The Financial Services Regulatory Authority of Ontario (FSRA) proposed amendments to Rule 2019-001 – Assessments and Fees (the Fee Rule) in late July, which sets out the structure for fees to be charged to credentialling bodies (each, a CB) with respect to the title protection framework. FSRA’s proposed title protection framework was subject to an earlier consultation in May 2021 and described here. FSRA has proposed that fees be comprised of both application fees, and annual fees, as follows:
- $10,000 application fee upon the submission of an application for approval of a CB and $5,000 for each credential application for either a financial advisor or financial planner credential.
- An annual assessment, itself comprised of the following three components:
- A fixed annual CB fee of $25,000.
- A variable annual CB assessment. The variable annual assessment will allocate FSRA’s total budgeted expenses related to the financial professionals sector (currently anticipated to be $1.1 million / year), net of budged fixed fees, among CBs proportionally, based on their share of the total number of credential holders in the sector.
- A time limited annual assessment to recoup FSRA’s start-up costs. This time-limited annual assessment relates to FSRA’s costs incurred to implement the title protection framework, and are estimated to be $3.1 million. Again, FSRA proposes to allocate these costs to approved CBs in proportion to their share of the total number of credential holders, over a 5-year period. If new CBs are approved during the 5-year period, this portion of the annual assessment would be adjusted for all CBs.
The fees are based on the stated principles included in the Fee Rule, which include fairness, simplicity, consistency and transparency. The application fees are intended to be associated with the time FSRA staff will spend reviewing the applications. The annual assessment fees relate to FSRA’s recovery of costs, and will support its infrastructure for the oversight of CBs and help monitor individuals who use a financial advisor or financial planner title without an approved credential. As a bottom line, FSRA estimates that the annual average cost for the first five years of the framework could be $22 per credential holder, all assuming the costs set out above and 81,000 credential holders in Ontario.
Commentators on the earlier proposed amendments to the framework had expressed concerns that persons holding more than one approved credential might pay more than one fee under the Fee Rule, particularly as the Fee Rule only applies in Ontario and other jurisdictions are implementing their own title protection rules, and that smaller organizations might be disincentivized from applying as a CB, or wait to apply until start-up costs have been recouped by FSRA. Suggestions had been made earlier that FSRA should instead determine fees based on the number of title users, and not the number of credential holders. FSRA is seeking feedback on the fee rule, including how it should determine which credential holders would be subject to the fee payable by the CB, such as whether residency in Ontario or the conduct of business in Ontario should be a factor. If you have any questions on the proposal or wish to provide a comment, please contact your usual AUM lawyer. Comments are due October 20, 2021.
August 31, 2021