NI 81-105: National Instrument restricting sales commissions, soft-dollar arrangements, and incentives in the mutual fund industry.

NI 81-105

National Instrument restricting sales commissions, soft-dollar arrangements, and incentives in the mutual fund industry.

Definition

NI 81-105 Mutual Fund Sales Practices prohibits fund manufacturers from paying commissions or other incentives to dealers that could influence the recommendation of a particular fund over another. The DSC ban (effective June 1, 2022) was the most significant recent amendment: dealers can no longer receive upfront commissions paid by fund managers on new mutual fund sales. NI 81-105 also restricts co-operative marketing, sales contests, and other arrangements that could create conflicts with the client's interest.

Source

National Instrument 81-105 Mutual Fund Sales Practices

Where this shows up on the CIRE

Outcome 3.4

Test yourself

Two real CIRE-bank questions on this exact outcome. Click to reveal the answer and the rule citation.

1
A client opens a margin account and immediately requests a leveraged position equal to three times her net liquid assets. The registrant processes the order because the client signed the margin agreement and insists she understands the risks. Which statement best reflects the registrant's obligation?
Outcome 3.4 · click for answer
A.The registrant has no further obligation once the client has signed the margin agreement and acknowledged the risks.
B.The registrant must still assess whether the leveraged strategy is suitable for the client's KYC profile; client acknowledgment of risk does not discharge the suitability obligation.Correct
C.The suitability obligation is suspended for margin accounts because clients self-certify their understanding.
D.The obligation is fully discharged if the registrant provides a written risk disclosure document at account opening.
Signing a margin agreement and acknowledging risks transfers some responsibility to the client but does not extinguish the registrant's suitability obligation under NI 31-103 and CIRO rules. The registrant must still assess whether the leveraged strategy is appropriate given the client's financial situation, risk tolerance, and investment objectives. Suitability analysis applies to each order or recommendation, not only at account opening.
2
Under IDPC Rule 3206, which of the following must be included in the written relationship disclosure information provided to a new retail client?
Outcome 3.4 · click for answer
A.The full list of securities the dealer member is currently recommending.
B.The registrant's personal investment track record for the previous three years.
C.A description of the products, services, and account types available; the limitations on those products and services; charges and fee structures; how the account will operate; the suitability process; and the account reporting the client will receive.Correct
D.A signed legal waiver that the client has read and understood all CIRO rules.
IDPC Rule 3206 specifies the required content of the Relationship Disclosure Information: the products, services, and account types available at the firm; the limitations on those; the charges, fees, and compensation guidelines; how the account will operate under regulatory and firm-based rules; a description of how suitability is determined; and what account reporting the client will receive. It is a comprehensive onboarding document, not a legal waiver or a marketing piece. The registrant's personal track record is not a required element.

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