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Connecting intelligent regulation and investor protection

2017 ANNUAL REPORT

Walterdale Bridge - Edmonton, AlbertaCover Photo: Peace Bridge - Calgary, Alberta

2017 ANNUAL REPORT

The ASC’s vision is to be a practical, intelligent, best-in-class regulator. We strive to protect investors from improper, misleading or fraudulent practices while allowing our capital market to thrive.

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Intelligent oversight supporting efficient markets

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Advancing proactive enforcement, compliance and education

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Engaging stakeholders

9 MESSAGE FROM THE CHAIR

14 EXECUTIVE MANAGEMENT TEAM

16 ASC'S 2017 COMMISSION MEMBERS

18 THREE-YEAR STATISTICAL SUMMARY 2017

19 MANAGEMENT’S DISCUSSION & ANALYSIS

31 FINANCIAL STATEMENTS

50 GLOSSARY

51 ASC COMMITTEES

Intelligent oversight supporting efficient markets

KEEPING PACE WITH TECHNOLOGY

In today’s rapidly evolving financial markets, regulators must act nimbly to ensure the market maintains both efficiency and investor protection.

The Canadian Securities Administrators (CSA) launched the regulatory sandbox initiative this year to help emerging financial technology companies (known as fintech) to test new securities products and services, with the goal of advancing genuine technological innovation. The CSA will grant time-limited relief from certain regulatory obligations to qualified firms pursuing initiatives in areas such as crowdfunding, robo-advisers, crypto- currency and blockchain.

Social media has become a common way for issuers to connect with investors, customers and other stakeholders. In Fiscal 2017 (F2017), the CSA conducted a review of disclosure provided by issuers on social media to assess compliance, and published recommendations on how to avoid selective or misleading

disclosure. We will continue to monitor this area closely.

The ASC introduced a new crowdfunding prospectus exemption in F2017 that is intended to allow small or medium-sized businesses in Alberta to raise capital across Canada more easily, including through online portals.

TAILORING THE DISCLOSURE REGIME

Increasingly, investors demand improved disclosure from issuers about the business risks and financial impacts caused by climate change, as a means to make more informed investment decisions.The ASC is co-leading a CSA project to review the current state of climate change disclosure, in Canada and internationally, to determine whether improvements are necessary to the existing regimes.

The ASC is also participating in a CSA project to reduce the regulatory burden of public issuers. This project seeks to identify ways to lower costs

The Alberta Securities Commission works to ensure

that Alberta’s regulatory regime is appropriate to

the needs of our market, prioritizing strong investor

protection while not unduly burdening issuers and

other market participants.

related to ongoing reporting and capital-raising transactions, without diminishing investor protection. Proposed options being considered include eliminating certain prospectus form requirements and moving from quarterly to semi- annual financial reporting.

Both projects were launched in F2017 and are in the consultation stage.

IMPROVING THE QUALITY OF THE SHAREHOLDER VOTE

In early 2017, following extensive research and consultation, the CSA introduced changes to lay the foundation for key entities to work collectively to improve meeting vote reconciliation. The goal is to increase the accuracy, accountability and reliability of the proxy voting infrastructure in Canada; specifically, a set of protocols was introduced to improve communication between intermediaries and tabulators, and to encourage intermediaries to implement appropriate internal controls to monitor the effectiveness of vote entitlement and tabulation processes.

2 l ALBERTA SECURITIES COMMISSION

~$8.0BRAISED BY ALBERTA-BASED ISSUERS

IN THE PROSPECTUS-EXEMPT MARKET

ALBERTA IS CANADA'S 2ND LARGEST

CAPITAL MARKET, REPRESENTING

>$820BIN MARKET CAPITALIZATION

$28.8BRAISED BY ALBERTA-BASED ISSUERS

IN THE PUBLIC MARKET

ADDRESSING SYSTEMIC RISK

As part of Canada’s G20 commitments following the financial crisis, the ASC is engaged in several initiatives to address systemic risk. We have contributed significantly to the International Organization of Securities Commissions’ (IOSCO) Committee on Emerging Risk, including adding to a growing body of research on risks relating to novel technologies and platforms such as blockchain, robo-advisers and crowdfunding. We also continue to lead the CSA’s Systemic Risk Committee.

CAPITAL MARKET STATISTICS2017

Derivative financial instruments have been identified as a potential source of systemic risk in global capital markets. Along with our CSA colleagues, the ASC reached a milestone in derivatives regulation in F2017 when the first rules relating to over-the-counter (OTC) transactions were finalized. The ASC engaged our energy industry stakeholders early in this process, ensuring a practical regime that avoids unintended impacts on the energy market. The ASC also participates in several CSA initiatives aimed at developing a practical framework for the regulation of OTC derivatives.

ANNUAL REPORT 2017 l 3

Advancing proactive enforcement, compliance and education

We must anticipate future problems or needs in

the market and act decisively to promote public

confidence in our capital markets, protect investors

and support market integrity.

BROADENING OUR ENFORCEMENT TOOLBOX

Increasingly, effective enforcement of securities laws means pooling resources with other organizations, leveraging technology, and stopping scams earlier to mitigate harm to investors.

In F2017, the ASC sanctioned Saileshwar Narayan, Prospera Mortgage Investment Corporation and Prosperity Development Group Ltd., for engaging in capital market misconduct including fraud. Early in the investigation, the ASC froze four accounts belonging to the corporations that held $1.745 million, a significant portion of which will be returned to investors.

Our newly created Joint Serious Offences Team (JSOT), a collaboration with the Royal Canadian Mounted Police (RCMP), made its first arrest in F2017. JSOT leverages the ASC’s expertise in securities law alongside the RCMP’s enhanced investigative capabilities, such as undercover surveillance, to identify and pursue repeat and serious offenders.

PREVENTING AND ADDRESSING MARKET MANIPULATION

Halt trade orders are an effective tool in disrupting suspected “pump-and-dump” schemes, where scam artists artificially inflate the price of a stock for their own financial gain, then sell quickly, leaving investors with substantial losses. The ASC issued two halt trade orders in F2017 against Gold Lakes Corp. and Horizon Minerals Corp.

In the Coastal Pacific Mining Corporation case, Caroline Meyers was sentenced to two years’ imprisonment for her role in orchestrating a pump-and-dump scheme. This was the first prison sentence handed down in a pump-and-dump in Alberta. Subsequently, an ASC panel ordered that the company pay over $370,000 in disgorgement and costs. Prison terms, fines, penalties and marketplace bans serve to deter those who may consider damaging the integrity of our capital market.

REVIEWING COMPLIANCE OF ALBERTA-BASED EXEMPT MARKET DEALERS

The ASC recently concluded an extensive exempt market dealer (EMD) sweep of 66 firms to assess registrants’ compliance with securities laws. Outcomes ranged from companies that voluntarily improved business conduct compliance systems to registration termination. Details of this project, including a summary of findings and guidance to assist registrants to improve their compliance, are contained in an EMD Project Staff Notice available on the ASC's website.

CREATING THE PERFECT SCAM

The ASC’s award-winning CheckFirst campaign aims to educate Albertans about how they can protect themselves and their families from securities fraud.

For Fraud Prevention Month, we challenged the commonly held belief that “it can’t happen to me” by showing Albertans how easy it can be to fall for investment fraud. To


accomplish this, the Investor Education team created the perfect scam.

We devised a fake company, Maplestock Investments, and hired an actor to pose as our fake “British-born financier” Jonathan Fisher, who was touting a fake seminar. The seminar was advertised on numerous online and grassroots channels. The day of the event, the faux Jonathan Fisher presented to a room full of potential

~2,400INQUIRIES TO THE PUBLIC

INFORMATION OFFICE

REACHED STAKEHOLDERS WITH OUR

INVESTOR EDUCATION MESSAGES

19+MILLION TIMES

10,000+

ALBERTANS ENGAGED THROUGH

GRASSROOTS EFFORTS

CAPITAL MARKET STATISTICS2017

investors about a new way to “Profit Like the Experts.” Halfway through the presentation, we revealed the scam, then showed attendees how to identify investment fraud and protect themselves against it. The event was filmed and turned into an educational video for Fraud Prevention Month, which received widespread media attention across Canada.


IMPROVING THE QUALITY AND TRANSPARENCY OF THE CLIENT/ADVISER RELATIONSHIP

As the final phase of the changes to the Client Relationship Model (CRM2) from the CSA came into effect in F2017, Canadian investors began to receive new reports from financial institutions about the cost of advice and annual fund performance, increasing transparency and empowering investors to discuss fees and performance with their advisers.

Along with our CSA colleagues, in F2017 the ASC published Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers and Representatives Toward their Clients. We proactively sought extensive stakeholder feedback, including focus groups in urban and rural Alberta, a public town hall and various speaking opportunities. The information we gathered informs our strong support of the CSA’s suite of proposed targeted reforms to meaningfully improve the investor-adviser relationship and significantly advance the best interest of all investors.

Also this year, the CSA published 81-408 Consultation of the Option of Discontinuing Embedded Commissions, that sought input from stakeholders, including feedback on the potential impacts of discontinuing embedded commissions in mutual fund sales to Canadian investors and market participants.

PROTECTING CANADIANS AGAINST BINARY OPTIONS SCAMS

Binary options fraud has increased dramatically in Canada in the past two years. Although marketed as a “bet” on whether the price of a stock or other asset will increase or decrease in a short period of time – a type of online gambling – in reality, most of these websites are fraudulent.

The CSA is taking an aggressive multi-pronged approach to protect investors from these predatory scam artists. A Binary Options Task Force was created to work with online advertisers to eliminate binary option advertising in Canada, to coordinate efforts with

international organizations including the Federal Bureau of Investigation (FBI), and to work closely with the fraud teams at major credit card and financial institutions to cut off funding mechanisms. A robust investor education campaign was launched to educate Canadians on the risks and serious consequences of betting on binary options. In addition, we are expediting policy changes to clarify that offering binary options is illegal in Canada. Our ultimate goal is to stop this scourge from targeting our citizens.

REPORTING ON GENDER DIVERSITY

In response to feedback received from investors that gender diversity information is helpful when making investment and voting decisions, in F2017 the ASC adopted amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices and to Form 58-101F1 Corporate Governance Disclosure. The amendments require non-venture issuers to disclose the representation of women on boards of directors and in

Engaging stakeholders

Regular, timely and relevant engagement with

all stakeholders is critical for the effective

administration of Alberta’s securities laws.


executive officer positions, as well as information about term limits, or other mechanisms of board renewal, for board directors. To the extent that an issuer has not adopted gender diversity mechanisms, policies, or targets, or does not consider the representation of women in the identification of candidates for board or executive positions, it is required to disclose its reasons for not doing so.

In response to local interest in gender diversity among Alberta businesses, in F2017 the ASC published our second annual Alberta Women on Boards Index in partnership with the University of Calgary. The Index is a research study intended to provide greater visibility into the gender mix on the boards of directors of publicly traded TSX and TSX Venture Alberta issuers. The results showed that, while

women currently hold 11 per cent of all board positions of TSX-listed companies, 32 per cent of new board directors appointed by these companies in 2016 were women.

INDUSTRY OUTREACH

The ASC is actively engaged in outreach programs to public companies, registrants, advisory service organizations, banks, law enforcement agencies, and other market participants that are active in our province. Through speaking engagements, consultations, publications and other activities, we aim to ensure that market participants understand their obligations and changes to existing laws, are aware of current issues in the capital market, and are able to provide feedback.

• More than 55 presentations to industry participants on a variety of enforcement, corporate finance, market regulation, accounting and securities law topics that advance our mandate of protecting investors and ensuring a fair and efficient capital market.

• Extensive outreach by our Enforcement division to educate stakeholders about current issues in the securities industry, including binary options and microcap fraud.

• Publishing up-to-date guidance documents such as the Corporate Finance Disclosure Report and the Oil and Gas Review, and two financial reporting bulletins: Disclosure of Key Performance Indicators in the Oil and Gas Industry and Abandonment and Reclamation Costs.

• Significant industry engagement, including the ASC’s first public town hall on the proposed best interest standard and targeted reforms.

• A well-attended Women on Boards panel discussion that attracted many of the province’s business leaders for an engaging conversation about gender equity.

OUR F2017 ACTIVITIES INCLUDE:


Centre Street Bridge - Calgary, Alberta


A more specific disruption is occurring in Alberta, Canada’s second-largest capital market. The oil and gas industry, a prime economic driver not only of our province but also of the nation, is undergoing fundamental shifts: in ownership; in the availability and size of financings; and in climate change considerations such as carbon pricing.

To address these market forces effectively, the ASC undertook a rigorous strategic planning process in 2016. After obtaining extensive feedback from our capital markets community, we re-examined, rethought and reassessed our priorities and strategy. The resulting plan prioritizes intelligent regulation; proactive and comprehensive compliance, enforcement and education; and a culture of engagement.

The priorities in our strategic plan will shape our focus for the next three fiscal years. I will share some related accomplishments made in these areas over the past year.

