A Roadmap For Strengthening The Protection Of Quebec Mutual Fund Investors

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The Quebec government has mandated the Autorité des marchés financiers (‘’AMF’’) to hold a public consultation on compensation for victims of financial fraud. In response, the AMF published, on December 9th, 2011, a Notice of consultation on the compensation of consumers of financial products and services in Quebec (‘’financial consumers’’). The mutual funds sector is the main concern because of its large size, Quebec customers of mutual fund dealers are not covered by a Canada wide investor compensation scheme and the industry has been the locus of major bankruptcies in the recent past.

The security of the savings of Canadians invested in mutual funds is a legitimate area of concern for public policy. About 13% of Canadian families own units or shares of mutual funds; it represents a significant proportion of their wealth held in financial assets. In the second quarter of 2011, the value of the assets held by Canadians in mutual funds amounted to $756.2 billion; Quebecers held $117 billion at the same date, representing 15% of the total. Approximately 46% of mutual fund units or shares owned by Quebec financial consumers are held in the custody of a deposit institution. On average, in 2011 in Quebec, retail securities and mutual fund dealers ‘’sold’’ approximately $40 million per month in mutual funds. Retail securities and mutual fund dealers affiliated to a deposit-taking institution collected about $38.3 million and those affiliated to an insurance company, approximately $1.6 million. The remainder was sold to financial consumers by Quebec independent mutual fund dealers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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