Proposed rule changes would end a long-standing gap in compensation structure between mutual fund and investment dealer advisors across Canada
The Canadian Investment Regulatory Organization (CIRO) took a significant step toward advisor incorporation on Thursday, releasing proposed rule amendments that would give all client-facing Approved Persons sponsored by CIRO Dealer Members the option to receive compensation through an incorporated entity.
The proposals, now open for public comment, address one of the more persistent structural inequities left over from the 2023 merger of the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC): the fact that advisors registered with investment dealers have never been able to access the same compensation flexibility available to their mutual fund dealer counterparts.
Under existing rules, advisors sponsored by mutual fund dealers, or firms with dual registration, can channel a portion of their compensation through an unregistered corporation via what is known as a directed commission arrangement. That option is expressly unavailable to advisors registered solely with investment dealers, who are compensated directly by their sponsoring firm.
The proposed amendments would dismantle that distinction entirely.
A regulatory priority since CIRO's formation
Harmonizing advisor compensation was identified as a key integration priority in CIRO's 2027 Annual Priorities and is embedded in its three-year Strategic Plan. Alexandra Williams, Senior Vice-President, Strategy, Innovation and Stakeholder Protection at CIRO in Toronto, said the proposals reflect the regulator's broader mandate following the MFDA-IIROC merger.
"Harmonizing advisor compensation is an important way that CIRO is demonstrating its commitment to providing more efficient and consistent regulation," Williams said. "Adopting an incorporated advisor compensation option will provide flexibility for advisors and address the lack of tax certainty associated with the current directed commission approach."
What the changes would look like
Following extensive stakeholder consultation, the proposed amendments take a three-part approach. The existing options allowing advisors to operate as either an employee or an agent of their sponsoring dealer would be preserved. The directed commission arrangement — currently available only to a subset of registrants — would be phased out. In its place, all client-facing Approved Persons would gain access to an incorporated advisor compensation arrangement.
For advisors, the practical implications are meaningful. Incorporation opens the door to income splitting, corporate tax deferral, and greater flexibility in structuring compensation across career transitions — advantages that investment dealer advisors have been unable to access under the current framework. Wealth Professional Canada has covered related regulatory shifts affecting how advisors structure their practices and compensation arrangements, as well as broader CIRO integration developments since the regulator's launch.
CIRO has confirmed that investor protection obligations will remain in force under the new model, with the incorporated entity subject to regulatory requirements owed to clients.
Path to implementation
The proposed amendments are not yet in effect. If approved by the Canadian Securities Administrators (CSA), implementation will require legislative changes, meaning a multi-stage regulatory process lies ahead before the option becomes available in practice.
The full text of the proposed rule amendments is available on CIRO's website. The comment period is open, and industry participants are encouraged to submit feedback.
