On September 24, 2025, the CFFiM responded to the Proposed Amendments to National Instrument 31-103, Registration Requirements, Exemptions, and Ongoing Registrant Obligation to Prohibit the use of Chargebacks (the “Proposed Prohibition”.)

The Proposed Prohibition follows a long line of regulatory reforms centered on perceived conflicts of interests in the compensation structures used by investment funds, dealers, and representatives in the sale of mutual funds. Consistent with the CSA’s ban on deferred sales charges, the Proposed Prohibition is premised on the assumption that compensation structures with a chargeback option give rise to an inherent and irreconcilable conflict of interest that can only be addressed through a strict ban. According to this view, if a representative is subject to a chargeback fee, the representative will be inclined to prioritize his or her interests and dissuade the client from redeeming during the chargeback period against the client’s best interest. The CFFiM does not support this approach.

The Proposed Prohibition is designed to prohibit speculative or hypothetical market conduct. As recognized in the proposal, chargebacks are not an industry practice. The Ontario Securities Commission’s cost benefit analysis estimates that no investment dealers and only one mutual fund dealer make use of this compensation model

Any risks associated with this compensation structure are effectively addressed through the existing rules and regulations. There is no international consensus on banning chargebacks. The Proposed Prohibition is also inconsistent with the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organization’s proposed guidance on the use of chargebacks for segregated funds.