INTELLIGENT REGULATION

Intelligent regulation means striking the right balance between strong investor protection and a structure that allows our capital market to thrive, while focusing on the most critical issues in our capital market.

Working with the CSA, we are evaluating how best to coordinate an effective approach to advances in fintech like robo-advisers and high-frequency trading, among others.

We’re actively engaged in the CSA project to reduce regulatory burden for issuers. After decades of securities regulation, it’s time to re-evaluate which laws are necessary to ensure a fair market, and which are outdated roadblocks to capital raising or to being a publicly traded company.

Another CSA project we’re co-leading is consultation on climate change disclosure. We know that investors are concerned about business risk and financial impacts relating to climate change; with many resource-based

issuers in our jurisdiction, we are positioned to play a key role in the development or revision of any national securities regulatory disclosure regime.

This year, we also paved the way for crowdfunding in our province as a means for small, entrepreneurial businesses that power Alberta’s local economy to raise capital more easily.

PROACTIVE AND COMPREHENSIVE COMPLIANCE, ENFORCEMENT AND EDUCATION

Compliance and disclosure reviews are a cornerstone of what we do. Given the commodity price environment, we focused this year on ensuring that information provided to investors by oil and gas issuers contained a full discussion of liquidity risks, financial condition, and risks to breach of financial covenants. More scrutiny was applied to non-GAAP Financial Measures to ensure they meet our expectations for balance and consistency.

Global capital markets are evolving at an accelerated pace. Fintech, innovative

capital-raising opportunities, cross-border developments and ever-increasing

globalization mean a general disruption of the status quo.

Message from the Chair


A

B

C

DE

We also recently completed a sweep of Exempt Market Dealers (EMDs) in Alberta. This project evaluated 66 EMD firms to determine if their compliance systems, suitability, and sales practices were compliant with regulatory requirements for firms and individuals. Where deficiencies were found, we worked with the companies to put policies and procedures in place to improve future compliance. If we were unsatisfied with their response, or if the seriousness of the deficiencies led to concerns about investor protection, we took regulatory action, including imposing special requirements or restrictions on business, or suspension or termination of registration.

Enforcement is an area where we have made significant progress. In December 2016, we announced the creation of JSOT with the RCMP. This partnership tackles serious violations of securities laws, with investigations leading to quasi- criminal charges under the Securities Act (Alberta) and criminal charges under the Criminal Code (Canada). Leveraging the strengths of both organizations, JSOT benefits from the ASC’s securities law expertise and the RCMP’s skill in various tools like undercover surveillance. Under the Criminal Code, repeat and serious securities offenders face up to 14 years in jail. JSOT laid its first criminal charges in February 2017.

We are making strides in proactive enforcement. All too frequently, by the time a scam is investigated, the money has been spent or moved offshore, where it is nearly impossible to recover. We’re investing in advanced analytics and surveillance to quickly identify market misconduct. Combined with regulatory tools such as issuing halt trade orders and freezing bank accounts, analytics and surveillance enable us to prevent further damage to investors and market confidence. In F2017, proactive measures led to more than $1.6 million returned to investors and considerable investor losses were avoided.

With more than half of all Canadians failing to meet basic financial literacy standards, investor education is critical in our society. Financial literacy among Canadians is strongly correlated with retirement savings; the more we know, the more we are likely to save and protect our financial future. Further, knowledge about how to check registration and the red flags of fraud help investors to identify fraud. Our Investor Education division continues to produce innovative and cost-effective programming, like the perfect scam campaign that is highlighted on pages 4-5, to reach as broad an audience as possible.

A CULTURE OF ENGAGEMENT

Central to our strategy is engagement. Internally, we have enhanced two-way communication with our staff to involve them more in decisions and strategic direction.

ALBERTA IS THE SECOND-LARGEST CAPITAL MARKET IN CANADA*

52% ONTARIO (A)

23% ALBERTA (B)

16% QUEBEC (C)

6% BRITISH COLUMBIA (D)

3% OTHER (E)

* Measured by aggregate market capitalization of issuers.


" I am energized by our staff's commitment to being a practical, best-in-class regulator."

STAN MAGIDSON Chair and Chief Executive Officer


A

B

C

DE

OIL & GAS, UTILITIES AND PIPELINES CONTINUES TO BE THE MOST SIGNIFICANT INDUSTRY IN ALBERTA ECONOMY*

56% OIL AND GAS (A)

22% UTILITIES AND PIPELINES (B)

12% ALL OTHER INDUSTRIES (C)

7% DIVERSIFIED INDUSTRIES (D)

3% MINING (E)

Locally, we engaged market participants and retail investors as part of our consultation process on proposed regulatory amendments to the adviser-client relationship. We held webinars, focus groups and an open house to gather as much feedback as possible on Albertans’ views on the investor-adviser relationship. This input factored strongly into our support of proposed targeted reforms in areas with identified problems, and align advisers’ interests with those of their clients.

On May 10, 2017, the Quebec Court of Appeal issued its decision determining that the proposed national securities regulator is unconstitutional. This supports the Government of Alberta’s view that the ASC should continue as a standalone provincial regulator that understands Alberta’s unique local economy and needs. We will continue to work with our CSA colleagues to harmonize securities regulation across the country, while accounting for important regional differences.

Since securities regulation is an increasingly global matter, we must look beyond our national borders. In the context of commonality in multinational standards such as IFRS, and worldwide concerns about systemic risk, we are actively engaged in the International Organization of Securities Commissions (IOSCO) to ensure that regulation of our capital markets is keeping pace with global standards and that we are influencing the development of those standards.

On behalf of the ASC’s senior management team, I extend my thanks to our Commission members for their valuable insights and support. In particular, I would like to acknowledge the contributions of Richard Shaw and Fred Snell, who both recently stepped down after successfully completing their terms, and Stephen Murison who stepped down after 14 years as Vice-Chair. Their expertise and business acumen will be missed, and the ASC is the better for their guidance.

I’d also like to thank Bill Rice and Tom Cotter who served as our Chair and Interim Chair, respectively, prior to my assuming the role of Chair and CEO. I have inherited a high-performing organization that is proud to serve Albertans.

As my first year at the Commission draws to a close I see some green shoots in our capital markets, such as some recent initial public offerings. I am energized by our staff’s commitment to being a practical, best-in-class regulator, and I am confident that we have the right plan and the right people to successfully navigate today’s capital markets. It is my privilege to lead this organization at such a dynamic time.

STAN MAGIDSON Chair and Chief Executive Officer

* Measured by aggregate market capitalization of issuers.


STRATEGY

MISSION

Our strategy for realizing our mission and vision is:

Proactive and comprehensive

compliance, enforcement and

education

Intelligent regulation that

supports a thriving capital

market

STAKEHOLDER RESPONSIVENESS - Customer Focus • Building Partnerships

QUALITY RESULTS - Planning & Organizing • Accomplishing Tasks

CONTINUOUS IMPROVEMENT - Innovation • Continuous Learning • Initiating Action

TEAMWORK - Contributing to Team Success • Coaching

PRINCIPLED ENVIRONMENT - Trust • Communication

The values that guide employee action at the ASC are:

VALUES

VISION

Foster a culture of engagement

www.albertasecurities.com

MISSION, VISION, VALUES AND STRATEGY AT A GLANCE

To be a practical, intelligent, best-in-class regulator that allows our capital market to thrive and ensures that investors are protected from improper, misleading or fraudulent practices.

To foster a fair and efficient capital market in Alberta and to

protect investors.


Executive Management Team

ALISON TROLLOPEDirector, Communications and Investor Education

The Communications and Investor Education Division provides strategic communications counsel and support to all areas of the ASC in a manner that meets the ASC’s organizational objectives. The division’s award-winning CheckFirst consumer campaign aims to educate Albertans about investing, and how they can protect themselves from securities fraud. In addition, through media relations, corporate communications and internal communications the team promotes transparent, relevant and timely communication to support efficient and effective securities regulation in Alberta and throughout Canada.

From left to right.

DAVID LINDERExecutive Director

The Executive Director is the ASC’s Chief Administrative Officer and, as such, is responsible for ensuring that all business divisions of the ASC operate effectively and efficiently. The Executive Director is directly responsible for overseeing the divisions of Corporate Finance, Corporate Resources, Enforcement, Market Regulation, and the Office of the Chief Accountant and Financial Services. The Executive Director participates in meetings of the ASC’s Human Resources and Audit committees and chairs the Senior Management and Strategic Planning committees. Pursuant to the Securities Act (Alberta), the Executive Director may review decisions made by Corporate Finance, Market Regulation and Enforcement staff. The Executive Director is also the chief officer of the ASC under the Public Interest Disclosure (Whistleblower Protection) Act (Alberta) that came into force on June 1, 2013*.

LYNN TSUTSUMIDirector, Market Regulation

Market Regulation develops and administers securities regulation to the Alberta capital market by developing and administering rules and policies relating to registrants (dealers, advisers, and investment fund managers), equities and derivatives exchanges and clearing agencies, trade repositories, and self-regulatory organizations (SROs), including the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada. Staff register market participants that are in the business of trading and advising in securities and managing investment funds, perform compliance examinations of registrants and review exemption applications. Staff conduct oversight of SROs, the TSX Venture Exchange, energy exchanges and clearing agencies conducting business in Alberta such as the Natural Gas Exchange Inc. (NGX), and trade repositories.


TOM GRAHAMDirector, Corporate Finance

The Corporate Finance Division is the main interface for issuers accessing the capital market in Alberta and is responsible for reviewing offering documents and continuous disclosure, monitoring filings in respect of takeover bids and making recommendations on applications for exemptive relief from securities legislation. In addition to these day-to-day services, Corporate Finance is active in the formulation and development of appropriate rules, regulatory instruments and policies used in the regulation of the Alberta and Canadian capital markets for issuers, including investment funds, and over-the-counter derivatives. Given the significance of the oil and gas industry, Corporate Finance places a considerable emphasis on reviewing the public disclosure of oil and gas reserves information and overseeing the relevant disclosure policies for these issuers.

STAN MAGIDSONChair and Chief Executive Officer

The Chair and Chief Executive Officer is responsible for representing the ASC, addressing emerging issues in securities regulation and leading the ASC to achieve its organizational objectives. The Chair has direct oversight responsibilities for the Communications & Investor Education Division and the offices of the Executive Director and the General Counsel. The Chair is appointed by the Lieutenant Governor in Council and reports to the Members and to the Minister of Finance.

KARI HORNGeneral Counsel

The Office of the General Counsel (OGC) provides specialized legal advisory services to the Commission Members, the Chair, the Executive Director and staff on a broad range of operational, transactional and policy projects. The OGC provides research and analysis and advice on emerging issues, as well as guidance to market participants on the interpretation of securities laws and policies. Staff in the OGC deal with policy initiatives related to corporate governance and projects requiring a broad assessment of existing regulation. The OGC is also responsible for the corporate secretarial and legislative functions at the ASC.

LARA GAEDEChief Accountant and Chief Financial Officer

The Chief Financial Officer and Chief Accountant (CFO) is the ASC’s senior financial officer and is responsible for effective internal control over financial reporting, annual budget preparation, administration of investment manager reporting and relations, coordination of risk management processes, and accurate and timely financial reporting to senior management, Commission Members and the Minister of Finance. The CFO provides expert knowledge in the areas of accounting, auditing and financial reporting matters to ASC staff as well as guidance to reporting issuers and their advisers. This division is involved in policy initiatives that relate to these areas of expertise. This Office also provides training as needed to the professional accountants within the organization.

WAYNE OLMSTEAD Director, Corporate Resources

The Corporate Resources Division provides business, technical and human resource services to enable staff to fulfill the ASC’s mandate. It provides expertise in the areas of: information technology; human resources; and corporate services, including purchasing, security and business continuity, health and safety, facility management, and information and records management. Corporate Resources supports the needs of employees and management through the initiation, development, delivery and implementation of key strategies, programs and policies that are aligned to organizational objectives.

CYNTHIA J. CAMPBELLDirector, Enforcement

The Enforcement Division enforces Alberta securities laws by discovering, investigating, and prosecuting breaches of those laws with a view to both stopping current misconduct and preventing future misconduct. Through proactive, fair, and visible enforcement action locally, through collaboration with the Commission’s compliance divisions, securities law regulators and police forces, Canadian and foreign, the Enforcement Division seeks to foster investor confidence and promote the integrity of Alberta’s capital market, thereby protecting the investing public.

* The Public Interest Disclosure (Whistleblower Protection) Act (Alberta) applies to most public entities in the Province of Alberta, including the Alberta Securities Commission. The Act enables the disclosure and investigation of wrongdoings alleged to have occurred at a public entity in Alberta. It also protects individuals who report alleged wrongdoings from reprisal. Section 32 of the Act requires annual reporting on all disclosures that have been made in accordance with the Act. Since the Act came into force on June 1, 2013, there have been no disclosures received by the designated officer; accordingly, there were no disclosures acted upon or investigated.

