On August 23, 2012, the Ontario Securities Commission (OSC) published proposed amendments to its fee rule, 13-502.
Being a self-funded agency, and citing issues like the increasing need to deal with regulatory matters on an international level and the complexity added by technological advances in trading and trading strategies and products, fees are generally proposed to be increased over the three years following implementation of these proposals. While fees for both registrants and issuers are proposed to be increased, the increase will represent a 7.9% increase per year for registrants, as compared to 15.5% for issuers, in an attempt to continue to bring the balance for the two groups closer to 50/50.
For example, the annual corporate finance participation fee for issuers in the $50 million to under $100 million capitalization category is slated to increase from the current $5,125 to $5,925 effective April 1, 2013, and then increasing to $6,850 and $7,900 over the following years. The annual capital markets participation fee for registrants in the $1 million to $3 million (Ontario revenues) category, for example, is slated to increase from the current $7,250 to $7,825 effective April 1, 2013, and to $8,400 and then $9,110 over the following two years.
The method for calculating annual fees is also proposed to be changed from a model based on projected market capitalization for issuers, or Ontario revenues for registrants, to one that relies on historical data. The new model will use market capitalization or revenue, as applicable, for the most recent fiscal year prior to May 1, 2012 as a “reference year” for the purpose of calculating the fees for a three-year cycle.
Activity-based fees are also proposed to generally increase, including fees for filing a preliminary prospectus ($3,250 to $3,750), a preliminary prospectus accompanied by a technical report ($2,000 to $2,500), a rights offering circular ($2,000 to $3,750) and a takeover bid or issuer bid circular ($4,000 to $4,500). With respect to filing a report of exempt distribution (private placement) on form 45-106F1 or form 45-501F1, the $500 fee per form is now proposed to apply to all issuers, including those who pay (or whose investment fund manager pays) an annual participation fee. Reports of exempt distribution will also now be subject to their own late-filing fee cap of $5,000 per year, no longer to be aggregated with other late filings for the purposes of the cap.
Two new categories of fees are also proposed to be added. The first is for specified regulated entities, such as stock exchanges, alternative trading systems, clearing agencies and trade repositories, with fees ranging from $8,750 to $500,000 per year. The second is for designated rating organizations, being a flat fee of $15,000 per year.
A number of technical amendments to the rule, companion policy and forms are also proposed, including changes to the definition of “unregistered investment fund manager” to exclude unregistered investment fund managers with no place of business in Ontario that act for one or more investment funds provided that none of the managed funds have securityholders resident in Ontario and neither the investment fund manager nor any of the managed funds has, at any time after September 27, 2012, actively solicited residents in Ontario to purchase securities of any of the managed funds.
The current fee structure was established in 2003 and is re-evaluated every three years. The proposed amendments are open for a 90 day comment period closing on November 21, 2012.