Securities Law & Instruments

Headnote

Application pursuant to section 6.1 of OSC Rule 13-502 Fees (the Fee Rule) for an exemption from the fees payable for the retrieval and copying of insider trading reports -- Applicant wishes to obtain copies of large number of insider reports filed by insiders prior to implementation of the System for Electronic Disclosure by Insiders (SEDI) -- Applicant requesting reports to conduct study of alleged stock option back-dating in Canada -- reports on public record and may be obtained upon payment of applicable fees -- compilation of the reports would be substantial undertaking for the Commission requiring extensive staff resources at substantial cost -- Application denied -- fees are activity fees designed to represent the direct cost of Commission resources expended in undertaking activities requested by market participants -- fees charged reflect actual Commission costs -- absorbing the costs for retrieving and copying the reports would divert substantial funds away from other Commission priorities and would indirectly be funded by other market participants -- Granting requested relief would put Applicant in better position than other market participants requesting retrieval and copying of insider reports.

Applicable Rules

OSC Rule 13-502 Fees, s. 4.1, 6.1, and section K, ss. 1 and 2 of Appendix C.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED AND

ONTARIO SECURITIES COMMISSION

RULE 13-502 FEES (the Fee Rule)

AND

IN THE MATTER OF

SISKIND, CROMARTY, IVEY AND DOWLER LLP

(the Applicant)

 

ORDER

(Section 6.1 of the Fee Rule)

Background

1. The Commission received an application dated August 22, 2006 (the Application Letter) from the Applicant pursuant to section 6.1 of the Fee Rule for an exemption from the fees (the Fees) payable for the retrieval and copying of insider trading reports pursuant to section K, ss. 1 and 2 of Appendix C to the Fee Rule (the Requested Relief).

2. Staff of the Commission (Staff) have recommended that the Director not grant the Requested Relief.

Facts

The Director has considered the following facts:

3. The Applicant wishes to obtain copies of a large number of insider trading reports (the Reports) filed by insiders of Ontario reporting issuers before the System for Electronic Disclosure by Insiders (SEDI) was established.

4. The Reports are being requested to conduct a study of alleged stock option back-dating in Canada (the Study).

5. The Reports are on the public record at the Commission and copies may be obtained upon payment of the applicable fees pursuant to section 4.1 of the Fee Rule.

6. The applicable fees are:

    • Request for a search of Commission records: $150

    • Request for a photocopy of Commission records: $0.50 per page

7. The compilation of the Reports would be a substantial undertaking for the Commission requiring extensive staff resources at substantial cost.

Issue

8. Is it in the public interest for the Director to grant the Requested Relief?

Analysis

Summary of Applicant's Submissions

9. The complete submissions of the Applicant are included in the Commission file.

10. The Applicant submits that the Fees pose a serious financial impediment to its ability to complete the Study.

11. The Applicant submits that it is a mid-sized class action law firm without significant financial resources, and that if the Director does not grant the Requested Relief, the Applicant will not be able to obtain the Reports to complete the Study.

12. The Applicant submits that the preparation of the Study is in the public interest because it is alleged that manipulation of stock option grants frequently results in an understatement of executive compensation and an overstatement of corporate profits.

13. The Applicant submits that while some of the necessary data for the preparation of the Study is available from other sources, critical pieces of information such as insider trading report filing dates are not. Therefore, complete versions of the Reports are required to conduct the Study.

Summary of Staff's Submissions

14. Staff submit that it is not in the public interest for the Director to grant the Requested Relief.

15. The purpose of the Fee Rule is to establish a fee regime that creates a clear and streamlined fee structure and to adopt fees that accurately reflect the Commission's costs of providing services.

16. The Fees are activity fees that are designed to represent the direct cost of Commission resources expended in undertaking certain activities requested of Staff by market players.

17. The fees charged to market players for requested activities reflect actual Commission costs. The Fee Rule was revised on April 1, 2006 with the intention of ensuring consistency between fees charged and the Commission's costs of providing services. At that time, the fee for a search of Commission records was increased from $10 to $150 to reflect the average Commission staff resources required to undertake these searches.

18. Absorbing the costs for retrieving and copying the Reports would divert substantial funds away from other Commission priorities and would indirectly be funded by other market players.

19. The Fee Rule is intended to apply equally to all market players. Granting the Requested Relief would put the Applicant in a better position than other market players requesting the retrieval and copying of insider trading reports.

20. To Staff's knowledge, no activity fee relief of the type sought by this Application has previously been granted.

Decision

UPON the Director considering the submissions of the Applicant and Staff;

UPON the Director being satisfied that to grant the Requested Relief would be prejudicial to the public interest;

IT IS THE DECISION of the Director, pursuant to section 6.1 of the Fee Rule, that the Requested Relief is denied.

DATED at Toronto on this 22nd day of August, 2007.

"Margo Paul"
Director, Corporate Finance
Ontario Securities Commission