Industry self-regulatory organization the Canadian Investment Regulatory Organization (CIRO) is proposing its version of rule changes that will expand dealers’ obligations to report investing costs to clients.
CIRO published for comment a set of proposals that aim to harmonize its cost reporting rules with the Canadian Securities Administrators’ (CSA) new total cost reporting rules, which will require dealers to begin reporting ongoing fund expenses and charges alongside disclosing their own fees.
The CSA adopted the rule changes in 2023, along with the Canadian Council of Insurance Regulators, in an effort to boost cost transparency to investors and harmonize disclosures by investment funds and segregated funds.
That initiative represents the next phase of the client relationship model reforms, which focused on reporting dealers’ costs to investors but didn’t cover the ongoing fees and charges that investors pay to investment funds.
“These fees can be easily overlooked, because they are embedded in the value of the investment fund and either disclosed only at the point of sale or reported in a way that is not customized to specific investor holdings,” CIRO said in a notice outlining its proposals.
CIRO is now proposing its own reforms to track the CSA’s requirements, enabling dealers to meet the demands of the new CSA requirements by complying with the self-regulatory organization’s requirements in this area.
CIRO also noted that it’s proposing these changes as a separate project from its ongoing rule consolidation project, as the CSA’s total cost reporting rules are expected to come into force before the harmonized rulebook takes effect.
CIRO’s proposals are out for comment until Jan. 8, 2025, with the expectation that the new rules will take effect in 2026. Revised cost reporting would be expected in 2027 for the year ended Dec. 31, 2026.
In addition to harmonizing CIRO’s requirements with the CSA’s rules, the proposal — which would apply to both investment dealers and fund dealers — aims to “bridge some of the existing differences in the client reporting requirements and practices of investment dealers and mutual fund dealers,” CIRO’s notice said.