Having scrapped earlier proposed fee model changes in light of the recession, the Ontario Securities Commission is now proposing to hike its fees starting in fiscal 2011.

The proposed amendments to the fee rule, which are out for comment until the end of the year, would not see any changes to the basic structure of the fee model.

However, there would changes to numerous participation and activity fees. For example, participation fees for reporting issuers would be increased by 17% annually over three years at each tier of capitalization, and capital markets participation fees would be increased by 9% annually over three years at each tier of specified Ontario revenues.

Earlier, the commission proposed fundamentally changing its fee model, but on March 13 the OSC announced that, in light of the economic climate, participation and activity fees would not be increased in fiscal 2010, as a result, it forecast a revenue shortfall for fiscal 2010 of approximately $22 million. The fees that are now being proposed “are designed to allow the OSC to reach cost recovery by the end of fiscal 2013, in order to remain financially stable and achieve its mandate”, it says.

The OSC points out that while it is seeking to increase participation fees from the 2006 levels, “the participation fees for issuers would be less in each of the years covered by the proposed amendments (2011 to 2013) than in 2003, when these fees were first set.”

Using a weighted average, issuers’ participation fees would be 10.6% less in 2013 than in 2003, it reports. But, on the same basis, participation fees payable by registrants in 2013 would be 4.0% higher relative to 2003. However, it says that many smaller registrants’ fees will be lower in 2013.

The OSC says that it remains sensitive to current economic conditions and has taken steps to minimize the proposed fee increases. “The proposed fees assume full use of the OSC’s remaining surplus to minimize fee increases. For the three years ending March 2013, we project operating costs will still exceed revenues by $25.4 million. This deficit will be offset by applying the expected March 2010 surplus of $24.8 million. We also project that we will need to use $0.6 million of our $20 million operating reserve,” it explains.

The commission projects that its costs will increase by 3%, 4% and 5% in 2011, 2012 and 2013 respectively, and its revenue forecast assumes 10% market growth each year.

IE