As CIRO consults on advisor incorporation, harmonization of rules proves challenging – The Globe and Mail

Earlier this year, the Canadian Investment Regulatory Organization (CIRO) released a policy paper outlining three potential approaches to harmonizing the rules around incorporation for mutual fund and investment advisors. As it stands, mutual fund-licenced advisors (apart from those in Alberta) can be paid through a personal corporation for certain activities (like tax or financial planning), while securities-licenced advisors can only be paid by their dealer firms directly.

The aim of the CIRO’s approaches is to level the playing field around compensation for both kinds of advisors. But as Lorraine Lynds, a partner in Osler’s Corporate group, tells The Globe and Mail, the CIRO paper didn’t explicitly consider the likely tax implications of the three options — though it seems to acknowledge the limitations to the tax benefit an enhanced directed commissions model would bring.

“The tax implications need to be understood before the regulators propose their final model,” Lorraine says. “A key question they should be thinking about and should be answered is, ‘Will the [Canada Revenue Agency] and Revenue Québec accept the tax characterization under whichever model they propose?’”

“Whatever path the regulators take, hopefully it’s a harmonized approach. Especially for firms that do businesses across Canada, it’ll be difficult to take advantage of the rules if they’re not harmonized.”

If you have a subscription, you can read the full article, “As CIRO consults on advisor incorporation, harmonization of rules proves challenging,” on the Globe and Mail website.