transparent. unbiased. accessible.market dealers in f2015. the oversight team focused on testing the...

2015 AnnuAl RepoRt

Transparent. Unbiased. Accessible.

ALBERTA SECURITIES COMMISSION

Strong capital marketS through regulation investigation education

ANNUAL REPORT 2015

2 REgULATE

4 INvEsTIgATE

6 EdUcATE

8 MEssAgE fROM ThE chAIR

16 ExEcUTIvE MANAgEMENT TEAM - dIvIsIONs

17 ThREE YEAR sTATIsTIcAL sUMMARY 2015

18 Asc’s 2015 cOMMIssION MEMbERs

19 MANAgEMENT’s dIscUssION & ANALYsIs

31 fINANcIAL sTATEMENTs

48 gLOssARY

49 Asc cOMMITTEEs

REGULATE

The Alberta Securities Commission (ASC) is the regulatory agency responsible for administering the province's securities laws. Our goal is to maintain confidence in our capital market by ensuring that those who operate here adhere to Alberta securities laws. To achieve this goal, the ASC manages a regulatory framework that balances the need to protect investors with maintaining regulatory rules and regulations that allow the market to thrive.

Ensuring Compliance in the Exempt Market Alberta’s robust exempt market, which enables cost-effective capital raising, represents nearly 40 per cent of all equity raised in the province. To balance appropriate investor protection with the need for issuers to access this important source of capital, the ASC’s registrant oversight department began an extensive compliance examination of exempt market dealers in F2015. The oversight team focused on testing the quality of client relationships in the exempt market, including the adequacy of compliance with know-your-client, know-your-product and suitability requirements.

The oversight team also examined sales practices, including the training of salespeople, marketing, relationship disclosure, and conflicts of interest, such as outside business activities. This examination, which is expected to conclude in F2016, will allow the ASC to observe actual performance

against the most crucial aspects of dealers’ regulatory responsibilities. To support best practice compliance in the future, the ASC will provide feedback from our examinations to the dealer community.

Improving Key Regulations The ASC actively examines and improves the rules that govern the capital market in Alberta, both independently and with the Canadian Securities Administrators (CSA). Significant undertakings include:

• Amendments to National Instrument (NI) 45-106 Prospectus Exemptions. The amendments address issues that emerged from both the financial crisis and the ensuing recession. The purpose of the amendments is the maintenance of an appropriate balance between investor protection and market efficiency in exempt offerings.

Regulate


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cAPITAL MARKET sTATIsTIcs

$10.7BRAISED BY ALBERTA-

BASED ISSUERS IN THE

EXEMPT MARKET

~575ALBERTA-BASED ISSUERS

IN THE EXEMPT MARKET

$16.5BRAISED BY ALBERTA-

BASED ISSUERS IN THE

PUBLIC MARKET

~600ALBERTA-BASED ISSUERS

IN THE PUBLIC MARKET

NAVDEEP GILLMANAGER, REGISTRATION

As Manager, Registration in the Market Regulation division, Navdeep oversees the registration team and works with CSA members to develop and harmonize registration-related securities laws across Canada.

“ The registration team reviewed over 3,000 submissions during the last year from registrants who sell securities to the public. The registration and ongoing oversight of these market intermediaries is important to maintaining the integrity of the Alberta capital market.”

• Amendments to NI 51-101 Standards of Disclosure for Oil and Gas Activities. These amendments promote improved disclosure of resources other than reserves, provide increased flexibility for oil and gas issuers operating and reporting in different jurisdictions, and align NI 51-101 with the Canadian Oil and Gas Evaluation Handbook.

• Amendments to NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and NI 33-109 Registration Information. These amendments were the result of the CSA’s monitoring of the registration regime since its implementation on September 28, 2009, and aimed at enhancing investor protection and increasing overall efficiency.

Halt Trade Orders IntroducedIn December 2014, the ASC introduced a new tool to protect the integrity of Alberta’s capital market by enabling swift action to prevent misconduct, such as market manipulation. In certain prescribed circumstances, the Commission or the Executive Director now have the authority to order that trading in a security or derivative be halted immediately for up to 15 days without prior notice.

A halt trade order can be extended after a hearing if the Commission, or Executive Director, considers it necessary and in the public interest. To date, the Executive Director has issued two halt trade orders, after a determination that circumstances existed, or were about to occur, that could result in other-than-orderly trading.

ANNUAL REPORT 2015

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The ASC will pursue those who pose a threat to investors and the fair and efficient operation of the Alberta capital market. Those who are suspected of breaching Alberta securities laws are assessed by ASC staff and, if appropriate, investigated and prosecuted. The ASC strives to protect investors and the market in a prompt and visible manner.

2014 Case Spotlight

CASE 1: AmARindER SinGh (mARk) LALL

“ This is clearly a trust fraud, exploiting a professional and personal relationship with [the victim]... [It] was an opportunistic, economic, criminal activity where the fruits of the crime have been dissipated entirely.”

– Provincial Court of Alberta ruling in Amarinder Singh Lall case.

In May 2014, Amarinder Singh (Mark) Lall was sentenced in Provincial Court to three years in jail. Lall was given permanent market bans after he was found guilty on four counts of breaching Alberta securities laws. The counts, connected to the illegal sale of securities issued either by Lall or Laxum Capital LLP, included fraud and trading in securities without being registered.

CASE 2: RobERT AndREw mCPhERSon

“ …your actions in setting up a company under the dummy leadership of your daughter, and indulging in the conduct that you did, was disdainful of orders against you and the legislation under the Securities Act, and could even be viewed as provocative.”

– Provincial Court of Alberta ruling in Robert Andrew McPherson case.

In August 2014, a Provincial Court of Alberta judge sentenced Robert Andrew McPherson to two years and three months in jail and handed down permanent market bans after he was found guilty on 12 counts of breaching Alberta securities laws. McPherson’s illegal activity included breaching a 2006 ASC order that banned him from trading in securities and acting as an officer and/or director of any issuer. The ASC charged McPherson in connection with illegally raising funds for Alexandra Exploration Inc., Hazelwood Energy Ltd., and Tilston Resources Ltd.

invESTiGATE

Investigate


4

cOURT ANd hEARINgs

49 hearing daysRELATED TO 15 HEARINGS BEFORE AN ASC PANEL IN F2015

73 court appearances RELATED TO 12 CASES BEFORE PROVINCIAL COURT IN F2015

“ This year, the enforcement team extradited a suspect from the USA for the first time in over a decade. This speaks to the lengths we will go to ensure that those accused of breaching securities laws in Alberta face the consequences of their actions.”

CASE 3: PLATinUm EqUiTiES

“ We share with Staff a concern that the apparent ease with which the respondents raised vast sums from investors, in part through serious and, in one aspect, systemic misconduct ...could tempt any of the respondents - or observers - to attempt something similar in the absence of firm sanctions here.”

– ASC sanction decision in Platinum Equities Inc., Shariff Chandran, Chitra Chandran and other entities linked to Platinum administrative hearing.

In September 2014, an ASC panel permanently banned Platinum and related entities from the Alberta capital market. The ASC panel also handed down trading, market and other bans of 25 and 10 years to Shariff Chandran and Chitra Chandran, respectively. Additionally, Shariff Chandran and Platinum were ordered to jointly and severally pay an administrative penalty of $1 million. The panel found certain parties made illegal trades and distributions of securities and other capital-market misconduct. This matter is subject to appeal.

CASE 4: doUGLAS wAynE SChnEidER

In June 2014, for the first time in almost a decade, a suspect was extradited to Canada on a securities charge when the ASC successfully brought Douglas Wayne Schneider to Alberta from the USA. Schneider was arrested at the request of the ASC and Alberta Justice, and held in custody in California pending his extradition.

The ASC had charged Schneider and Kenneth Charles Fowler in Provincial Court with fraud and other offences in relation to the sale of securities of The Investment Exchange Mortgage Corporation. When the accused did not appear in court, warrants were issued for their arrest.

The ASC gratefully acknowledges the assistance of the following law enforcement agencies in the arrest and extradition of Schneider: Department of Justice (Canada), Alberta Justice, United States Department of Justice, United States Marshals Service, Medicine Hat Police Service, Calgary Police Service and the Royal Canadian Mounted Police.

ERIc KELLER Securities Investigator, Investigations

As a Securities Investigator in the ASC’s Enforcement division, Eric conducts investigations regarding breaches of Alberta securities laws. He also liaises with a number of law enforcement and regulatory bodies across Canada and internationally.

ANNUAL REPORT 2015

5

A core responsibility of the ASC is to educate investors and to provide Albertans with unbiased tools and resources to learn about investing and the capital markets. A key focus of the ASC is to assist the public in recognizing and avoiding fraud. The ASC also educates market participants to ensure they are aware of their responsibilities and obligations when operating in the Alberta capital market.

EdUCATE

Educate

Reaching Out to Industry and ConsumersThe ASC expects that those who operate in the Alberta capital market will meet our high standards for accurate disclosure and appropriate conduct. We appreciate the effort to comply and acknowledge that we have responsibility to educate and explain. With this in mind, we solicit feedback from market participants on how we can improve or adapt proposed and existing rules and regulations to ensure the efficiency of the market. To meet these leadership goals, the ASC held or took part in numerous presentations and forums throughout the year to educate, explain and listen to market participants.

These sessions included:

• consultations regarding the proxy voting system;

• consultations and a webinar for proposed new derivatives rules;

• Oil and Gas Review session and webinar;

• Corporate Finance Review session and webinar;

• regulatory update for registrants;

• MD&A seminars in cooperation with the Alberta Institute of Chartered Accountants; and

• participation in the TMX local and national advisory group meetings.


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MARKET AwARENEss

60+INDUSTRY AND INVESTOR

PRESENTATIONS

2,300+INQUIRIES TO PUBLIC

INFORMATION OFFICE

121,000VISITS TO THE ASC INVESTOR WEBSITES

“ Fraudsters tailor their message to any economic circumstance, promising excellent returns in good times and bad. They prey on the vulnerable and the ill-informed. Education is key to investor protection. The ASC provides resources that help the public recognize and avoid investment fraud.”

NIcOLE TUNcAY Senior Advisor, Investor Education

As a Senior Advisor in the ASC’s Communications and Investor Education division, Nicole provides Albertans with the information needed to teach them how to spot and avoid unsuitable or fraudulent investments.

