On October 3, 2008, the Ontario Securities Commission published
proposed changes to OSC Rule 13-502 Fees, its Forms and
Companion Policy. The deadline for comments is January 3, 2009. If
adopted by the OSC and approved by the Ontario government, the
amended Rule would take effect on April 1, 2009.
The proposed changes are significant and will affect reporting
issuers, registrants, and unregistered fund managers. The proposed
changes have particular resonance when considered against the
current market and economic downturn.
The most important proposed change relates to the basis of
calculation of participation fees that are payable on an annual
basis by reporting issuers, registrants and unregistered fund
managers. Instead of basing calculations on capitalization, in the
case of a reporting issuer, or its specified Ontario revenue, in
the case of a registrant/unregistered fund manager, for its most
recently completed financial year, a participant will prepare the
required calculations based on the applicable data for its last
completed financial year that ended prior to January 1, 2008. The
OSC defines this as the participant's "reference fiscal
year", but does not comment on the fact that this period
represents the peak of the capital markets. Participants who did
not have the status of a reporting issuer, registrant or
unregistered fund manager throughout that financial year will use
their most recently completed fiscal year, as is currently the case
for all participants.
The Corporate Finance and Capital Markets participation fee
tiers remain unchanged, but the OSC proposes to increase the fees
for each tier. The fees will increase by at least 55 percent for
reporting issuers and by a range from 11 to 25 percent for
registrants and unregistered fund managers. The OSC explains that
the current fees are lower since they reflect accumulated OSC
surpluses, which will be used up by the time the amended Rule comes
The OSC states that the change to historical data, as opposed to
forecasted data, will allow staff to more accurately forecast the
fees payable by Ontario capital markets participants, which will
facilitate the OSC's budgetary process. The OSC expects that
participants also may benefit from being able to forecast future
Currently, the OSC reviews the participation fees –
both the tiers and the fees for each tier - every three years. The
OSC now proposes to review (and presumably change) the reference
fiscal year, the tiers and the fees every two years. This means
that participants will be calculating participation fees based on
capitalization/Ontario revenues as at their last financial year
before January 1, 2008, until April 1, 2011.
The OSC proposes other changes, including increased fees for
some activities (prospectus filings and applications for exemption,
among other things), simplification of participation fees payable
by new participants and clarification of late filing fees.
The OSC explains its reasons for proposing these changes and
reiterates that the fee revenue generated from the Rule is intended
to cover the operating costs of the OSC. Any surpluses will be
returned to participants. The OSC also explains how it proposes to
apply its projected $49 million surplus as at March 31, 2009.
We intend to comment on the proposed changes to the Rule, with
particular focus on the need for transparency in how the OSC
determines its operating budgets and how it allocates surplus fee
revenue amongst reporting issuers and registrants. We believe that
the OSC should reconsider its decision to require the use of
historical data in light of the market conditions, considering that
most participants can be expected to have lower capitalization and
revenues for their current fiscal years than they did for the
fiscal years ended prior to January 1, 2008.
Please click here for a copy of the Request for
Comments and the proposed Rule, Forms and Companion Policy.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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