Our divisions work together to deliver on our mandate of fostering a fair and efficient capital market while providing strong investor protection.


ASC's 2017 Commission Members

appropriate talents to support the achievement of the ASC’s objectives. The public rely on the Members of the ASC to be both qualified and empowered to deal with matters that affect the public interest in Alberta’s capital market.

For a current list of active Commission Members, including details of credentials and experience, visit our website. They are listed under About the ASC – Organization & Governance – ASC Members.

The ASC has two operational levels: ASC Members and staff, including the executive management team. During F2017, there were 12 Members.

The Members act as the ASC’s board of directors, overseeing the management of the Commission. They also adjudicate enforcement proceedings and disputes among market participants.

Alberta’s Lieutenant Governor in Council appoints ASC Commission Members. These Members determine policy, consider and approve new rules or amend existing rules. They have extensive knowledge of Alberta’s capital market. Their combined credentials and experience in accounting, law, securities and corporate finance represent the

From left to right.

KATHRYN (KATE) CHISHOLM, Q.C., ICD.D

RICHARD A. SHAW, Q.C., ICD.D

MARYSE SAINT-LAURENT, ICD.D

TOM COTTER Vice-Chair

TERRY ALLEN, CFA, ICD.D

STAN MAGIDSON, ICD.DChair and Chief Executive Officer

BRADLEY NEMETZ, Q.C.

DR. IAN BEDDIS

ANN ROONEY, FCA, ICD.D

FRED R. N. SNELL, FCA

WEBSTER (WEB) MACDONALD, Q.C.

STEPHEN R. MURISON Vice-Chair (not pictured)


ABOUT THE MEMBERS

A majority of the Members are “Independent” as that term is applied in National Instrument 52-110 Audit Committees (NI 52-110). The Chair and Vice-Chairs are involved in the day-to-day activities of the ASC, so are not classified as Independent. Alberta’s Lieutenant Governor in Council designates one of the ASC’s Independent Members as the “Lead Independent Member." Meetings of the Members are held on a monthly basis. Members meet in camera (in private) following each meeting in the absence of the Chair and Vice-Chairs. The ASC has three board committees: Governance, Human Resources, and Audit. All three are made up exclusively of Independent Members.

All members of the Audit Committee are financially literate as that term is used in NI 52-110. As part of the ASC’s orientation program, new Members are provided with a briefing book detailing the operations of the ASC and the duties and responsibilities of the Members. Each member of the ASC’s senior management team meets with new Members to provide an overview of the operations of their respective divisions. In addition, Members are encouraged to attend appropriate courses or programs for further instruction relevant to their duties and responsibilities. The ASC’s Governance Policy, which contains a description of the ASC’s orientation program for new Members and continuing education for all Members, is available on the ASC website at www.albertasecurities.com.

DIVERSITY

The Commission appreciates the benefits that diversity can bring to the Board and to the Executive. The Commission seeks to maintain a Board and Executive comprised of talented and dedicated individuals with a diverse mix of expertise, experience, skills and backgrounds relevant to the mission, vision and strategy of the Commission. In addition to diversity of skills, knowledge, experience and backgrounds necessary to support the Commission’s mandate, diversity of age, ethnicity and gender is also considered in the appointment of Members and Executive Officers. The Commission’s ability to administer the Securities Act (Alberta) depends on the competence, integrity, capability and commitment of its Members and Executive Officers.

With specific reference to the representation of women on the Commission and in Executive Officer positions, an objective in the recruitment process is to achieve a gender diverse Board and Executive while simultaneously ensuring that the Members and Executive Officers collectively possess the required mix of skills and experience necessary to enable the Commission to carry out its mandate. With respect to gender, although the ASC does not have targets for Board or Executive Officer positions, the representation of women in these groups is generally significant as demonstrated below. The ASC will continue to consider gender diversity in the recruitment process for Board and Executive Officer positions:

F 2017 F 2016

Male Female Male Female

# % # % # % # %

Independent Members 5 55.6 4 44.4 6 66.7 3 33.3

Chair, Vice-Chairs 3 100 0 0 3 100 0 0

Executive Management 3 37.5 5 62.5 2 25 6 75

ATTENDANCE (1)

Stan Magidson, Chair Term Expiry – June 30, 2021Currently in Term – 1Commission – 9/9 (100%)Audit Committee – 4/4 (100%) Governance Committee – 3/3 (100%) Human Resources Committee – 1/1 (100%)

Tom Cotter, Vice-ChairTerm Expiry – March 31, 2020Currently in Term – 1Commission – 11/12 (91.7%) Interim Chair 3/3 (100%)

Stephen R. Murison, Vice-ChairRetired – March 31, 2017Commission – 11/12 (91.7%)

Ann Rooney FCA, ICD.D Term Expiry – March 31, 2019Currently in Term – 2Commission – 8/9 (88.9%) Audit Committee – 4/4 (100%) Governance Committee – 3/3 (100%) Human Resources Committee – 1/1 (100%)

Terry Allen CFA, ICD.D Term Expiry – March 31, 2018Currently in Term – 2Commission – 12/12 (100%) Audit Committee – 5/6 (83%)

Dr. Ian Beddis Term Expiry – March 31, 2019Currently in Term – 2Commission – 9/9 (100%) Audit Committee – 4/4 (100%)

Kate Chisholm Q.C., ICD.D Term Expiry – March 31, 2018Currently in Term – 1Commission - 12/12 (100%) Human Resources Committee – 2/2 (100%)

Webster (Web) Macdonald Q.C. Term Expiry – March 31, 2018Currently in Term – 2Commission – 11/12 (91.7%) Human Resources Committee - 2/2 (100%)

Bradley Nemetz Q.C. Term Expiry – March 31, 2019Currently in Term – 2Commission – 8/9 (88.9%) Governance Committee – 3/3 (100%)

Maryse Saint-LaurentTerm Expiry – March 31, 2019Currently in Term – 1Commission – 9/9 (100%) Human Resources Committee – 1/1 (100%)

Richard A. Shaw Q.C., ICD.D Term Expiry – March 31, 2017Currently in Term – 2Commission – 12/12 (100%) Audit Committee – 2/2 (100%) Governance Committee – 3/3 (100%) Human Resources Committee – 1/1 (100%)

Fred R. N. Snell FCA Term Expiry – March 31, 2017Currently in Term – 2Commission – 12/12 (100%) Audit Committee – 6/6 (100%) Human Resources Committee – 1/1 (100%)

(1) Commission Members are appointed to three-year terms, the Chair is appointed to a five-year term, and the Vice-Chairs are appointed to six-year terms.


THREE-YEAR STATISTICAL SUMMARY 2017

As of March 31, 2017 F2017 F2016 F2015

Enforcement Activity

Complaints received 351 374 579

Concluded investigations 328 467 630

Current cases 139 124 175

Interim cease trade orders 4 1 0

Halt trade orders 2 1 0

Settlement agreements 8 6 5

Hearings commenced 6 7 6

Settlements agreed to $ 583,802 $ 485,744 $ 265,000

Settlements collected $ 484,802 $ 485,744 $ 265,000

Administrative penalties levied $ 1,040,311 $ 2,595,000 $ 2,810,000

Administrative penalties recovered $ 340,524 $ 551,672 $ 122,000

Prosecutions initiated in Provincial Court 1 0 0

Appeal Hearings 2 6 1

Cease trade orders* 44 113 145

Active Reporting Issuers**

Principal Regulator – Alberta 605 669 709

Principal Regulator – Other 6,691 6,679 6,760

Total 7,296 7,348 7,469

Prospectuses and mutual funds


Principal Regulator – Other 625 557 638

Total 733 659 756

Rights offerings



Total 35 15 16

Exemption Applications (Corporate Finance)



Total 132 221 217

Continuous Disclosure Reviews (Principal Regulator – Alberta)

Full 52 75 75

Issue-oriented 165 71 304

Total 217 146 379

Total Registered Firms 894 871 855

Total Registered Individuals*** 29,842 29,192 28,320

Reciprocal orders are no longer reported. As of July 1, 2015, the ASC automatically reciprocates orders from other jurisdictions.

* These orders are the result of failure to comply with ASC filing requirements.

** Excludes issuers that have been cease-traded by the ASC.

*** Numbers do not include permitted individuals (CEO, CFO, COO or shareholders that own 10 per cent or more of the voting securities of a firm) who are tracked in the National Registration Database, but are not registrants.

Three Year Statistical Summary 2017


This Management Discussion & Analysis (MD&A), prepared as of June 14, 2017, should be read in conjunction with the Alberta Securities Commission’s March 31, 2017 audited financial statements and the accompanying notes, prepared in accordance with Canadian public sector accounting standards. Certain statements outlining fiscal 2018 expectations are forward-looking and are subject to risks and uncertainties. Furthermore, assumptions in the “Fiscal 2018 Outlook and Assumptions” section, although reasonable at the date of publication, are not guarantees of future performance. The results or events predicted in these statements and assumptions may differ materially from actual results or events. Factors that could cause results or events to differ from current expectations are described in the “Risks and Uncertainties” section of this MD&A.

References to “we,” “our,” or “the ASC” refer to the Alberta Securities Commission. In this MD&A, references to years, such as F2017, refer to the fiscal years of the ASC ending March 31. All amounts are in Canadian dollars.

The ASC maintains accounting and internal control systems to provide reasonable assurance that its financial information is complete, reliable and accurate and that its assets are adequately protected. Commission Members, in conjunction with the Audit Committee, have an oversight role to ensure the integrity of the reported information. Specific processes that enhance the ASC’s financial accountability and oversight include:

• preparation of an annual budget that is reviewed by the Audit Committee and approved by Commission Members;

• reports of actual versus budget performance and updated full-year forecasts;

• the requirement for Commission Member approval of significant unbudgeted expenses or reallocations; and

• quarterly testing of the design and effectiveness of critical financial controls.

The ASC’s annual budget is approved by Alberta’s Minister of Finance and is consolidated with the Government of Alberta’s budget.

OverviewThe ASC, an industry-funded provincial corporation without share capital, is the regulatory agency responsible for administering the province’s securities laws. It is entrusted with fostering a fair and efficient capital market in Alberta and with protecting investors. As a member of the Canadian Securities Administrators (CSA), the ASC works to improve, coordinate and harmonize the regulation of Canada’s capital markets. As a provincial corporation, the ASC is exempt from income taxes and GST/HST.

The ASC is also an administrative tribunal with quasi-judicial powers. Panels, comprised of Commission Members, hear enforcement proceedings and consider applications for discretionary exemptions from the requirements of Alberta securities laws. ASC panels also sit as appeal bodies to hear appeals from decisions of the Executive Director, the TSX Venture Exchange (TSXV), the Natural Gas Exchange Inc. (NGX) and recognized self-regulatory organizations, including the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA).

Management’s Discussion & Analysis


Financial Highlights

thousands of dollars

REVENUE

Annual financial 16,363statements 4,825

Distribution 16,195of securities 16,422

Registrations 14,889 11,235

Investment 1,439income 1,226

Other enforcement 813receipts 972

SEDI, exempt 748distributions & 907registration late fees

Administrative 347penalties 276

Orders 141(applications) 182

Conference 12and other 13

EXPENSES

Salaries 27,971and benefits 27,571

Premises 3,318 3,411

Professional 2,762services 1,996

Administration 2,697 2,648

Amortization of 1,115capital assets 1,255

Investor 519education 489

DIVISION EXPENSES

Enforcement 7,647 7,782

Corporate 6,610Finance 6,080

Market 5,736Regulation 5,293

Corporate 4,844Resources 4,777

Office of the Chair 3,085and Members 3,170

Communications 2,485and Investor 2,032 Education

Office of the Chief 1,329Accountant and 1,296Financial Services

Office of the 1,218General Counsel 1,277

Office of the 995Executive Director 997

Expenses 4,433not allocated1 4,666

Total 38,382 37,370

F2017 F2016

1 Expenses not allocated include: amortization of capital assets and premises.


SELECTED ANNUAL INFORMATION

thousands of dollars F2017 F2017 F2016 F2015

Budget Actual Actual Actual

Revenue 32,055 50,947 36,058 32,250

Regulatory expenses 40,104 38,382 37,370 38,495

Operating surplus (deficit) (8,049) 12,565 (1,312) (6,245)

Financial assets

Cash 16,815 10,013 7,064

Investments 29,198 20,970 26,065

Liabilities

Lease inducements 1,898 2,116 2,391

Accrued pension liability 8,763 8,000 7,134

Net financial assets 30,635 17,352 19,093

Capital assets 5,429 5,965 6,787

Accumulated surplus 36,305 23,578 26,171

Capital additions 665 580 434 627

HighlightsThe ASC had a $12.6 million operating surplus in F2017 compared with a budgeted deficit of $8.0 million and an actual deficit of $1.3 million in F2016.