The ASC reminds Albertans to “CheckFirst”The ASC considers education the first line of defence when it comes to protecting investors from fraudulent or unsuitable investments. Last year, the ASC launched a second website — CheckFirst.ca — to give Albertans simple and clear information on how to Check, Protect and Invest.

During Fraud Prevention Month, the ASC went into the community, educating investors face-to-face. The ASC launched the CheckFirst Café, expanding on the theme of the CheckFirst.ca website.

The CheckFirst Café was at the Calgary and Edmonton Home and Garden Shows, where the ASC served coffee, tea and investor education to visitors. The ASC connected

with approximately 6,000 Albertans, educating them on the importance of doing research before making an investment. Booth visitors were encouraged to visit the CheckFirst.ca website to find more resources to help them make informed investing decisions.

The CheckFirst Café also took over a downtown Calgary coffee shop – Café Rosso – for a morning in March, serving fraudaccinos, scammer scones and other investment-themed drinks and treats. Café visitors left with their morning pick-me-ups and valuable information to help them learn how to “CheckFirst” before investing.

In conjunction with these events, a CheckFirst.ca advertising campaign ran province-wide throughout the year in an effort to educate Albertans about investment fraud through free ASC resources and tools.

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Message from the ChairI am pleased to present the annual report of the Alberta Securities Commission (ASC) on its operations,

achievements and financial status for the fiscal year ended March 31, 2015. This will be the 10th and last

of my introductions to our annual report, as my term will come to an end later this year.

The following highlights certain activities of the ASC during the past year to provide a flavour for the environment in which the ASC serves as the securities regulator for the Alberta capital market and as a member of the Canadian Securities Administrators (CSA), the umbrella group that manages the national system of securities regulation in Canada. To put our responsibilities in context, I would note that, on the basis of resident market capitalization, Alberta is home to the second largest capital market in Canada, fifty per cent larger than the next in line.

The broad goals of the ASC are: to administer Alberta securities laws as mandated by the Securities Act (Alberta); to protect Alberta investors and the integrity of the Alberta capital market; to provide efficient and responsive service to participants in the Alberta capital market; to deliver securities regulatory expertise for the oil and gas industry in Canada; to present the Alberta perspective in national rule making, while strongly supporting the national harmonization of the rules that comprise securities regulations; and to continue to improve levels of expertise, experience and effort among all our staff in order to best satisfy our goals.

REGULATion oF iSSUERS

The continuing significance of prospectus disclosure and review was emphasized during the past fiscal year with the launch of some significant initial public offerings and increased financing activity by Alberta issuers during the last quarter of the fiscal year. At the same time, greater attention was paid by ASC staff to the content of offering memoranda, used by issuers for sales of securities in the “exempt market”, having regard to concerns about

both quality and conduct. Today exempt market financings totalled $10.7 billion in F2015 and represented almost 40 per cent of all capital raised by Alberta-based issuers.

Following the 2008-09 financial crisis, securities regulators internationally were pressured to re-examine securities transactions that are exempt from prospectus and/or registration requirements to determine whether investors were being afforded adequate protection. Then, as difficult economic times settled in, securities regulators were pressured to re-examine applicable exemptions to determine whether greater freedom and lower costs could be accommodated for small businesses looking to raise much needed capital.

After a lengthy review by CSA members of prescribed exemptions from prospectus requirements, final amendments were made at the conclusion of F2015 to the short-term-debt exemption, the short-term securitized products exemption, the accredited investor exemption and the minimum amount exemption. The ASC also removed certain barriers encountered by institutional investors participating in private placements, particularly those by international issuers.

Significant progress was also made during the year in other areas of the exempt market, including the analysis of amendments to the offering memorandum exemption, the publishing of amendments to the rights offering exemption and the exploration of an exemption for retail investors to invest in reporting issuers based on the advice of a registrant, which would build on the “existing security holder” exemption that was adopted in Alberta in March 2014. A new prospectus exemption for start-up or early stage issuers that is substantially similar to that proposed in other jurisdictions


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Securities regulation is most beneficial in circumstances where the discipline of market forces is insufficient to adequately protect investors and the integrity of the capital market.

wILLIAM s. RIcE, Q.c. Chair and Chief Executive Officer

is being considered for Alberta as well. The implementation of a crowdfunding regime as contemplated by the proposed Multilateral Instrument 45-108 is not being considered for our province at this time as it is judged to be duplicative of the applicable offering memorandum exemption and further provisions available under ASC Blanket Order 45-515.

In connection with the ASC priorities in recent years of improving the quality and timeliness of continuous disclosure by reporting issuers, the ASC focused during the past fiscal year on disclosure regarding the effectiveness of issuers’ controls, revenue recognition, restatements, operations in higher risk countries and IFRS compliance.

On the oil and gas front, amendments to the rule governing the standard of disclosure for oil and gas activities were finalized. These amendments, which will come into effect July 1, 2015, promote improved disclosure of resources other than reserves, and provide flexibility for issuers that report in different jurisdictions. In addition, the ASC assisted the Society of Petroleum Evaluation Engineers in the publication of the update to the Canadian Oil and Gas Evaluation Handbook, focusing on resources other than reserves.

In the area of takeover bid regulation, the ASC was an influential contributor to the eventual resolution by the CSA of a nationally harmonized rule establishing mandatory bid provisions, which address issues relevant to the application and termination of shareholders’ rights plans. The proposed rule is intended to provide target boards with sufficient time to respond to hostile bids, while facilitating the ability of target shareholders to make voluntary, informed and coordinated tender decisions. This resolution, still awaiting final rule amendment, represents a significant achievement for the CSA.

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Alberta is the Second Largest Capital Market in Canada

Executive Management Team

wILLIAM s. RIcE, Q.c.Chair and Chief Executive Officer

Another success for the CSA, in which the ASC had a stake, was the publication of the requirement for a simplified Fund Facts document. Mutual fund salespersons must now offer simplified Fund Facts to investors “at the point of sale” – that is, in advance of the investor making an investment decision. The Fund Facts document has been designed to offer essential investment information in a short and digestible format, providing retail investors greater capacity to make an informed investment choice.

mARkET REGULATion

The ASC participated in the CSA’s review and evaluation of the national registration rules implemented in 2009. Important amendments that became effective January 11, 2015, include provisions that: clarified proficiency requirements; codified and clarified certain registration-related exemptions; streamlined the process for review of notices of acquisition of shares or assets of registered firms; provided additional guidance concerning conflict of interest situations; and updated the registration forms.

To ensure the proper functioning of regulated entities that operate in Alberta, in F2015 the ASC participated in oversight reviews of the TSX Venture Exchange, the Investment Industry Regulatory Organization of Canada, the Mutual Fund Dealers Association of Canada and the Canadian Investor Protection Fund.

Acknowledging the ever-changing nature of traded products, trading venues and trading practices, the ASC undertook research and analysis in relatively new areas of market activity and potential regulation. Subjects included crude oil

A

BC

D

E

25% Alberta (A)

48% ontario (B)

6% british Columbia (C)

17% québec (D)

4% other (E)


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mESSAGE FRom ThE ChAiR

dANNA McLEOd Director, Corporate Resources

LYNN TsUTsUMI Director, Market Regulation

indices used to settle derivative contracts, OTC derivatives rule implementation, international standards for financial market infrastructure, the existing order protection rule prohibiting trade-throughs, and the regulation of trading and data fees. The ASC also responded to inquiries from international regulators regarding their assessment of the equivalency of the Canadian regime of regulation of clearing agencies and derivatives and equities exchanges.

The ASC undertook a significant initiative in F2015 involving an extensive compliance examination of exempt market dealers. Details of that initiative are contained on page 2 of this Annual Report under the heading of “Ensuring Compliance in the Exempt Market.”

ComPLiAnCE And EnFoRCEmEnT

Amendments to the Securities Act (Alberta) that came into force in December 2014 granted the Executive Director of the ASC the authority in prescribed circumstances to order that trading in a security or derivative be immediately halted for up to 15 days without prior notice. This authority will assist the ASC in the mitigation of damage by those observed to be breaking the rules. This topic is discussed on page 3 of this Report, under the heading “Halt Trade Orders Introduced.”

As well, the ASC increased focus on the activities of OTC-traded issuers that are suspected of abusive market practices, including “pump and dump” schemes. During the course of the fiscal year, cease-trade orders were issued against 22 such issuers.

It has been recognized in recent years that prison terms are the only deterrent for certain offenders who break Alberta securities laws. In F2015, Provincial Court proceedings were completed in two cases, resulting in one sentence of three years imprisonment and another of 27 months. The ASC currently has 11 matters on the Provincial Court docket, three of which have trials underway.

As the damage from offensive conduct has grown and the enforcement actions undertaken by the ASC become more severe, challenges to the authority of the ASC have increased. In the past year the ASC received several favourable constitutional and Canadian Charter of Rights and Freedoms decisions from the courts. In two separate matters, the Court of Queen’s Bench ruled that the Charter right to a jury trial is not triggered in the context of ASC quasi-criminal prosecutions. The Court of Queen’s Bench also ruled that provisions of the Securities Act (Alberta) that allow the ASC to compel the delivery of information during a regulatory investigation and provide that information to foreign regulatory agencies do not violate the Charter. These matters are currently under appeal.

In a first for Canadian securities regulators in recent years, the ASC was successful in coordinating the arrest of an accused in California and his extradition to Alberta to face quasi-criminal charges under the Securities Act (Alberta). The degree of cooperation demonstrated between the ASC and law enforcement authorities in Canada and the United States was gratifying.

The successful prosecution of insider trading cases has continued to be difficult for the ASC, as it has for other securities regulatory authorities in North America. In one

ANNUAL REPORT 2015

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LARA gAEdE Chief Accountant and Chief Financial Officer

TOM gRAhAM Director, Corporate Finance

high profile case, findings of breach and the ordering of related sanctions by an ASC panel were overturned in part by the Alberta Court of Appeal and a subsequent application for leave to appeal that decision to the Supreme Court of Canada was recently dismissed. The ASC continues to believe strongly that the prosecution of alleged insider trading is essential for maintaining the integrity of the Alberta capital market, and prosecutions will continue to be undertaken where investigations support them. With the goal of achieving more consistent success in future cases, analysis will be given to investigative procedures, anticipated inferences from circumstantial evidence, and trial and hearing strategies.

