The Investment Dealers Association of Canada has decided that firms are responsible for supervising reps’ financial planning activities, even when they are engaged in principal/agent relationships.

In a member regulation notice issued Tuesday, the IDA said that it has concluded that financial planning is a securities-related business “in that the nature and extent of any investment recommendations to a client are inextricably tied to the overall plan. While it is possible for financial plan to generate no investment recommendations, such plans are likely to prove the exception rather than the rule.”

This is important because the by-law that permits principal/agent relationships requires that all securities-related business of an agent be conducted through the firm. “Members are therefore responsible for supervision of the financial planning activities of their agents and employees and the attendant record keeping,” the IDA said.

The IDA advised that it does not mean to suggest that all financial plans provided to clients require pre-approval. Firms may develop their own policies and procedures for the supervision of financial planning activities, subject to IDA review and approval.

However, firms entering into principal/agent relationships may not include financial planning in their disclosures of activities carried on outside the firm and for which the firm is not liable.

The IDA approved principal/agent relationships back in May 2003.