Government relations update

IMBA’s Government Relations Chair, Jeff Atlin and Executive Director, Joe Rosati recently participated in a symposium with FSCO staff, led by commission-CEO Philip Howell. The following are key pieces of information that he shared with attendees:

1. Regulatory compliance has improved overall from 2010;
2. Product suitability for consumers remains a top cause for their complaints;
3. Compliance with advertising regulations is still low in the industry;
4. Because of the low-level of compliance with respect to advertising, principal brokers and compliance officers need to enhance their efforts to ensure compliance by brokers and agents;
5. Principals of brokerages need to take responsibility in adequately training agents and brokers so that they both meet the compliance standards and enhance their professionalism.

Important news regarding proposed MIC ownership limits

Dear Colleague;

You may be interested to know or be aware that the federal government is currently reviewing MIC share ownership rules. The proposals affect the following:

1. Reduction of maximum ownership by shareholders and their related parties from 25% to 10% of any class of a MIC share;
2. Related parties definitions deemed to be included in the ownership percentage will be drastically broadened from a spouse and minor children to anyone who is related by blood, marriage or adoption, which in effect further restricts the ownership ceiling;
3. A tax of 42.9 % of earnings will apply to MIC income and accrued gains in the current tax year, including dividends paid after March 23, 2011, for shareholders who together with related parties own more than 10% of the MIC, and the tax will begin if the MIC shares are not outside of the RRSP before the end of the current tax year. Higher taxes will also be applied if the shares are not then outside the RRSP by 2017.

The federal government has requested commentary on the proposals prior to September 16, 2011. If you disagree with the proposals, then register your concerns, and encourage your shareholders, employees and partners to register theirs as well. The appeal that we are recommending is to leave current MIC rules unchanged vis-á-vis the Income Tax Act.

If this matter affects you, we have drafted a letter, which we invite you to use to send your concerns to the Department of Finance, Minister of Finance and the Parliamentary Committee that is reviewing the proposals. Please download the letter print it on your stationary, sign it and send it by e-mail to James.Rajotte@Parl.GC.Ca, ConsultationB2011tax-fiscalite@Fin.GC.Ca, JFlaherty@Fin.GC.Ca and Alexandra.MacLean@Fin.GC.Ca.

We encourage you to act immediately. We also invite you to forward this message to your clients who may be shareholders of MICs and MITs so that they can send a letter that is tailored from their perspective, which can be downloaded here. You or your clients may make changes to either letter as you see fit.

We appreciate your time in this matter, and encourage you to register your concerns before the September 16, 2011 deadline. IMBA will also state its position to the aforementioned people or committees.

Please contact Jeff Atlin if you have any questions or concerns at either 416.638.6200 or Jeff.Atlin@IMBA.Ca.

Letter from MICs to Department of Finance

Letter from Shareholder of MICs to Department of Finance