BOR 95/08 - Transitional Relief [Rescinded]

IN THE MATTER OF THE SECURITIES ACT S.B.C. 1985, c. 83

AND

IN THE MATTER OF TRANSITIONAL RELIEF

Order Under Sections 33, 59, 73.2(a), 113(b) and 159.4 of the Securities Act and Sections 3(8) and 137(2) of the Securities Rules

WHEREAS the Lieutenant Governor in Council, by B.C. Reg. 479/95, ordered, among other things, effective January 1, 1996 that,

(a) certain amendments to the Securities Act, S.B.C. 1985, c. 83 (the "Act") are brought into force;

(b) the Securities Regulation, B.C. Reg. 270/86 (the "Old Regulation") is repealed;

(c) the regulation entitled the "Securities Rules" (the "Rules"), attached to B.C. Reg. 479/95, is made and is designated to be a rule of the Commission; and

(d) the Commodity Contract Act, R.S.B.C. 1979, c. 56 (the "CCA") is repealed;

AND WHEREAS, effective January 1, 1996, the Commission has repealed Interim Local Policy Statement 3-22 dated February 10, 1989 ("Interim LPS 3-22"), and the Superintendent has replaced it with Local Policy Statement 3-22 dated December 7, 1995 ("LPS 3-22");

AND WHEREAS a number of requirements that under the Old Regulation related only to financial statements contained in a prospectus, such as the requirement for a foreign issuer to reconcile its financial statements to Canadian generally accepted accounting principles ("GAAP"), the Rules apply these requirements to all financial statements filed with the Commission;

AND WHEREAS the Rules have added a number of new requirements applicable to all financial statements filed with the Commission, such as the requirement in section 2(6) of the Rules for a foreign issuer to explain the significant differences between the auditing standards applied and Canadian generally accepted auditing standards ("GAAS"), and in section 3(12) of the Rules for an issuer that is required to have an audit committee to have that audit committee review all financial statements filed with the Commission;

AND WHEREAS sections 19 and 20 of the Rules have increased the minimum risk adjusted capital and working capital for certain dealers, underwriters and advisers;

AND WHEREAS section 21 of the Rules and LPS 3-22 require all dealers, including exchange contracts dealers that are not currently required to be bonded under the CCA, to maintain a financial institution bond;

AND WHEREAS section 23 of the Rules includes a new requirement for exchange contracts dealers to become members of the compensation or contingency trust fund referred to in section 23 of the Rules, which they are not required to do under the CCA;

AND WHEREAS the Rules do not contain a provision similar to section 13.1 of the Old Regulation, which deemed a registered broker, investment dealer and securities dealer to be registered as an underwriter, and therefore section 20(1)(b) of the Act applies, requiring a person to register as an underwriter in order to act as an underwriter;

AND WHEREAS section 45 of the Rules requires an underwriter to establish and apply written prudent business procedures or other safeguards for underwriting distributions of securities and to maintain and file a copy of these procedures and other safeguards;

AND WHEREAS section 50(3) of the Rules requires a dealer to advise its clients, on every statement of account, or by other means that the Commission or Executive Director has approved, of the availability of information about the dealer that is required to be disclosed under section 50(1) of the Rules, certain of which information is not required to be disclosed under section 86 of the Old Regulation;

AND WHEREAS section 60 of the Rules and LPS 3-22 require branch managers and administration officers of dealers and compliance officers of underwriters to satisfy certain proficiency requirements;

AND WHEREAS section 61 of the Rules and LPS 3-22 require partners, directors, officers and salespersons of securities dealers to satisfy certain proficiency requirements that are additional to the proficiency requirements required under sections 59 and 62 of the Old Regulation and Interim LPS 3-22;

AND WHEREAS the definition of "sophisticated purchaser" set out in section 1 of the Rules includes, among other things, a person with a minimum level of net worth, net assets or net income, which are requirements that did not form part of the definition of "sophisticated purchaser" set out in section 1 of the Old Regulation;

AND WHEREAS sections 91, 130 and 135 of the Rules require an issuer to obtain an acknowledgment in Form 20A from an individual purchaser who purchases a security with an aggregate acquisition cost of not less than $97,000 under sections 31(2)(5) and 55(2)(4) of the Act;

AND WHEREAS section 136 of the Rules requires a control person of a reporting issuer to file a notice and declaration in Form 23 when using the exemptions in sections 55(2)(1), (3), (4), (6) or (16)(ii) of the Act, not just the exemption in section 128(d) of the Rules (sections 117(c) and (d) of the Old Regulation);

