The industry self-regulatory organization, the Canadian Investment Regulatory Organization (CIRO), is proposing its version of regulatory changes that will expand dealers’ obligations to report investment costs to customers.
CIRO has published for comment a set of proposals aimed at harmonizing its cost reporting rules with the Canadian Securities Administrators’ (CSA) new total cost reporting rules, which will require dealers to begin reporting a fund’s ongoing expenses and fees along with disclosing their own fees.
The CSA adopted regulatory changes in 2023 with the Canadian Council of Insurance Regulators to increase cost transparency for investors and harmonize disclosures by mutual funds and segregated funds.
This initiative is the next step in reforming the customer relationship model, which focused on reporting dealer costs to investors but did not include ongoing fees and commissions paid by investors to investment funds.
“These fees can be easily overlooked because they are built into the value of an investment fund and are either only disclosed at the time of sale or reported in a way that is not tailored to investors’ specific portfolios,” CIRO said in a notice outlining its proposals.
CIRO is currently proposing its own reforms to track CSA requirements, enabling dealers to meet the requirements of the new CSA requirements by complying with the requirements of the self-regulatory organization in this area.
CIRO also noted that it is proposing these changes as a separate project from the ongoing regulatory consolidation project because the CSA total cost reporting rules are expected to come into force before the harmonized rulebook comes into force.
Comments on CIRO’s proposals are open until January 8, 2025, assuming the new rules enter into force in 2026. In 2027, adjusted cost reporting for the year ended December 31, 2026 is expected.
In addition to harmonizing CIRO requirements with CSA regulations, the proposal – which would apply to both investment dealers and fund dealers – aims to “bridge some of the existing differences in customer reporting requirements and practices of investment dealers and mutual fund dealers.” As per the CIRO notice.