Total revenue increased by $14.9 million in F2017 and exceeded budget by $18.9 million. During F2017, after a public consultation process, the ASC implemented a new fee rule, ASC Rule 13-501 Fees (Fee Rule). At the time the F2017 budget was approved, the Fee Rule was subject to Ministerial approval and therefore the F2017 budget did not incorporate resulting changes to revenue. This was one of the primary reasons for an increase in total revenue, specifically for annual financial statements filing and registrations fees. The last fee increase was implemented over 10 years ago, other than increases to some late filing fees. Regulatory obligations have increased and evolved since that time. The ASC operates on a cost recovery basis and has operated at a structural deficit for the past six fiscal years, drawing down our investments too close to our minimum sustainable balance, thereby forestalling any fee increase as long as possible. The Fee Rule was necessary to ensure that the ASC continues to deliver quality results in accordance with its mandate and to meet its existing and future operational budgets.

Administrative penalties and other enforcement receipts were $88,000 lower than the prior year but were $410,000 higher than budget. Enforcement receipts fluctuate annually because of the variability in cases, the timing of their resolution and success in collections efforts. Investment income increased by $213,000 from the prior year, primarily the result of an improving capital market.

Total expenses increased by $1.0 million in F2017 but were less than budget by $1.7 million. Cost increases over F2016 included a higher professional services expense due to an increase in the IIROC service charges (see “Regulatory Expenses” in the Quarterly Variance Analysis section) as a result of the Fee Rule and website improvements. Salaries and benefits expense also increased due to a lower staff vacancy rate than the prior year. However, cost increases in F2017 were partially offset by lower amortization and premises expenses. Total expenses were lower than budgeted due to a property tax adjustment, a higher-than-expected staff vacancy rate, operational cost reductions primarily in office operation costs, travel and member fees, and timing of capital additions.


Analysis of Fiscal 2017 Operating Results

REVENUE

thousands of dollars F2017 F2017 F2016

Budget Actual Actual

Fees

Annual financial statements 4,946 16,363 4,825

Distribution of securities 13,953 16,195 16,422

Registrations 10,776 14,889 11,235

SEDI, exempt distributions & registration late filing fees 400 748 907

Orders (applications) 210 141 182

Total fees 30,285 48,336 33,571

Other revenue

Investment income 1,000 1,439 1,226

Other enforcement receipts 500 813 972

Administrative penalties 250 347 276

Conference and other 20 12 13

Total revenue 32,055 50,947 36,058

The ASC collects 94.9 per cent (93.2 per cent in F2016) of its total revenue from fees paid by those who participate in the system. These participant transaction fees, in addition to certain enforcement receipts and investment income, fund our operations. The ASC does not receive transfers from government tax revenue. ASC funding requirements are modeled on a cost recovery basis.

ANNUAL FINANCIAL STATEMENTS

Effective December 1, 2016, annual financial statement filing fees for certain reporting issuers changed from a fixed fee model to a participation fee model based on average market capitalization. Annual financial statement filing fees totaled $16.4 million ($4.8 million in F2016). These fees accounted for 33.9 per cent of the ASC’s total fee revenue (14.3 per cent in F2016). The total number of active reporting issuers in Alberta at March 31, 2017 was 7,296 (7,348 at March 31, 2016). The total market capitalization of active reporting issuers in Alberta at March 31, 2017 was $4,112.1 billion ($2,981.9 billion at March 31, 2016).

DISTRIBUTION OF SECURITIES

Distribution fees have both fixed and variable components. The fixed component is charged for each prospectus or prospectus-exempt distribution filing by an Alberta issuer. The fixed transaction fee component of distribution fees totaled $6.7 million ($6.0 million in F2016) and 13.9 per cent (17.9 per cent in F2016) of total fees. The variable fee component is calculated based on the proceeds obtained from public (prospectus) and private (prospectus-exempt) distributions of securities sold in Alberta. The variable fee component accounted for $9.5 million in F2017 ($10.4 million in F2016) and 19.6 per cent (31.0 per cent in F2016) of total fees. The decrease in F2017 was due to a decline in mutual fund sales performance in 2016. Also, effective December 1, 2016, the ASC eliminated the variable component of distribution fees for reporting issuers which are not investment funds.

Distribution fee revenue varies with the level of capital market activity, equity value changes and mutual fund sales. ASC distribution fee revenue increases or decreases because of changes in public and private securities distributions and mutual fund sales. While equity market volatility has an impact on ASC revenue, the majority of fee revenue is relatively stable.

22 l ALBERTA SECURITIES COMMISSION MANAGEMENT’S DISCUSSION & ANALYSIS

REGISTRATIONS

Fee receipts of $14.9 million in F2017 ($11.2 million in F2016), from registered firms and individuals accounted for 30.8 per cent of fees (33.4 per cent in F2016). Registration fees were paid by approximately 894 firms and 29,842 individuals (871 firms and 29,192 individuals in F2016) registered in Alberta. Registration fees were higher than the prior year primarily due to an increase in fee rates under the Fee Rule. Over 86.4 per cent of fees were received from registration renewals.

Other Revenue SourcesLATE FILING FEES RELATING TO EXEMPT DISTRIBUTIONS, REGISTRATION AND THE SYSTEM FOR ELECTRONIC

DISCLOSURE BY INSIDERS (SEDI)

The ASC collected late filing fees of $748,000 ($907,000 in F2016), mostly contributed by late fees on prospectus-exempt distributions and insider report filings. Late filing fees, introduced in F2015, are expected to decline over time with increase in awareness of late fees.

ORDERS (APPLICATIONS)

In F2017, 138 applications were received (252 in F2016). Fewer applications for cease trade orders, cease to be a reporting issuer orders and exemptive relief orders were received in F2017 compared with F2016, primarily due to the expansion of the passport system to allow issuers to file a single application with their principal regulator to cease to be a reporting issuer.

INVESTMENT INCOME

In F2017 investment income totaled $1.4 million ($1.2 million in F2016). This includes investment income from interest- bearing securities of $1.0 million ($1.2 million in F2016) and investment income from equities of $432,000 ($6,000 in F2016).

OTHER ENFORCEMENT RECEIPTS

thousands of dollars F2017 F2016

Disgorgements

Assessed 1,602 918

Uncollectible (1,602) (894)

Recoveries of prior-year assessments – 54

Settlement receipts

Assessed 584 486

Uncollectible (99) –

Cost recoveries

Assessed 627 429

Uncollectible (359) (380)

Recoveries of prior-year assessments 60 359

Total 813 972


ADMINISTRATIVE PENALTIES


Administrative penalties

Assessed penalties 1,040 2,595

Uncollectible (1,005) (2,350)

Repayments – (284)

Recoveries of prior-year assessments 306 307

Interest income & other 6 8

Total 347 276

Penalties and enforcement receipts depend on the circumstances of specific cases and vary from year to year. An administrative penalty receipt occurs following collection of a financial penalty imposed by an ASC panel. Disgorgements represent orders to respondents to disgorge amounts made from actions that violated the Securities Act (Alberta). A settlement receipt arises from a negotiated settlement that includes a financial payment. Cost recovery receipts arise on collection of assessed costs. Cost recoveries arise in both settlements and hearing decisions.

Current year receipts totaled $1.2 million ($1.2 million in F2016) and compare to a five-year average of $1.1 million in receipts. The ASC actively pursues unpaid amounts through the use of external legal counsel, writ filing and questionings in aid of execution. Recoveries are often limited because respondents have minimal resources at the time of assessment. However, the ASC collected $366,000 ($720,000 in F2016) of prior-year assessments and costs in F2017.

The ASC annually transfers administrative penalties revenue, less eligible expenditures, to a restricted cash account. Restricted cash is segregated from other assets because of statutory limitations on the use of these funds. The Securities Act (Alberta) restricts the use of revenue the ASC receives from administrative penalties to certain operating expenditures that educate investors and enhance participants’ knowledge of how securities markets operate.

The decrease in restricted cash of $161,000 was the result of a transfer of $519,000 to fund eligible expenditures ($489,000 in F2016), partially offset by prior and current year collections of $341,000 ($552,000 in F2016), $11,000 of conference fees ($12,000 in F2016), and interest income of $6,000 ($8,000 in F2016). In F2016, the Court of Appeal of Alberta directed the ASC to reconsider the sanctions in a specific enforcement matter resulting in a repayment of $284,000 of previously collected penalties.

CONFERENCE & OTHER

The majority of fees in this category were collected from two annual conferences held during F2017: the Corporate Finance Review and the Oil and Gas Information Session.

Comparative and Budget Expense AnalysisIn F2017, expenses were 4.3 per cent less than budget. Details by expense category follow.

REGULATORY EXPENSES



Salaries and benefits 28,524 27,971 27,571

Premises 4,135 3,318 3,411

Professional services 2,408 2,762 1,996

Administration 3,207 2,697 2,648

Amortization of capital assets 1,310 1,115 1,255

Investor education 520 519 489

40,104 38,382 37,370


SALARIES AND BENEFITS

Compensation expenses accounted for 72.9 per cent of operating costs in F2017 (73.8 per cent in F2016) and increased by $400,000 from the prior year due to a lower staff vacancy rate and use of additional contractors. While the staff vacancy rate was lower than the prior year, it was higher than budgeted. ASC staff was comprised of an average of 180 full-time employees during the year (179 in F2016). Compensation costs were lower than budget by $553,000 because of a higher staff vacancy rate than budgeted. Compensation also includes a performance-based variable pay program that represented 7.6 per cent (7.6 per cent in F2016) of total salaries and benefits expenses.

PREMISES

Premises costs were 8.6 per cent of total costs (9.1 per cent in F2016). These costs decreased by $93,000 because of a reduction in operating costs charged by the property manager in F2017. Premises costs were lower than budget by $817,000 due to a property tax adjustment.

PROFESSIONAL SERVICES

Professional services costs represented 7.2 per cent of total costs in F2017 (5.3 per cent in F2016). These costs were higher than the prior year by $766,000, primarily due to an increase in IIROC service charges due to the changes in the Fee Rule, website improvements, and a cyber-security audit. These costs were also higher than budget, primarily due to an increase in IIROC service charges.

All CSA projects, including the development of harmonized securities policies and rules and shared CSA information systems, are coordinated through a permanent Secretariat located in Montreal, Quebec. CSA operating costs are borne on a formula basis by CSA members; the ASC pays 11.8 per cent of these costs. In F2017, the ASC’s share of CSA costs was $227,000 ($215,000 in F2016).

ADMINISTRATION

Administration costs increased by $49,000 in F2017. These costs were $510,000 less than budget and accounted for 7.0 per cent of total costs (7.1 per cent in F2016). The administration cost category includes office operations, member fees, travel, and business consultation.

Office operating costs were reduced by $27,000 and $319,000 compared with the prior year and budget, respectively. This was due to effective cost control efforts. These costs include repairs and maintenance, communications, technology licenses, supplies, library, and equipment rental. Travel expenses increased $40,000 relative to the prior year, however were $86,000 less than budget. Travel expenses are required primarily for coordination with other CSA jurisdictions, enforcement activities, and exempt market dealer reviews. Member fees increased by $41,000 in F2017 but were $80,000 less than budget because there were fewer hearing days than anticipated. Business consultation expense was less than the prior year and budget by $5,000 and $25,000, respectively.

AMORTIZATION OF CAPITAL ASSETS

Amortization expense decreased by $140,000 and $195,000 compared to the prior year and budget, respectively. This was a result of lower capital additions from the prior year and timing of current year additions.

INVESTOR EDUCATION

Investor education costs were $30,000 higher than the prior year and consistent with budget.


EXPENSES BY DIVISION



Enforcement 7,995 7,647 7,782

Corporate Finance 6,631 6,610 6,080

Market Regulation 5,687 5,736 5,293

Corporate Resources 4,966 4,844 4,777

Office of the Chair and Members 3,530 3,085 3,170

Communications and Investor Education 2,228 2,485 2,032

Office of the Chief Accountant and Financial Services 1,297 1,329 1,296

Office of the General Counsel 1,267 1,218 1,277

Office of the Executive Director 1,058 995 997

Expenses not allocated2 5,445 4,433 4,666

Total 40,104 38,382 37,370

1 Certain F2016 figures have been reclassified to conform to the F2017 presentation.

2 Expenses not allocated include: amortization of capital assets and premises.

Division expenses are primarily for staff and professional services.

Independent Member fees are recorded in the ‘Office of the Chair and Members’ section. Fees are variable due to difficulty in forecasting the number and duration of hearings. See Schedule A of the March 31, 2017 annual audited financial statements for Member fees.

CAPITAL EXPENDITURES



Computer equipment and software 560 516 243

Furniture and equipment 75 38 18

Leaseholds 30 26 173

Total 665 580 434

In F2017, capital expenditures were primarily related to technology projects including desktop replacements, network equipment upgrades, software licenses, Microsoft Exchange upgrade, and electronic document management system enhancements.

