IFIC calls for NRD fee reduction

(March 6, 2003) The Investment Funds Institute of Canada wants regulators to reduce the first annual fee for the National Registration Database, scheduled to launch at the end of the month. IFIC says the Canadian Securities Administrators plans to collect a full year of fees for 2003 on May 30, even though the database will only be available to the industry for nine months.

“We note with disappointment that the CSA apparently deem it neither necessary nor appropriate to pro-rate these first-year fees to reflect a launch date that does not begin until the last day of the first quarter of 2003 and we write to express the frustration of our members,” IFIC says in a letter sent to CSA chair Doug Hyndman earlier this week.

“The way the CSA is seeking to levy NRD fees, we think compromises to no purpose the economic viability of our industry, particularly our dealer members,” adds IFIC legal counsel Aamir Mirza.

In response, Ontario Securities Commission spokesperson Jeff Codispodi says although it may appear regulators are charging 12 months worth of fees for nine months of service, that’s not the case. “We’re amortizing the development and operating costs of the system over five years,” Codispodi said in an interview. “We calculated annual fees based on an amount that will pay off those costs. It’s like a mortgage. This has to be paid back, one way or another.”

Codispodi says even if regulators reduced fees for this year, the extra money would simply have to be added on at a later date. “It’s not a fee for service, it’s a one-time cost we have to collect from firms,” he explains.

In its letter, IFIC says the cost-recovery argument is a subsidiary issue, suggesting its members were denied the opportunity to provide meaningful input in the development of the NRD and “thus had no chance to control the costs that the CSA incurred and are now passing on to the industry.”

NRD fees are just the tip of the iceberg, IFIC adds, noting the resources of its dealer members are “constantly strained” as a result of new regulatory expenses.

“There are too many fees coming out at once in an environment where costs are mounting and the industry is facing economic challenges,” Mirza told Advisor.ca, pointing to the Mutual Fund Dealers Association, the new Centre for the Financial Services OmbudsNetwork and its securities offshoot, the Ombudsman for Banking Services and Investments, as well as existing regulatory costs.

The NRD will allow companies to file registration forms online for multiple jurisdictions. All provinces and territories are participating in the project, except Quebec. Investment Dealers Association firms are also taking part. It’s estimated the database will initially have about 100,000 registrants.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca