MD Management Limited Relationship Disclosure

MD Management Limited (MD) is here to help you meet your financial goals. We believe in providing you with the account types you want, and access to investments in a way that best suits your needs. And in the changing world we live in, we want to help you save and invest in the way that is most comfortable for you.

We think we can do all this most successfully if we know you, and you know what to expect from us. The information you provide to us on the “Know Your Client” (KYC) form is critical to our meeting your expectations. And on the flip side, it’s important that you have a good understanding of the products and services we offer; the features of your accounts and how they operate; and our responsibilities to you.

We promote active client participation for a mutually successful relationship. Regulatory guidance encourages us to ask you to keep us up to date, remain informed, ask us questions, and stay on top of your investments.

This relationship disclosure document will be updated from time to time, when there are material changes to it. When this happens, we will refer you to md.ca, or send you a printed copy if you request one. If you have any questions about the contents of this document, please contact your MD Advisor^*.

You will receive a copy of the KYC information you provided at the time of account opening and you will be asked to confirm this information. If you need to change your KYC information, please contact your MD Advisor. Your KYC information will be updated, and you will be asked to confirm this updated information. You will also receive a copy of the updated KYC information.

Services and products we offer

Financial planning: MD offers financial planning services. Your MD Advisor will assist you in developing a plan to help you meet your personal and financial goals.

Advisory accounts: With an advisory account, you (or your authorized representative) direct all trading and are ultimately responsible for all investment decisions, although you can rely on advice given by your MD Advisor. In providing this advice, an MD Advisor must meet an appropriate standard of care, provide suitable investment recommendations, put your interests first and present unbiased investment advice based on the KYC information you provide us. In certain circumstances, we may not proceed with your request to invest in an investment that we consider unsuitable for you, and instead, may recommend suitable alternatives.

We have two types of advisory accounts: MD Plus™ accounts, which are fee-based, and commission-based accounts. All new accounts will be MD Plus accounts. 

• MD Plus: Fees are charged quarterly and calculated as a percentage of the value of your assets, regardless of the number of transactions you make.
• Commission-based: Trade commissions may be charged on transactions you make in your account.

Access to banking: We offer access to a complete range of banking services, through our partnership with Scotiabank and the Scotiabank Healthcare+ Physician Banking Program. These services include day-to-day needs like credit cards, personal and business chequing accounts, short- and long-term loans, and personal and business lines of credit.

MD can provide access to a range of investment products, including the following:

• cash and equivalents
• fixed income and debt securities
• equities (not available for purchase in MD Plus accounts, however limited transfers are available)
• exchange-traded funds
• investment funds such as mutual funds, which are primarily the MD mutual funds that are sponsored and managed by MD Financial Management Inc.

For a comprehensive list of the products offered by MD, speak to your MD Advisor. He or she can explain these investment products to you, their risks and possible returns, and whether they are appropriate for you.

From time to time, we develop new services and products. Learn more about these new offerings by asking your MD Advisor, visiting md.ca, or reading the information we send with your statements or in other communication.

Generally, the securities that we recommend to you for investment will be able to be readily liquidated or resold. Any exceptions will be noted in your account statements.

Investment suitability

Before we make any recommendations about an investment, or carry out a request from you to buy or sell a security, we first assess whether that investment is suitable for you according to our understanding of your personal and financial profile. In making this assessment, we will always put your interests first. Our suitability assessment is based on the information you provided us on your KYC form. That is why keeping this information up to date and accurate is very important.

There are several factors we consider when deciding on an investment’s suitability for you:

