How to get a mutual funds licence in Canada

Getting a mutual funds licence is an important first step before trading in mutual funds in Canada. It also provides other benefits - read this article to know more

How to get a mutual funds licence in Canada

When it comes to investing and increasing assets, mutual funds are a good strategy for a couple of reasons. Firstly, a small investor can use this as a relatively inexpensive way to hire a fund manager to invest and monitor the investments on their behalf. Secondly, mutual funds, such as mutual funds in Canada, are less risky investments compared to individual stocks. Risk is mitigated over a large and diverse portfolio of investments.  

But before attempting to trade in mutual funds, it’s important to secure a mutual funds licence in Canada. In this article, we discuss how to get a mutual funds licence.  

What is a mutual funds licence?

A mutual fund licence is one that allows you to offer advice on and sell mutual fund investments in Canada. The requirement for a mutual fund licence is based on the principle that due to the high potential impact of the mutual fund industry (along with everything related to investments and securities) on the economy, this must be highly regulated.

Why is a mutual funds licence important?

The mutual fund licence ensures that every mutual fund dealer in Canada has the necessary educational background to be registered.

The process of getting a mutual funds licence is also a way to test an applicant’s ethics and work experience. Then, based on the applicant’s performance, the appropriate securities regulators can approve or refuse issuance of the licence.

How to get a mutuals fund licence

Here are the steps involved in getting a mutual fund licence:

1. Take a Pre-licensing Course

The first step in getting your mutual fund licence is to complete a proficiency course. You have 2 choices:

Those who wish to secure higher positions at a financial institution (such as compliance officer or branch manager) must take more prescribed courses.

2. Take the Exams

After taking either of the courses, you can then take the appropriate written exams to pass the Canadian Securities Course (CSC), Investment Funds in Canada (IFC), or Canadian Investment Funds (CIFC) exams.

Each exam is given an allotment of 3 hours to complete. These exams consist of 100 multiple-choice questions divided among several topics. The passing rate for these exams is 60%. Every examinee is given 3 tries to pass the exams.

3. Get a Sponsorship

A financial institution like a bank or mutual fund dealership must then sponsor your licence application. Your sponsor can be your employer; otherwise, you will have to find a financial institution willing to sponsor you. Your sponsor then files the necessary forms and submits your application to the appropriate territorial or provincial securities regulator.

Once your application is approved, your sponsoring institution must ensure that you complete a 90-day training program to gain sufficient knowledge about the Canadian mutual fund industry.

4. Pay the appropriate fees

There are different fees and charges that vary by territory and province; these are usually system fees and application fees. Additional regulatory fees will be charged if you’re registering in more than one territory or province.

After you’re registered, your firm will also pay an annual participation fee with your securities regulator.

5. Wait for regulators’ decision

Once you’re done with the previous steps, the only thing to do now is wait. Expect one of three results from a provincial or territorial securities regulator:

  1. Approve your application
  2. Disapprove your application
  3. Approve your application with certain terms and conditions

In the case of approving an application with terms and conditions, the terms and conditions may include:

  • A restriction on the duration of the licence
  • Restrictions on specific securities or securities issuers the registrant can trade, underwrite, or advise

NOTE: A mutual fund licence is inherently restricted. The licence holder can only advise on and sell mutual fund investments exclusively. Other tests, registrations and certifications may be required to trade in a more comprehensive suite of investment products.

For an overview of mutual funds and the different types, read our guide on mutual funds for the beginner investor.

Will my mutual funds licence expire?

In a way, yes, the mutual fund licence does expire. Completion of a mutual fund licence course has a validity of 3 years. 

If within that period you are unable to get a job that requires the licence, then the course validity is deemed expired. At this point, you may have to re-apply for your mutual fund licence and retake the exam.

This is how securities regulators ensure that licensed mutual fund advisors stay up to date with the latest rules, regulations, industry changes, mutual fund product innovations, etc. You can get to know more about the validity of mutual funds licences and other details with this video:

Why should I get a mutual funds licence?

The primary and most important reason, especially if you want to become a mutual fund trader, is that it allows you to legally trade them.

Another reason is that taking the course can give you an advantage over other job applicants. Getting licensed as a mutual fund dealer can be part of your continuing education.

