Only two firms are affected - but every fund manager faces fresh disclosure rules
Canada's securities regulators have finalized rules limiting a dealer to acting as principal distributor for only one mutual fund family.
The Canadian Securities Administrators announced the final amendments on June 11, 2026, closing out a review of the principal distributor model in mutual fund distribution. The CSA, which coordinates regulation across the provinces and territories, said the changes are meant to improve investor protection and help maintain confidence in Canada's capital markets.
A principal distributor, as the CSA defines it, is a dealer that holds an exclusive right to distribute a fund family's securities, or that benefits from a feature giving it a material competitive advantage over other distributors. Under the amendments, a dealer can hold that role for only one mutual fund family. The rules do not stop a principal distributor from also selling other families' funds as a participating dealer.
For fund managers and dealers, the practical reach is narrow. The CSA estimates that two dealers currently act as a principal distributor for more than one mutual fund family, and it noted that doing so is uncommon. The regulator said most market participants had already read the existing rules the way the amendments now spell out.
The package also tightens disclosure. Firms will have to lay out principal distributor arrangements and the related compensation in the simplified prospectus, the fund facts document, and the annual report on charges and other compensation. The disclosure turns on the maximum percentage of a fund's management fee that the manager pays the principal distributor.
The rules also close a gap left by the 2022 ban on deferred sales charges. Principal distributors had been carved out of the sales-practice provisions that applied to participating dealers, so the amendments confirm that the DSC option is not available to investors buying funds through a principal distributor. A new provision prohibits a manager from charging a redemption fee to a fund's securityholders, subject to a carve-out for fee arrangements that existed before June 1, 2022. A separate provision bars a principal distributor from giving its representatives an incentive to recommend one fund over another within the same family.
The timeline is staggered. The amendments to NI 81-101, NI 81-102 and NI 81-105 come into force on October 1, 2026, and the amendments to NI 31-103 take effect on January 1, 2027, subject to required ministerial approvals. The CSA built in 24-month transition periods for the changes to NI 31-103, NI 81-101 and NI 81-105.
The amendments grew out of a proposal the CSA published on November 28, 2024, which drew 20 comment letters. Some commenters argued the model suppresses competition and should be retired; others said existing client-focused reforms already cover the conflicts at issue. The CSA said the principal distributor model still has a place in the industry. The regulator is separately weighing a ban on chargebacks, having published proposed amendments on that practice on June 26, 2025.
The full text of the CSA Notice of Amendments - The Principal Distributor Model is available at https://www.osc.ca/sites/default/files/2026-06/csa_20260611_21-103_81-101_81-102_81-105_principal-distributor-model.pdf
