Which statement accurately describes trailer fee (trailing commission) rules for Canadian mutual funds?

Question: Which statement accurately describes trailer fee (trailing commission) rules for Canadian mutual funds?

Answer options:

• Trailer fees are paid directly by the investor to the advisor for ongoing service. ✅ Trailer fees are calculated based on the assets under administration and paid by the mutual fund company to the dealer, who then pays the advisor.
• Trailer fees are a one-time upfront commission paid to the advisor at the time of purchase.
• Trailer fees are always a fixed percentage, regardless of the fund type or investor's assets.

Correct answer: Trailer fees are calculated based on the assets under administration and paid by the mutual fund company to the dealer, who then pays the advisor.

Explanation: Trailer fees, or trailing commissions, are an ongoing compensation paid by the mutual fund manager to the dealer for services provided to the client. They are calculated as a percentage of the client's assets under administration and then often passed from the dealer to the advisor.