From the Regulators

Regulator proposes a return to fees based on current market conditions

By James Langton |

The Ontario Securities Commission (OSC) is proposing to revert back to charging fees based on current market conditions.

The OSC published proposed amendments to its fee rules today that would mean that market participants, such as dealers and fund managers, calculate their participation fees based on their most recent financial year, rather than using a reference year. "The main advantage to this model for market participants is that fees will track more closely to their current fiscal situation, with fees rising or falling based on changes in their respective business conditions or performance," the commission notes.

The downside of this approach is that it may reduce the predictability of the OSC's revenues. Indeed, the OSC only introduced a fee model that utilizes a reference year in 2013 for the very reason of improving revenue predictability and better matching its revenues to costs. Now, it's proposing to revert back to the old way of calculating fees, in response to complaints from the industry; and, citing progress towards the new cooperative regulator.

The OSC notes that it typically re-evaluates its fee levels only every three years, however, it says that it is re-examining its fee rules early "to consider important issues raised by market participants."

"The proposed rules carefully considered comments from our stakeholders as well as our funding needs," said Maureen Jensen, executive director and chief administrative officer of the OSC. "As a result, the proposed amendments establish a new model that better reflects current market activity and is less complex to administer."

The commission notes that, under the proposed new model, recent growth in the markets, combined with its cost control efforts, will mean that it can avoid implementing rate increases that are due to come into effect April 1, 2015. Instead, it would maintain participation fee rates at current rate levels.

Comments on the proposed amendments are due by December 17.