LEGiSLATivE AmEndmEnTS

It is essential for the effective operation of the ASC in an ever-evolving capital market, subject to local, national and international influences, that its enabling provincial legislation also continues to evolve. Significant, and some long-awaited, amendments to the Securities Act (Alberta) were passed in both the 2014 fall session and the 2015 spring session of the Alberta Legislature. Included in these amendments were provisions that provide for the automatic reciprocation in Alberta of enforcement orders made in other Canadian jurisdictions. As the first of their kind in Canada, it is anticipated that these provisions will be sought by other Canadian securities regulators in their empowering legislation.

RESTRUCTURE oF CAnAdiAn SECURiTiES REGULATion

The increasing efforts of the federal and several provincial governments to restructure securities regulation in Canada has caused uncertainty and apprehension among Canada’s

securities regulators for several years. In September 2014 a consultation draft of a proposed federal Capital Markets Stability Act (CMSA) was published, along with a model provincial act that would be promulgated by provinces participating in the federal restructuring effort. In December 2014 the Ministers responsible for securities regulation in the provinces of Quebec, Manitoba and Alberta submitted a joint response to the federal Minister of Finance, informing him that their respective provinces will not participate in the proposed Cooperative Capital Markets Regulatory System.

This definitive response has served to greatly clarify the ASC’s appreciation for the intentions of the Alberta Government. It has also reconciled CSA members to the likelihood that there will be, for the foreseeable future, both participating and non-participating jurisdictions in any newly created agency. Having regard to the fundamental obligation of the CSA to ensure the efficient functioning of capital markets regulation in Canada, the CSA quickly dedicated itself to identifying and evaluating the most effective interface that should be implemented among all restructured and non-restructured securities regulatory agencies, should the federal initiative proceed. This responsibility of the CSA has been a priority for the ASC and myself as chair of the CSA, and I am hopeful for agreement of provincial governments.

SySTEmiC RiSk

Following the 2008 financial crisis, systemic risk has been given a heightened level of attention by financial regulators and governments. To satisfy both international and domestic concerns, and to demonstrate that the evaluation of systemic risk in the Canadian capital markets


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In order to fulfill our mandate of protecting investors, effective rule-making, oversight, compliance reviews and education must be backed by rigorous and visible enforcement.

The Oil and Gas Industry is the Most Significant Industry in Alberta

KARI hORN General Counsel

A

B

C

D

EF

50% oil and Gas (A)

9% diversified industries (B)

19% All other industries (C)

14% mining (D)

4% Technology (E)

4% Clean Technology (F)

is in hand, the CSA created a systemic risk committee, led by the ASC, to identify, analyze and inventory such risk. The committee delivered its latest annual report at the end of calendar 2014 without identifying areas for alarm. ASC staff also contributed to the report of the International Organization of Securities Commissions: “Risk Identification and Assessment Methodologies for Securities Regulators”. Further, one ASC staff member was seconded during F2015 to the United States Securities Exchange Commission (the SEC) for six months to work with SEC staff in the Division of Economic and Risk Analysis within the Office of Asset Management, gaining valuable experience in this area of elevated regulatory responsibility.

oPERATionAL AdvAnCES

The ASC continued throughout F2015 to improve its internal infrastructure and processes to better deliver its services to market participants. Of particular significance was work undertaken by the Enforcement division to fully implement new electronic evidence management software that holds the promise of revolutionizing the processing and analysis of documentary evidence by the ASC.

The ASC also contributed in a substantial way to the CSA National Systems Renewal Project, which involves the replacement of all of the SEDAR, SEDI, NRD, NRS, DPL and NCTO systems. A request for proposals was issued in October 2014 and a vendor selection process is scheduled to conclude in August 2015. New systems will be phased in over the next three years. David Linder, the Executive Director of the ASC, is the chair of the CSA Systems Governance Committee.

ANNUAL REPORT 2015

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dAvId LINdER Executive Director

cYNThIA cAMPbELL Director, Enforcement

The ASC continued in F2015 with its Professional Education Program for accounting students seeking a professional designation, initiated in 2011.

A thorough review of the ASC fee structure was initiated in F2015 that will result in recommendations to be made in the current year for changes intended to ensure the financial viability of the ASC in the coming years.

invESToR EdUCATion

In a continuous effort to provide education to retail investors to help them avoid inappropriate risk, poor business platforms and dishonest promoters, the ASC undertook a “CheckFirst” campaign that involved: the launching of a new website (CheckFirst.ca); events held in association with October’s Investor Education Month; the promotion of “pop-up” coffee shops under the name of CheckFirst Café in downtown Calgary and at the Calgary and Edmonton Home and Garden shows; a research project to identify Albertans most at risk to investment fraud; presentations to various seniors groups across the province; the running of a consumer update radio show in 20 rural communities; and the posting of informational and educational materials on the ASC websites. The ASC also participates in investor education at the national level, chairing the CSA’s Investor Education Committee.

The ASC’s Public Information Office answered 2,300 public inquiries in F2015 and, through public notices distributed by investor alerts and the social media network, actively warned investors of suspicious investment schemes.

ConCLUSion

As I enter the final months of my second term as Chair and CEO of the ASC, I would offer, with as much objectivity as I can muster, the following observations of the fabric and the impact of the ASC. Staff are respectful and supportive of both their colleagues and the market participants they serve. Management strives to make the ASC the best securities regulator it can be, meaning that it deliver prompt quality service, is rigorous in its compliance demands and enforcement activities, and contributes policy decisions that best suit Alberta’s capital market and Alberta’s business philosophy. ASC staff share a trait common to responsible regulators: to do the right thing and, eventually, find the right balance.

The ASC is challenged, as are all financial regulators, to stay abreast of quickly changing economic circumstances, product creation, financing innovation, trading technology, data management, international standards, and the unrelenting efforts of those who brazenly break the rules. Nevertheless, the core responsibilities of the ASC to protect investors and the integrity of the Alberta capital market, in particular in respect of capital raising for the oil and gas industry, are being well fulfilled.

At the top, the organization is overseen and directed by a strong group of Commission members of considerable and varied talents and backgrounds, who share a common desire to serve the Alberta capital market and its participants. On the subject of Commission membership, I would like to welcome Kate Chisholm, who commenced a three-year term April 1, 2015 and to thank Maureen McCaw for her time, effort and valued contribution during her term, which concluded March 31, 2015.


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See page 16 for Executive Management Team – Divisions

ALIsON TROLLOPEDirector, Communications & Investor Relations

Two milestones achieved in F2015 highlight the positive attitude that ASC’s staff bring to their jobs. As evidence of the ASC staff’s commitment to the Alberta and Calgary communities, the ASC broke its fundraising record for the 2014 annual United Way campaign by nearly 25 per cent. In addition, the ASC was proud to be named one of Alberta’s Top 70 Employers for 2015.

I owe thanks to the Alberta Government, and the Department of Finance in particular, for their confidence in me over the course of 10 years, to a loyal and supportive group of Commission members that has greatly assisted in the effective functioning of the ASC, to a management group that has consistently pulled together and kept the faith, amidst often loud and threatening external noise, to a friendly, cooperative staff that always projected a willingness to help and accommodate, and to many external professional and industry representatives who have offered thoughtful, practical advice and support.

Finally, I would be remiss in not recognizing my colleagues who comprise the CSA and whom I had the privilege of leading for the past four years. I am convinced that there is no finer model for cooperative administration within the Canadian federal structure than the CSA.

wILLIAM s. RIcE, Q.c. Chair and Chief Executive Officer

Common Types of Investment FraudAFFiniTy FRAUd exploits the trust and friendship that exists within groups who have something in common, such as religious, ethnic or even professional communities. The fraudsters frequently are, or pretend to be, members of the group. Scam artists will first befriend a respected or influential member (who may be an unsuspecting victim themselves) who then recruits new investors. In an affinity fraud, investors lose their money to individuals they thought they could trust.

A PonZi SChEmE promises high rates of return with little or no risk to investors. However, returns to existing investors are generated by transferring funds from new investors; there is no legitimate investment. These schemes always collapse as new investments inevitably subside or end and investors lose some or all of their money.

In a PyRAmid SChEmE, participants recruit new people into the program who are required to “invest” a certain amount, which is paid to the recruiter. In order to make his or her money back, the new recruit must recruit more people under him or her, each of whom will also have to invest. Participants move up the “pyramid” as new investors buy in. However, when there are no new participants, the scheme collapses and the majority of participants lose their money.

In a typical PUmP-And-dUmP scheme, the potential investor receives an email or call promoting or “pumping” an incredible deal on a low-priced stock. However, what investors may not know is that the promoter likely owns much of this stock. As more investors buy shares, the value of the stock skyrockets. Once the share price hits a peak, the scam artist sells or “dumps” their own shares and the value of the stock plummets, leaving investors with worthless shares.

ANNUAL REPORT 2015

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wILLIAM s. RIcEChair 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 in achieving its objectives. The Chair has direct oversight of the Communications and Investor Education Division, and of the offices of the Executive Director and the General Counsel. The Chair is appointed by the Lieutenant Governor in Council, reporting to the Members and to the Minister of Finance. The Chair 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*.

dAvId LINdERExecutive Director

The Executive Director reports to the Chair and Chief Executive Officer. As the ASC’s Chief Administrative Officer the Executive Director is responsible for the efficient and effective operation of all business divisions of the ASC. The Executive Director oversees Corporate Finance, Corporate Resources, Enforcement, Market Regulation, as well as 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 is the chair of the Senior Management and Strategic Planning committees. Pursuant to the Securities Act (Alberta), the Executive Director has a quasi-judicial role in exercising discretion and making decisions in respect of a number of matters, including where Market Regulation and Enforcement staff recommend that specified action be taken.

cYNThIA J. cAMPbELLDirector, Enforcement

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

LARA gAEdEChief Accountant and Chief Financial Officer

The Chief Financial Officer and Chief Accountant (CFO) is the ASC’s senior financial officer, providing accurate and timely financial reporting to senior management, Commission Members and the Minister of Finance. The CFO is responsible for effective internal controls, annual budget preparation, investment manager relations, and coordination of risk management processes. In addition, the CFO also provides expert knowledge in the areas of accounting, auditing and financial reporting to ASC staff, as well as guidance to reporting issuers and their advisors. The Office of the Chief Accountant is involved in policy initiatives that relate to these areas of expertise. This Office also coordinates the CA Training program.