• Your personal circumstances: We will consider your date of birth, civil status or family situation, number of dependants, employment status and occupation, and other personal circumstances.
• Your financial situation: What financial assets (deposits, investments) and liabilities (debt, mortgage) you have; and the sources and amount of your income. We compare the size of any transaction with the overall value of your net financial assets (assets minus liabilities).
• Your investment knowledge and experience: Whether you consider yourself, or we understand you to be, a novice investor, an investor with some knowledge and experience, or an investor who understands some of the new, more complex financial products and has experience with investing in such products.
• Your investment objectives: What you tell us are your specific financial goals. This will help us determine how to balance a range of goals: keeping your money safe (not losing principal), earning income, and increasing your capital through growth in the market value of your holdings/account. Objectives can be different for each individual account you hold at MD.
• Your time horizon: How soon you expect to need your financial assets; for example, to buy a house, pay for education or enter retirement. In retirement, we may also need to consider tax requirements to withdraw minimum amounts. Time horizon can be different for each individual account you hold at MD.
• Your risk profile: We consider both your capacity for taking on risk, by objectively reviewing your personal and financial situation and time horizon, among other factors, and your risk tolerance.
• Your risk tolerance: Risk tolerance is an important factor making up your risk profile. Risk tolerance means whether you feel comfortable with the possibility of losing money in some years, even if you have many years to earn and save. In other words, the level of risk you are prepared to accept to achieve your investment objectives. The risk tolerance can be different for each individual account you hold at MD. Risk tolerance can be identified as low, medium or high. You can assign 100% of your account to one level of risk tolerance or select any combination of tolerance levels that add up to 100%. This is meant as a general guide to your preference:
  • Low: Your primary concern is preservation of capital with a low likelihood of capital loss, understanding the impact on potential returns.
  • Medium: You want the potential for higher investment return and are willing to assume a moderate risk of loss and fluctuation in your investments, including the possibility of losing some of your invested capital.
  • High: You are prepared to assume a higher level of risk and fluctuation in the value of your investments and accept a significant risk of losing some or all of your invested capital.
• Your risk capacity: How much risk you can comfortably take on given your personal and financial circumstances.
• The composition and risk level of your portfolio: How the purchase or sale of particular securities affects the overall allocation of holdings between debt, equity and other classes, and the overall riskiness of the assets held.

Our understanding of your profile is critical. Some of the factors above are quite easily summed up with a “yes” or “no” answer or an assigned number (within a range). However, some are more complex, particularly your risk profile (risk tolerance and risk capacity), so we need to have a meaningful dialogue with you.

A solid understanding of your profile will help us suggest the allocation of your holdings. Choices must be made between registered (tax-advantaged) and non-registered accounts; debt, mutual fund and other investments; and Canadian and foreign investments. Decisions will also be made about the terms of specific investments, and the riskiness of both individual securities and the combination of securities in your portfolio.

We will make a suitability assessment in any of these situations:

• before a trade is accepted
• before we make a recommendation
• before securities are transferred or deposited into your account
• if there is a new MD Advisor for your account
• if there is a significant change to your KYC information
• if we become aware of a significant change in any security in your account that could result in the security or your account not being suitable for you
• when we review your KYC information with you, which will be, at a minimum, every 36 months

If during the suitability determination we identify any concerns, we will discuss them with you. We reserve the right not to accept an order to purchase a security if we are concerned it is not in keeping with your investment objectives or is otherwise not suitable for you.

It is your responsibility to notify us whenever there is a significant change in your personal or financial circumstances so that we can update your KYC information. We will also reach out to you periodically to remind you to notify us if there have been any significant changes to your KYC information, and we will review your KYC information with you when we meet with you on a regular basis (at a minimum, every 36 months).

We will provide you with a copy of the KYC information that we collect from you at the time your account is opened and anytime you notify us of a significant change to this information. We will ask you to confirm this KYC information at such times.

Your MD Advisor is ready to discuss the effect of market fluctuations on your portfolio at any time. However, given the long-term nature of investing for most clients, market fluctuations will not trigger a suitability assessment. We encourage you to speak with your MD Advisor, especially if you think you will need to convert your assets to cash in the near future (for example, for a major purchase such as a house), if you want to change your time of retirement, or if there are other major changes to your KYC profile.

We will also ask you to provide us with the name and contact information of a trusted contact person, who is an individual we may contact in accordance with your written consent. You may appoint a trusted contact person, decline to appoint a trusted contact person, or revoke or change a previously appointed trusted contact person, by completing a Trusted Contact Person (TCP) – Consent Form. We may contact your trusted contact person and/or disclose information about you or your account to your trusted contact person in one or more of the following circumstances:

• If we are concerned about your possible financial exploitation. Financial exploitation means the use or control of, or deprivation of the use or control of, a financial asset of an individual by a person or company through undue influence, unlawful conduct or another wrongful act.
• If we are concerned about your mental capacity as it relates to your ability to make decisions involving financial matters.
• To obtain the name and contact information of your legal representative, if any.
• To obtain your contact information, if we are unable to communicate with you using the information we have on file.

When you provide us with a name of a trusted contact person, you confirm to us that you have the consent of that person to provide us with their name and contact information and that the person knows you are naming them as your trusted contact.

