A consultation paper published late last year by Alberta’s Ministry of Finance and Enterprise proposes three possible ways for financial advisors to structure their businesses as personal corporations.

Two of the proposals involve legislative changes to introduce incorporation and the third aims to level the playing field between mutual fund dealers’ reps, who have traditionally been allowed to incorporate, and investment dealers’ reps, who have not.

The first proposal, developed by the Alberta Securities Commission, involves setting up a permit system that would not require a rep’s corporation to register but would require it to have a permit from the regulator authorizing the personal corporation to provide trading or advisory services. This option would also impose certain shareholder structure restrictions on the corporation.

The second proposal, developed by Advocis, would set out the requirements for incorporation largely based on regulatory requirements that already exist in the life insurance sector. This option would not impose limitations on a corporation’s directors or shareholders, nor would it constrain their shareholdings.

The third option would allow the Investment Industry Regulatory Organization of Canada to modify its rules to allow dealers’ reps to redirect their commissions through unregistered corporations.

The paper notes that this option has the benefit of not disrupting the existing flow of liability between reps and their dealers but may not provide the same tax advantages as the other two proposals.

The consultation paper is out for comment until Feb. 25.

— JAMES LANGTON