TOM gRAhAMDirector, Corporate Finance

The Corporate Finance Division provides timely regulatory services by reviewing offering documents, monitoring continuous disclosure filings and making recommendations on applications for exemptive relief from securities legislation. Given the significance of the oil and gas industry, Corporate Finance places considerable emphasis on reviewing the disclosure of oil and gas reserves information prepared for annual disclosures, prospectuses and other related documents. In addition to these day-to-day services, Corporate Finance is active in the formulation and development of rules, regulatory instruments and policies that govern the Alberta and Canadian capital markets.

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, analysis and advice on emerging issues, as well as guidance to market participants on the interpretation of securities laws and policies. The OGC is also responsible for the ASC’s corporate secretarial and legislative functions.

dANNA McLEOdDirector, Corporate Resources

The Corporate Resources Division provides business, technical and human resource services. This division provides services 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 high quality strategies, programs and policies.

ALIsON TROLLOPEDirector, Communications and Investor Education

The Communications and Investor Education Division provides strategic communications counsel and support to all areas of the ASC. This division engages and educates stakeholders and other market participants in support of the ASC’s organizational objectives. Through media relations, investor education, corporate and internal communications, and public information, the team promotes consistent, relevant and timely communication to support efficient and effective securities regulation in Alberta and Canada.

LYNN TsUTsUMIDirector, Market Regulation

Market Regulation provides securities regulation to the Alberta capital market by developing and administering rules and policies relating to registrants (dealers, advisors, and investment fund managers), equities and derivatives exchanges, and self-regulatory organizations (SROs), including the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada. This division registers market participants that are in the business of trading and advising in securities and managing investment funds, performs financial reviews and business conduct compliance examinations of registrants, and reviews exemption applications. It also conducts oversight of SROs, industry self-insurance funds, clearing agencies, the TSX Venture Exchange and energy exchanges conducting business in Alberta such as the Natural Gas

Exchange Inc. (NGX).

* The Public Interest (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.

Executive Management Team - Divisions


16

EXECUTivE mAnAGEmEnT TEAm - diviSionS

Three Year statistical summary 2015

As at March 31 F2015 F2014 F2013

Enforcement Activity

Complaints received 579 583 708

Concluded investigations 630 358 772

Current cases 175 203 204

Interim cease trade orders 0 1 8

Settlement agreements 5 10 12

Hearings commenced 6 13 16

Settlements agreed to $ 265, 000 $ 402,000 $ 546,000

Settlements collected $ 265, 000 $ 402,000 $ 546,000

Administrative penalties levied* $ 2,810,000 $ 6,910,000 $ 6,169,000

Administrative penalties recovered $ 122,000 $ 2,034,000* $ 247,000

Prosecutions initiated in provincial court 0 4 5

Other court proceedings (including appeals) 11 13 9

Reciprocal orders 9 8 5

Cease trade orders** 145 155 111

Active Reporting issuers***

Principal Regulator – Alberta 709 758 801

Principal Regulator – Other 6,760 6,682 6,750

Total 7,469 7,440 7,551

Prospectuses and mutual funds


Principal Regulator – Other 638 727 749

Total 756 875 896

Rights offerings



Total 16 13 19

Exemption Applications (Corporate Finance)



Total 217 269 273

Continuous disclosure Reviews (Principal Regulator – Alberta)

Full 75 45 95

Issue-oriented 304 107 185

Total 379 152 280

Total Registered Firms 855 832 831

Total Registered individuals**** 28,320 27,606 27,112

* A decision related to a specific enforcement matter by the Court of Appeal of Alberta in F2015 resulted in a repayment of $1.0 million in administrative penalties originally recognized in F2014. At year-end F2015, the same court decision resulted in administrative penalty and disgorgement receipts of approximately $1.1 million, also previously recognized in F2014, being held in restricted cash pending reconsideration of the sanctions.

** 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% 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 2015

ANNUAL REPORT 2015

17

wiLLiAm S. RiCE q.C., Chair

Tom CoTTER vice-Chair

STEPhEn R. mURiSon vice-Chair

TERRy ALLEn CFA, iCd.d

dR. iAn bEddiS

wEbSTER (wEb) mACdonALd q.C.

kATE ChiShoLm q.C., iCd.d

dAniEL mCkinLEy FCA, iCd.d

bRAdLEy nEmETZ q.C.

Ann RoonEy FCA, iCd.d

RiChARd A. ShAw q.C., iCd.d

FREd R. n. SnELL FCA

The ASC has two operational levels: ASC Members; and staff, including the executive management team. Currently, there are 12 Members, including the Chair and two full-time Vice-Chairs. The Chair also acts as the ASC’s Chief Executive Officer and is responsible for the overall operation of the ASC. The Members act as the ASC’s board of directors, overseeing the management of the Commission. The Members also adjudicate enforcement proceedings and disputes among market participants.

Alberta’s Lieutenant Governor in Council appoints ASC Commission Members. Members determine policy, considering and approving new rules or amending existing rules. ASC Members have extensive knowledge of Alberta’s capital market. Their combined credentials and experience in accounting, law, securities and corporate finance represent the appropriate talents to support the achievement of the ASC’s objectives. The public rely on the Members of the ASC as being both qualified and empowered to deal with matters that affect the public interest in Alberta’s capital market.

For a complete list of credentials and experience, visit our website where you will find them listed under About the ASC – Organization & Governance – ASC Members.

AboUT ThE mEmbERS

A majority of the 12 Commission Members are “Independent” as that term is applied in NI 52-110 Audit Committees. Three Members (the Chair and two 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 Commission 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 Commission 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.

ASC’s 2015 Commission Members


18

ASC’S 2015 CommiSSion mEmbERS

Management’s Discussion & AnalysisThis Management Discussion & Analysis (MD&A), prepared as of June 10, 2015, should be read in conjunction with the Alberta Securities Commission’s March 31, 2015 audited financial statements and the accompanying notes, in accordance with Canadian public sector accounting standards. Certain statements outlining F2016 expectations are forward-looking and are subject to risks and uncertainties. Furthermore, assumptions in the “Fiscal 2016 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 F2015, 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. The Commission Members, in conjunction with the Audit Committee, have an oversight role to ensure the integrity of the reported information. Specific processes that enhance ASC financial accountability and oversight include:

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

• quarterly 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 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 hear enforcement proceedings and consider applications for discretionary exemptions from the requirements of Alberta securities laws. ASC panels also sit as an appeal body 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).

ANNUAL REPORT 2015

19

Financial Highlights

Revenue

Distribution 14,943of securities 14,139

Registrations 10,895 10,498

Annual financial 4,945statements 5,227

Investment 1,568income 2,014

SEDI, EXD, 394registration late fees 104

Orders 192(applications) 228

Other enforcement 155receipts 1,037

Conference 13and other 15

Administrative (855)penalties (repayments) 2,034

Expenses

Salaries 28,198and benefits 25,632

Premises 3,098 3,044

Administration 2,920 2,893

Professional 2,694services 2,642

Amortization 1,081 1,359

Investor 504education 196

division Expenses

Office of the Chair 3,381and Members 3,136

Office of the 930Executive Director 1,077

Enforcement 7,964 7,982

Corporate 6,951Finance 5,902

Expenses 5,657not allocated1 5,509

Corporate 5,155Resources 4,764

Market 3,820Regulation 3,439

Communications 1,743and Investor Education 1,463

Office of the 1,274General Counsel 1,195

Financial 876Services 604

Office of the 744Chief Accountant 695

1 Expenses not allocated include: amortization of capital assets, audit fees, premises including insurance, IIROC contract services, investor education and budget contingency.

F2015 F2014


20

mAnAGEmEnT’S diSCUSSion & AnALySiS

selected Annual Information

thousands of dollars F2015 F2015 F2014 F2013

budget Actual Actual Actual

Revenue 32,400 32,250 35,296 30,564

Regulatory Expenses 39,445 38,495 35,766 34,504

Budget Contingency 955 - - -

Operating Deficit (8,000) (6,245) (470) (3,940)

Assets

Cash and cash equivalents 7,064 7,540 7,761

Investments 26,065 28,006 29,232

Capital assets 6,787 7,241 7,999

Total assets 41,410 45,314 45,580

Liabilities

Lease inducement 2,391 2,666 2,941

Accrued pension liability 7,134 6,458 5,691

Net assets 26,171 31,375 32,029

Capital additions 630 627 604 907

HighlightsThe ASC lost $6.2 million in F2015 compared to a budgeted deficit of $8.0 million and an actual deficit of $0.5 million in F2014.

Total revenues decreased $3.0 million in F2015 and were under budget by $0.2 million. However, fee revenues increased $1.2 million from the prior year and exceeded budget by $1.7 million, primarily the result of mutual fund distribution fees and related sales growth of 32 per cent for the year. Investment income decreased $0.4 million from the prior year, primarily the result of a weaker stock market. Administrative penalties (repayments) and other enforcement receipts decreased $3.8 million from the prior year and were $2.2 million under budget, as a result of the repayment of previously collected administrative penalties. Enforcement receipts fluctuate annually because of the variability in cases, the timing of their resolution and success in recovering assessments.

Expenses in F2015 were almost $1 million less than budget and $2.7 million greater than the prior year. Cost increases included annual salary adjustments, incremental termination payments, retirement allowances, and increased premises costs for leased space expansion and operations. Expenses were less than budget due to operational cost reductions, primarily in travel, member fees and contract services. The F2015 budget included a contingency of $1 million. However, this was not required.

As at March 31, 2015, the ASC had cash and cash equivalents, and investments of $33.1 million ($35.5 million F2014). The decrease of $2.4 million from the prior year is primarily due to funding operations and capital additions.

