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The Ontario Securities Commission (OSC) delivered a much larger surplus in fiscal 2015-16, ended March 31, as it had higher than expected revenue, lower expenses and did a better job at collecting enforcement sanctions. However, the OSC expects its surplus to shrink in fiscal 2016-17 as expenses are forecasted to grow while revenue remains flat.

The OSC’s latest annual report, published on Friday, indicates that the provincial regulator’s total revenue came in at $116.85 million in fiscal 2015-16, which is about $2.2 million more than planned. The increase was due primarily to the impact of new fee rules, particularly higher participation fees, which rose as the basis for calculating participation fees changed.

At the same time, overall expenses were $101.9 million, well under the $107.7 million forecasted, thanks to cost-cutting and deferred initiatives, which curbed planned spending on compensation, professional services, travel and administration. As a result of the higher revenue and lower expenses, the OSC produced a surplus of just under $15 million; it had budgeted for a $6.6 million surplus in 2015-16.

Looking ahead, the OSC’s annual report indicates that revenue will be more or less unchanged in fiscal 2016-17, but expenses are expected to increase by more than $10 million to $112.1 million. The big jump in expenses is due to a planned increased investment in derivatives market oversight, the implementation of its new whistleblower program and increased spending on information services.

If those forecasts are realized, the surplus would drop to $4.4 million in 2016-17. Nevertheless, the OSC forecasts that its accumulated surplus will reach $30 million by the end of fiscal 2017-18, which will be taken into account when fees are reassessed in fiscal 2018-19.

Another pleasant surprise for the OSC was an improved collection rate for the enforcement sanctions. The overall collection rate came in at 18.6%, up from 15.4% in fiscal 2014-15 and less than 5% in fiscal 2013-14. Although the OSC collected less than 3% of the sanctions imposed in contested hearings, it did recover 42.8% of the amounts assessed in settlements, pushing total collections to almost $11 million, up from $7.5 million in fiscal 2014-15.

“Collections of monetary sanctions improved in 2016 primarily because two of the respondents are well-established firms that paid the sanctions assessed to them,” the report notes.

The report also indicates that the OSC’s expenditureof staff resources on the planned Capital Markets Regulatory Authority (CMRA) declined to $1.3 million from $1.8 million year-over-year. This does not include time its executives have spent on the CMRA transition team.

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