Last month, the Ontario Securities Commission published its final amendments to OSC Rule 13-502 Fees and Companion Policy 13-502CP Fees. These amendments are largely consistent with materials published for public comment on August 23, 2012, but incorporate a number of changes made in response to concerns communicated during the comment process. Assuming Ministerial approval, the amendments will come into force on April 1, 2013.
Purpose of the amendments
In order to remain financially stable, achieve cost recovery by 2016, and be able to achieve its mandate, the OSC is raising its fees as set out in the amendments. The OSC, which is dependent on fees from market participants, is currently projecting to operate at a deficit of $10.7 million in 2012/2013. The fee rates it set in 2010 were structured with a regard for market participants facing a challenging market period, and were anticipated to be insufficient to fully recover the OSC's projected costs. The OSC considers the fee increases necessary to address the current operating deficit and return the OSC to cost recovery. Furthermore, it plans to allocate part of the increased fee revenues towards new costs associated with meeting evolving regulatory responsibilities and improving its capacity to keep up with market developments, innovation, and investor concerns.
Summary of the amendments
The amendments are largely consistent with the current framework, but make changes so that the fees charged by the OSC are aligned more closely with actual costs. New activity and participation fees are imposed in areas where workload has increased and more resources are being targeted.
Participation fees are based on the cost of a range of regulatory services that cannot practically be attributed to individual entities or activities. These fees will continue to be set using a tiered structure, with reporting issuer fees varying by average market capitalization in a fiscal year and registrant fees varying by the registrant's annual Ontario revenues. However, the final amendments raise the participation fees for reporting issuers by approximately 11.65% as of April 2013, with subsequent 11.65% increases in April of 2014 and 2015. The final amendments also raise the participation fees for registrants approximately 4.7%, with subsequent 4.7% increases in April of 2014 and 2015. This is a marked decrease from the August 2012 proposals, which proposed increases of 15.5% per year and 7.9% per year, respectively. The final amendments also provide for two additional categories of participation fees: fees for specified regulated entities (such as exchanges and clearing agencies) and fees for designated rating organizations.
For the full text of the amendments, please see Notice of Amendments to OSC Rule 13-502 Fees and Companion Policy 13-502CP Fees.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
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