ANNUAL REPORT 2015

21

Analysis of Fiscal 2015 Operating Results Revenue

thousands of dollars F2015 F2015 F2014

budget Actual Actual

Fee revenues

Distribution of securities 12,939 14,943 14,139

Registrations 10,686 10,895 10,498

Annual financial statements 5,430 4,945 5,227

SEDI, exempt distributions & registration late fees 400 394 104

Orders (applications) 229 192 228

Total fees 29,684 31,369 30,196

Other revenue

Investment income 1,196 1,568 2,014

Administrative penalties (repayments) 250 (855) 2,034

Other enforcement receipts 1,250 155 1,037

Conference and other 20 13 15

Total revenue 32,400 32,250 35,296

The ASC administers the Alberta capital market regulatory system and collects 97 per cent (86 per cent in F2014) of its total revenue from fees paid by those who participate in the system. The ASC does not receive transfers from government tax revenues. ASC funding requirements are modelled on a total cost and revenue basis. Many ASC processes, such as enforcement actions and policy development, have no related fees but are required to maintain the regulatory system. As a result, specific transaction fees paid by issuers and registrants are not based on the cost of those transactions. These participant transaction fees, in addition to certain enforcement receipts and investment income, fund our operations.

diSTRibUTion oF SECURiTiES

These fees are paid by issuers for the distribution of securities. Distribution fees have both a fixed and variable component. The fixed component is charged for each prospectus or exempt distribution by an Alberta issuer. The fixed transaction fee component of distribution fees totalled $5.7 million ($6.1 million in F2014) and 18 per cent (20 per cent in F2014) 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 $9.2 million in F2015 ($8.0 million in F2014) and 29 per cent (27 per cent in F2014) of total fees. The increase in fee revenues in F2015 is the result of mutual fund sales growth.

Distribution fee revenues vary with the level of capital market activity, equity value changes and mutual fund sales. ASC distribution fee revenues increase or decrease because of changes in public and private securities distributions and mutual fund sales. However, while equity market volatility has an impact on ASC revenues, the majority of fees are relatively stable.

REGiSTRATionS

Fee receipts of $10.9 million in F2015 ($10.5 million in F2014) from registered firms and individuals accounted for 35 per cent of fees (35 per cent in F2014). Registration fees are paid by approximately 855 firms and 28,300 individuals registered in Alberta. Over 80 per cent of fees are received annually from registration renewals in January.

AnnUAL FinAnCiAL STATEmEnTS

Reporting issuers pay financial statement filing fees, which totalled $4.9 million ($5.2 million in F2014). These fees account for 16 per cent of total fees (17 per cent in F2014). The total number of active reporting issuers in Alberta is 7,470 (7,440 in F2014) and remains reasonably stable from year to year. The number of short-form-eligible reporting issuers decreased from 1,339 to 1,310 in F2015, which contributed to a decrease in these fees.


22


Other Revenue Sources

invESTmEnT inComE

In F2015, investment income totalled $1.6 million ($2.0 million in F2014). Investment income included equity gains (including dividends) of $654,000 ($888,000 in F2014), and interest income of $914,000 ($1.1 million in F2014).

oRdERS (APPLiCATionS)

Generally, only reporting issuers having the ASC as their principal regulator pay application fees. In F2015, 256 applications were received (304 in F2014). Fewer applications for Cease Trade Orders, Cease to be a Reporting Issuer Orders and Exemptive Relief Orders were received in F2015 than the prior year.

SEdi, EXEmPT diSTRibUTion & REGiSTRATion LATE FEES

Change in insider late filing fees and the introduction of new late filing fees for exempt distribution and registration filings commenced during F2015. This contributed to an increase in late fees of $290,000 compared to the prior year.

Administrative penalties (repayments) and other enforcement receipts

thousands of dollars F2015 F2014

Administrative penalties (repayments)

Assessed-penalties 2,810 6,910

Uncollectible (2,789) (5,022)

Recoveries from prior years 101 126

Repayments (985) -

Interest income & other 8 20

Total (855) 2,034

Other enforcement receipts

Disgorgements

Assessed - 10,729

Uncollectible - (10,552)

Repayments (97) -

Settlement receipts

Assessed 265 402

Recoveries from prior years - 12

Cost recoveries

Assessed 520 761

Uncollectible (488) (471)

Recoveries from prior years 5 156

Repayments (50) -

Total 155 1,037

ANNUAL REPORT 2015

23

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 hearing decision. Disgorgements represent orders to respondents to disgorge profits 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 net repayments totalled $700,000 (compared to receipts of $3.1 million in F2014) and compare to a five-year average of $1.9 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. Regardless, the ASC collected $106,000 ($294,000 in F2014) of prior year assessments and costs in F2015.

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 revenues the ASC receives from administrative penalties to certain operating expenditures that educate investors and enhance participants’ knowledge of securities market operation.

The decrease in restricted cash of $1.1 million was the result of a repayment of $985,000 (nil in F2014) and transfer of $479,000 of eligible expenditures ($196,000 in F2014), partially offset by prior and current year collections of $122,000 ($2.0 million in F2014), $12,000 of conference fees ($13,000 in F2014), interest income of $8,000 ($20,000 in F2014), and transfer of $174,000 to be held in trust (nil in F2014). As at March 31, 2015 administrative penalty and disgorgement receipts of $1.1 million are held in restricted cash per the Court of Appeal of Alberta’s decision related to a specific enforcement matter, pending reconsideration of the sanctions; the repayment referred to above was also pursuant to this decision.

ConFEREnCE & oThER

The majority of these fees were collected from two conferences held during F2015 (2014 Corporate Finance Review and 2014 Oil & Gas Information Session).

Comparative and Budget Expense Analysis

Regulatory Expenses



Salaries and benefits 27,953 28,198 25,632

Premises 3,180 3,098 3,044

Administration 3,443 2,920 2,893

Professional services 2,870 2,694 2,642

Amortization 1,490 1,081 1,359

Investor education 509 504 196

39,445 38,495 35,766

Budget contingency 955 - -

40,400 38,495 35,766


24


In F2015, expenses increased to $38.5 million from $35.8 million and were 5 per cent less than budget of $40.4 million. Details by expense category follow.

sALARIEs ANd bENEfITs

Compensation expenses accounted for 73 per cent of operating costs (72 per cent in F2014) and increased $2.6 million in F2015. Increases were the result of annual salary adjustments at the beginning of the fiscal year averaging 4 per cent, marketplace adjustments and incremental retirement allowances and termination payments. ASC staff was comprised of an average 177 full-time employees during the year (172 in F2014). Compensation costs were higher than budget because of unbudgeted incremental termination payments partially offset by vacant positions. Compensation also includes a performance-based variable pay program that represented 7 per cent (8 per cent in F2014) of total salary and benefits costs, including variable pay.

PREMIsEs

Premises costs were 8 per cent of total costs (9 per cent in F2014). These costs increased in F2015 because of the increased operating costs and property taxes. However, premises operating costs were less than budget.

AdMINIsTRATION

Administration costs increased by $27,000 in F2015. These costs were $523,000 less than budget and accounted for 8 per cent of total costs (8 per cent in F2014). The administration cost category includes: travel, member fees, office operations, recruitment advertising, business consultation and audit-related fees.

Travel expenses were $81,000 and $221,000 less than the prior year and budget, respectively. Travel expenses are required primarily for coordination with other CSA jurisdictions and enforcement activities. Member fees decreased $48,000 in F2015 and were $181,000 less than budget because there were fewer hearing days than expected. Office operation costs, including maintenance, telecommunications, technology licences, supplies, equipment and rent were less than budget by $121,000 primarily because of operational cost control and renegotiated telecommunications contracts. However, office operation costs were $156,000 greater than the prior year due to unbudgeted expenditures on new software licenses and triennial Public Service Pension Plan audit fees.

PROfEssIONAL sERvIcEs

Professional services costs represented 7 per cent of total costs in F2015 (7 per cent in F2014). These costs exceeded the prior year by $52,000 primarily because of higher contract services costs arising from technology projects and the hiring of temporary contractors to replace full-time staff who left the ASC. 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 Montréal, Québec. The operating costs are borne on a formula basis by CSA members and the ASC pays 11.6 per cent. In F2015, the ASC’s share of CSA costs was $186,000 ($216,000 in F2014).

AMORTIZATION

Amortization expense decreased compared to the prior year and was less than budget because significant technology additions from prior years were fully depreciated and technology additions occurred later in F2015 than originally budgeted.

INvEsTOR EdUcATION

Investor education costs were as budgeted. This budgeted amount was increased by $308,000 as compared to F2014 as a result of increased public awareness campaigns.

ANNUAL REPORT 2015

25

Expenses by division



Office of the Chair and Members 3,582 3,381 3,136

Office of the Executive Director 1,034 930 1,077

Enforcement 8,046 7,964 7,982

Corporate Finance 6,932 6,951 5,902

Market Regulation 4,141 3,820 3,439

Office of the General Counsel 1,236 1,274 1,195

Office of the Chief Accountant 832 744 695

Administration

Corporate Resources 5,037 5,155 4,764

Communications 1,772 1,743 1,463

Financial Services 697 876 604

Expenses not allocated1 7,091 5,657 5,509

Total 40,400 38,495 35,766

1 Expenses not allocated include: amortization of capital assets, audit fees, premises including insurance, IIROC contract services, investor education and budget contingency.

Division expenses are primarily for staff, professional services and travel. Expenses not allocated were less than budget because the budget contingency was not required and planned capital expenditures occurred later in the year than anticipated.

Independent Member fees are recorded in the Office of the Chair and Members. Fees are variable because the duration and number of hearings are not easily forecast. During the year there were changes in Member fees. See Schedule A, footnote 5, of the March 31, 2015 annual audited financial statements for Member fees.

Total Member fees and related hearing costs decreased $48,000 in F2015 because of a decrease in hearing days.

capital Expenditures



Leasehold improvements 30 30 6

Information technology 475 486 546

Office furniture and equipment 125 111 52

Total 630 627 604

In F2015, capital expenditures were primarily related to technology projects that included server upgrades and additions, an enforcement electronic evidence management system, new software licenses, a market regulation audit project, network hardware replacements and upgrades, and data management software enhancements.


26


Liquidity and Financial Position

LiqUidiTy

The ASC has sufficient resources to fund future operations and capital purchases with cash of $7.1 million ($7.5 million in F2014) and investments at market value of $26.1 million ($28.0 million in F2014).

ACCoUnTS RECEivAbLE

Accounts receivable as at March 31, 2015 were $135,000 ($98,000 in F2014), comprised of $120,000 of CSA-related expenses ($79,000 in F2014) and $15,000 of employee loans for computer acquisitions ($18,000 in F2014).

