The Canadian Investment Regulatory Organization (CIRO) is continuing its work to harmonize rules which currently only allow mutual fund dealer representatives to incorporate.
The project is developing rule amendments which would allow advisors to incorporate, regardless of whether they are representing an investment dealer or a mutual fund dealer.
“Harmonizing advisor compensation is a key integration project addressed within CIRO’s three-year strategic plan. CIRO has assumed primary responsibility for determining the most appropriate harmonized approach and to develop and propose rules, with the Canadian Securities Administrators (CSA) continuing to monitor CIRO’s efforts as part of its standard oversight activities,” the regulator states in an update about its progress.
It says pursuing policy work related to the harmonization of allowable advisor relationships was one solution proposed to support the new regulator when it assumed the regulatory functions of its predecessor organizations on Jan. 1, 2023. Under current rules, investment dealer advisors must be compensated directly as employees or as individual agents of their sponsoring dealer, while mutual fund dealer advisors, under certain circumstances, can have a portion of their compensation directed to a personal corporation.
“CIRO intends to pursue rule amendments that will harmonize the allowable compensation options,” they add.
The work follows the publication of a January 2024 position paper setting out three personal corporation-related policy options for comment. “Commenter responses to this paper indicated a clear preference to pursuing an approach that allowed the personal corporation to engage in all activities the advisors and their staff perform for their sponsoring dealer (not just non-registerable activities),” the update states. “CIRO staff have focused their recent work on developing a detailed proposal and are working to finalize a proposal that is compliant with applicable regulatory and tax requirements.”
The regulator has also provided parts of the proposal to the Canada Revenue Agency (CRA) for comment, asking a number of questions about the related tax considerations. Next steps include receiving the CRA’s feedback to finalize the proposed amendments and publish them for comment.
If approved, CIRO says it will then announce an implementation timeline. “The exact timing of these next steps is not yet known but we will keep dealers updated as work progresses,” they conclude.
