CIRO awaiting CRA feedback on advisor corporations

Efforts to enable all dealer reps to use personal corporation structures remain a work in progress — the Canadian Investment Regulatory Organization (CIRO) says it’s seeking feedback from the Canada Revenue Agency (CRA), as it crafts an approach that will work for the industry while also satisfying the tax authorities and provincial securities regulators.

In a notice, the self-regulatory organization provided a status report on its ongoing efforts to develop a model for reps to use personal corporations — a structure that can have tax and other benefits for reps — but has also raised investor protection concerns among regulators. And, there remains a long-standing disparity between the investment dealer industry and the fund dealer industry when it comes to the use of these kinds of business structures.

To resolve these issues, CIRO said that it’s working on a proposal that would create a registration category for advisor corporations, the “incorporated approved person” category, to ensure that it maintains jurisdiction over activity conducted within the corporation.

The proposed model would also stipulate how these corporations are owned and governed. It would also require agreements between a dealer, an advisor corporation, and the advisors that work under that corporate umbrella, setting out details of regulatory accountability and responsibility within the structure.

In addition to developing a model that aims to resolve regulators’ concerns with the use of personal corporations, the SRO has also filed a proposal to the CRA setting out the model, and seeking feedback on possible tax consequences of its proposed approach.

“The questions asked are focused on assisting CIRO with the finalization of its rule amendment proposals,” the SRO said.

After it gets responses from the tax authorities, CIRO intends to finalize its proposal, which would then be published for public comment, with a view to ultimately securing approval from provincial regulators and implementing the model.

As there remain a number of moving parts in this process, “The exact timing of these next steps is not yet known,” CIRO said, adding that it will keep the industry updated as its work progresses.

The Canadian Securities Administrators (CSA) said that it’s continuing to monitor the SRO’s work on this project as part of its ongoing oversight of CIRO.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.