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. 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 investments is between 50 per cent and 100 per cent of the ASC’s annual expected expenses. This range was $19.7 million to $39.3 million at March 31, 2015. F2016 year-end balance of investments and cash is expected to be $26.3 million compared to the March 31, 2015 balance of $33.1 million. The $6.8 million reduction in investments and cash in F2016 is due to estimated cash expenditures for capital additions of $846,000 and operations of $6.0 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 - The rate of return (based on market value) was 10.6 per cent in F2015, compared with 2.6 per cent in the prior year.

• Equity funds - The rate of return (based on market value) was 7.9 per cent in F2015, compared with 18.8 per cent in the prior year.

• Money market funds - These returned 1.18 per cent in F2015 and 1.17 per cent in the prior year.

Fixed-income securities are sensitive to interest rate fluctuations. At March 31, 2015, ASC fixed-income security investments of $19.7 million market value had maturities that range from under one year (15.4 per cent) to greater than 10 years (38.3 per cent) with an average duration of 7.0 years (6.3 years in F2014). 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 7.01 per cent (6.27 per cent in F2014).

ANNUAL REPORT 2015

27

Investment Risk Management and the Use of DerivativesAIMCo 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

thousands of dollars F2015 F2014

q4 q3 q2 q1 Q4 Q3 Q2 Q1

(Jan-mar) (oct-dec) (July-Sept) (Apr-June) (Jan-Mar) (Oct-Dec) (July-Sept) (Apr-June)

Revenues

Fees & other 15,225 4,494 3,501 7,462 16,370 3,836 6,581 6,495

Investment income 118 231 576 643 490 683 641 200

15,343 4,725 4,077 8,105 16,860 4,519 7,222 6,695

Expenses

Salaries & benefits 7,503 6,853 6,848 6,994 6,441 6,375 6,126 6,690

Other 3,299 2,507 2,290 2,201 3,270 2,300 2,161 2,403

10,802 9,360 9,138 9,195 9,711 8,675 8,287 9,093

Operating surplus (deficit) 4,541 (4,635) (5,061) (1,090) 7,149 (4,156) (1,065) (2,398)

Investments 26,065 25,154 25,243 28,924 28,006 26,884 29,170 28,497

Cash 7,064 575 3,884 4,580 7,540 331 1,651 4,302

Restricted cash 1,068 2,131 2,229 2,223 2,216 2,129 2,122 366

FEE REvEnUES

Quarterly fee revenues are variable due to the timing of fee-related filings among the reporting issuer population and the variable portion of prospectus fees fluctuating with market activity. Fifty per cent of total fee revenues are received in the fourth quarter each year, primarily due to annual registration renewal and annual financial statements 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.

EXPEnSES

ASC pays IIROC a portion of annual registration renewal fees. Approximately $912,000 was incurred in F2015 ($886,000 in F2014).

Other expenses vary from quarter to quarter because of the timing of expenditures. For example, professional services for enforcement activities depends on the nature of investigations and the timing of expert reports and testimony during hearings and trials.


28


Contractual ObligationsCommitments to outside organizations with contracts in place as at March 31, 2015 amounted to $51.1 million ($53.9 million in F2014). Commitments include leases of premises to 2016 and 2025 and rental of office equipment to 2018. See Note 10 of the March 31, 2015 annual audited financial statements for 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 because they are recorded as liabilities.

Financial InstrumentsThe ASC’s financial instruments include cash and cash equivalents, 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 the ASC’s investment manager. ASC financial reporting includes:

• 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, interest rate, price and market risks; and

• investment fair value hierarchy disclosure differentiates amongst valuation methods.

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 12 of the March 31, 2015 annual audited financial statements for related party transactions.

CSA National Filing Systems and Operating AgreementsSee Note 9 of the March 31, 2015 annual audited financial statements for the CSA National Systems and Operating Agreements.

Risk Management Initiatives

bUSinESS ConTinUiTy

The ASC has emergency response plans and processes in place that are tested annually, including two data centres that are fully replicated. The primary data centre is located at a secure off-site facility. However, the data centre is replicated in our on-premise data centre such that the ASC can run indefinitely should one of the facilities fail. 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.

ANNUAL REPORT 2015

29

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 F2015, the ASC updated its list of key risks to the organization, identified controls and activities to address those risks, and estimated 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. The ASC will continue to monitor its risk exposure with another comprehensive review planned for F2017.

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 and any subsequent changes that materially modify the budget, and quarterly reporting to the Minister of actual financial results and budget updates.

Fiscal 2016 Outlook and Assumptions

REvEnUES

Anticipated F2016 $33.4 million revenue assumes that fee receipts and other income remain largely consistent with the F2015 budget of $32.4 million. Forecasted investment income of $1.2 million assumes investment returns consistent with investment manager projections of 4.0 per cent for bonds and 6.5 per cent for equities.

EXPEnSES

Expenses are expected to be $40.2 million, a decrease of $0.2 million over F2015 actual expenses of $40.4 million. In F2015, the ASC cut planned F2016 expenses by 5 per cent at the request of the Alberta government.

The ASC forecasts an operating loss of $6.8 million that assumes full use of the $0.6 million contingency. Actual experience over the last several years has consistently resulted in under-expenditure, primarily due to professional staff vacancies and unused budget contingency.

LiqUidiTy And CASh FLow

The ASC operates primarily on a cash basis. In addition to cash from operations, cash requirements for F2016 operations and capital budgets are estimated at $6.8 million. Cash is available from existing cash and investment balances. The ASC is currently reviewing our fee structure to ensure we can continue to meet our mandate.

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, investment income of 4.0 per cent for bonds and 6.5 per cent for equities, a 6.0 per cent staff vacancy rate, inflationary salary increases and specific project costs for information technology, training and recruitment. Factors that could cause actual results to differ materially include:

• capital market volatility and the impact on fees paid in connection with the distribution of securities 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.


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Financial StatementsManagement’s ReportThe financial statements included in this Annual Report are the responsibility of management and have been approved by the Members of the Commission. These financial statements have been prepared by management in accordance with Canadian public sector accounting standards. Financial information contained elsewhere in this Annual Report is consistent with the financial statements. The Auditor General of Alberta has examined the financial statements. The ASC’s Audit Committee meets with management and with the Auditor General to review issues relating to audit plans and outcomes, internal controls, accounting policies and financial reporting. The Audit Committee reports its findings to the Commission Members for their consideration in approving the financial statements.

wILLIAM s. RIcE, Q.c. dAvId c. LINdER, Q.c.Chair and Chief Executive Officer Executive Director

June 10, 2015

ANNUAL REPORT 2015

31

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, 2015, and the statements of 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, 2015, and the results of its operations, its remeasurement gains and losses and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Auditor General June 10, 2015 Edmonton, Alberta


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FinAnCiAL STATEmEnTS

[Original signed by Merwan N. Saher, FCA]

statement of financial Position

thousands of dollars march 31, 2015 March 31, 2014

Assets

Cash and cash equivalents (Note 4) 7,064 7,540

Accounts receivable 135 98

Prepaid expenses 291 213

Restricted cash (Note 3) 1,068 2,216

Investments (Note 4) 26,065 28,006

Capital assets (Note 6) 6,787 7,241

41,410 45,314

Liabilities

Accounts payable and accrued liabilities 5,714 4,815

Lease inducements 2,391 2,666

Accrued pension liability (Note 7) 7,134 6,458

15,239 13,939

Net Assets

Accumulated operating surplus, beginning of year 30,692 31,162

Operating deficit (6,245) (470)

Accumulated operating surplus, end of year 24,447 30,692

Accumulated remeasurement gains, end of year 1,724 683

Net assets, end of year (Note 3) 26,171 31,375

41,410 45,314

Commitments and contingent liabilities (Note 10)

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

Approved by the Members

wILLIAM s. RIcE, Q.c. dANIEL McKINLEY, fcA, Icd.dChair and Chief Executive Officer Member

June 10, 2015

ANNUAL REPORT 2015

33

statement of Operations

thousands of dollars For year ended march 31

2015 2015 2014

budget(Note 11)

Actual Actual

Revenue

Fees (Note 8) 29,684 31,369 30,196

Investment income (Note 5) 1,196 1,568 2,014

Other enforcement receipts (Note 8) 1,250 155 1,037

Conference and other 20 13 15

Administrative penalties (repayments) (Note 3) 250 (855) 2,034

32,400 32,250 35,296

Regulatory Expenses

Salaries and benefits 27,953 28,198 25,632

Premises 3,180 3,098 3,044

Administration 3,443 2,920 2,893

Professional services 2,870 2,694 2,642

Amortization of capital assets 1,490 1,081 1,359

Investor education (Note 3) 509 504 196

39,445 38,495 35,766

Budget contingency 955 – -

Operating deficit (8,000) (6,245) (470)


statement of Remeasurement gains and Losses (Notes 2 and 4)


2015 2014

Accumulated remeasurement gains, beginning of year 683 867

Unrealized gains (losses) on investments during the year 1,232 (56)

Less: Amounts reclassified during the year to the Statement of Operations (191) (128)

Net remeasurement gains (losses) for the year 1,041 (184)

Accumulated remeasurement gains, end of year 1,724 683



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statement of cash flows


Operating transactions 2015 2014

Fees and other 31,404 30,212

Payments to and on behalf of employees (26,271) (24,524)

Payments to suppliers for goods and services (9,955) (9,615)

Investment income 1,568 2,014

Other enforcement receipts 155 1,159

Administrative penalties (repayments) (855) 2,034

Cash received from (used in) operating transactions (3,954) 1,280

Capital transactions

Cash used to acquire capital assets (653) (694)

Proceeds on disposal of capital assets - 2

Cash used in capital transactions (653) (692)

Investing transactions

Decrease (Increase) in restricted cash 1,148 (1,851)

Purchases of investments (1,517) (1,958)

Disposals of investments 4,500 3,000

Cash received from (used in) investing transactions 4,131 (809)

Decrease in cash and cash equivalents (476) (221)

Cash and cash equivalents, beginning of year 7,540 7,761

Cash and cash equivalents, end of year 7,064 7,540


ANNUAL REPORT 2015

35

Notes to the Financial StatementsMarch 31, 2015

in thousands of dollars unless otherwise noted

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 report financial instruments of AIMCo’s pooled investment funds on its statement of financial position and 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 recorded 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, interest rate swaps 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 are recorded 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.


