Investors Group Inc. has received relief from provincial regulators exempting a proposed option plan targeted at sales reps from registration and prospectus requirements.

The decision, which involves regulators from every province except Ontario and British Columbia, exempts the granting by IG of options to purchase common shares “to certain individuals who exclusively sell financial products and services approved by [IG].” The Manitoba Securities Commission is the principal regulator for the decision.

The decision highlights some of the confusion over the use of independent contractors by dealers. It declares that, “Although the salespersons are independent contractors for federal income tax and employment law purposes, [IG] will be responsible for much of the administration of the business carried on by the salesperson and, in all cases, will be responsible for the regulatory supervision of the salesperson consistent with a principal and agent relationship.”

Each rep will be registered exclusively with IG or a subsidiary, and will be covered by the bonding and insurance of the sponsoring dealer as if they were an employee of the sponsoring dealer.

The decision says that IG “acknowledges that the Canadian Securities Administrators have taken the position that sales representatives and investment advisors should only be permitted to carry out services on behalf of mutual fund dealers or securities dealers if employed by the dealer or engaged under a principal and agent relationship with the dealer.” Nevertheless, IG insists its reps are independent contractors.

The options plan is being used to reward performance and provide an incentive for certain key reps. IG argues that their exclusive relationship provides them with substantial knowledge about the business and affairs of the firm, and that those who will receive options, “possess expertise of value to [IG] and spend a significant amount of time and attention on the business and affairs of [IG].”

Investors Group obtained an order on February 28, 1998 from the Alberta Securities Commission in connection with the plan, exempting the distribution of options to salespersons in Alberta. It seeks to revoke the Alberta Order to expand across these other jurisdictions.