The Investment Dealers Association of Canada has fleshed out the requirements member firm will have to fulfill to introduce principal-agent relationships.

Before entering into any principal/agent relationship, firms must enter into an agreement with the IDA, outlining their plans for client disclosure, among other things.

Firms must also obtain IDA approval of the form of its agency agreements. They must have an “agent” rider added to their Financial Institution Bond policies in order to ensure that all its agents and the employees of those agents are covered by its FIB policy to the same extent as employees.

As well, firms using principal/agent relationships are required to report to any compliance issues arising from the principal/agent relationships and how they were resolved, to the IDA’s vice president of sales compliance and registration. The IDA will be reporting these issues to the securities commissions.

Firms must also show the IDA that arrangements between it and its agents comply with applicable tax laws. Registration applications for individuals in an agency relationship must disclose that they are agents.

The IDA adds that any firm in the audit jurisdiction of the Montreal Exchange that wishes to establish principal/agency relationships should file the relevant documents with the ME.