IDA approves incorporated agents

By Steven Lamb | March 6, 2006 | Last updated on March 6, 2006
2 min read

The board of the IDA has approved the use of a new business structure that would allow its advisors to incorporate. The association has proposed by-law amendments and is now lobbying provincial regulators to allow the change.

The rules governing the relationship between a firm and its sales staff were laid out in By-law 39 in May 2003, allowing for either an employer-employee structure, or that of principal and agent. The proposed changes would open the door to a third structure, allowing for incorporated agents.

The structure is technically still against Canadian Securities Administrators (CSA) rules, although that body has allowed members of the Mutual Fund Dealers Association (MFDA) to use the arrangement under an exemption arrangement.

“Its something we’ve been looking to get for a few years,” says Richard Corner, vice-president, regulatory policy at the IDA. “There certainly is a lot of demand for it. It’s seen as an issue in terms of trying to bring over salespersons who are currently using the MFDA platform. Those members who are actively involved in bringing registrants over to the IDA platform are very interested in this.”

The CSA Registration Reform Working Group is currently looking into legislative changes which would explicitly allow the structure. He says the CSA will need to make a decision on how to proceed by the end of the year, as the MFDA exemption will expire this year.

Using the corporate structure carries tax advantages for the agent, but the IDA warns that it “is permissive and costs of compliance will be considerable for members.” The structure preserves the dealer’s current level of responsibility and therefore would not shield either the firm or the agent from liability.

“The challenge we have is to enable the structure without weakening our ability to regulate the registered individual putting in place the structure,” Corner says. “We believe our proposed rules will prevent that.”

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Steven Lamb