Risks

There are various risks that can affect your investment accounts:

• Market fluctuations can impact the value of your holdings. These price fluctuations (up or down) can last for extended periods.
• Interest rate fluctuations can impact your returns or the value or your fixed-income investments.
• Credit or default risk can impact the issuer’s ability to keep paying interest or dividends on the security you hold. This may also impact the security’s market value.
• Foreign currency risk can impact cash conversions between currencies; it can also impact buys/sells of securities in an account of a different currency. (For example, selling a U.S. currency investment in a Canadian currency account requires an exchange to Canadian currency to post the proceeds of the sale to the cash position.)
• Illiquidity of investments can affect your ability to sell your investment (i.e., there may be no market in which to sell or no buyers to purchase your securities).

If you invest in mutual funds, the prospectus documents for each mutual fund set out the specific risks associated with investing in the mutual fund.

Temporary hold

We may place a temporary hold on any proposed investment into, or withdrawal or transfer of cash or securities from, your account, where we reasonably believe one or more of the following:

• You might have an illness, impairment, disability or aging-process limitation that places you at risk of financial exploitation, and your financial exploitation has occurred, is occurring, has been attempted or will be attempted.
• You do not have the mental capacity to make decisions involving financial matters.

If we place a temporary hold on your account in either of these situations, a notice of the temporary hold and the reasons for the temporary hold will be provided to you as soon as possible after we place the temporary hold. Unless the hold is revoked, we will provide you with a notice of the decision to continue the hold and the reasons for that decision within 30 days of our placing the temporary hold and within every subsequent 30-day period. We may also contact your trusted contact person in these circumstances.

Conflicts of interest

Actual, potential and perceived conflicts of interest arise where an action or decision by someone has the effect of benefiting an individual or a group of people at the expense of others. Such conflicts exist in almost all human interactions and will arise from time to time:

• between you and our firm, as well as between you and your MD Advisor.
• between you and our other clients: we act for many clients, offering different types of accounts and must allocate investment opportunities among all of them fairly, so as not to favour intentionally one client over another.
• between us, you and our related or associated companies.

Canadian securities laws require us to take reasonable steps to identify and respond to material conflicts of interest in your best interest. We are also required to tell you about them, including how the conflicts might impact you and how we address them in your best interest.

We have policies and procedures in place to address material conflicts of interest in your best interest.

To help you assess actual and potential conflicts of interest, we have prepared a more detailed explanation of our material conflicts and how we manage them in your best interest. To find out more, please review the conflicts of interest disclosure.

Fees and service charges

All fees are disclosed as required by regulation.

If you have a commission-based account, commissions are transaction-related fees paid to us at the time of sale or shortly thereafter. These commissions (as well as other transaction fees) apply to mutual funds, bonds, gold certificates, silver certificates, and equities held in your MD account.

In MD Plus accounts, no transaction commissions are charged. Instead, clients pay a quarterly account fee. This fee is calculated as a percentage of the value of your assets (excluding products that contain trailing commissions), regardless of the number of transactions you make. The MD Plus fee covers account administration and custody services provided by MD. It also covers comprehensive investment advice, including an assessment of your investment needs and risk profile, recommendations regarding the purchase and sale of eligible investments, and an annual review of your portfolio to ensure alignment with your investment objectives.

A fee will be charged for each account that is transferred, in whole or in part, to another financial institution.

For debt securities (such as bonds, strip bonds and T-bills) purchased or sold, a markup may be added to, or deducted from, the price of the security.

MD may earn interest on the free credit balance in your account (this is the total amount that can be withdrawn by the account holder). Any free credit balances represent funds payable on demand which, although properly recorded in our books, are not segregated and may be used in the conduct of our business.

Due to the timing of when we process some foreign exchange transactions between Canadian dollar and U.S. dollar accounts, MD may make a profit or incur a loss on the transaction.

When you acquire mutual funds, you should recognize that each mutual fund pays a management fee to its manager (MD Financial Management Inc. in the case of the MD Funds or the MD PIM Pools) as compensation for the management and other services provided by the manager to the specific fund. MD receives a financial planning fee from MD Financial Management Inc. as manager of the MD Funds in respect of its services to investors in Series A securities of the MD Funds. Each mutual fund also pays other operating charges, which, when combined with the management fees paid by the mutual fund, equals the management expense ratio for the fund. These fees and charges, including the financial planning fee paid, are described in the prospectus and the Fund Facts document for each fund. When you invest in mutual funds, you do not pay any of these fees directly; however, they do affect you because they reduce your fund’s return and the overall performance of your account.

