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Mutual Fund Sales Practices

National Instrument 81-105

Part 7: Other Sales Practices

7.1 Commission Rebates

  1. A participating dealer or representative of a participating dealer may pay all or part of a fee or commission payable by a security holder on the redemption of securities of a mutual fund that occurs in connection with the purchase by the security holder of securities of a mutual fund in a different mutual fund family, only if
    1. the participating dealer, or a representative on behalf of the participating dealer, before taking any steps in connection with the redemption, provides the security holder with written disclosure of the matters described in subsection (2) and obtains the written consent of the security holder to the completion of the redemption; and
    2. the participating dealer is not a member of the organization of the mutual fund the securities of which are being acquired.
  2. The written disclosure referred to in subsection (1) shall include
    1. a reasonable estimate of the amount of the fee or commission being paid by the participating dealer on the redemption;
    2. a reasonable estimate of the amount of the redemption charges to which the security holder will be subject in connection with the securities of the mutual fund being acquired, expressed both as dollar amounts and as percentages of the value of the securities being redeemed, and the times at which those charges would be made; and
    3. the tax consequences of the redemption.
  3. No member of the organization of a mutual fund, other than a member that is also a participating dealer acting in compliance with subsection (1), shall pay to any person or company all or part of a fee or commission payable by a security holder on the redemption of securities of another mutual fund that is not in the same mutual fund family.
 
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