Liquidity and Financial Position

LIQUIDITY

The ASC has sufficient resources to fund future operations and capital purchases with cash of $16.8 million ($10.0 million in F2016) and investments at market value of $29.2 million ($21.0 million in F2016).


ACCOUNTS RECEIVABLE

Accounts receivable as at March 31, 2017 were $32,000 ($402,000 in F2016), comprised of $22,000 ($37,000 in F2016) due to annual premise operating adjustments, $7,000 of employee loans for computer acquisitions ($10,000 in F2016), and $3,000 of CSA related reimbursement ($51,000 in F2016). In F2016, the ASC also had receivables of $304,000 relating to refunds on property and business tax adjustments.

INVESTMENTS

The ASC’s investments are independently managed by the Alberta Investment Management Corporation (AIMCo). AIMCo is a provincial corporation responsible to the Minister of Finance. The ASC does not participate in specific capital market investment decisions or transactions, however, the ASC’s investment policy provides guidance relevant to the governance, purpose, size, access, management and annual income of the investments.

The target balance for the combined investments and cash balances is 50 per cent of the average forecast annual expenses for the current fiscal year and budgeted annual expenses for the next fiscal year. This target for F2018 is $20.9 million. The F2018 year-end balance of investments and cash is expected to be $52.4 million compared with the March 31, 2017 balance of $46.0 million. The $6.4 million increase expected in F2018 is due to higher cash receipts from the Fee Rule, partially offset by estimated cash expenditures for operations of $39.8 million and capital additions of $1.0 million.

RATES OF RETURN ON INVESTMENTS

Investments include fixed-income and equity investments. The fixed-income pool includes a mix of high-quality government and corporate (public and private) fixed-income securities and debt-related derivatives. Equity investments include publicly traded Canadian large cap and market index participant equities. The equity pools participate in derivative transactions to simulate index composition and minimize investment risk. Investments can be accessed on two weeks’ notice and are available to fund ASC cash requirements.

The rates of return on the ASC’s investments are:

• Fixed-income securities (market value) – a gain of 1.1 per cent in F2017, compared with a gain of 1.6 per cent in F2016.

• Equity funds (market value) – a gain of 17.9 per cent in F2017, compared with a loss of 5.2 per cent in F2016.

• Money market funds – a gain of 1.1 per cent in F2017, compared with a gain of 0.8 per cent in F2016.

Fixed-income securities are sensitive to interest rate fluctuations. At March 31, 2017, ASC fixed-income security investments of $21.8 million market value had maturities that range from under one year (14.2 per cent) to greater than 10 years (28.3 per cent) with an average duration of 6.9 years (7.0 years in F2016). A 1.0 per cent increase in the interest rate, assuming no other changes, would reduce the market value of the ASC’s fixed-income securities by 6.4 per cent (6.7 per cent in F2016).

Investment Risk Management and the Use of DerivativesThe ASC’s investment manager, AIMCo, uses several types of derivatives across most product areas to cost-effectively manage asset exposure, hedge interest rate and foreign currency risk, and enhance return. Current credit exposure is represented by the current replacement cost of all outstanding derivative contracts in a favourable position (positive fair value).


Quarterly Variance Analysis

QUARTERLY RESULTS SUMMARY


Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

(Jan-Mar) (Oct-Dec) (July-Sept) (Apr-June) (Jan-Mar) (Oct-Dec) (July-Sept) (Apr-June)

Revenue

Fees & other 31,794 5,276 4,009 8,429 17,741 5,037 4,572 7,482

Investment income 240 353 400 446 442 199 146 439

32,034 5,629 4,409 8,875 18,183 5,236 4,718 7,921

Regulatory expenses

Salaries & benefits 7,451 6,859 6,824 6,837 7,022 6,592 6,981 6,976

Other 3,993 2,480 1,976 1,962 3,192 2,429 2,023 2,155

11,444 9,339 8,800 8,799 10,214 9,021 9,004 9,131

Operating surplus (deficit) 20,590 (3,710) (4,391) 76 7,969 (3,785) (4,286) (1,210)

Investments 29,198 20,740 22,296 21,721 20,970 20,505 21,409 25,719

Cash 16,815 3,092 4,478 8,487 10,013 1,653 3,761 3,272

Restricted cash 535 701 699 698 696 792 1,073 1,070

FEE REVENUE

Quarterly fee revenue is variable due to the timing of fee-related filings among reporting issuers and the variable portion of prospectus and prospectus-exempt fees, which fluctuate with market activity. Majority of total fee revenue is received in the fourth quarter each year, primarily due to annual registration renewal and annual financial statement filing fees. Annual registration renewal fees are received in January and the majority of annual financial statements filing fees are received from February to April.

REGULATORY EXPENSES

The ASC pays IIROC a portion of IIROC members’ annual registration renewal fees. Approximately $1.2 million was paid in F2017 ($924,000 in F2016).

Other expenses vary from quarter to quarter because of the timing of expenditures. For example, professional services for enforcement activities depend on the nature of investigations and the timing of expert reports, and testimony required for hearings and trials. Investor education activities generally correspond with investor education and fraud prevention months.

Contractual ObligationsCommitments to outside organizations with contracts in place as at March 31, 2017 totaled $31.4 million ($35.1 million in F2016). Commitments include leases of premises to 2025 and rental of office equipment to 2021. See Note 9(A) of the March 31, 2017 annual audited financial statements for the commitments schedule.

The ASC also has contractual commitments for a supplemental pension plan maintained for certain senior executives. Payment amounts are dependent on the future decisions of plan participants and are not included in the summary of contractual obligations as they are recorded as liabilities.


Financial InstrumentsThe ASC’s financial instruments include cash, accounts receivable, restricted cash, investments, and accounts payable and accrued liabilities. AIMCo manages investments that include derivative contracts for effective investment risk and return management. Details of these financial instruments are described in the Investments section of the MD&A and in the Notes to the ASC’s financial statements.

The ASC reports all of its investments at fair value, consistent with how they are evaluated and managed by AIMCo. Investments are reported on the Statement of Financial Position at fair value. Realized and unrealized investment gains and losses are reported separately. Only realized gains and losses are reported in the Statement of Operations. Unrealized gains and losses are reported in the Statement of Remeasurement Gains and Losses. Investment risks are disclosed, including credit risk, foreign currency risk, interest rate risk, price risk, and liquidity risk.

Related Party TransactionsThe ASC is related, through the common Government of Alberta reporting entity, to all provincial government ministries, agencies, boards, commissions, and Crown corporations. See Note 11 of the March 31, 2017 annual audited financial statements for related party transactions.

CSA National Systems See Note 8 of the March 31, 2017 annual audited financial statements for the CSA National Systems.

Risk Management InitiativesBUSINESS CONTINUITY

The ASC has emergency response plans and processes in place that are tested annually. Key systems and data are replicated between two data centres – a primary data centre located at a secure off-site facility and a secondary, backup data centre on-site at Centennial Place. Should any or all systems running at the primary site fail, the secondary data centre will take over. The ASC can run indefinitely using the secondary data centre until primary services are restored. Remote access capability exists for all critical ASC systems, which enables ASC staff to continue critical work, supported through information technology, if ASC offices are not accessible.

RISK ASSESSMENT AND MITIGATION

Key risks to the effective operations of the ASC include loss of key personnel, disruption and loss of computing systems, crises beyond our control, or loss of public confidence in the ASC. The ASC has a comprehensive crisis management program in place including systems, protocols and controls designed to lessen the impact on business processes and minimize the risks. During F2017, the ASC performed an extensive review of key risks to the organization, including identification of controls and activities to address those risks, and estimation of the remaining risk exposure. The review concluded that all reasonable steps have been taken, or are being taken, to mitigate risks to the extent they are within the control of the organization. This risk review was performed in conjunction with the development of the ASC’s three-year strategic plan. An annual targeted risk review will be completed in F2018 and F2019, with another comprehensive review planned for F2020. The ASC also engaged Deloitte to undertake a comprehensive Cyber Security Maturity and Vulnerability Assessment to understand the current state of the ASC’s cyber secure capability and controls against industry leading practices, and to provide remediation advice to enhance security further. The ASC will work to address all recommendations in F2018.


MINISTERIAL BUDGET APPROVAL

In November 2010, the ASC and the Minister of Finance and Enterprise executed a Mandate and Roles Document (MRD) as per the requirements of the Alberta Public Agencies Governance Act (APAGA). The MRD became effective on proclamation of the APAGA on June 12, 2013. The MRD outlines the ongoing roles, responsibilities, and accountability relationships between the two parties. Significant MRD financial requirements include Ministerial approval of annual ASC budgets, any subsequent changes that materially modify the budget, and quarterly reporting to the Minister of actual financial results and budget amendments.

Fiscal 2018 Outlook and AssumptionsREVENUE

F2018 revenue is anticipated to be $47.2 million. This increase is substantially due to the Fee Rule.

EXPENSES

F2018 expenses are expected to be $41.0 million, an increase of $907,000 over F2017 budgeted expenses of $40.1 million. This will result in a forecasted operating surplus of $6.2 million.

LIQUIDITY AND CASH FLOW

The cash requirements for F2018 operations and capital budgets can be met from existing cash and investment balances.

RISKS AND UNCERTAINTIES

This budget is based on the ASC’s experience and assessment of historical and future trends, and the application of key assumptions relating to future events that include fee income growth consistent with that of the capital markets, assumptions concerning investment income, a 6.0 per cent staff vacancy rate and specific project costs for information technology, training and recruitment. Factors that could lead to higher risks to the ASC include:

• capital market volatility and the impact on fees paid in connection with the distribution of securities and annual financial statements, and investment income;

• business plan changes and their impact on cost assumptions; and

• disruption of CSA national systems fee processing that delays fee receipts at the ASC’s year-end.


Management’s Responsibility for Financial ReportingThe accompanying ASC financial statements and all other information relating to the ASC contained in this annual report have been prepared and presented by management, who is responsible for the integrity and fair presentation of the information.

These financial statements are prepared in accordance with Canadian public sector accounting standards. The financial statements necessarily include certain amounts based on the informed judgments and best estimates of management. The financial information contained elsewhere in this annual report is consistent with that in the financial statements.

In fulfilling its responsibilities and recognizing the limits inherent in all systems, the ASC has developed and maintains a system of internal control to produce reliable information for reporting requirements. The systems are designed to provide reasonable assurance that ASC transactions are properly authorized, assets are safeguarded from loss and the accounting records are a reliable basis for the preparation of the financial statements.

The Auditor General of Alberta, the ASC’s external auditor appointed under the Auditor General Act, performed an independent external audit of these financial statements in accordance with Canadian generally accepted auditing standards and has expressed his opinion in the accompanying Independent Auditor’s Report.

ASC Commission members are responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The members exercise this responsibility through the Audit Committee. In both the presence and absence of management, the Audit Committee meets with the external auditors to discuss the audit, including any findings as to the integrity of financial reporting processes and the adequacy of our systems of internal controls. The external auditors have full and unrestricted access to the members of the Audit Committee.

STAN MAGIDSON DAVID C. LINDER, Q.C.Chair and Chief Executive Officer Executive Director

June 14, 2017

Financial Statements


Independent Auditor’s Report

To the Members of the Alberta Securities Commission

REPORT ON THE FINANCIAL STATEMENTS

I have audited the accompanying financial statements of the Alberta Securities Commission, which comprise the statement of financial position as at March 31, 2017, and the statements of change in net financial assets, operations, remeasurement gains and losses, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

OPINION

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Alberta Securities Commission as at March 31, 2017, and the results of its operations, its remeasurement gains and losses, its changes in net financial assets, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

[Original signed by Merwan N. Saher FCPA, FCA]

Auditor General

June 14, 2017

Edmonton, Alberta

32 l ALBERTA SECURITIES COMMISSION FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION

thousands of dollars At March 31, 2017 At March 31, 2016

Financial Assets

Cash (Note 3) 16,815 10,013

Accounts receivable 32 402

Restricted cash (Note 3) 535 696

Investments (Note 4) 29,198 20,970

46,580 32,081

Liabilities

Accounts payable and accrued liabilities 5,284 4,613

Lease inducements 1,898 2,116

Accrued pension liability (Note 6) 8,763 8,000

15,945 14,729

Net Financial Assets 30,635 17,352

Non-Financial Assets

Capital assets (Note 5) 5,429 5,965

Prepaid expenses 241 261

5,670 6,226

Accumulated Surplus 36,305 23,578

Accumulated surplus is comprised of:

Accumulated operating surplus 35,700 23,135

Accumulated remeasurement gains 605 443

36,305 23,578

Commitments and contingent liabilities (Note 9)

The accompanying notes and schedule are part of these financial statements.