AND WHEREAS section 137 of the Rules requires a control person of a reporting issuer to file an early insider report when securities are sold under any exemption, not just the exemption in section 128(d) of the Rules;

AND WHEREAS sections 140, 141 and 143 of the Rules require holders that have acquired securities of an exchange issuer before it became an exchange issuer to comply with the seed share resale requirements of the Vancouver Stock Exchange (the "Exchange");

AND WHEREAS sections 142 and 143 of the Rules provide new hold periods for securities issued by exchange issuers under sections 55(2)(18) (resource property acquisitions) and 55(2)(24) (securities to brokers in consideration for services rendered in connection with a distribution) of the Act, and sections 128(e) (securities for debt) and 128(f) (bonus or finder's fees) of the Rules;

AND WHEREAS effective January 1, 1996, the Act will no longer include the exemption in former section 58(1)(c) of the Act, which was available for a distribution of securities qualified by a statement of material facts;

AND WHEREAS section 149 of the Rules requires an issuer to send a quarterly report, filed under section 152 of the Rules, to the same security holders that receive its financial statements;

AND WHEREAS section 110.1 of the Act includes new requirements applicable to related party transactions of mutual funds and their responsible persons;

AND WHEREAS securities market participants require a period of time to adjust to these new requirements;

AND WHEREAS the Commission considers that to do so would not be prejudicial to the public interest;

EFFECTIVE January 1, 1996, IT IS ORDERED

Exemptions relating to Part 1

Executive Director's consent to use of foreign statements, reconciliation with GAAP and GAAS, public accountant's report and formatting - continuous disclosure

1. under section 3(8) of the Rules that

(a) section 2(4) of the Rules, which requires a foreign issuer, other than a U.S. issuer, to obtain the Executive Director's written consent to financial statements being prepared in accordance with section 2(3)(b) of the Rules,

(b) section 2(5) of the Rules, which requires the notes to the financial statements of a foreign issuer to state the accounting principles that have been applied and explain and quantify any significant differences between these principles and GAAP,

(c) section 2(6) of the Rules, which requires the auditor's report on the financial statements of a foreign issuer to explain any significant differences between the auditing standards used in the preparation of the financial statements and GAAS,

(d) section 2(7) of the Rules, which requires a public accountant's report on the financial statements of a foreign issuer to explain any significant differences between the procedures performed to prepare the report in accordance with section 2(3)(b) of the Rules and the procedures necessary to prepare a Canadian review engagement report or notice to reader, and

(e) sections 3(10), 3(11) and 3(13) of the Rules, which require changes to the formatting of financial statements,

do not apply to financial statements filed under Part 10 of the Act or the Rules, for periods ended before April 1, 1996;

Reconciliation with GAAS and public accountant's report - prospectus and take over bid

2. under section 3(8) of the Rules that

(a) section 2(6) of the Rules, which requires the auditor's report on the financial statements of a foreign issuer to explain any significant differences between the auditing standards used in the preparation of the financial statements and GAAS, and

(b) section 2(7) of the Rules, which requires a public accountant's report on the financial statements of a foreign issuer to explain any significant differences between the procedures performed to prepare the report in accordance with section 2(3)(b) of the Rules and the procedures necessary to prepare a Canadian review engagement report or notice to reader,

do not apply to financial statements contained in a preliminary prospectus or a prospectus, where a receipt for the preliminary prospectus is obtained before July 1, 1996, or to financial statements contained in a take over bid circular that is filed before July 1, 1996;

Audit committee review

3. under section 3(8) of the Rules that section 3(12) of the Rules, which requires an issuer that is required to have an audit committee to have that committee review all financial statements, does not apply to financial statements for periods ended before January 1, 1996;

Exemptions relating to Part 4

Underwriter registration requirements and procedures

4. under section 33 of the Act that

(a) section 20(1)(b) of the Act, which requires a person that acts as an underwriter to be registered as an underwriter, and

(b) section 45 of the Rules, which requires an underwriter to establish and apply written prudent business procedures or other safeguards for underwriting distributions of securities and to maintain and file a copy of these procedures and other safeguards,

do not apply to a registered broker, investment dealer or securities dealer until the later of April 1, 1996 or the registrant's next renewal date for registration as a dealer, provided that, where the registrant's next renewal date for registration is after January 1, 1997, the registrant files, no later than January 1, 1997, a description of its written prudent business procedures and other safeguards for underwriting distributions of securities;

