The Canadian Depository for Securities Limited and CDS Clearing and Depository Services Inc. (collectively, “CDS”) operates the depository and the clearing settlement system for equities and fixed income securities in Canada and is the sole provider of such services of the Canadian cash market. In November 2014, CDS submitted a proposal to amend its fee schedule relating to issuer services (the “Issuer Fee Proposal”) for approval to the Ontario Securities Commission, the Autorité des marchés financiers and the British Columbia Securities Commission (collectively, the “Regulatory Authorities”). CDS must file any proposed amendments to its fee schedule with the Regulatory Authorities for approval pursuant to its recognition orders. Under the Issuer Fee Proposal, CDS requests to amend issuance and eligibility fees and to start charging entitlement and corporate action event management fees to issuers, either directly or through their transfer agents. This is the first CDS proposal under which it proposes to charge users who are non-participants for certain key depository services it provides.
On May 14, 2015, the Canadian Securities Administrators (the “CSA”) issued Multilateral CSA Staff Notice 24-313 CSA’s Staff Review of the Proposed Amendments to Fee Schedule of The Canadian Depository for Securities Limited and CDS Clearing and Depository Services Inc. (the “Notice”), in which the Regulatory Authorities set out their staff’s approach when reviewing and evaluating any CDS proposed fee amendments and recommending to the Regulatory Authorities whether to approve a CDS proposal.
The Regulatory Authorities recognize that CDS must have sufficient resources to provide clearing, settlement and depository services given the centrality of its functions to the Canadian capital markets and expect that CDS will do so in a fair, equitable and appropriate manner. As set out in the Notice, the key principles underlying the Regulatory Authorities’ expectations about how CDS sets its fees include:
- fair access to CDS’ services;
- equitable allocation of fees and costs;
- commercially reasonable fee structures;
- non-discriminatory basis; and
- provision of sufficient resources to CDS
As set out in the Notice, to understand whether the requirements have been met, the Regulatory Authorities’ staff take into consideration the following general minimum guidelines:
- the potential impact of the proposed fee change or new fee to the safety and efficiency of, and competition within, Canada’s capital market;
- the potential impact of the proposed fee change or new fee on access to Canada’s capital markets;
- the anticipated impact to CDS’ customers (current and prospective);
- views expressed by customers and other stakeholders during the consultation on the proposal;
- the reason(s) for the fee change or new fee;
- the impact on other businesses and revenues of CDS;
- the projected change in revenue for CDS;
- historic and projected costs of CDS in providing the particular service;
- the impact on financial ratios that must be maintained by CDS pursuant to its recognition order;
- the movement of overhead and direct costs between CDS’ services, and between core and non-core services;
- how the proposed fees benchmark to fees for comparable services in other jurisdictions; and
- how the proposed fees will be rolled out and implemented.
In the process of evaluating CDS’ fee proposal, the Regulatory Authorities’ staff may take into account other factors on a case by case basis as necessary.
For more information, please refer to the Notice at https://www.bcsc.bc.ca/Securities_Law/Policies/Policy2/PDF/24-313__Multilateral_CSA_Notice___May_14__2015/