Approved by the Members

STAN MAGIDSON TERRY ALLENChair and Chief Executive Officer Chair of the Audit Committee

June 14, 2017


STATEMENT OF CHANGE IN NET FINANCIAL ASSETS

thousands of dollars For year ended March 31

2017 2017 2016

Budget(Note 10)

Actual Actual

Operating Surplus (Deficit) (8,049) 12,565 (1,312)

Acquisition of capital assets (665) (580) (434)


Losses (Gains) on sale of capital assets (1) 1

Proceeds on sale of capital assets 1 -

Prepayment of expenses (439) (397)

Reduction of prepaid expenses 459 427

Net remeasurement gains (losses) 162 (1,281)

Increase (Decrease) in net financial assets (7,404) 13,283 (1,741)

Net financial assets, beginning of year 17,352 17,352 19,093

Net financial assets, end of year 9,948 30,635 17,352



STATEMENT OF OPERATIONS


2017 2017 2016

Budget(Note 10)

Actual Actual

Revenue

Fees (Note 7) 30,285 48,336 33,571

Investment income (Note 4) 1,000 1,439 1,226

Other enforcement receipts (Note 7) 500 813 972

Administrative penalties (Note 3) 250 347 276

Conference and other 20 12 13

32,055 50,947 36,058

Regulatory Expenses

Salaries and benefits 28,524 27,971 27,571

Premises 4,135 3,318 3,411

Professional services 2,408 2,762 1,996

Administration 3,207 2,697 2,648


Investor education (Note 3) 520 519 489

40,104 38,382 37,370

Operating surplus (deficit) (8,049) 12,565 (1,312)

Accumulated operating surplus, beginning of year 23,135 23,135 24,447

Accumulated operating surplus, end of year 15,086 35,700 23,135


STATEMENT OF REMEASUREMENT GAINS AND LOSSES (NOTE 4)


2017 2016

Accumulated remeasurement gains, beginning of year 443 1,724

Unrealized gains (losses) on investments during the year 206 (1,098)

Less: Amounts reclassified during the year to the Statement of Operations (44) (183)

Net remeasurement gains (losses) for the year 162 (1,281)

Accumulated remeasurement gains, end of year 605 443



STATEMENT OF CASH FLOWS


2017 2016

Operating transactions

Fees and other 48,510 33,562

Payments to and on behalf of employees (27,047) (27,318)

Payments to suppliers for goods and services (8,968) (9,508)

Investment income (Note 4) 1,439 1,226

Other enforcement receipts (Note 7) 813 972

Administrative penalties (Note 3) 347 276

Cash received from (used in) operating transactions 15,094 (790)

Capital transactions

Cash used to acquire capital assets (388) (447)

Proceeds on sale of capital assets 1 -

Cash used in capital transactions (387) (447)

Investing transactions

Decrease in restricted cash (Note 3) 161 372

Purchases of investments (9,366) (1,186)

Disposals of investments 1,300 5,000

Cash (used in) received from investing transactions (7,905) 4,186

Increase in cash 6,802 2,949

Cash, beginning of year 10,013 7,064

Cash, end of year 16,815 10,013



Notes to the Financial StatementsMarch 31, 2017

NOTE 1 NATURE OF OPERATIONS

The Alberta Securities Commission (ASC), a provincial corporation operating under the Securities Act (Alberta), is the regulatory agency responsible for administering the province’s securities laws.

The ASC, as an Alberta provincial corporation, is exempt from income tax under the Income Tax Act (Canada).

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES

These financial statements are prepared in accordance with Canadian public sector accounting standards (PSAS).

A) INVESTMENTS

The Alberta Investment Management Corporation (AIMCo) invests the ASC’s assets in pooled investment funds in accordance with the investment policy asset mix approved by the ASC. AIMCo controls the creation of the pools and the management and administration of the pools including security selection. Accordingly, the ASC does not participate in capital market investment decisions or transactions.

AIMCo manages and reports all ASC investments and cash balances using the accounting policies outlined in (i), (ii), and (iii). Fixed-income securities and equities consist of units in pooled investment funds. The units are recognized at fair value based on the fair value of the financial instruments held in the pools.

i. Valuation of Investments

Fair values of investments managed and held by AIMCo in pooled investment funds are determined as follows:

• public fixed-income securities and equities are valued at the year-end closing sale price, or, if not actively traded, any price point between the bid/ask spread that is deemed to be the most representative of fair value;

• private fixed-income securities are valued based on the net present value of future cash flows. These cash flows are discounted using appropriate interest rate premiums over similar Government of Canada benchmark bonds trading in the market; and

• the pools include derivative contracts that contain equity and bond index swaps, interest rate swaps, cross-currency interest rate swaps, credit default swaps, forward foreign exchange contracts, and equity index futures contracts. The value of derivative contracts is included in the fair value of the pools.

ii. Investment Income and Expenses

Income from investment in units of the pools and total expense and transaction costs incurred by the pools are allocated to the ASC based on the ASC’s pro-rata share of units in each pool. Investment services provided by AIMCo are charged directly to the pools on a cost-recovery basis. Investment services provided by external managers are charged to the pools based on a percentage of net assets under management. Investment income, including that from derivative contracts and expenses, is recognized on the accrual basis.

Gains and losses arising as a result of disposal of investments and related pool units are included in the determination of investment income and reported in investment income on the Statement of Operations. The cost of disposal is determined on an average-cost basis.

Interest income attributable to interest-bearing financial assets held by the pools is recognized using the effective interest method.

Dividend income attributable to equities held by the pools is recognized on the ex-dividend date.


iii. Remeasurement Gains and Losses

Accumulated remeasurement gains represent the excess of the fair value of the pool units at year-end over the cost of the pool units. Changes in accumulated remeasurement gains are recognized in the Statement of Remeasurement Gains and Losses. Changes in accumulated remeasurement gains during the year include unrealized increases and decreases in fair value of the pooled units and realized gains and losses on sale of the pool units. When the pool units are sold (derecognized), any accumulated unrealized gain or loss associated with the investment becomes realized and is included in the Statement of Operations.

B) VALUATION OF FINANCIAL ASSETS AND LIABILITIES

Cash, restricted cash, accounts receivable, accounts payable and accrued liabilities are recognized at cost or amortized cost. The fair values of each of these line items approximate their carrying values due to their short-term nature. See Notes 2(A) and (G) for the valuation of investments and accrued pension liability, respectively.

C) CAPITAL ASSETS

Capital assets are recognized at cost, which includes amounts directly related to the acquisition, design, construction, development, improvement or betterment of the assets. Capital assets are written down when conditions indicate that they no longer contribute to ASC’s ability to provide goods and services, or when the value of future economic benefits associated with the capital assets are less than their net book value. The net write-downs are accounted for as expenses in the Statement of Operations.

Assets are amortized on a straight-line basis over their estimated useful lives as follows:

Computer equipment and software 3 years

Furniture and equipment 10 years

Leaseholds one 15-year lease term to November 2025

D) PREPAID EXPENSES

Prepaid expenses are recognized at cost and amortized based on the terms of the agreement.

E) FEES, ADMINISTRATIVE PENALTIES AND OTHER ENFORCEMENT RECEIPTS RECOGNITION

Fees are recognized when earned, which is upon cash receipt.

Administrative penalties and other enforcement receipts, including disgorgements, settlement payments and cost recoveries, are recognized when the decision is issued or agreement reached and collectability is assured, which is generally upon cash receipt.

F) EXPENSES

Expenses are reported on an accrual basis. The costs of all goods consumed and services received during the year are expensed.

G) EMPLOYEE FUTURE BENEFITS

The ASC participates in the Public Service Pension Plan, a multi-employer defined benefit pension plan. This plan is accounted for as a defined contribution plan as the ASC has insufficient information to apply defined benefit plan accounting to this pension plan. Pension expenses recognized in these financial statements are comprised of employer contributions related to the current service of employees during the year and additional employer contributions for service relating to prior years.

The ASC established a retirement plan for one employee at the time of the transition to a provincial corporation. The employee is retired and the plan costs are fully provided for.


The ASC maintains a supplemental pension plan for certain designated executives of the ASC. The cost of the pension is actuarially determined using the projected unit credit cost method pro-rated on service as well as management’s best estimate of economic assumptions. Past service costs and actuarial losses arising from assumption changes are amortized on a straight-line basis over the average remaining service period of employees active at the date of commencement of the Supplemental Pension Plan. The average remaining service period of active employees of the supplemental pension plan is five years.

The ASC also maintains a plan whereby it makes Registered Retirement Savings Plan (RRSP) contributions on behalf of certain employees of the ASC. The contributions are calculated based on a fixed percentage of the employee’s salary to a maximum of the RRSP contribution limit as specified in the Income Tax Act (Canada). The expense included in these financial statements represents the current contributions made on behalf of the employees.

H) LEASE INDUCEMENTS

Cash payments received as lease inducements are deferred and amortized on a straight-line basis over the lease term (15 years ending November 30, 2025).

I) MEASUREMENT UNCERTAINTY

Financial statements prepared in conformity with PSAS require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates include the value of investments, the value of accrued employee benefit liabilities, the useful lives of capital assets, and uncollectible amounts of accounts receivable, including administrative penalties and related cost recoveries. Actual results could differ from those estimates.

The estimated provision for uncollectible administrative penalties and cost recoveries is based on an assessment of the ability to pay at the time of penalty assessment. Subsequent collection actions and changes in the ability to pay may result in recovery of amounts previously considered uncollectible. However, it is not possible to estimate what, if any, subsequent recoveries may occur.

J) RESTRICTED CASH

The Securities Act (Alberta) restricts the use of revenue the ASC receives from administrative penalties to certain operating expenditures that educate investors and enhance participants’ knowledge of how securities markets operate.

K) FUTURE ACCOUNTING CHANGES

The Public Sector Accounting Board has issued the following accounting standards:

i. PS2200 Related Party Disclosures and PS3420 Inter-Entity Transactions (effective April 1, 2017)

PS2200 defines a related party and establishes disclosures required for related party transactions; PS3420 establishes standards on how to account for and report transactions between public sector entities that comprise a government's reporting entity from both a provider and recipient perspective.

ii. PS3210 Assets, PS3320 Contingent Assets, and PS3380 Contractual Rights (effective April 1, 2017)

PS3210 provides guidance for applying the definition of assets set out in FINANCIAL STATEMENT CONCEPTS, Section PS1000, and establishes general disclosure standards for assets; PS3320 defines and establishes disclosure standards on contingent assets; PS3380 defines and establishes disclosure standards on contractual rights.

iii. PS3430 Restructuring Transactions (effective April 1, 2018)

This standard provides guidance on how to account for and report restructuring transactions by both transferors and recipients of assets and/or liabilities, together with related program or operating responsibilities.

Management is currently assessing the impact of these standards on the ASC’s financial statements. At this time, management does not anticipate any material changes.


NOTE 3 CASH AND RESTRICTED CASH

thousands of dollars 2017 2016

Cash 16,815 10,013

Restricted Cash 535 696

Net financial assets include $535,000 of accumulated net administrative penalty revenue ($696,000 in F2016) represented as restricted cash. The change in restricted cash is comprised of:


Administrative penalties

Assessed penalties 1,040 2,595

Less provision for uncollectible amounts (1,005) (2,350)

Less repayments - (284)

Plus recoveries of prior-year assessments 306 307

341 268

Interest income and other 6 8

Administrative penalties 347 276

Plus education conference 11 12

Less eligible restricted cash expenses (investor education) (519) (489)

Plus funds transferred due to Alberta Court of Appeal decision - (171)

Restricted cash decrease (161) (372)

Restricted cash, beginning of year 696 1,068

Restricted cash, end of year 535 696

Cash and restricted cash consist of demand deposits in the Consolidated Cash Investment Trust Fund (CCITF). The CCITF is managed by AIMCo with the objective of providing competitive interest income to depositors while maintaining appropriate security and liquidity of depositors’ capital. As at March 31, 2017, the ASC received an annualized return of 0.9 per cent (0.8 per cent in F2016).

NOTE 4 INVESTMENTS

A) SUMMARY


Investments CostRemeasurement

Gains (Losses) Fair Value % Cost Fair Value %

CCITF deposit 81 – 81 0.3 80 80 0.4

Fixed-income securities 21,870 (85) 21,785 74.6 15,366 15,625 74.5

Canadian equities 6,642 690 7,332 25.1 5,081 5,265 25.1

28,593 605 29,198 100.0 20,527 20,970 100.0

At March 31, 2017, the carrying amounts of the ASC’s investments are recognized on a fair-value basis. The ASC’s investments are held in pooled investment funds established and managed by AIMCo. Pooled investment funds have a market-based unit value that is used to allocate income to participants and to value purchases and sales of pool units.

The fixed-income pool includes a mix of high-quality government and corporate (public and private) fixed-income securities and debt-related derivatives. The fund is actively managed to minimize credit and market risk through the use of derivatives, portfolio duration and sector rotation.


Equity investments include publicly traded Canadian large cap and market index participant equities. The equity pools participate in derivative transactions to simulate index composition and minimize investment risk.

