After recording a surplus in its latest fiscal year amid rising revenues and expenses, the Canadian Investment Regulatory Organization (CIRO) is anticipating a modest deficit for fiscal 2025 as it continues to integrate the dealer self-regulatory organizations (SROs).
In its latest annual report, the SRO detailed its financial results for the past year (to March 31), which saw revenues rise 10% and operating expenses increase 9%, year over year.
The costs of dealer regulation, specifically, rose 7% from the previous year, which CIRO said was “mainly driven by higher occupancy, compensation and technology expenses.”
With revenue growth outpacing expenses, the SRO reported a surplus of $5.9 million before integration costs, up from $4.3 million the previous year.
The operating surplus was primarily due to “higher investment income on short-term investments and non-registered employee pension and post-retirement benefit earmarked investments, as well as underwriting levies, both of which fluctuate with market conditions,” it noted.
The costs of integrating the two SROs, which are being recovered from the affiliated and dually registered dealers that are expected to benefit most from the merger, declined to $10.9 million in fiscal 2024 from $13.5 million the previous year. The special fees being charged to account for those costs began in 2024.
Looking ahead, the report indicated CIRO is budgeting for a 7% increase in operating expenses in fiscal 2025, with total expenses rising to $160.1 million from $149.1 million in 2024.
Total revenues are forecast at $156.8 million, which would result in a deficit of $3.3 million for the year.
CIRO said non-fee revenues are expected to rise sharply (up 29%) in fiscal 2025; even so, fees are budgeted to rise 4%, with dealer fees up 4.5%, as a result.
“These fee increases factor in inflationary increases, merit increases for employees, higher amortization stemming from the move into a new Toronto office, and a return to normalized project spending after a period largely focused on integration,” the report said.
The dealers that are footing the bill for the integration costs will also pay an additional 6% of their annual SRO fees to finance those costs.
“It is estimated that if rates are held at 6% in future years, the costs will be recovered over a total of four years from fiscal 2024 to fiscal 2027,” the report noted.
As part of the ongoing integration process, CIRO expects to carry out consultations on the last two phases of the rulebook consolidation project, complete its consultations on a new fee model, and develop proposals for harmonizing its continuing education regimes and for merging its complaint and inquiry handling functions, the report said.
“This past year, we have made significant strides to ensure that our services are efficient, cost-effective, and responsive to the needs of Canadian investors,” said Andrew Kriegler, president and CEO of CIRO, in a release accompanying the annual report.
The SRO’s investor advisory panel (IAP) also released its first annual report, which detailed its activities over the past year.
“The inaugural year of the IAP was a busy and fulfilling year of engagement and consultation,” said Kriegler. “I want to thank the IAP members for their time and effort as we launched this important new advisory panel and for the thoughtful advice they provided to CIRO from the perspective of investors.”