You should note that every dollar taken out to cover fees is one dollar less to invest in your account. The impact of these fees compound over time as a deduction to the overall value of your account and over larger periods of time, this impact increases. Your MD Advisor can answer any questions you may have about the fees and expenses payable by each mutual fund in which you invest. We encourage you to review the Fund Facts document about any mutual fund in which you will invest prior to investing.

You also may be subject to costs for other, non-MD services you use. For example, your bank may levy charges for pre-authorized transfers, which help you save more quickly and securely. There may be penalties for early withdrawal from or cashing out of certain types of investments. Also, if you own shares of small, emerging companies, you may be required to pay for valuations of these holdings to satisfy Canada Revenue Agency requirements. Knowing about and planning for these costs is your responsibility.

We also charge other account operation fees, to cover things like wire transfers, security certificate registration, replacement of lost certificates, or Canadian-controlled private corporation (CCPC) certificate deposits.

Notice of fee changes

We will provide you with at least 30 days’ written notice of any new fee or any change in fees.

Benchmarks

Investors can assess the performance of their investments by comparing them with an investment performance benchmark. Investment performance benchmarks illustrate the performance over time of a select group of securities.

There are many different benchmarks, so it is important to select one that is comparable to the investments you hold.

An example

MD Canadian Equity Fund’s primary objective (as defined by the simplified prospectus) is to provide exposure to Canadian equities, so it uses the S&P/TSX Capped Composite Index as a benchmark.

This index would be a good benchmark for assessing the performance of a Canadian equity fund that invests only in large Canadian companies. However, it would be a poor benchmark if your investments are diversified in other products, sectors or geographic areas.

We do not provide benchmark comparisons in our account reporting. Please speak to your MD Advisor if you have questions about the performance of your portfolio.

Account reporting

You will receive account statements every quarter.

• This applies if at the end of the quarter, the account has a credit or debit balance (i.e., it is not at zero) or the account held securities (including securities held in safekeeping or in segregation).
• You will also receive a statement for any month in which there was activity in your account. In other words, if you have made a transaction or we have changed the balance of securities or cash in your account, unless the entries refer to dividends or interest.

Your statement shows all account activity, including purchases and sales of securities, contributions and withdrawals, dividends, interest earned and paid, transfers, and any other transactions that occurred over the previous period. These statements also list your current holdings and the net value of your portfolio as of the date on the statement.

We also will send you an annual report, which will set out the following:

• the fees and charges related to the operation of your account;
• the amount of any trailing commission received by us in relation to securities held in your account; and
• any compensation, excluding trailing commissions, received by us.

Confirmations

We provide you with written confirmations of the details of every purchase, sale, transfer or other transaction. Please look for your confirmation and review it as soon as you receive it.

Note: We do our utmost to avoid errors; however, misunderstandings and mistakes can happen. Please let us know within 45 days if you see any transactions that you do not recall or if you identify any errors.

Performance

We provide you with account percentage return on your investments over various periods. The return numbers are updated every quarter as well as annually in the Reports on Fees and Performance. Please note that you may earn more or less than others have earned on the same investments or that you may have read about in market commentaries; this is due to differences in when you buy and sell securities.

Fees and charges paid

Fees are reflected on your statements as well as annually in the Reports on Fees and Performance.

Additional disclosure documents

The following disclosures are included in the Reference Guide for Your MD Management Accounts. The Reference Guide is provided to all new clients.

• Schedule of fees and commissions
• MD Financial Management privacy commitment
• Strip bonds and strip bond packages information statement
• Canadian Investor Protection Fund (CIPF) brochure
• Canadian Investment Regulatory Organization (CIRO) brochures: Making a Complaint, A Guide for Investors, How Can I Get My Money Back? A Guide for Investors and How CIRO protects investors

Additional disclosures found in your New Account Application Form include:

• Conflict of interest disclosure
• Leveraging disclosure

Complaints

At MD, we pride ourselves on the quality of the products and service we deliver. However, instances may arise where there are problems with your accounts or your requests. When a problem occurs, the earlier you contact us, the faster we can begin resolving it. Please note that for any problem you want formally addressed or corrected, you must send us a request in writing.

