What is a deferred sales charge (DSC)?

In Canada, regulators banned the sale of mutual funds with deferred sales charges effective June 1, 2022. They felt this compensation model created a conflict of interest for dealers by offering them an incentive to sell funds that might not be in the best interests of their customers, who would be forced to pay redemption fees if they wanted or needed to sell their DSC funds earlier than originally anticipated.

Example: “Deferred sales charges can result in hefty commissions for investors who change their minds and sell in the first few years after investing.”

Read more on DSCs:

• Should you sell mutual funds with DSC charges?
  Katrina could lose thousands and wonders if there’s a better way.
• Switching from mutual funds to ETFs
  Thinking about switching from high-fee mutual funds to low-fee exchange-traded funds? An investor advocate walks through the steps—and precautions—to follow when you’re ready.
• Converting mutual funds: The benefits, the risks and the costs
  How to deal with DSC fees when redeeming mutual funds and find out if it’s worth paying the fees. Sometimes it’s about luck.
• Is there a low-cost way to sell your DSC mutual funds?
  Firstly, ditch the advisor and open a self-directed account.

About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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