Capital requirements

5. under section 33 of the Act that sections 19 and 20 of the Rules, which require certain dealers, underwriters and advisers to maintain increased risk adjusted capital and working capital, do not apply to a registered dealer, underwriter or adviser until April 1, 1996, provided that the registrant complies with the capital requirements set out in the Old Regulation and Interim LPS 3-22;

Bonding requirements

6. under section 33 of the Act that section 21 of the Rules and related provisions of LPS 3-22, which require certain dealers, underwriters and advisers to maintain a financial institution bond, do not apply to a registered dealer, underwriter or adviser until April 1, 1996, provided that the registrant complies with the bonding requirements, if any, set out in the Old Regulation, Interim LPS 3-22 and the registrant's conditions of registration;

Participation in contingency trust fund

7. under section 33 of the Act that section 23 of the Rules, which requires certain dealers to participate in and contribute to a compensation or contingency trust fund, does not apply to an exchange contracts dealer until April 1, 1996;

Registrant information

8. under section 33 of the Act that a registered dealer is exempt from section 50(3) of the Rules until July 1, 1996, provided that the dealer complies with the requirement in section 86(1)(b) of the Old Regulation;

Qualification requirements

9. under section 33 of the Act that the proficiency requirements for branch managers and administration officers of dealers and for compliance officers of underwriters under section 60 of the Rules and LPS 3-22 do not apply until October 1, 1996, provided that a branch manager or administration officer of a dealer or a compliance officer of an underwriter complies with the proficiency requirements, if any, set out in the Old Regulation and Interim LPS 3-22;

10. under section 33 of the Act that the proficiency requirements for partners, directors, officers and salespersons of securities dealers under section 61 of the Rules and LPS 3-22 do not apply until October 1, 1996, provided that a partner, director, officer or salesperson complies with the proficiency requirements, if any, set out in the Old Regulation and Interim LPS 3-22;

Exemptions relating to Parts 5 & 8

Distributions to "sophisticated purchasers"

11. under sections 33 and 59 of the Act that sections 20 and 42 of the Act do not apply to a distribution of a security to a "sophisticated purchaser", provided that

(a) the purchaser is a "sophisticated purchaser" as defined in section 1 of the Old Regulation,

(b) the issuer has complied with all of the provisions in section 76(a) or (b) and section 117(a) or (b) of the Old Regulation with respect to the distribution of the security,

(c) the issuer and the "sophisticated purchaser" have entered into a signed agreement before January 1, 1996, committing the "sophisticated purchaser" to acquire the security, or the issuer and a registered dealer have entered into a signed agreement before January 1, 1996 under which the dealer has agreed to distribute the security to "sophisticated purchasers",

(d) the initial filing for acceptance of the distribution, if required, is made to the relevant exchange before February 1, 1996, and

(e) the issuer has distributed the security to the "sophisticated purchaser" before July 1, 1996;

Distributions to individual purchasers in amounts of at least $97,000

12. under sections 33 and 59 of the Act that sections 20 and 42 of the Act do not apply to a distribution of securities by an issuer to an individual purchaser, provided that the issuer and the individual purchaser have entered into a signed agreement before April 1, 1996, committing the purchaser to acquire the securities, and the issuer has complied with all requirements for a distribution of securities under sections 31(2)(5) and 55(2)(4) of the Act, other than the requirement in sections 91 and 130 of the Rules to obtain a Form 20A acknowledgment from the purchaser;

Form 20A acknowledgment

13. under sections 33 and 59 of the Act that sections 20 and 42 of the Act do not apply to a distribution of securities by an issuer to a purchaser who has signed an acknowledgment in the old Form 20A (previously required under section 128 of the Old Regulation), provided that

(a) the issuer has complied with all other requirements for use of the exemptions in section 89(a), (b) or (g) and section 128(a), (b) or (h) of the Rules, and

(b) the acknowledgment is signed by the purchaser before April 1, 1996;

14. under section 159.4 of the Act that section 135(3) of the Rules, which requires an issuer to retain an acknowledgment in Form 20A, does not apply to an issuer with respect to a distribution for which the issuer inadvertently files either the old Form 20A or new Form 20A before April 1, 1996;

Notice by control person

15. under section 59 of the Act that section 42 of the Act does not apply to a trade by a control person before April 1, 1996, provided that the control person complies with all of the requirements necessary for the distribution of securities under

(a) an exemption in section 55(2) of the Act, other than the exemption in section 128(d) of the Rules, or