36


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 and cash equivalents, accounts receivable, restricted cash and accounts payable and accrued liabilities are measured at cost or amortized cost. The fair values of cash and cash equivalents, accounts receivable, restricted cash and accounts payable approximate their carrying values due to their short-term nature.

c) cAPITAL AssETs

Capital assets are recorded at cost.

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, and one 3.5-year lease term to March 2016.

d) fEEs, AdMINIsTRATIvE PENALTIEs (REPAYMENTs) ANd OThER ENfORcEMENT REcEIPTs REcOgNITION

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

Administrative penalties and other enforcement receipts that include 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.

e) ExPENsEs

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

f) EMPLOYEE fUTURE bENEfITs

The ASC participates in the Public Service Pension Plan, a multi-employer defined benefit pension plan, with other government entities. 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 costs included in these financial statements are comprised of the cost of employer contributions for current service of employees during the year and additional employer contributions for the service relating to prior years.

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

ANNUAL REPORT 2015

37

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 services and 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 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 Registered Retirement Savings Plan 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.

g) LEAsE INdUcEMENTs

Cash payments received as lease inducements are deferred and amortized on a straight-line basis over the lease terms (15 years ending November 30, 2025 and 3.5 years ending March 31, 2016).

h) MEAsUREMENT UNcERTAINTY

The financial statements prepared in conformity with PSAS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates include uncollectible amounts of accounts receivable for administrative penalties and related cost recoveries, the useful lives of capital assets, and the value of accrued employee benefit liabilities. 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.

i) REsTRIcTEd cAsh

The Securities Act (Alberta) restricts the use of revenues the ASC receives from administrative penalties to certain operating expenditures that educate investors and enhance the knowledge of securities market operation.

j) NET AssETs

Net assets represent the difference between the carrying value of assets held by the ASC and its liabilities.

PSAS require a “net debt” presentation for the statement of financial position in the summary financial statements of governments. The net debt presentation reports the difference between financial assets and liabilities as “net debt” or “net financial assets” as an indicator of the future revenues required to pay for past transactions and events. While the ASC operates as a government reporting entity, it is in a net asset position and is self-funded, raising revenues from those entities it regulates. Accordingly, these financial statements do not report a net debt indicator.


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noTE 3 RESTRiCTEd CASh

Net assets include $1,068 of accumulated net penalty revenues ($2,216 in F2014) represented as restricted cash. The ASC is required to hold the entire balance of $1,068 in an interest bearing separate cash account, as directed by a decision of the Alberta Court of Appeal. The balance will be held pending an ASC review of sanctions imposed by an ASC tribunal.

The change in restricted cash is comprised of:

2015 2014

Administrative penalties 2,810 6,910

Less provision for uncollectible amounts (2,789) (5,022)

Less repayments (985) -

Plus recoveries of prior-year assessments 101 126

Net realizable value (863) 2,014

Interest income and other 8 20

Administrative penalties (repayments) (855) 2,034

Plus education conference 12 13

Less eligible restricted cash expenses (479) (196)

Plus funds transferred due to Alberta Court of Appeal decision 174 -

Restricted cash increase (decrease) (1,148) 1,851

Restricted cash, beginning of year 2,216 365

Restricted cash, end of year 1,068 2,216

noTE 4 CASh And CASh EqUivALEnTS And invESTmEnTS

a) sUMMARY

2015 2014

Cost

Remea- surement

Gain Fair value

Fair value hierarchy

% Cost Fair Value % Level 1 Level 2

Cash and cash equivalents

CCITF deposit 7,064 - 7,064 - 7,064 - 7,540 7,540 -

Investments

CCITF deposit 79 - 79 - 79 0.3 78 78 0.3

Fixed-income securities 18,496 1,179 19,675 - 19,675 75.5 20,484 20,546 73.4

Canadian equities 5,766 545 6,311 4,733 1,578 24.2 6,761 7,382 26.3

24,341 1,724 26,065 4,733 21,332 100.0 27,323 28,006 100.0

ANNUAL REPORT 2015

39

Cash and cash equivalents 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 maximum security and liquidity of depositors’ capital. The CCITF portfolio comprises high-quality short-term and mid-term fixed-income securities with a maximum term-to-maturity of three years. As at March 31, 2015, securities held by the CCITF have a time weighted annualized return of 1.18 per cent (1.17 per cent in F2014).

At March 31, 2015, the carrying amounts of the ASC’s investments are recorded 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.

Fixed-income securities held at March 31, 2015 have maturities ranging from less than one year to over 10 years (38.3 per cent of maturities are greater than 10 years), a market yield of 2.61 per cent (3.22 per cent in F2014) and an average duration of 7.0 years (6.3 years in F2014). 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.

Disclosure of the hierarchy of inputs used in the determination of fair value for investments are reported according to the following levels:

a) Level one: Fair value is based on quoted prices in an active market.

b) Level two: Fair value is based on model-based valuation methods for which all significant inputs are market-observable other than quoted prices.

b) INvEsTMENT RIsK MANAgEMENT

In order to earn an optimal financial return at an acceptable level of risk, ASC management has established an investment policy that is reviewed annually. Investment income risk is reduced through asset class allocation targets of 75 per cent fixed-income securities and 25 per cent equities with a small value in residual cash.

Income and financial returns of the ASC are exposed to credit, interest rate, price and market risk.

AIMCo manages risk through diversification within each asset class, quality and duration constraints on fixed-income instruments, and use of derivative contracts. Specific risk management measures and exposures include:

• fixed-income credit risk reduction primarily through credit ratings of investment grade (BBB Corporate Bonds) or higher of 95.9 per cent (94.6 per cent in F2014);

• for each 1.0 per cent increase in interest rates this would limit loss exposure on fixed income securities to 7.0 per cent (6.3 per cent in F2014) as this is controlled using duration constraints;

• price risk associated with equity investments that, subject to a decline of 10 per cent in equity values, with all other variables held constant, would cause a 2.5 per cent (2.5 per cent in F2014) decline in the fair value of total investments, and

• market risk using derivative instruments.

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).


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noTE 5 invESTmEnT inComE

The ASC’s investment income included $914 from interest-bearing securities ($1,126 in F2014) and $654 from equities ($888 in F2014). The ASC’s investments realized market value returns of 10.0 per cent for the year ended March 31, 2015 (6.6 per cent in F2014). 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 9.6 per cent in F2015 and a benchmark gain of 4.5 per cent in F2014.

noTE 6 CAPiTAL ASSETS

Computer Equipment & Software

Furniture & Equipment Leaseholds 2015 2014

Estimated useful life 3 years 10 years Lease duration

Cost

Beginning of year 2,486 2,619 6,473 11,578 12,147

Additions 482 153 31 666 604

Disposals (1) (77) - (78) (1,173)

2,967 2,695 6,504 12,166 11,578

Accumulated amortization

Beginning of year 1,775 1,045 1,517 4,337 4,148

Amortization expense 331 248 493 1,072 1,359

Disposals 37 (67) - (30) (1,170)

2,143 1,226 2,010 5,379 4,337

Net book value 824 1,469 4,494 6,787 7,241

Leaseholds relate to a 15-year lease (leasehold net book value of $4,403) commencing December 1, 2010 and a 3.5 year lease (leasehold net book value of $91) commencing October 2012. The amortization expense of $1,081 recognized in the statement of operations includes a loss on disposal of $9. The disposals for accumulated amortization include immaterial adjustments relating to prior years.

noTE 7 ACCRUEd PEnSion LiAbiLiTy And PEnSion EXPEnSE

The accrued pension liability is comprised of:

2015 2014

Retirement Plan 57 84

Supplemental Pension Plan 7,315 6,539

Less accounts payable (238) (165)

7,134 6,458

ANNUAL REPORT 2015

41

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

2015 2014

Public Service Pension Plan 1,275 1,193

Registered Retirement Savings Plan 684 527

Supplemental Pension Plan 918 955

2,877 2,675

a) Retirement Plan

The Retirement Plan is unfunded and the benefits will be paid to August 2017. For the year ended March 31, 2015, the ASC paid $27 ($26 in F2014).

b) Public service Pension Plan

The ASC participates in the Public Service Pension Plan. At December 31, 2014, the Public Service Pension Plan reported a deficiency of $803,000 ($1,254,000 as at December 31, 2013). The ASC is not responsible for future funding of the plan deficit other than through contribution increases.

c) Registered Retirement savings Plan

The ASC makes contributions on behalf of employees who do not participate in the Public Service Pension Plan to employee Registered Retirement Savings Plans.

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.


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Actuarial valuations of the Supplemental Pension Plan are 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 2015 2014

Accrued benefit and unfunded obligation 8,951 7,226

Unamortized actuarial loss (1,636) (687)

Accrued benefit liability 7,315 6,539

Accrued benefit obligation 2015 2014

Accrued benefit obligation at beginning of year 7,226 6,549

Service cost 441 502

Interest cost 311 281

Benefits paid (142) (106)

Actuarial Loss – experience & assumptions 1,115 -

Accrued benefit obligation at end of year 8,951 7,226

Pension Expense for the Supplemental Pension Plan 2015 2014

Service cost 441 503

Interest cost 311 281

Amortization of actuarial losses during the year 166 171

918 955

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 2015 2014

Discount rate, year-end obligation 3.25% 4.00%

Discount rate, annual pension expense 3.25% 4.00%

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

Salary increases, year-end obligation 3.00% 3.50%

Remaining service life, year-end obligation 5 years 6 years

ANNUAL REPORT 2015

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noTE 8 FEES And oThER EnFoRCEmEnT RECEiPTS

Fees 2015 2014

Distribution of securities 14,943 14,139

Registrations 10,895 10,498

Annual financial statements 4,945 5,227

SEDI, exempt distributions & registration late fees 394 104

Orders (applications) 192 228

Fees 31,369 30,196

Other enforcement receipts 2015 2014

Settlement payments, disgorgements and cost recoveries assessed 785 11,892

Less provision for uncollectible amounts (488) (11,023)

Plus recoveries of prior-year assessments 5 168

Less repayment (147) -

Other enforcement receipts 155 1,037

noTE 9 nATionAL SySTEmS

Canadian Securities Administrators (CSA), National Systems and Operating Agreements

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 exceed revenues. Alternatively, any revenues in excess of system operating costs (surplus) are 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, 2015 the accumulated operating surplus totalled $128.8 million (March 31, 2014 - $115.7 million) made up of $35.4 million cash held by the Ontario Securities Commission earning interest at a rate of 1.85 per cent below the prime rate and $90 million marketable securities held in one year term deposits and GICs earning 1.25 per cent to 2.00 per cent. The average rate of interest for the year was 1.32 per cent (1.15 per cent in F2014).


