The OSC has alleged the Ernst & Young audit of China’s Zungui Haixi was not in accordance with generally accepted auditing standards.Peter Power/The Globe and Mail
The Ontario Securities Commission saw its deficit grow last year as its expenses climbed due to rising salary and benefits costs.
Final financial statements published Thursday for the year ended March 31 show the regulator's loss for fiscal 2013 climbed to $7.6-million from $4.4-million in the prior year. The OSC's revenues grew 2 per cent to $87.3-million in 2013, but expenses climbed 5.5 per cent in the same period to $94.9-million.
The deficit is lower than the $10.7-million loss the OSC forecast last year when it announced fee increases for market participants. The increases, which came into force April 1 for the three-year period that followed, were proposed because the commission has been drawing down its general surplus to cover its annual losses even though it is supposed to operate on a cost-recover or break even basis.
Fees are the OSC's main source of revenue, totalling $86.9-million last year, up from $85.2-million the prior year. The commission also collected $1.2-million in penalties related to recovery of enforcement costs, up slightly from $1.1-million the year before.
The OSC's latest fee increase drew criticism from market participants, who said it came at a terrible time when the brokerage sector was already struggling with huge financial pressures. In December, the OSC announced it would reduce the amount of increase it was seeking for both firms and registrants, and removed an extra component of the fee increase that was designed to increase its surplus reserve.
Participation fees for companies that are reporting issuers rose 11.65 per cent, the OSC said, while participation fees for registrants climbed 4.7 per cent. The OSC had originally proposed increasing participation fees by 15.55 per cent for reporting issuers and 7.9 per cent for registrants.
In a statement in December, executive director Maureen Jensen said the new funding model is a compromise that would enable the OSC to carry out its work while recognizing the "difficult environment" for market participants.
"The OSC's new funding model strikes the right balance between feedback from market participants and the commission's responsibility to respond to evolving capital market demands," she said.
The OSC said its staffing costs have been rising because its enforcement cases have grown rapidly, requiring more resources to investigate and prosecute cases. The OSC also says its regulatory responsibilities have been growing, including more work at the international level to deal with G20 commitments related to regulating derivatives and systemic risk.
In its December statement on fee increases, the OSC forecast a shortfall of $1.3-million for the current year ended March 31, 2014, a deficit of $100,000 in fiscal 2015, and a surplus of $1.5-million by 2016. According to the forecast, the next three years combined would see the OSC essentially break even with a surplus of $100,000.
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Janet McFarland