IFIC responds to CIRO’s proposed integrated fee model
Despite agreeing overall with the model, IFIC urges CIRO to revise four key areas
June 24, 2024 (Toronto) – The Investment Funds Institute of Canada has responded to the Canadian Investment Regulatory Organization (CIRO)’s proposed integrated fee model, slated to come into force on April 1, 2025. The proposed model would calculate fees for investment dealers and mutual fund dealers based on revenue and the number of approved persons registered by each firm.
IFIC and its members agree with the model for the most part, but there are four key points that must be addressed before the model is finalized.
Level of fees
IFIC was surprised to see that fees are likely to rise for 64 per cent of registrants, given that enhancing regulatory efficiency was one of the main goals when CIRO was created in 2023. (CIRO resulted from the amalgamation of the former Mutual Fund Dealers Association of Canada and the Investment Industry Regulatory Organization of Canada). Only 36 per cent of registrants are likely to see their fees go down.
“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.”
Elements of fees
There is a lack of certain data from CIRO to support the proposed fee model, even though the consultation includes transparency as one of its guiding principles. IFIC cannot make final recommendations on potential adjustments to the model without seeing details about the figures and assumptions that went into the decision-making process.
IFIC also asks CIRO to review the definitions of “revenue” and “approved persons” for the purposes of fee calculation. Some firms’ revenues include cost-recovery, interest income and foreign exchange gains, which the industry believes should not be included to reflect the cost of regulatory oversight. For approved persons, IFIC members believe that only those who are client facing should be included in the calculation of fees, while those who work in compliance or branch management should be excluded.
Use of tiers
IFIC’s understanding is that there will be seven revenue tiers and that one consistent rate will apply to all tiers. IFIC requests that CIRO disclose that rate. In addition, some of the information on tiers is inconsistent – for example, some references include the concept of scale and others refer to complexity. 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.
Regulatory fees in Quebec
There is great concern in the industry about a possible duplication of fees in Quebec. The current oversight fees in Quebec for mutual fund dealers are the sum of Autorité des marchés financiers (AMF) fees and Chambre de la sécurité financière (CSF) fees. IFIC recommends that the AMF reduce its fees to reflect the oversight activities it is delegating to CIRO and that CIRO reduce its fees proportionally to the oversight activities that are already conducted by the CSF.
Summary
IFIC urges CIRO to accept their suggested changes and recommends holding a second consultation before the fee model is finalized.
About IFIC
The Investment Funds Institute of Canada is the voice of Canada’s investment funds industry. IFIC brings together approximately 150 organizations, including fund managers, dealers, professional and back-office service providers, to strengthen the integrity of the investment funds industry, foster public confidence in investment funds, and enable investors to achieve good outcomes. By connecting savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation.
For more information:
Christine Harminc
Senior Manager, Communications and Public Affairs
charminc@sima-amvi.ca
416-309-2313
