PMAC submitted comments to CIRO and the CSA on CIRO’s proposed rule amendments to introduce an Incorporated Approved Person compensation option (CIRO Bulletin 26-0150).
Our principal recommendation is that CIRO not proceed with the proposal. We do not believe CIRO has demonstrated that the anticipated benefits justify the significant costs, regulatory complexity, potential investor-protection risks and industry disruption. We also recommend that concerns associated with existing directed-commission arrangements be addressed directly and separately, including through consideration of eliminating that model.
If CIRO and the CSA nevertheless pursue incorporated compensation, our submission emphasizes the need to:
- Demonstrate a sufficient public-interest benefit, including how the proposal would improve investor outcomes, access to advice or capital-market efficiency, rather than primarily providing tax-driven benefits to incorporated advisors.
- Resolve tax-policy and administrative uncertainties, including obtaining written clarification from the CRA and Revenu Québec regarding tax treatment, reporting and withholding obligations, and potential exposure for firms.
- Assess the supervisory and operational implications, including additional costs, regulatory accountability, access to records and potential personal regulatory liability exposure for ultimate designated persons and chief compliance officers.
- Consider the implications across registration categories and business models, through a coordinated CIRO and CSA assessment from the outset, to avoid competitive disadvantages for CSA-registered portfolio managers and unjustified regulatory disparities.
Read PMAC’s full comment letter here.