Now is not the time for higher regulatory fees on dealer firms, according to the Toronto-based Investment Industry Association of Canada (IIAC).
The IIAC filed a response on Monday regarding the fee hike proposed by the Ontario Securities Commission (OSC). The provincial regulator plans to impose a 7.9% annual increase to dealer member participation fees over a three-year period beginning on April 1, 2013. For issuers, fees would increase by 15.5% per year.
New fees will place too great a burden on dealer firms, according to the industry association. Firms are already struggling because the OSC has continually increased fees over the past decade despite the weak market condition of the past few years. Instead, the association claims that the OSC should be able to meet its current regulatory responsibilities within budget. That the regulator's budget has increased means more transparency is required, said Ian Russell, president and CEO of the IIAC.
"The commission should make public its annual business plan and budget and other documents it is required to submit to Ontario's Minister of Finance," said Russell in a press release. "Further, the commission should be required to justify its regulatory initiatives, budgets and fees, and its performance before a Standing Committee of the Ontario Legislature that conducts annual or biannual reviews of its activities."
The IIAC also made the following recommendations to the OSC in regards to fees:
- The OSC's participation fees for the next three years should not be based on a market participant's performance in a single year (a "reference fiscal year"), but on a three-year rolling average of revenues or market capitalization. This approach will enable fees to reflect to some degree actual performance, and still enhance the commission's ability to predict its annual revenues.
- The OSC should not prohibit registrants from treating participation fees as business expenses and factoring them into their fee models.
- If the OSC decides to prohibit registrants from passing on participation fees, the prohibition should not be adopted in a policy, but should be adopted as a rule and clearly explained.
- The OSC should consider increasing the proportion of activity fees in its fee model; the IIAC suggests specific alternatives, such as fees to achieve regulatory goals and lowering the threshold to charge variable fees to the stock exchanges and clearing agencies.
- The OSC should charge fees for hearing applications made by parties to a takeover bid or proxy contest, such as poison pill hearings.