Proposed model is due to come into force in April 2025
The Investment Fund Institute of Canada have four key concerns about the proposed integrated fee model for mutual fund dealers and investment dealers.
CIRO proposed the new model in April which would see fees for the dealers calculated based on revenue and the number of approved persons registered by each firm, and while IFIC says it and its members agree with most of what is proposed, they want to see some amendments before the model is implemented in April 2025.
Firstly, 64% of members are likely to see their fees increase with just 36% seeing a decrease under the new model.
“We understood that the creation of CIRO would create synergies and cost savings for all dealers, all things being equal,” said Andy Mitchell, president and CEO at IFIC. “We expected these synergies would lead to regulatory fee reductions and that all registrants would thus experience a fee reduction.”
IFIC says that CIRO has not delivered on its transparency principle in providing the necessary data and assumptions relating the consultation on the proposed fee model.
Its members want the regulator to review the definitions of ‘revenue’ and ‘approved persons’ used for fee calculation. It believes that firms’ revenue that includes cost-recovery, interest income and foreign exchange gains should be excluded from the cost of regulatory oversight. Further, IFIC members believe only client facing employees, not compliance or branch management staff, should be considered approved persons in fee calculations.
Rate tiers for fees are also proposed but IFIC says the way the seven tiers are structured is inconsistent and should be rectified. “If differentiated rates are being considered, the rates per tier should be disclosed and a public consultation should be held if material fee increases could result,” IFIC’s statement says.
Finally, the risk of duplicate fees in Quebec should be addressed, IFIC says. It suggests that the AMF should reduce its fees to reflect the oversight activities delegated to CIRO while CIRO should reduce its fees to reflect the oversight activities conducted by the CSF.
“IFIC urges CIRO to accept their suggested changes and recommends holding a second consultation before the fee model is finalized,” its statement concludes.