To help organize the details of your complaint, we suggest you do the following:

• Gather all supporting documents and information related to your concern.
• Pay special attention to relevant dates and the names of the employees involved.
• Clearly define what action you would like us to take.

If you need help finding the appropriate person or company to deal with, or an individual’s contact information, you can call MD Client Services for assistance at 1 800 267-2332.

Our complaints procedure
Here is the recommended complaint process:

• For any complaints, please contact your MD Advisor.

If your complaint is unresolved, please contact the Regional Manager for your branch or you can call MD Client Services at 1 800 267-2332. You can also contact our Chief Compliance Officer:

Mr. James Rudderham
Designated Complaints Officer
MD Management Limited
1870 Alta Vista Dr.
Ottawa ON K1G 6R7
1 800 267-4022

If you are not satisfied with our response, you can refer the matter to the Customer Complaints Appeals Office for review:

Customer Complaints Appeals Office 44 King St. W.
Toronto ON M5H 1H1
Tel. 1 800 785-8772 | Fax 1 866 787-7061
ccao@scotiabank.com

If you are still not satisfied, you can contact one of the external complaint resolution resources listed below.

You should deliver your complaint to us as soon as possible. We will acknowledge your complaint, in writing, typically within five business days of receiving your complaint. We may ask you to provide clarification or more information to help us fully understand your complaint. Please reply promptly if we ask you for more information.

We will normally be able to provide our decision for addressing your complaint within 90 days after receipt of your complaint. We will provide a summary of the complaint, the results of our investigation and our decision to either offer to resolve or deny the complaint, along with an explanation. If we need more time to consider your complaint, we will send you an explanation and provide a new date for providing our decision. 

You may be eligible for the Ombudsman for Banking Services and Investments’ (OBSI’s) free and independent dispute resolution service (or, if you are a Quebec resident, you may consider the free mediation service offered by the Autorité des marchés financiers). You are eligible for OBSI’s service if (1) your complaint relates to an advisory activity of our firm or one of our representatives; (2) you bring your complaint to us within six years from the day that you first knew, or ought to have known, about the act or omission that caused or contributed to your complaint; (3) either (a) we do not provide you with our decision within 90 days after you made your complaint and you thereafter notify OBSI that you wish to have OBSI consider your complaint, or, (b) you are not satisfied with our decision and you file your complaint with OBSI within 180 days after we provided you with the decision; and (4) your claim does not exceed $350,000.

Keep in mind that OBSI’s dispute resolution service does not restrict your ability to take your complaint to a dispute resolution service of your choosing at your own expense. 

Furthermore, you always have the right to seek independent legal advice at your own expense.  However, there are time limits for legal action so delays could limit your options and legal rights.

To file a complaint with OBSI, you can either call them at 1 888 451-4519 or 416 287 2877 in Toronto, or email ombudsman@obsi.ca. OBSI works confidentially and in an informal manner. It is not like going to court, and you do not need a lawyer. During its investigation, OBSI may interview you and representatives of our firm. We are required to cooperate in OBSI's investigations. Once OBSI has completed its investigation, it will provide its recommendations to you and us. OBSI’s recommendations are not binding on you or us. OBSI can recommend compensation of up to $350,000. If your claim is higher, you will have to agree to that limit on any compensation you seek through OBSI. If you want to recover more than $350,000, you may want to consider another option, such as legal action as noted above, to resolve your complaint.

For more information about OBSI, visit www.obsi.ca.

External resources

Canadian Investment Regulatory Organization (CIRO)
Bay Adelaide North
40 Temperance Street, Suite 2600
Toronto, Ontario, M5H 0B4
1 877 442-4322

Ombudsman for Banking Services and Investments (OBSI)
P.O. Box 896, Station Adelaide
Toronto ON M5C 2K3
1 888 451-4519

Other external resources — Quebec

Autorité des marchés financiers (AMF)
Place de la Cité, Tour Cominar
2640, boul. Laurier, bureau 400
Québec (Québec) G1V 5C1
1 418 525-0337 | www.lautorite.qc.ca

MD Stable Income Fund related complaints

ADR Chambers Banking Ombuds Office (ADRBO)
Corporate Headquarters
P.O. Box 1006, 31 Adelaide Street E.
Toronto ON M5C 2K4
1 800 856-5154
Fax: 1 877 862-8825
Email: adr@adrchambers.com