FAIR Canada seeks relief for group RESP plan subscribers

Investor advocacy group urges regulators to step in as products present higher risk amid COVID-19

FAIR Canada seeks relief for group RESP plan subscribers

FAIR Canada is asking the Ontario Securities Commission (OSC) and the Canadian Securities Administrators (CSA) to act on behalf of group plan RESP subscribers, who are particularly vulnerable as measures to contain the coronavirus continue.

“Terms of group plan RESPs can be costly and punitive for subscribers who cannot afford to continue to comply with a prescribed contribution schedule or to do so always on time,” the investor advocacy group said in a statement.

In failing to adhere to a contribution schedule to group RESPs, the group said, subscribers risk default, plan cancellation, and potential loss and forfeiture of sales charges, earnings on investments, and/or account funds. There’s also a possibility of interest charges being incurred.

As wide-ranging business shutdowns cost many Canadians their incomes and jobs, FAIR Canada urged the OSC and CSA to impose a waiver or moratorium on default terms, cancellation terms, and penalties forfeitures arising from missed contributions and account changes for group plan RESP subscribers.

“Group plan RESP promoters and managers are scholarship plan dealer and investment fund manager registrants, variously registered with CSA members,” FAIR Canada noted. “Because [the payout structure of group RESP plans] is based partially on subscriber attrition, attention must be particularly paid to these registrants and their customers during periods of broad financial distress.”

The group is also asking regulators to issue guidance with regard to group plan RESPs, specifically concerning how suitability should be assessed for new sales and subscription activity given the current environment.

Aside from tenuous employment prospects and highly volatile incomes, COVID-19 has resulted in a more uncertain path to post-secondary education for children and family members.

“As colleges and universities have closed their campus doors and moved classes online, and as businesses shutter and job losses mount, several of the key criteria for suitability assessments for group plan RESPs, including income, ongoing contribution affordability and education plans, have become more uncertain and higher risk,” FAIR Canada said.


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