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noTE 10 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 March 31, 2016 and November 30, 2025, and rental of office equipment to 2018 totalling $51,064 ($53,935 in F2014). These commitments become expenses of the ASC when the terms of the contracts are met.

2015–16 3,766

2016–17 4,376

2017–18 4,468

2018–19 4,468

2019–20 4,568

Thereafter 29,418

Total 51,064

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

b) contingent Liabilities

There are appeals involving the ASC that arise in the normal course of business. The outcome of these matters are not determinable at this time, therefore impact to operating deficit cannot be determined. However, management does not expect the impact to be material.

noTE 11 bUdGET

The ASC’s F2015 budget was approved by the Commission on January 15, 2014.

noTE 12 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 $49 in administration expenses primarily for insurance and postage ($36 in F2014).

noTE 13 ComPARATivE FiGURES

Certain F2014 figures have been reclassified to conform to the F2015 presentation.

ANNUAL REPORT 2015

45

Schedule of Salaries & Benefits – Schedule A

thousands of dollars 2015 2014

base salary1 Cash benefits2 non-cash benefits3 Total Total

Chair, Securities Commission4 533 89 169 791 764

Executive Director 375 63 181 619 596

Vice-Chair, Securities Commission4 361 57 142 560 542

Vice-Chair, Securities Commission4,6 356 56 57 469 381

Independent Members5 474 – – 474 522

1 Base salary includes regular base pay and Independent Member compensation.

2 Cash benefits include variable pay, Chair and Executive Director’s automobile allowances, transit allowances and memberships.

3 Employer’s share of all employee non-cash 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 7(d) of the financial statements and summarized in the accounting narrative.

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

5 During the year there were changes in the Member Fees. The Independent Members’ compensation includes total fees paid for governance responsibilities of $302,000 ($290,000 in F2014) and hearing and application panel participation of $172,000 ($232,000 in F2014). Independent Member fees include:

April 1 to October 14 Effective on or after October 15

Annual retainer $ 10,000 $ 10,000

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

Committee memberships (Audit Committee) $ 2,500 $ 4,000

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

Committee chairing (Audit Committee) $ 5,000 $ 8,000

Lead Independent Member $ 5,000 $ 5,000

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

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

Hearing fees $1,000 per hearing day; and $125 per hour of related preparation, review and decision writing

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

Hearing fees (Panel Chair) $1,000 per hearing day; and $125 per hour of related preparation, review and decision writing

$2,000 per hearing day; and $250 per hour of related preparation, review and decision writing

6 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.


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Supplemental Retirement BenefitsUnder the terms of the Supplemental Pension Plan as described in Note 7(d) of the ASC financial statements, executive officers may receive supplemental retirement payments. Supplemental Pension Plan costs, as detailed below for the four most highly paid executives of the ASC, 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 as described in Note 7(d). The cost of these benefits is actuarially determined using the projected benefit method pro-rated on services, a cost of borrowing interest rate and management’s best estimate of expected inflation, salary costs and the remaining service period for 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 actuarial 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

thousands of dollars 2015 20141

Current service costs

Prior service and other costs Total Total

Chair, Securities Commission 144 (5) 139 129

Executive Director 118 31 149 142

Vice-Chair, Securities Commission 87 25 112 106

Vice-Chair, Securities Commission2 - - - -

The accrued obligation for each of the four highest paid executives under the Supplemental Pension Plan is outlined in the following table:

Accrued obligations

thousands of dollars

Accrued obligation April 1, 2014

Changes in accrued obligation

Accrued obligation march 31, 2015

Chair, Securities Commission 900 130 1,030

Executive Director 1,189 249 1,438

Vice-Chair, Securities Commission 649 274 923

Vice-Chair, Securities Commission2 - - -

1 The previous Vice-Chair had annual expenses of $137,000 in F2014.

2 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.

ANNUAL REPORT 2015

47

Glossary

Alberta Investment Management corporation (AIMco)

AIMCo is an Alberta government agency that is responsible for the investments of 27 pension, endowment and government funds in the province.

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.

disciplined Persons List (dPL)

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

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.

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.

Natural gas Exchange (Ngx)

The NGX is a Canadian-based energy exchange that provides trading, clearing and data services for natural gas and electricity contracts.

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.

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.

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.

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 Exchange (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.


48

GLoSSARy

2015 AdviSoRy CommiTTEES

The ASC has established five advisory committees of industry representatives to evaluate 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.

financial Advisory committee

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

Scott Bandura, CA PricewaterhouseCoopers LLP

Rhonda Bashnick, CA Shaw Communications Inc.

Terry Booth, FCA, CF Collins Barrow Calgary LLP

Matt Bootle, FCA Ernst & Young LLP

Dell Chapman, CA Corporate Director

Sean Du Plessis, CA Meyers Norris Penny LLP

Imam Hasan, CA KPMG LLP

Mike Mazar, CA, CFA BMO Capital Markets

Patricia Newson, FCA Corporate Director

Christopher Webster, CGA,CFA Pengrowth Corporation

Ward Zimmer, CA Deloitte 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.

David P. Carey, P.Eng., MBA ARC Resources Ltd.

Jonathan Fleming, MBA Granite Oil Corp.

Chris Fong, P.Eng. Retired

Harry Helwerda, P.Eng., FEC Sproule Associates Limited

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

Robin Mann, MSc, CPG, P.Geol. AJM Deloitte

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

Ian McDonald, P.Eng. Nexen Energy ULC

Rob Morgan, P.Eng. Crew Energy Inc.

Jim Screaton, CA Corval Energy Ltd.

James Surbey, B.Eng., LLB Birchcliff Energy Ltd.

John Zahary, P.Eng. Altex Energy Ltd.

securities Advisory committee

This committee is composed of practising securities lawyers who review and comment on proposed legislation, rules and policies, and provide general advisory services to the ASC.

Keith Chatwin, LLB, MBA Stikeman Elliott LLP

Scott Clarke, B.Comm., LLB Blake, Cassels & Graydon LLP

Nicholas (Nick) Fader, LLB Bennett Jones LLP

Leanne C. Krawchuk, B.Comm., LLB Dentons Canada Ltd.

David R.J. Lefebvre, B.Comm., LLM, MA Gowling Lafleur Henderson

William Maslechko, LLB Burnet, Duckworth & Palmer LLP

John Osler, Q.C. McCarthy Tétrault LLP

Tyler Robinson, B.Comm., LLB Enbridge Pipelines Inc.

Bryce Tingle, LLB, LLM N. Murray Edwards Chair in Business Law, University of Calgary

Andrea Whyte, B.Sc., LLB Osler, Hoskin & Harcourt LLP

financial Review committee

This committee reviews and comments on the ASC’s annual business plan and budget.

John Chambers, MBA FirstEnergy Capital Corp

Kerry D. Dyte, Q.C. Cenovus Energy Inc.

Robert Engbloom, Q.C. Norton Rose Fulbright Canada LLP

derivatives Advisory committee

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

Cameron Bowman, LLB ATB Financial

Carissa Browning, LLB TransAlta Corporation

Priscilla Bunke, LLB, LLM Dentons Canada Ltd.

Keith Chatwin, LLB, MBA Stikeman Elliott LLP

Antony Deakin, Ph.D. BP Canada Energy Group ULC

Cheryl Graden, LLB, Master of Laws TMX Group

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

Darren McAdoo, B.Comm., CMA Suncor Energy Inc.

Brent M. Morgan, CFA Deloitte Canada

Dan Zastawny Net Energy Inc.

commission Member committees

Board Committees are made up of the Members listed below. All are independent except William S. Rice and Kari F. Horn, who sit as ex officio members where indicated. As Lead Independent Member, Richard A. Shaw sits as an ex officio member of all committees.

Audit committee

Daniel McKinley (Chair)

Terry Allen

Fred R. N. Snell

William S. Rice (ex officio)

Richard A. Shaw (ex officio)

human Resources committee

Webster (Web) Macdonald (Chair)

Ian Beddis

Kate Chisholm


Richard A. Shaw (ex officio)

governance committee

Richard A. Shaw (Chair)

Bradley Nemetz

Ann Rooney


Kari F. Horn (ex officio)

Attendance

william S. Rice q.C., Chair Commission - 10/11 (90.9%) Audit Committee - 4/4 (100%) Governance Committee - 4/4 (100%) Human Resources Committee - 2/2 (100%)

Tom Cotter vice-Chair Commission - 11/11 (100%)

Stephen R. murison vice-Chair Commission - 10/11 (90.9%)

Richard A. Shaw q.C., iCd.d Commission - 11/11 (100%) Audit Committee - 4/4 (100%) Governance Committee - 4/4 (100%) Human Resources Committee - 2/2 (100%)

Terry Allen CFA, iCd.d Commission - 11/11 (100%) Audit Committee - 4/4 (100%)

dr. ian beddis Commission - 11/11 (100%) Human Resources Committee - 2/2 (100%)

kate Chisholm q.C., iCd.d Began appointment after F2015

webster (web) macdonald q.C. Commission - 11/11 (100%) Human Resources Committee - 2/2 (100%)

daniel mckinley FCA, iCd.d Commission - 11/11 (100%) Audit Committee - 4/4 (100%)

bradley nemetz q.C. Commission - 10/11 (90.9%) Governance Committee - 4/4 (100%)

Ann Rooney FCA, iCd.d Commission - 11/11 (100%) Governance Committee - 4/4 (100%)

Fred R. n. Snell FCA Commission - 10/11 (90.9%) Audit Committee - 4/4 (100%)

commission Member (retired)

maureen mcCaw Commission - 9/11 (81.8%) Human Resources Committee - 2/2 (100%)

ASC Committees

ANNUAL REPORT 2015

49

ASC CommiTTEES

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