FAIR VALUE HIERARCHY

The table below provides a summary of management’s estimate of the relative reliability of data or inputs to measure the fair value of the ASC’s investments. The measure of reliability is determined based on the following three levels:

i. Level One:

Fair value is based on unadjusted quoted prices in active markets for identical assets or liabilities traded in active markets. Level one primarily includes publicly traded listed equity investments.

ii. Level Two:

Fair value is based on valuation methods that make use of inputs, other than quoted prices included within level one, that are observable by market participation either directly through quoted prices for similar but not identical assets or indirectly through observable market information used in valuation models. Level two primarily includes debt securities and derivative contracts not traded on a public exchange and public equities not traded in an active market. For these investments, fair values are either derived from a number of prices that are provided by independent pricing sources or from pricing models that use observable market data such as swap curves and credit spreads.

iii. Level Three:

Fair value is based on valuation methods where inputs that are based on non-observable market data have a significant impact on the valuation. For these investments trading activity is infrequent and fair values are derived using valuation techniques.

thousands of dollars Level One Level Two Level Three Total

CCITF deposit – 81 – 81

Fixed-income securities – 21,785 – 21,785

Canadian equities 5,581 419 1,332 7,332

5,581 22,285 1,332 29,198

19.1% 76.3% 4.6% 100.0%


Reconciliation of Level 3 Investments

Balance, April 1, 2016 –

Unrealized gains 62

Purchases of Level 3 pooled fund units 1,275

Sales of Level 3 pooled fund units (5)

Balance, March 31, 2017 1,332

B) INVESTMENT RISK MANAGEMENT

The ASC is exposed to a variety of financial risks associated with the underlying securities held in the investment funds. These financial risks include credit risk, foreign currency risk, interest rate risk, price risk and liquidity risk.

i. Credit Risk

Counterparty credit risk is the risk of loss arising from the failure of a counterparty to fully honour its financial obligations with the ASC. The credit quality of financial assets is generally assessed by reference to external credit ratings. Credit risk


can also lead to losses when issuers and debtors are downgraded by credit rating agencies, usually leading to a fall in the fair value of the counterparty’s obligations. Credit risk exposure for financial instruments is measured by the positive fair value of the contractual obligations with counterparties. The fair value of all investments is directly or indirectly impacted by credit risk to some degree. Most of the ASC’s investments in debt securities are with counterparties considered to be investment grade.

The ASC is exposed to credit risk associated with the underlying debt securities held in investment funds managed by AIMCo. The following table summarizes the ASC’s investment in debt securities by counterparty credit rating at March 31:

Credit Rating 2017 2016

Investment Grade (AAA to BBB-) 99.9% 99.7%

Speculative Grade (BB+ or lower) 0.3% –

Unrated (0.2%) 0.3%

100.0% 100.0%

ii. Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. While the ASC does not have direct foreign currency exposure, through investments in fixed-income securities and Canadian equities, there are small positions in inter-listed companies that pay dividends in foreign currency.

iii. Interest Rate Risk

The ASC is exposed to interest rate risk associated with the underlying interest-bearing securities held in the investment funds. Interest rate risk relates to the possibility that the fair value of investments will change due to future fluctuations in market interest rates. In general, investment returns from bonds are sensitive to changes in the level of interest rates, with longer-term interest-bearing securities being more sensitive to interest rate changes than shorter-term bonds. If interest rates increased by 1.0 per cent, and all other variables are held constant, the potential loss in fair value to the ASC would be approximately 4.8 per cent of total investments (5.0 per cent in F2016).

The following table summarizes the terms to maturity of interest-bearing securities at March 31, 2017.

<1 year 1-5 years Over 5 yearsRepurchase

Agreements*

Interest-bearing securities 14.2% 39.3% 71.0% (24.5)%

*All repurchase agreements are less than 1 year.

iv. Price Risk

The ASC is exposed to price risk associated with the underlying equity investments held in investment funds in Canadian equities. Price risk relates to the possibility that equity investments will change in fair value due to future fluctuations in market prices caused by factors specific to an individual equity investment or other factors affecting all equities traded in the market. If equity market indices declined by 10.0 per cent, and all other variables are held constant, the potential loss in fair value to ASC would be approximately 2.5 per cent of total investments (2.3 per cent in F2016).

v. Liquidity Risk

Liquidity risk is the risk that ASC will encounter difficulty in meeting obligations associated with its financial liabilities. Liquidity requirements are met through income generated from investments and by investing in liquid assets that are publicly traded in an active market and easily sold and converted to cash. These sources of cash are used to pay operating expenses, purchase new investments, and settle derivative transactions with counterparties and margin calls on future contracts.


C) INVESTMENT INCOME

The ASC’s investment income included $1.0 million from interest-bearing securities ($1.2 million in F2016) and $432,000 from equities ($6,000 in F2016). The ASC’s investments had a realized market value gain of 7.1 per cent for the year ended March 31, 2017 (0.1 per cent loss in F2016). This performance compares to a benchmark (composite of FTSE TMX 91 Day T-Bill, FTSE TMX Canada Universe Bond and S&P/TSX indexes) gain of 5.7 per cent in F2017 and a benchmark loss of 0.8 per cent in F2016.

NOTE 5 CAPITAL ASSETS

thousands of dollars Computer Equipment &

Software

Furniture & Equipment

Leaseholds 2017Total

2016Total

Estimated useful life 3 years 10 years Lease duration

Cost

Beginning of year 3,209 2,713 6,677 12,599 12,166

Additions 516 38 26 580 434

Disposals (153) (6) – (159) (1)

3,572 2,745 6,703 13,020 12,599

Accumulated amortization

Beginning of year 2,632 1,481 2,521 6,634 5,379

Amortization expense 431 255 430 1,116 1,255

Disposals (153) (6) – (159) -

2,910 1,730 2,951 7,591 6,634

Net book value 662 1,015 3,752 5,429 5,965

Leaseholds relate to a 15-year lease commenced on December 1, 2010.

NOTE 6 ACCRUED PENSION LIABILITY AND PENSION EXPENSE

The accrued pension liability is comprised of:


Retirement Plan 10 38

Supplemental Pension Plan 9,088 8,258

Less accounts payable (335) (296)

8,763 8,000

The following pension expense for the plans is included in the Statement of Operations under salaries and benefits.


Public Service Pension Plan 1,286 1,288

Registered Retirement Savings Plan 662 634

Supplemental Pension Plan 1,098 1,143

3,046 3,065


A) RETIREMENT PLAN

The Retirement Plan is unfunded and the benefits will be paid to August 2017. For the year ended March 31, 2017, the ASC paid $28,000 ($27,000 in F2016).

B) PUBLIC SERVICE PENSION PLAN

The ASC participates in the Public Service Pension Plan. At December 31, 2016, the Public Service Pension Plan reported a surplus of $303.0 million (a deficiency of $133.2 million as at December 31, 2015). The ASC is not responsible for future funding of any plan deficit other than through contribution increases.

C) RRSP

The ASC makes RRSP contributions on behalf of employees who do not participate in the Public Service Pension Plan.

D) SUPPLEMENTAL PENSION PLAN

The ASC has a Supplemental Pension Plan for certain designated executives of the ASC. The provisions of the Plan were established pursuant to a written agreement with each designated executive.

The Supplemental Pension Plan provides pension benefits to the designated executives based on pensionable earnings that are defined by reference to base salary in excess of the limit imposed by the Income Tax Act (Canada) on registered pension arrangements.

Pension benefits from the Supplemental Pension Plan are payable on or after attainment of age 55 and are equal to 1.75 per cent of the highest average pensionable earnings (average over five years) for each year of service with the ASC. Members of the Supplemental Pension Plan become vested in the benefits of the plan after two years of service.

The Supplemental Pension Plan is unfunded and the benefits will be paid as they come due from the assets of the ASC.

An actuarial valuation of the Supplemental Pension Plan is undertaken every three years. At March 31, 2015, an independent actuary performed a Supplemental Pension Plan valuation. The next valuation is scheduled for March 31, 2018. The results of the actuarial valuation and management’s cost estimates as they apply to the Supplemental Pension Plan are summarized below:


Supplemental Pension Plan

Accrued benefit and unfunded obligation 9,934 9,505

Unamortized actuarial loss (846) (1,247)

Accrued benefit liability 9,088 8,258


Accrued benefit obligation

Accrued benefit obligation at beginning of year 9,505 8,951

Service cost 370 449

Interest cost 327 305

Benefits paid (268) (200)

Accrued benefit obligation at end of year 9,934 9,505



Pension expense for the Supplemental Pension Plan

Service cost 370 449

Interest cost 327 305

Amortization of actuarial losses during the year 401 389

1,098 1,143

The assumptions used in the actuarial valuation of the Supplemental Pension Plan and three-year projections are summarized below. The discount and other economic assumptions were established as management’s best estimate in collaboration with the actuary. Demographic assumptions were selected by the actuary based on a best estimate of the future experience of the plans.

Assumptions 2017 2016

Discount rate, year-end obligation 3.25% 3.25%

Discount rate, annual pension expense 3.25% 3.25%

Rate of inflation, year-end obligation 2.25% 2.25%

Salary increases, year-end obligation* 3.00% 3.00%

Remaining service life, year-end obligation 5 years 5 years

*Based on long-term assumptions and management’s best estimate.

NOTE 7 FEES AND OTHER ENFORCEMENT RECEIPTS


Fees

Annual financial statements 16,363 4,825

Distribution of securities 16,195 16,422

Registrations 14,889 11,235

SEDI, exempt distributions & registration late filing fees 748 907

Orders (applications) 141 182

48,336 33,571


Other enforcement receipts

Settlement payments, disgorgements and cost recoveries assessed 2,813 1,833

Less provision for uncollectible amounts (2,060) (1,274)

Plus recoveries of prior-year assessments 60 413

813 972


NOTE 8 CSA NATIONAL SYSTEMS

The CSA National Systems are comprised of the following: System for Electronic Document Analysis and Retrieval (SEDAR), National Registration Database (NRD) and System for Electronic Disclosure by Insiders (SEDI). These systems are administered under a CSA National Systems operations management and governance agreement (the Agreement). The Agreement empowers the ASC, jointly with three other CSA members, to manage the systems and to engage an external service provider to operate the systems. The ASC, as one of the agreement signatories, commits to pay 25 per cent of any shortfall from approved system operating costs that exceeds revenue. Alternatively, any revenue in excess of system operating costs (surplus) is accumulated for future systems operations including possible revenue shortfalls, fee adjustments and system enhancements. The surplus is not divisible; the CSA owns it as a group. As at March 31, 2017 the accumulated operating surplus totaled $151.7 million ($139.9 million at March 31, 2016), primarily made up of $19.9 million cash held by the Ontario Securities Commission earning interest at 1.85 per cent below the prime rate and $115 million marketable securities held in one to two year term deposits earning 1.10 per cent to 1.70 per cent.

NOTE 9 COMMITMENTS AND CONTINGENT LIABILITIES

Details of commitments to organizations outside the ASC are set out below.

A) COMMITMENTS

Premises Leases and Equipment Rental Commitments arising from contractual obligations are associated primarily with the lease of premises to November 30, 2025 and rental of office equipment to 2021 totaling $31.4 million ($35.1 million in F2016). These commitments become expenses of the ASC when the terms of the contracts are met.


2017–18 3,394

2018–19 3,420

2019–20 3,447

2020–21 3,568

2021–22 3,721

Thereafter 13,855

Total 31,405

Canadian Securities Administrators The CSA Secretariat assists in the development and harmonization of rules, regulations and policies across Canada. The ASC shares, based on an agreed-upon cost-sharing formula, costs incurred for the maintenance of the CSA Secretariat and any third-party costs incurred in the development of harmonized rules, regulations and policies.

B) CONTINGENT LIABILITIES

ASC panel or court decisions may be appealed. The outcomes of these matters are not determinable at this time; therefore the impact to operating deficit cannot be determined. However, management does not expect the impact to be material.


NOTE 10 BUDGET

The ASC’s F2017 budget was originally approved by the Commission on January 13, 2016, and subsequently amended and approved on April 13, 2016.

In May 2016, the ASC published ASC Rule 13-501 Fees (Fee Rule). The Fee Rule was subject to obtaining the necessary Ministerial approval. The ASC received Ministerial approval in respect of the Fee Rule on October 17, 2016 and the Fee Rule became effective on December 1, 2016. The ASC’s F2017 budgeted revenue did not reflect changes resulting from the Fee Rule.

NOTE 11 RELATED PARTY TRANSACTIONS

The ASC is related through common ownership to all provincial government ministries, agencies, boards, commissions and Crown corporations. The ASC conducted all transactions with these entities as though they were unrelated parties and recorded transaction costs of $55,000 in administration expenses primarily for insurance, transcript and postage services ($72,000 in F2016).

NOTE 12 COMPARATIVE FIGURES

Certain F2016 figures have been reclassified to conform to the F2017 presentation.