(b) an order made pursuant to section 59 of the Act,

except for the requirement in section 136 of the Rules to file a form 23;

Early insider report

16. under section 137(2) of the Rules that section 137(1) of the Rules, which requires a control person of a reporting issuer to file an early insider report upon distributing securities under any exemption in section 55(2) of the Act or an order issued under section 59 of the Act, does not apply to a trade made before April 1, 1996, other than a trade made pursuant to section 128(d) of the Rules;

Deemed distributions of securities of exchange issuers

17. under section 59 of the Act that section 42 of the Act does not apply to a deemed distribution by the holder of a security of an exchange issuer issued under section 55(2)(18) or (24) of the Act or section 128(e) or (f) of the Rules or an exchanged security issued in relation to that security, provided that

(a) the issuer and the holder have entered into a signed agreement before January 1, 1996, respecting the issuance of the security,

(b) the initial filing for acceptance of that agreement, if required, is made to the relevant exchange before February 1, 1996,

(c) the issuer has distributed the primary security to the holder before July 1, 1996, and

(d) the holder has complied with the resale requirements in sections 133 and 134 of the Old Regulation that would have been applicable to the security that is the subject of the trade had the Old Regulation not been repealed;

Deemed distribution of a security issued to a registrant in connection with an SMF distribution

18. under section 59 of the Act that section 42 of the Act does not apply to a deemed distribution by the holder of a security of an exchange issuer issued under section 55(2)(24) of the Act in consideration for services performed by a registered dealer in connection with a distribution of securities qualified by filing a statement of material facts ("SMF"), or an exchanged security issued in relation to that security, provided that

(a) the issuer and the registered dealer have entered into a signed agreement before February 1, 1996 under which the dealer has agreed to distribute securities of the issuer,

(b) an SMF in Form 24 is filed before February 1, 1996 in accordance with Local Policy Statement 3-26,

(c) the SMF is accepted by the Exchange and the Executive Director before May 1, 1996,

(d) the primary security is distributed on or before the earlier of August 1, 1996 and 180 days after the SMF was accepted by the Executive Director, and

(e) each of the requirements of section 142(2)(e) to (i) has been met with respect to the security that is the subject of the trade;

Statement of material facts

19. under section 59 of the Act that section 42 of the Act does not apply to a distribution of a security that is

(a) listed and posted for trading on the Exchange, and

(b) made on or through the facilities of the Exchange in accordance with the rules of the Exchange or the requirements of the commission,

provided that

(c) the requirements applicable to a distribution of securities under the former section 58(1)(c) of the Act are complied with as if section 58(1)(c) of the Act had not been repealed,

(d) an SMF in Form 24 is filed before February 1, 1996 in accordance with Local Policy Statement 3-26,

(e) the SMF is accepted by the Exchange and the Executive Director before May 1, 1996, and

(f) the securities are distributed or, in the case of exchanged securities, the primary securities are distributed on or before the earlier of August 1, 1996 and 180 days after the SMF was accepted by the Executive Director;

Primary securities qualified by SMF

20. under section 59 of the Act that section 42 of the Act does not apply to a deemed distribution by the holder of a security that is an exchanged security issued in relation to a primary security, where the security that is the subject of the trade, an earlier exchanged security or the primary security has been distributed under an SMF on or before the earlier of August 1, 1996 and 180 days after the SMF was accepted by the Executive Director;

Deemed Distribution

21. under section 59 of the Act that a trade in a security acquired under paragraphs 11, 12, and 13 of this order, or in an exchanged security issued in relation to the security, is deemed to be a distribution, unless the trade is made in compliance with the resale restrictions set out in sections 140 to 143, as if the distributions had been made under 55(2)(4) of the Act or section 128(a), (b) or (h) of the Rules, as applicable;

Exemptions relating to Part 10

Delivery of quarterly report to security holders

22. under section 73.2(a) of the Act that section 149 of the Rules does not apply to require an exchange issuer to deliver a quarterly report to security holders where the period end for the quarterly report is before January 1, 1996;

Exemptions relating to Part 13

Responsible person of a mutual fund

23. under section 113(b) of the Act that section 110.1 of the Act does not apply to a related party transaction between a mutual fund and its responsible persons, provided the transaction is entered into before April 1, 1996.

DATED at Vancouver, British Columbia, on December 15, 1995.

Reference: NIN#95/39
NIN#95/40
NIN#95/41
NIN#95/42
NIN#95/44