The Canadian Securities Administrators published final amendments prohibiting chargebacks in the distribution of publicly offered investment fund securities, completing a rulemaking proposed in June 2025. The ban targets a compensation structure that the regulators view as creating a significant conflict between advisors’ financial interests and clients’ investment needs. Under a chargeback arrangement, a dealer or dealing representative receives an upfront commission or payment when a client buys securities but must repay some or all of it if the client redeems before a fixed schedule. Removing this structure is intended to prevent advisors from being financially incentivized to discourage redemptions and to better align investment advice with clients’ interests.
Canadian Securities Administrators finalizes ban on chargebacks in publicly offered investment fund distribution
The Canadian Securities Administrators finalized amendments banning chargebacks in the distribution of publicly offered investment fund securities. The ban removes a compensation structure that can incentivize advisors to discourage client redemptions to avoid repaying upfront commissions.