On November 25, 2015, the Investment Industry Regulatory Organization of Canada (IIROC) published a white paper proposing changes on two fundamental issues on the business operations of registered dealers and representatives.
First, IIROC has proposed allowing firms and individuals to obtain IIROC registration only for the purpose of conducting business limited to mutual funds and exchange traded funds. Consequently, under the IIROC Dealer Member Rules, individuals approved as registered representatives and investment representatives of an IIROC dealer who only have mutual fund dealer representative qualifications would no longer be required to upgrade their credentials within 270 days of approval. Currently, a failure to upgrade one’s credentials results in the automatic suspension of registration.
Second, IIROC is proposing to allow firms to take advantage of “directed commissions” which are widely used in the mutual fund industry. A directed commission refers to the ability of a dealing representative to request that his sponsoring dealer pay commissions earned by him or her to a personal corporation. This is distinct from an incorporated salesperson, in which the corporation is itself registered under securities law. IIROC has made it explicit that if it adopts such a proposal, directed commissions would be subject to investor protection conditions equivalent to those under the MFDA rules.
For further information, please consult IIROC Rules Notice 15-0260. IIROC will be accepting comments on the white paper until March 31, 2016.