Alberta sole holdout on incorporation

By Bryan Borzykowski | June 4, 2008 | Last updated on June 4, 2008
3 min read

New Brunswick is the latest province to allow Mutual Fund Dealer Association members to incorporate, leaving Alberta as the only jurisdiction that forces advisors to act as individuals.

The move toward incorporation meant the New Brunswick Securities Commission (NBSC) had to suspend MFDA rule 2.4, which states that advisors have to be paid as individuals. So far, every Canadian securities commission, save for the Alberta Securities Commission, has halted the rule.

Peter Tzanetakis, senior director of regulatory affairs for Advocis, says his organization has made a formal representation to Alberta, asking the government to follow suit. He says the ASC has to decide whether or not the change is prejudicial to the public interest, but “we believe it isn’t and we hope Alberta does move toward allowing corporations,” he says, adding that he hopes the NBSC ruling will push Alberta to act.

The ASC didn’t return calls for comment.

Allowing advisors to incorporate, says Tzanetakis, is beneficial in a number of ways. It means advisors can set up a modern business structure, it allows for effective succession planning, clients can maintain their continuity by dealing with a corporation, and there are positive tax implications.

But, there were concerns that if an advisor incorporated, and then committed fraud or another financial crime, the advisor would be able to “duck under the veil of the corporation,” says Rick Hancox, the NBSC’s executive director.

“That was one of the questions we had,” he explains. “If the salesperson creates a company, does that add a layer into making it more difficult for an investor who had problems to go after somebody?”

The NBSC asked Advocis and other industry players to address this concern before they could move forward. “We did legal research into this area, and we’re not aware of any cases where the individual couldn’t be held responsible,” says Tzanetakis.

That answer seemed to satisfy the regulator and the NBSC went ahead and suspended the MFDA rule. However, members of the Investment Industry Regulatory Organization of Canada (formerly the Investment Dealers Association) are still barred from incorporating.

According to Tzenetakis, IIROC has put forward a proposal to the Canadian Securities Administrators that would let its advisors incorporate, but so far the securities commissions haven’t given their approval.

He adds that he would like a nationwide solution to this problem, spearheaded by the CSA, but it’s unlikely that will happen any time soon. “We’d like to see it resolved at a CSA level, but there hasn’t been any indication that that’s a priority.”

In the meantime, Advocis has been speaking with each securities commission individually to ask them to change their rules. “What we’re ultimately looking for is a permanent solution to allow all advisors to incorporate, but that may require legal amendments,” says Tzenetakis. “Once we start dealing with legal amendments, we have to not only deal with securities commissions, but the legislation of each province too. That’s why we’ve been dealing with individual securities commissions.”

Filed by Bryan Borzykowski,,


Bryan Borzykowski