSI Alternative Strategies: Hedge Funds and Liquid Alternatives course. Over time, MFDA members would also have the flexibility to produce a customized ”in-house” course of specific topics that could also meet the proficiency standard.

A summary of the proposed phased development of proficiency requirements for MFDA dealers is below. The full recommendation can be accessed here.

Table 1 - Phased Development of Proficiency for the MFDA dealers

 

Current Proficiency Requirements

For the MFDA[1] to Distribute Alternative Mutual Funds

Proposed Interim

Bridging Courses

MFDA Policy re Proficiency

Recommended Final State

Approved Person

One of the following:

  • CSC[2]
  • DFC[3]
  • CFA[4]
  • Applicable proficiency standard mandated by a self-regulatory authority and approved/not disapproved by CSA

 

As an interim step, any one of the following courses would also be acceptable to meet alternative mutual fund product proficiency requirements:

  1. CAIA[5] designation
  2. CAIA Fundamentals certificate course
  3. CSI[6] Alternative Strategies: Hedge Funds and Liquid Alternatives

 

MFDA issues a new policy prescribing the proficiency standard for Approved Persons of Members based on Schedule A & B.

 

CSA approval of MFDA Policy following which Members may implement the new prescribed proficiency standards via:

 

  1. An internal course managed by the Member based on the content in Schedule A & B; or
  2. An approved independent course provider[7] such as:
    1. CAIA Association
    2. CSI
    3. IFSE
    4. CFA

 

Supervisor

DFC or CFA

Same as above

Same as above

Same as above

 

[1] MFDA = Mutual Fund Dealers Association

[2] CSC = Canadian Securities Institute

[3] DSC = Derivatives Fundamentals Course

[4] CFA = Chartered Financial Analyst Program

[5] CAIA = Chartered Alternative Investment Analyst

[6] CSI = Canadian Securities Institute

[7] We expect both the CSI and IFSE to integrate greater alternative investment material in their applicable courses to address these new proficiency requirements

 

Claire Van Wyk-Allan, Director, Head of Canada, AIMA, commented: “We are pleased to submit this proposal to the Canadian securities regulators for further consideration. Given the diversification, risk reduction and non-correlated return benefits that alternative mutual funds offer to investor portfolios, it is imperative that fair access to these products is available to MFDA advisors across Canada. There are a number of existing courses that would meet our proficiency recommendations today and we also encourage the development of a customized solution if preferred by the dealer.”

Belle Kaura, VP Legal & CCO, Third Eye Capital and Chair, AIMA Canada, commented:  “As we near the end of a decade-long bull market, investors need to prepare for volatility of equity markets and declining fixed income returns by turning to investment strategies that are uncorrelated to traditional markets and provide risk-adjusted returns. Investors can no longer rely on the 60/40 model. With over 80,000 mutual fund dealers unable to sell alternatives, the democratization of alternatives will only be fully achieved with adoption of appropriate proficiency requirements. We are recommending a phased solution designed for ease of implementation which will provide all Canadians access to the benefits of alternatives while ensuring dealers meet high standards of proficiency. Bridging courses will serve to meet proficiency until the MFDA adopts standards proposed by AIMA for training.”

Rob Lemon, Executive Director, CIBC Capital Markets and Member, AIMA Canada Executive Committee, commented: “At CIBC, our clients have been asking for our help during this market change and view the MFDA advisor channel as critical to the success of growing their liquid alternatives business. After consulting with our clients, we collaborated with industry associations to determine the optimal distribution of alternative mutual funds. We view the proposed proficiency standard as the way forward in accessing this $580+ billion market. It’s an exciting opportunity that will help more of our clients realize their ambitions.”

Michael Burns, Partner, McMillan LLP and former Chair, AIMA Canada (2014-2018), commented: “The adoption of a sensible proficiency standard to permit alternative mutual funds to be distributed through the MFDA channel is the logical next step in the evolution of the “liquid alts” market in Canada. These proposals will aid MFDA members in understanding this exciting new class of investment products and the valuable role that they can perform within a client’s investment portfolio.”

Notes to Editors

AIMA
The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with more than 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2 trillion in hedge fund or private credit assets. AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes and sound practice guides. AIMA works to raise media and public awareness of the value of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. The ACC currently represents over 170 members that manage $400 billion of private credit assets globally.  AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For further information, please visit our website, www.aima.org. AIMA was founded in 1990, with the AIMA Canada subsidiary formed in 2003.

AIMA Media Contacts

 

Josh Nova, Managing Director, Hume Brophy, New York

 

Tom Kehoe, Communications, AIMA

 

Claire Van Wyk-Allan, Director, Head of Canada, AIMA

 

 

+1 646 791 1201

 

 

+44 (0)20 7822 8380

 

 

 

+1 416 453 0111

 

 

 

Josh.nova@humebrophy.com

 

 

Tkehoe@aima.org

 

 

 

cvanwykallan@aima.org

 

 

Belle Kaura, Chair, AIMA Canada & VP Legal & CCO, Third Eye Capital

+1 647 776 8217

belle@thirdeyecapital.com