DSC (Deferred Sales Charge) funds were banned for new purchases in June 2022. But if you bought one before the ban, you're still on the hook. The penalty schedule runs up to 7 years. Here's exactly how to get out with minimum damage.
When you bought a DSC mutual fund, your advisor got a fat upfront commission — typically 5% of your investment — paid by the fund company. In exchange, you agreed to stay in the fund for 5-7 years. Sell early, and you pay a penalty (the DSC) of up to 6% of the amount redeemed.
The kicker: you also pay the regular MER of 2-2.5% every year, including the embedded trailer fee. So the fund company pays the advisor 5% upfront, then recoups it from you through years of high MER, and if you try to leave — you pay a penalty too.
The Canadian Securities Administrators (CSA) banned DSC for new purchases effective June 1, 2022. But existing DSC schedules run their full course. If you bought a 7-year DSC fund in June 2021, your penalties don't expire until June 2028.
This is a real story from Reddit: A user invested $100,000 in a DSC fund. Their advisor received a $5,000 commission the day the money went in. When the investor wanted to switch to ETFs two years later, the fund company quoted a $4,000 DSC penalty. The advisor who collected $5,000 in commission was "unable" to help waive the fee.
Most DSC funds use a declining schedule. The penalty drops each year until it hits zero.
| Year Since Purchase | Typical DSC Penalty | If You Redeem $50,000 | Status |
|---|---|---|---|
| Year 1 | 5.5–6.0% | $2,750–$3,000 | Ouch |
| Year 2 | 5.0–5.5% | $2,500–$2,750 | Still hurts |
| Year 3 | 4.0–5.0% | $2,000–$2,500 | Getting better |
| Year 4 | 3.0–4.0% | $1,500–$2,000 | Breakeven territory |
| Year 5 | 2.0–3.0% | $1,000–$1,500 | May be worth paying |
| Year 6 | 1.0–2.0% | $500–$1,000 | Probably worth paying |
| Year 7+ | 0% | $0 | You're free |
Your schedule may differ. Some funds use 5-year schedules, some use 7. Some start at 5%, others at 6%. Check your Fund Facts document or call your fund company to get your exact schedule and purchase date.
Enter your details to see your current penalty and when you'll be free.
Check your original trade confirmation, call your fund company, or log into your account online. You need: purchase date, DSC schedule type (5, 6, or 7 years), and starting penalty rate.
Most DSC funds let you redeem 10% of your holdings per year with zero penalty. On a $50,000 balance, that's $5,000/year you can move to a low-cost alternative penalty-free. Some funds calculate this on the original purchase amount, others on current market value — check your contract.
Compare the DSC penalty to the ongoing MER cost. If your fund charges 2.2% MER and you'd switch to a 0.20% ETF, you save 2.0% per year. On a $50,000 balance, that's $1,000/year in fee savings. If the DSC penalty is $1,500 — it pays for itself in 18 months. Sometimes eating the penalty is the smarter move.
Some fund companies let you switch from a DSC series to a no-load (NL) or low-load (LL) series of the same fund without triggering the DSC penalty. This won't lower your MER much, but it removes the exit penalty. Then you can transfer out freely.
When your DSC hits 0%, transfer everything to a self-directed account at Questrade, Wealthsimple, or TD Direct Investing. Buy low-cost ETFs or low-fee mutual funds. Your switching guide has bank-specific instructions.
The "eat the penalty" math: If your MER is 2.3% and the DSC penalty is 2%, switching immediately to a 0.20% ETF saves you 2.1% per year going forward. The penalty pays for itself in under 12 months. For large balances ($100K+), paying the penalty and switching NOW often saves more than waiting 2-3 years for it to expire.
Sometimes. Here are situations where fund companies may waive or reduce the DSC:
Your advisor probably won't help. The advisor who sold you the DSC fund earned a 5% upfront commission. If you leave, they don't have to give it back — but they lose the ongoing trailer fee. They have no financial incentive to help you exit. Deal directly with the fund company if your advisor is unhelpful.
DSC purchases were banned June 1, 2022. The longest DSC schedules are 7 years. That means:
If you bought a DSC fund in 2019 or earlier with a 7-year schedule, your penalty is already at 0% or close to it. Check today — you might already be free and not know it.
By 2029, DSC funds will be completely extinct in Canada. Until then, this page exists.
Once your DSC penalty expires (or if you've decided to eat the cost), here's where to go next.
How to Switch Low-Fee AlternativesNothing on this site is financial advice. DSC schedules, penalty rates, and free redemption amounts vary by fund company and contract. Verify your specific terms in your Fund Facts document or by contacting your fund provider directly. Some links on this site are affiliate links.