The Ontario Securities Commission (OSC)  proposed amendments  to its fee structure includes a $16 million net increase in the OSC’s annual fee-based revenue,  the OSC states represents an 8.6% year-over-year increase to address a ‘funding gap’.

The OSC has not produced sufficient information to justify this fee increase on a cost-recovery basis. Rather than improve the OSC’s fee structure, the Proposed Amendments highlight deficiencies in that structure, which call for reform. Our full analysis is here. Key highlights as follows:

NO EVIDENCE OF A FUNDING GAP

Little information on the cause or scope of the OSC’s purported funding gap has been provided. Between 2010 and 2025, the OSC’s fee revenue increased from approximately $61 million to $169 million representing a 177% increase over that period. It is concerning that despite this significant increase in the OSC’s actual fees, the OSC anticipates that its operating and capital expenditures will outpace its annual revenue over the next three-year period. The costs of the OSC’s operations are outpacing the size and performance of Ontario’s capital markets.

Despite experiencing a deficit in 2025, the OSC holds approximately $140 million in surplus funds, which includes a $20 million reserve that the OSC maintains for the express purpose of funding the OSC’s operations in the event of revenue shortfalls and unanticipated costs. This marks a considerable increase from the $34 million that the OSC held in 2015. The OSC’s 2025 Annual Report indicates that the OSC intended to use its surplus funds to offset its anticipated deficit. It is unclear what it anything has changed that would justify the OSC’s deviation from that approach.

RISK OF REGULATORY CAPTURE

The Proposed Amendments also highlight the degree to which the OSC is financially reliant on Ontario’s largest market participants and increases the risk of the OSC’s fee structure contributing to regulatory capture or the appearance thereof. This proposal reflects the highly concentrated nature of Ontario’s capital markets and the significant disparity between Ontario’s largest and smallest market participants. The danger is that these amendments will further entrench the OSC’s financial reliance on a relatively small number of dominant firms and issuers.

ACCOUNTABILITY CONCERNS

The Proposed Amendments include an increase in participation fees, which unlike activity fees, cannot be traced to a specific regulatory service. As of 2025, the OSC’s participation fees accounted for 87% of its total fee-based revenue. This differs from the US Securities and Exchange Commission which focusses on activity and transaction-based revenue.

FEE DUPLICATION: THE NEED FOR A NATIONAL APPROACH

Canada’s system of securities regulation features 13 provincial/territorial securities regulators and the Canadian Investment Regulatory Organization (“CIRO”). Each regulatory authority sets its own “activity” and “participation” fees and collects those fees from market participants. The Proposed Amendments have been made in isolation from other members of the Canadian Securities Administrators (“CSA”) and CIRO and do not address the duplicative regulatory fees charged by those authorities. As a result, market participants will continue to pay separate but overlapping fees that are used to finance the operations of separate but overlapping regulatory authorities.

With respect to participation fees for issuers, the OSC’s prescribed method for calculating market capitalization does not include any geographic limitations, meaning that the OSC’s fees do not just reflect the use and benefits that an issuer derives from Ontario’s capital markets but includes equity value that may be held by investors across Canada. The Alberta Securities Commission has adopted the same approach, meaning that issuers are required to pay two participation fees to provincial regulators based on the same measure of market capitalization.

For registrants, the OSC charges an annual fee based on gross Ontario revenue. Although the OSC is the only provincial/territorial regulator to have adopted this approach, all other provincial/territorial regulators charge a flat annual fee based on registration type, meaning that a firm with a national presence will be required to pay multiple participation fees each year. In addition, registrants that are required to become members of CIRO are required to pay CIRO’s annual membership fee, which is also calculated with refence to the firm’s gross revenue, creating another duplicative fee.

OUR RECOMMENDATIONS

In efforts to stimulate growth, competition and capital formation, the OSC should:

• Submit to an external audit of its fees and cost-recovery model;
• Cease charging activity fees to market participants where the OSC is not the principal regulator;
• Exempt CIRO dealer members from paying registration and participation fees;
• Eliminate Corporate Finance Participation Fees or, alternatively, shift to a flat fee model;
• Amend its Markets Participation Fee model to adopt a flat fee model; and
• Engage with CIRO and other members of the CSA to establish a uniform fee schedule.