Further to our
past communication, on July 14, 2016, the Ontario Securities Commission (OSC) published, for a 30-day public comment period, revised CDS Clearing and Depository Services Inc. (CDS) proposals to implement:
- Revisions to certain existing fees, as well as new fees for ISIN Issuance and CDS Eligibility Services; and
- New fees for entitlement and corporate action ("E&CA") event management.
Concurrent with the release of these new proposals (the 2016 Proposal), CDS also withdrew their original proposal, published on November 13, 2014, "CDS Proposed Amendments to the CDS fee schedule re Issuer Services Program" (the 2014 Proposal).
In the 2016 Proposal, CDS has indicated that they believe that the fees proposed in the 2014 Proposal are fair, reasonable, and equitable. However, they have determined that the amendments should be made in two separate submissions, specifically the ISIN issuance and CDS eligibility processes that take place pre-closing (the "ISIN Services"), and the entitlement and corporate actions event management services that take place post-closing (the "E&CA Services").
On September 15, 2016, the OSC and AMF posted comment letters received.
Comment letters were submitted by more than a dozen entities, including stock exchanges, issuers, and government representatives. Comments generally focused on the following topics:
- The lack of sufficient detail provided in connection with the methodology used to develop the fees, causing commenters to be unable to determine whether or not they are appropriate;
- The lack of clarity in the notices, which are written in a way that is not easy to understand, thereby making it difficult to conduct a proper impact analysis;
- The belief that the self-service options provided for issuers to allow them to avoid the proposed E&CA fees are not viable;
- The significant magnitude of the financial effect on certain issuers, either in terms of the actual dollar amount, or the impact when measured against their market capitalization;
- Difficulties in understanding how the proposed fees better meet the needs of Canadian investors;
- That the time frames established in the proposal for ISIN issuance and eligibility processes are not reflective of the current market reality, which may possibly result in additional rush fees;
- The lack of a documented process to allow for refunds of fees paid in connection with the proposed up-front discount of 20% for simple fixed term securities, in the event of retirement in advance of the maturity date;
- A request for further information on the existing fees paid for E&CA events by CDS Participants, as there is the belief that the proposed fees may be charging issuers for services where fees are already collected from the Participants;
- Concern that government issuers may be subsidizing the development of CDS' technology, for the benefit of non-government issuers;
- The grandfathering of existing government debt securities should be expanded to all issues, including non-debt issues, which are in existence prior to the implementation date of any new fees;
- In the event new fees are approved, the transition period should be extended beyond the currently proposed date of November 1, 2016.
- Urging that the regulators must ensure that the fees being proposed are commensurate with the work that CDS is performing.
We are continuing to monitor the developments surrounding CDS's proposal. Should you have any questions, please contact Lara Donaldson, Director, Regulatory and Industry Affairs at Computershare (lara.donaldson@computershare.com).