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Advisors eager to access the tax advantages that come with incorporation will have to wait a bit longer, but Canadian Investment Regulatory Organization (CIRO) CEO Andrew Kriegler assured the audience at a Toronto event last Thursday that the regulators are working on it.

“We have a path forward. We’re engaging with tax authorities across the country,” he said, speaking as part of a panel at Advocis’ annual symposium. “I’m pretty optimistic that we’re going to get a solution out of this, but I can’t give a timeline because I don’t know what that is.”

Mutual fund advisors are able to flow some of their commission revenues through corporations to benefit from preferential tax rates, but investment fund reps don’t have that option. Regulators have been looking for solutions to level the playing field for a decade or more.

Insurance acts generally say activities can be carried out by the legal entity, whereas securities acts say they can’t, and rather have to be carried out by a person, he said.

“Well, that raises a bunch of challenges that are well beyond the scope of one small SRO to deal with,” Kriegler said. “You’re now talking about ministries of finance in every province across the country, and you’re talking about our federal colleagues as well [regarding tax law].”

A workable solution would allow all activities to be carried out in the entity — not just non-registerable ones.

Despite the complexities, Kriegler said all the parties involved, including the Canadian Securities Administrators, have now come to some consensus on how to move forward.

CIRO published a policy proposal on incorporation in January 2024. Of the options it consulted on, the incorporated approved person model was the most favoured, Kriegler said.

The SRO heard that it needs to “come up with a model that works across the country, works for all sides of the industry,” and respects the need for a “non-employer/employee relationship.” A solution that does that would avoid introducing extra risk to the consumer and tax risk to the sponsoring financial services entity, he said.

Rulebook consolidation

While the industry hopes for faster progress on advisor incorporation, Kriegler said that on another file, CIRO’s project to create a single rulebook for both mutual fund and investment dealers, it’s been told to slow down by stakeholders.

CIRO’s board has just approved the fourth phase of the five-part project after a consultation period that closed in early February, and will be publishing it within a couple of weeks.

“Interesting point, we would be probably about ready to go with the final move to implementation after this last set of consultations. But one of the things we heard back from industry was that we were going too fast,” Kriegler said. “So when we get the comments in this final round, we’re going to consolidate everything and do a big single republication of the entire rule set so people can do a consolidated analysis.”

The fourth phase aims to harmonize requirements that are mostly unique to the investment dealer partially consolidated rules (IDPC) and mutual fund dealer (MFD) rules, and have been assessed as having a material impact on stakeholders. They include rules related to approval and proficiency for individuals; managing significant areas of risk; and business conduct and client accounts rules. In many cases, the IDPC rules will be adopted, resulting in significant changes for mutual fund dealers.

The final consolidated rulebook is expected to be published in the winter of 2025-26, and follows the merger of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) to form CIRO just over two years ago.

Kriegler also noted that provincial securities regulators in a number of provinces, including Ontario, have delegated mutual fund firm and rep registration to CIRO as of April 1, and he expects the rest to follow.

CIRO also had responsibility for registration and firm licensing on the mutual fund side in Quebec, and now will also take on Ontario, Alberta, Nova Scotia, New Brunswick, and others.

“I’m very hopeful that by a year from now, if I come back, I can tell you that we’ll have done the entire country, and that we’ll be a one-stop shop,” Kriegler said.

The goal is that anyone who wants to be licensed on the mutual fund side as a registered rep, or as a portfolio manager, in one of the investment dealer platforms can come in and be registered “across the country and with every securities commission at the same time,” if that’s what they want.

Advisor.ca and sister publication Investment Executive were media sponsors of the event.