Passing the Canadian Securities Course from the Canadian Securities Institute, for example, can give you a basic understanding of:

  • how the Canadian economy works
  • economics
  • financial statements
  • investment products
  • the portfolio management process

This is background knowledge that some prospective employers might appreciate.

Who issues the mutual funds licence in Canada?

The issuing bodies for mutual fund licences vary by region or territory. The issuing regulators for different areas in Canada are:

  • Alberta: Alberta Securities Commission
  • British Columbia: British Columbia Securities Commission
  • New Brunswick: Financial and Consumer Services Commission
  • Ontario: Ontario Securities Commission
  • Québec: Autorité des marchés financiers

In the past, there were 2 separate bodies that regulated mutual funds and regulated investments. The Mutual Fund Dealers Association (MFDA) regulated the mutual fund dealers, while the Investment Industry Regulatory Organization of Canada (IIROC) governed regulated investment dealers.

Since the beginning of 2023, both Self-Regulating Organizations (SROs) merged into one regulatory authority, the Canadian Investment Regulatory Organization (CIRO). The CIRO now regulates both mutual funds and investment dealers.

How much does the mutual funds licence cost?

The mutual funds licence cost can vary, depending on the location and whether you plan to offer your services in more than one province or territory.

The cost can also depend on which course provider you choose to purchase the course. Other factors are costs of optional learning and review materials.

For instance, if you decide to take the course from the IFSE the course starts at $385 with additional costs for supplementary materials like a printed text or a study guide. This is the instructional arm of the Investment Funds Institute of Canada (IFIC).

What’s the difference between the CSC, IFC and the CIFC?

The CSC or Canadian Securities Course is the most comprehensive course of the three, and can prepare you to sell stocks, bonds, and mutual funds.

The CIFC (Canadian Investment Funds Course from the IFSE Institute) and the IFC (Investment Funds in Canada from CSI Global Education) are only for selling mutual funds.

Can I request financial aid to get my mutual fund licence?

Financial assistance for getting a mutual fund licence will unlikely be provided by the Canadian government. As the Investment Funds in Canada (IFC) course is a professional or industry program, it's unlikely that you can receive any financial aid for this.  However, if your employer encourages you to seek further education or has a skills enhancement program, they may shoulder the cost in part or in full, so don't be shy about asking your HR department!

What can you do with a mutual fund licence?

There are many jobs that need someone with a mutual fund licence. The job or career path that’s possible isn’t restricted to selling mutual funds or giving advice on them.

Also, the knowledge you gain from applying for the licence and the effort you put into passing the exams can help make you a more financially savvy investor.

Can an unregistered financial advisor give advice to family members?

In most cases, no. Anyone engaged in the business of providing investment advice or selling securities in Canada must be registered with a securities regulator in their province or territory.

This is required even if the individual in question happens to be offering investment advice to a family member.

Licensing and registration are necessary to avoid securities fraud. It also ensures that firms and individuals who trade in securities or give investment advice meet specific qualifications and adhere to industry standards.

Financial advisors, investment firms, mutual fund dealers, once registered, must abide by the rules set by securities regulators. These include pointing out the types of investments that fit their clients’ needs and providing sound advice to suit their investment goals and personal circumstances.

Can I trade mutual funds without a licence?

No, you may not trade mutual funds or other securities without the requisite licences. Mutual funds are strictly and heavily regulated. In Canada, any individual or company engaged in trading or advising in the trading of securities must comply with the securities laws of their province. They should be licensed and registered to engage in these activities.

The only way for anyone to trade in mutual funds without a licence is to have an exemption. This is provided by specific legislation or by an order from the securities regulator of that province.

Engaging in securities trading without the appropriate licence or legislative exemptions is a form of misconduct. This can then be considered as securities fraud.

Other benefits of getting a mutual fund licence

Getting a mutual fund licence offers a number of benefits:

  • allows you to sell mutual funds or become a bona-fide mutual funds dealer
  • makes you a stronger candidate for a higher position in your company
  • gives you a more well-rounded background for your college course or aid in your continuing education

Even if making the effort of securing a mutual funds licence does not have a direct impact on your career or educational goals, this can still make you a wiser investor.  

Since a mutual funds licence offers many benefits, will you consider getting one?  Are you pursuing a mutual funds licence? Let us know in the comments!