OSC proposing new fee schedule

The OSC has set three goads for the proposed inititative :

1. to reduce the overall fees charged to market players;
2. to simplify, clarify and streamline the current fee schedule; and
3. to more accurately reflect the OSC’s cost of providing services.

This project was originally outlined in the commission’s Statement of Priorities published in June, 2000.

The OSC proposes to base the new fee schedule on a new model that charges both “participation fees” and “activity fees”. All market players, including reporting issuers, registrants and mutual fund managers, will be required to pay participation fees annually. The participation fee will be based on the market player’s size, which is intended to serve as a proxy for its use of the capital markets.

For reporting issuers, the participation fee will replace most of the continuous disclosure filing fees. For registrants, the participation fee will replace many of the smaller activity fees relating to changes in their registration or to their mutual fund prospectuses during a year, as well as certain capital related fees.

Activity fees are intended to represent the direct cost of OSC staff resources expended in undertaking certain activities, such as reviewing. The OSC says the new user fees will be charged for a limited number of activities only and will be flat rate fees based on the average cost to the OSC of providing the service.

Just how firms will be impacted by the new model will be unique to each firm, although a couple of examples from the OSC indicate that the changes could be significant. For example, based on actual fees charged in 1999 a fund manager with 40 funds would see its fees drop from more than $1.9 million a year to less than $400,000. A fund dealer with about 500 salespeople would enjoy a drop from almost $1.8 million to about $440,000. However, a portfolio manager with six private mutual funds would see its annual fees jump from $7,500 to $25,000.

To assist market players in determining the effect of the changes in fees contemplated by the proposal, the OSC has added a fee estimator to its Web site under the “Market Participants” section.

The OSC is currently proposing the fee schedule be re-evaluated every three years. If a cumulative surplus or deficit occurs, the fee schedule will be adjusted accordingly.

The OSC sought input from market players from three different focus groups. The focus groups consisted of reporting issuers, dealers (including the Investment Dealers Association), advisors and mutual fund managers (including the Investment Funds Institute of Canada). Comments on the proposal are invited, due by May 31.