The Investment Industry Regulatory Organization of Canada has just published a white paper, suggesting that registration requirements could be changed to allow IIROC member firms to employ advisors who only sell mutual funds.

On Nov. 25, IIROC published a white paper (No. 15-0260) on the potential implications of changing some of the rules that deal with proficiency standards. Instead of requiring all advisors at IIROC firms to pass the Canadian Securities Course (CSC) and the Conduct and Practices Handbook Course (CPH) in order to become licensed for a full range of investment products (such as stocks and bonds), the regulator has drawn up "an illustrative proposal" that would allow IIROC member firms to employ advisors who only sell mutual funds and exchange-traded funds.

Under the proposed system, IIROC says that these advisors would not be required to pass the CSC or the CPH. What's more, IIROC dealers would be allowed to offer advisors "directed commissions", which is to say they could pay all or a portion of the commissions an advisor earns directly to a personal corporation.

Under the current system, IIROC regulates the full-service securities dealers while the Mutual Fund Dealers Association (MFDA) supervises those who only offer mutual funds. If the proficiency requirements were removed, mutual fund advisors could move to a full-service platform without having to upgrade their qualifications; IIROC admits this could cause “increased competition for MFDA dealers” and result in fewer mutual-fund-only firms, ultimately leading to the MFDA becoming "less economically viable".

IIROC says it is "very interested" in receiving comments on its white paper, and whether people believe the changes would be in the public interest. Submissions should be made before March 31. The white paper is available on the IIROC web site.