As a dealing representative, you may want to communicate with your clients through phone calls, letters, emails, and other sales material. There are strict rules governing what you can say in your sales communication, including advertising and statements you may make orally or in writing.
Sales communication includes any communication relating to a mutual fund that induces the public to invest in that mutual fund.
Certain documents that must be delivered to investors are not considered sales communications. These include:
- the prospectus
- the fund fact sheet
- annual information form
- financial statements
- trade confirmations
- statements of account
An advertisement is a sales communication that is published or designed for use on or through a public medium. It includes video and audio recordings, infomercials, displays, and billboards as well as newspaper, magazine, radio, internet, and television ads.
No advertisement or sales communication shall be issued unless it is first approved by a partner, director, officer, compliance officer, or branch manager who has been designated by the mutual fund dealer as being responsible for advertisements and sales communications.
Sales Communication Dos and Don’ts
What you may say
As long as you follow the rules, you are permitted to:
- provide information on a fund’s characteristics and attributes
- make certain comparisons
- promote the absence of fees and charges for a fund
- discuss investment performance of a fund, including ratings, rankings,
- provide quotations, rates of return, yield, volatility, or any other measurement of performance
What you may not say
The overriding principle for a sales communication is that it must not be misleading. As a result, you may not:
- make an untrue statement
- omit any information that, if excluded, would make a sales communication misleading
- include a statement that conflicts with information in a fund’s prospectus
- present information in a way that distorts the information contained in a prospectus
- include a visual image that gives a misleading impression
- include any unjustified promises or guarantees of specific results
- use misleading statistics
- include an opinion or forecast of future events that are not clearly labeled as such
- fail to fairly present the potential risks to the client
Trade Names and Holding Out to the Public
As a dealing representative, you normally conduct business under your mutual fund dealer’s name and/or trade name. You may conduct business under a different name, only if:
- It is a trade name or style, duly registered with the province if necessary, and not a corporate or legal name.
For instance, Aardvark Financial Services Inc. is a legal name and cannot be approved as a trading name but Aardvark Financial Services can be approved as a trading name.
- Your mutual fund dealer has given its prior written consent.
- The MFDA Member Services department has approved the use of the trade name.
In these cases, all materials communicated to clients or the public (except for contracts, account statements, and trade confirmations) must meet the following requirements:
- The trade name used by the dealing representative must be used together with the mutual fund dealer’s legal name.
- The mutual fund dealer’s legal name or a business or trade or style name of the mutual fund dealer must be at least equal in size and prominence to the name used by the dealing representative.
One of the principal objectives of the MFDA Rules regarding trade names is to ensure that clients are aware of the fact that there is a registered mutual fund dealer through which all securities-related business is being conducted.
Business Cards and Stationery
Business cards, and other stationery items such as letterhead or fax cover sheets, are considered to be advertising materials requiring approval by the Compliance Department of a mutual fund dealer. All of these documents must meet certain standards, and they cannot mislead investors about qualifications or designations. While you as a dealing representative are not permitted to advertise that you are registered, your business card and stationery can show that you are a dealing representative. Other business titles are subject to scrutiny by your mutual fund dealer to ensure that they do not give a false impression or “hold out” a misleading designation or qualification. Any business address included on your business card or stationery must be registered with the applicable securities commission.
Practice what you learned
- Archie is a recently registered dealing representative. He had business cards printed which read “Archie, Dealing Representative, Registered with OSC.”Choose all the answers that apply. Press Submit to check your answer. As a dealing representative:
Archie is not allowed to advertise that he is registered with the securities commission.
Archie is allowed to print business cards only after they are approved by Archie’s dealer.
|Conflicts of Interest||mfda.ca/regulation/MSN/MSN-0054.pdf|
|NI 81-102 Part 15 – Sales Communications and Prohibited Representations||bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/47_2_2000#part15|
|NI 31-103 Registration Requirements and Exemptions||osc.gov.on.ca/documents/en/Securities-Category3/rule_20090717_31-103_national-instrument.pdf|
|Outside Business Activities:||mfda.ca/regulation/MSN/MSN-0040.pdf|
|Personal Financial Dealings:||mfda.ca/regulation/MSN/MSN-0047.pdf|
|Sales communication (NI 81-102)||osc.gov.on.ca/documents/en/Securities-Category8/rule_20000128_81_102rule.pdf|
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