The choice and benefits of conducting business through a personal corporation are available to many professionals including lawyers, doctors, dentists, accountants, and insurance agents. As with those professions, CIRO advisers provide valuable services to the public, which ought to be encouraged. Permitting adviser incorporation would meaningfully incentivize participation in the declining adviser channel, facilitate the cost-effective delivery of financial services, and support the much-needed competition in Canada’s wealth management industry, all of which is to the benefit of the investing public.
The issue of CIRO (previously IIROC/MFDA) adviser incorporation has languished for approximately 28 years. Despite longstanding and ongoing public support for an incorporation model whereby these advisers perform registrable activities and receive compensation through corporations, Canada’s securities regulators have not accepted incorporation for them.
For example, adviser incorporation has been unnecessarily delayed by discussions on the potential tax treatment. The CRA would generally accept that an individual in the business of trading in securities could earn such income through a corporation provided:
- The individual is not otherwise legally, whether contractually or by statute, precluded from earning such income through the corporation, and
- The corporation is factually carrying on that business. Whether a corporation is factually carrying on that business is a question of fact that must be determined on a case-by-case basis and requires more than a mere assignment of income.
CFFiM’s correspondence to the OSC sets out ways the OSC might help.
The greatest contribution that may be made by the OSC is ensuring that item i) can be met by CIRO members in Ontario.
The repeating pattern of delay results in a preference for certain business models, to the detriment of others, and an inconsistent regulatory approach which limits competition and the options fairly available to CIRO advisers.
Solutions are long overdue.
