News Release

Vancouver - In a speech  to the Vancouver Board of Trade today, British Columbia Securities Commission Chair, Doug Hyndman, announced a new program that aims to disrupt, stop, and prevent locally-based abusive junior market activity taking place in the U.S. over-the-counter markets.

"It is for the sake of the majority that we must deal with the bad apples who can spoil it for everyone," said Hyndman. "Our goal is to make B.C. the most transparent, toughest jurisdiction anywhere for OTC trading."

Unfortunately, a disproportionate number of U.S. OTC players who engage in abusive activities have visible connections to B.C. Their activities damage the reputation of the province's capital markets, harming the interests of legitimate issuers, investment dealers, and other market participants.

The plan to disrupt, stop, and prevent abusive junior market activity has five key points:

• Improve disclosure and compliance by B.C. OTC issuers
• Discourage the manufacture and sale of U.S. OTC shell companies for abusive purposes
• Disrupt abusive promotions
• Hold dealers responsible for their trading activities in the U.S. OTC market
• Discourage the participation by lawyers, accountants, geologists and other professionals who facilitate abusive market practices

Much of the BCSC plan focuses on "BC OTC" issuers. These are issuers that have significant connections to B.C. and whose securities are quoted on U.S. OTC markets, but exclude issuers whose securities also trade on a more senior market.

The U.S. OTC markets consist of securities quoted on the OTC Bulletin Board (OTCBB) or the Pink Sheets. These markets are legal and home to legitimate businesses, but are vulnerable to abuse because of low regulatory scrutiny and issuer requirements are not onerous. 
           
Currently, there are approximately 500 OTCBB and 200 Pink Sheet companies that have some kind of B.C. connection - often professionals providing their services to these companies. Some of these companies are B.C.-based, but often head offices are elsewhere, Nevada and Florida, for example.

Here are some highlights of the initiatives in the BCSC plan to deal with disreputable B.C.-based individuals and companies working on the U.S. OTC markets:

• B.C. OTC companies must comply with timely and continuous disclosure requirements
• Directors and officers will have to file personal information forms
• Focused enforcement action will aim to disrupt the manufacture of B.C. shell companies, which are used as vehicles to falsely promote securities
• Resale restrictions will be imposed on B.C. residents who buy B.C. OTC issuer shares prior to it going public
• B.C.-based investment dealers actively trading on in the U.S. OTC market will have to comply with new conditions of registration
• SpamWatch, which began in May 2007, targets B.C. OTC companies that are part of a spam campaign - to date, the BCSC has issued five three-day halt orders
• Companies targeted by spam and those that have been halt-traded are posted at www.InvestRight.org, the BCSC investor education website
• Referrals will be made to professional self-regulatory associations for disciplinary purposes when appropriate

After publishing detailed policy proposals on this new program, the BCSC will consult with the public and industry. A notice outlining the plan and all of the initiatives is available at www.bcsc.bc.ca.

"We don't expect to eliminate completely all B.C.-based abuses of U.S. OTC markets, but if as a result of these initiatives, B.C.'s share of abusive U.S. OTC market activity is no longer disproportionate, that will be a significant success," said Hyndman.  "It will also be a first step to the ultimate goal of reducing our share of this activity to a disproportionately low level."

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. If you have questions, contact Ken Gracey, Media Relations, 604-899-6577.