Canada sets rules for foreign ETF sales

Foreign-listed exchange-traded funds now account for roughly a quarter of the ETF assets that Canadian retail investors hold through registered dealers. Consequently, the country’s securities regulators have established clear expectations for how firms should market and sell these products.

The Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) published these expectations in Staff Notice 81-339. The document specifically covers ETFs listed on a foreign exchange but not also listed on a Canadian one. As of March, such funds made up about 25% of total ETF assets held by Canadian retail investors in accounts at registered dealers.

Marketing Rules for Fund Managers

The guidance rests on existing securities law and creates no new legal requirements, staff said. However, it serves as a strong reminder to foreign ETF managers and their Canadian affiliates. Actively marketing or promoting a foreign ETF in Canada could trigger the prospectus requirement. In Ontario, Quebec, and Newfoundland and Labrador, it could also trigger the investment fund manager registration requirement.

The notice lists specific activities that would generally count as active promotion. These include soliciting dealers to recommend a fund or paying dealers incentives tied to sales. Running advertisements in Canadian media or targeted digital channels is also restricted. Additionally, returning foreign ETF results through a Canadian affiliate’s research tools or cross-listing the fund’s securities on a Canadian exchange are considered active promotion.

This regulatory move arrives after a period of explosive market growth that outpaced specific rulemaking. While the industry argued during consultations that restricting access would drive investors to unregulated platforms, regulators are clearly prioritizing standardized disclosure over easy access to ensure the market remains stable as it matures.

Duties for Dealers and Advisors

For dealers and advisors, the notice restates existing know-your-product and product due diligence duties. Before making a foreign ETF available or advertising it, dealers must take reasonable steps to assess the fund’s structure, features, risks, and costs. They must also approve the product and monitor it for significant changes.

Advisors who recommend or buy a foreign ETF for a client must understand the product and complete a suitability determination. Staff encouraged them to weigh whether the client grasps the key differences from Canadian ETFs. These differences include tax treatment, currency exposure, concentration, liquidity, and the availability of alternatives such as Canadian ETFs offering similar exposure. Portfolio managers exercising discretion are covered by the same expectations.

Order execution-only dealers, which do not assess suitability, drew a softer ask. Staff encouraged these firms to provide alerts at critical points before a purchase. This could be achieved through pop-up windows, confirmation checkboxes, on-screen text, or oral notices for phone orders. These alerts must inform investors that the product is a foreign ETF and explain how it differs from a Canadian one.

Industry Growth and Reaction

The market has expanded quickly. Canadian ETF net assets rose from $114 billion in 2016 to $713 billion in 2025, the highest figure on record. The notice reported year-over-year growth of 36 percent from 2023 to 2024 and 38 percent from 2024 to 2025. Net sales climbed from $16.4 billion in 2016 to $125.8 billion in 2025, a figure that highlights the rapid shift in investor preference.

“The guidance encourages practices that support investors in making more informed decisions when choosing between Canadian and foreign ETFs,” said Stan Magidson. He chairs the CSA and is chair and chief executive officer of the Alberta Securities Commission.

Andrew Kriegler, president and chief executive officer of CIRO, tied the move to the market’s size. He said the guidance will help ensure that Canadian investors who choose to purchase foreign ETFs have a clear understanding of the products they are investing in.

The Canadian ETF Association welcomed the guidance. Eli Yufest, the association’s executive director, said the group has pushed for clearer regulatory expectations for some time. He added that consistency across the industry supports investor protection.

Foreign ETFs generally do not file Canadian disclosure documents such as an ETF facts document. They may use strategies not permitted under National Instrument 81-102 and can carry different tax and currency conversion costs. The agencies stated they will keep monitoring the sale of foreign ETFs and will weigh further policy steps if needed.