Schedule of Salaries & Benefits – Schedule A


Base salary1 Cash benefits2 Non-cash benefits3 Total Total

Chair and Chief Executive Officer (CEO), Securities Commission4,5

367 – 14 381 426

Executive Director 379 64 208 651 659

Vice-Chair, Securities Commission4,6 388 3 201 592 636

Vice-Chair, Securities Commission4,7,8 394 62 48 504 526

Independent Members9 518 – – 518 491

1 Base salary includes regular base pay or Independent Members’ compensation.

2 Cash benefits may include variable pay, transit allowance, memberships and automobile allowance.

3 Employer’s share of all employee benefits includes: health, insurance, pension, professional memberships, RRSP and current and prior service cost for the unfunded Supplemental Pension Plan for designated executives as described in note 6(D) of the financial statements and summarized in the accompanying narrative.

4 The Chair and Vice-Chairs are full-time Commission Members.

5 The Chair and CEO’s term commenced on July 4, 2016. The former Chair and CEO retired on September 30, 2015 and had salaries & benefits of $426,000 in F2016.

6 This Vice-Chair retired on March 31, 2017. The base salary includes vacation pay.

7 This Vice-Chair assumed the role of Interim Chair and CEO from October 1, 2015 to July 3, 2016.

8 This Vice-Chair does not participate in the Supplemental Pension Plan, but participates in the RRSP program. This RRSP benefit is reported on Schedule A, Non-Cash Benefits.

9 The Independent Members’ compensation includes total fees paid for governance responsibilities of $308,000 ($349,000 in F2016) and hearing and application panel participation of $210,000 ($142,000 in F2016).

Independent Member fees include:

2017

Annual retainer $ 10,000

Committee memberships (other than Audit Committee) $ 2,500

Committee memberships (Audit Committee) $ 4,000

Committee chairing (other than Audit Committee) $ 5,000

Committee chairing (Audit Committee) $ 8,000

Lead Independent Member $ 5,000

Meeting attendance fee $1,000 per day for an ASC meeting; $750 for a Committee meeting

Hearing fees $1,500 per hearing day; and $200 per hour of related preparation, review and decision writing

Hearing fees (Panel Chair) $2,000 per hearing day; and $250 per hour of related preparation, review and decision writing


Supplemental Retirement BenefitsUnder the terms of the Supplemental Pension Plan, executive officers may receive supplemental retirement payments. Retirement arrangement costs as detailed below are not cash payments in the period but are the period expense for rights to future compensation. Costs shown reflect the total estimated cost to provide annual pension income over an actuarially determined post-employment period. The Supplemental Pension Plan provides future pension benefits to participants based on years of service and earnings. The cost of these benefits is actuarially determined using the projected benefit method pro-rated on services, a market interest rate and management’s best estimate of expected costs and the period of benefit coverage. Net actuarial gains and losses of the benefit obligations are amortized over the average remaining service life of the employee group. Current service cost is the present value of the benefits earned in the fiscal year. Prior service and other costs include amortization of past service costs on plan initiation, amortization of actuarial gains and losses, and interest accruing on the actuarial liability.

ANNUAL EXPENSE


Current service costs

Prior service and other costs Total Total

Chair and CEO, Securities Commission1 – – – 82

Executive Director 80 96 176 184

Vice-Chair, Securities Commission2 79 94 173 172

Vice-Chair, Securities Commission3,4 – – – –

The accrued obligation for each executive under the Supplemental Pension Plan is outlined in the following table:

ACCRUED OBLIGATIONS


Accrued obligation April 1, 2016

Changes in accrued obligation

Accrued obligation March 31, 2017

Chair and CEO, Securities Commission1 – – –

Executive Director 1,565 133 1,698

Vice-Chair, Securities Commission2 1,033 116 1,149

Vice-Chair, Securities Commission3,4 – – –

1 The Chair and CEO does not participate in the Supplemental Pension Plan. The former Chair and CEO retired on September 30, 2015. He had an annual expense of $82,000 in F2016 and an accrued obligation of $1,086,000 as at March 31, 2016.

2 This Vice-Chair retired on March 31, 2017.

3 This Vice-Chair does not participate in the Supplemental Pension Plan, but participates in the RRSP program. This benefit is reported on Schedule A, Non-Cash Benefits.

4 This Vice-Chair assumed the role of Interim Chair and CEO from October 1, 2015 to July 3, 2016.


Glossary

Alberta Investment Management Corporation (AIMCo)AIMCo is one of Canada's largest institutional investment fund managers, with more than $90 billion for Alberta pensions, endowments and government funds under management.

Canadian Securities Administrators (CSA)The 10 provinces and three territories in Canada are responsible for securities regulations. Securities regulators from each province and territory have teamed up to form the CSA. The CSA is primarily responsible for developing a harmonized approach to securities regulation across the country.

CRM2 CRM2 is a recent set of changes from the CSA to the Client Relationship Model. It includes new rules for what financial institutions need to disclose to clients, including essential information about the cost of advice and how investments have performed.

Crowdfunding Crowdfunding is a way to fund projects or ventures by raising money, generally small amounts from a large number of people. It is typically done via the internet. In Alberta, small and medium-sized businesses can raise money under rules set out in Multilateral Instrument 45-108 Crowdfunding and ASC Rule 45-517.

Disciplined List (DL)The DL is the CSA’s national internet search engine that allows the public to research if a person or company has been disciplined by a Canadian securities regulator, the MFDA or IIROC.

Group of Twenty (G20)The G20 is an international forum for the governments and central bank governors from 20 major economies that was founded to study, review and promote high-level discussion of policy issues pertaining to the promotion of international financial stability.

International Financial Reporting Standards (IFRS) IFRS is a set of international accounting standards used for the preparation of public company financial statements.

International Organization of Securities Commissions (IOSCO)IOSCO develops, implements and promotes adherence to internationally recognized standards for securities regulation.

Investment Industry Regulatory Organization of Canada (IIROC)IIROC is the national self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.

Joint Serious Offences Team JSOT is an enforcement partnership between the ASC and the RCMP. JSOT investigates and prosecutes quasi-criminal cases under the Securities Act (Alberta) and securities-related offences under the Criminal Code. JSOT targets repeat offenders, serious frauds and breaches of ASC or court orders or bans.

Mutual Fund Dealers Association of Canada (MFDA)The MFDA is a national self-regulatory organization for the distribution side of the Canadian mutual fund industry. The MFDA regulates the operations, standards of practice and business conduct of its members and their representatives.

National Cease Trade Order (NCTO)The NCTO is the CSA’s national web-based database that allows the public to research if an individual or firm has had a cease-trade order issued against them by a Canadian securities regulator.

National Registration Database (NRD)The NRD is the CSA’s national internet search engine that permits dealers, advisers and investment fund managers to file registration forms electronically.

National Registration Search (NRS)The NRS is the CSA’s national internet search engine that allows investors to check if an individual or firm is registered to sell investments.

Over-the-Counter (OTC) The OTC is a quotation service that displays quotes, last-sale prices and volume information for equity securities trading over-the-counter in the United States.

Regulatory SandboxThe CSA recently launched the regulatory sandbox initiative, which allows businesses to apply to benefit from a more tailored approach to regulation while developing innovative financial products, services and applications, while ensuring appropriate investor protection. Examples of business models potentially eligible for the CSA regulatory sandbox initiative include crowdfunding and roboadvisers, among others.

System for Electronic Disclosure by Insiders (SEDI)SEDI is the CSA’s national electronic web-based system that facilitates the filing and public dissemination of insider reports.

System for Electronic Document Analysis and Retrieval (SEDAR)SEDAR is the CSA’s national electronic web-based filing system for disclosure by public companies and mutual funds.

Toronto Stock Exchange (TSX)The TSX is Canada’s senior equities market, providing domestic and international investors with access to the Canadian marketplace.

TSX Venture (TSXV)The TSXV is the largest Canadian junior market, providing companies in the early stages of growth the opportunity to raise capital.

U.S. Securities and Exchange Commission (SEC)The SEC’s mission is to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.

GLOSSARY


2017 ADVISORY COMMITTEESThe ASC has five advisory committees of industry representatives to provide advice concerning the development of new or amended securities regulation. These expert committees help keep staff up to date on industry views and current business practices. As the market evolves, so do the terms of reference for these committees, as we work to ensure their efforts best serve the Alberta capital market. The ASC would like to thank committee members for their insights and contributions over the past year.

Exempt Market Dealer Advisory Committee This committee advises and provides views on proposed policy and market developments related to exempt market dealers.

Sandra BautzROQ Capital Partners Ltd.

Doug BedardMNP Corporate Finance Inc.

Philip du HeaumePhilip du Heaume Professional Corporation

Jarrod IsfeldDLA Piper (Canada) LLC

Dean KoellerCalvert Home Mortgage Investment Corporation

Brian KoscakPinnacle Wealth Broker

Darcy LakeCanoe Financial LP

Brian MengesCaplink Financial Corporation

Craig SkaugeNEMA

Kevin WolfeRichmond Equity Management Ltd.

Derivatives Advisory CommitteeThis committee advises Corporate Finance and Market Regulation staff on various policy issues and other matters of concern to Alberta derivatives marketplace participants.

Cameron BowmanATB Financial

Priscilla BunkePetroChina International (Canada) Trading Ltd.

Jason ComandanteCapital Power

Stephen Connelley BP Canada Energy Group ULC

Kara L. Dutta Intercontinental Exchange

Tim Elliott CME Group

Krista Friesen Husky Energy Inc.

Kerri L. Howard DLA Piper (Canada) LLP

Paul Kerr, CPA, CMA Shell Energy North America (Canada) Inc.

Kerrie J. LoganNorton Rose Fulbright Canada LLP

Darren McAdoo, CMA Suncor Energy Inc.

Kari Olesen Enbridge Inc.

Jennifer Oosterbaan TMX Group

Daryck RiddellTransAlta Corporation

Financial Advisory CommitteeThis committee assists and advises the Office of the Chief Accountant on current and proposed accounting, auditing and securities matters.

Scott Bandura, CA, CPA (Illinois, USA)PricewaterhouseCoopers LLP

Terry Booth, FCPA, FCA, CFCollins Barrow Calgary LLP

Matt Bootle, FCAErnst & Young LLP

Sean Du Plessis, CPA, CAMeyers Norris Penny LLP

Imam Hasan, CAKPMG LLP

Chris Johnston, CAEnbridge Inc.

Mike Mazar, CA, CFABMO Capital Markets

Patricia Newson, FCACorporate Director

Christopher Webster, CGA, CFAPengrowth Corporation

Ward Zimmer, CADeloitte LLP

Petroleum Advisory Committee This committee provides views and advice on issues and developments with respect to oil and gas regulatory policies, guidance and disclosure.

Caralyn P. Bennett, P. Eng.GLJ Petroleum Consultants Ltd.

David P. Carey, P.Eng.Retired

Jonathan FlemingGranite Oil Corp.

Chris Fong, P.Eng.Retired

Harry Helwerda, P.Eng., FECSproule Associates Limited

Dr. John Lacey, P.Eng.John R. Lacey International Ltd.

Keith McCandlish, P.Geol., P.Geo.DMT Geosciences Ltd.

Ian McDonald, P.Eng.Nexen Energy ULC

Jeff Meunier, P.Eng.RBC Capital Markets

Rob Morgan, P.Eng.Crew Energy Inc.

James Surbey, B.Eng.Birchcliff Energy Ltd.

Philip A. Welch, P.Eng.McDaniel & Associates Consultants Ltd.

John Zahary, P.Eng.Altex Energy Ltd.

Securities Advisory CommitteeThis committee is comprised of lawyers with securities law expertise who review and comment on proposed legislation, rules and policies, and provide general advisory services to the ASC.

Keith ChatwinStikeman Elliott LLP

Scott ClarkeBlake, Cassels & Graydon LLP

Nicholas (Nick) FaderBennett Jones LLP

Jamie L. GagnerNorton Rose Fulbridge Canada LLP

Leanne C. KrawchukDentons Canada Ltd.

David R.J. LefebvreDentons Canada Ltd.

William MaslechkoBurnet, Duckworth & Palmer LLP

John Osler, Q.C.McCarthy Tétrault LLP

David TaniguchiEnbridge Inc.

Bryce TingleN. Murray Edwards Chair in Business Law, University of Calgary

Andrea Whyte

McCarthy Tetrault LLP

Commission Member Committees

The F2017 Board Committees were made up of the Members listed below. All were independent except Stan Magidson and Kari Horn, who sat as ex officio members where indicated. Appointed as Lead Independent Member effective July 7, 2016, Ann Rooney sat as an ex officio member of all committees subsequent to that date.

Audit CommitteeFred Snell (Chair)

Terry Allen

Ian Beddis

Stan Magidson (ex officio)

Ann Rooney (ex officio)

Human Resources CommitteeWebster (Web) Macdonald (Chair)

Kate Chisholm

Maryse Saint-Laurent


Ann Rooney (ex officio)

Governance CommitteeBradley Nemetz (Chair)

Richard Shaw

Ann Rooney


Kari Horn (ex officio)

ASC COMMITTEES

ASC Committees


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