The Canadian Investment Regulatory Organization (CIRO) is preparing to do away with its dual registration model — enabling investment dealers to operate a mutual fund division, without having to be separately registered as a fund dealer — a change that it expects will facilitate advisor mobility, while giving industry firms more freedom to innovate.
The self-regulatory organization issued proposed rules Thursday that would put an end to the regulatory construct that it adopted in the wake of its creation via the merger of the previous fund dealer and investment dealer SROs. The dual registration mechanism was introduced to preserve the existing registration categories, while allowing individual firms to operate in both industry segments.
Since then, the regulatory landscape has shifted. Among other things, CIRO has largely taken over responsibility for registration from the provincial regulators, and it is also now proposing its consolidated rulebook, which will finally bring together the investment dealer and fund dealer rules into a single set of dealer rules.
Against that backdrop, CIRO is now also proposing to “adopt a simpler approach under which investment dealers can operate mutual fund divisions without the need to also be registered as a mutual fund dealer” — a change that should make it easier and more cost effective for dealers to run both types of business under one roof.
Under the proposed changes, the SRO will codify the conditions that were imposed on the existing dual-registered firms, and it will repeal the proficiency upgrade requirement for mutual fund reps that are employed by investment dealer (the 270-day rule).
“This change will simplify registration requirements and provide a unified framework across all [dealers],” the SRO said in a notice outlining the proposals, adding that it will lower registration costs too, as dealers won’t have to maintain two registrations.
Additionally, the SRO said that repealing the proficiency upgrade requirement on fund reps “will improve advisor mobility across CIRO-regulated firms and harmonize proficiency across [dealer] types.”
“Repealing the proficiency upgrade requirement will give firms greater flexibility in how they structure their businesses, making it easier to recruit and retain mutual fund only representatives within an integrated CIRO firm and to create clear career development pathways for those representatives,” it added.
The proposed changes will also relieve some of the workload on CIRO itself, it noted.
The proposals are now out for comment until June 12.
At the same time, the SRO has published the proposed consolidated dealer rules for a final comment. The harmonized rules have been developed through a five-phase consultation process, which will now go out for comment as a single, unified package.
In a separate notice, CIRO said the objectives of the single rulebook are to minimize regulatory arbitrage between dealer types, to regulate both sides of the industry the same way and to generally adopt “less prescriptive, more principles-based rule requirements.”
That consultation also runs until June 12.