The Canadian Investment Regulatory Organization (CIRO) has published proposed rule amendments aimed at harmonizing advisor compensation across all dealer members. The key change introduces a new incorporated advisor compensation option available to all client-facing Approved Persons sponsored by CIRO Dealer Members, replacing the existing directed commission arrangement.
Under the current system, advisors sponsored by mutual fund dealers or firms registered as both mutual fund and investment dealers can have a portion of their compensation paid through an unregistered corporation, except in Alberta. However, this option is not available for advisors registered with investment dealers, who must be paid directly by their firms. The proposed amendments seek to eliminate this inconsistency.
Key Integration Priority
Adopting an incorporated advisor compensation option is a key integration priority identified in CIRO’s 2027 Annual Priorities. It completes the advisor compensation harmonization objective set out in CIRO’s three-year Strategic Plan. Alexandra Williams, Senior Vice-President, Strategy, Innovation and Stakeholder Protection at CIRO, stated: “Harmonizing advisor compensation is an important way that CIRO is demonstrating its commitment to providing more efficient and consistent regulation. Adopting an incorporated advisor compensation option will provide flexibility for advisors and address the lack of tax certainty associated with the current directed commission approach.”
The proposed amendments follow extensive stakeholder consultation and take a three-pronged approach: retaining the current options for client-facing Approved Persons to be employees or agents of their sponsoring dealer; repealing the directed commission arrangement option; and introducing the incorporated advisor arrangement option for all client-facing Approved Persons.
Investor Protections Maintained
CIRO emphasized that the proposed incorporated advisor compensation option ensures that key investor protection-related regulatory obligations owed to clients are maintained. Implementation of the amendments, if approved by the Canadian Securities Administrators (CSA), will require changes to securities legislation. The full proposed rule amendments are available on CIRO’s website.
CIRO is the pan-Canadian self-regulatory organization overseeing investment dealers, mutual fund dealers, and trading activity on Canada’s debt and equity marketplaces. It is committed to investor protection, efficient and consistent regulation, and building Canadians’ trust in financial regulation.
