NIN 94/15 - Proposed Amendments to the Securities Regulation [NIN - Rescinded]
| Published Date: | 1994-10-07 |
|---|---|
| Effective Date: | 1994-10-05 |
The Commission is publishing for comment a significant package of proposed amendments to the Securities Regulation. Some of these proposed amendments implement part of the Government's response to the Matkin Report. Others are proposed by the Commission. The amendments are the culmination of a lengthy process beginning with the passage of the Securities Amendment Act, 1990.
The amendments are consequential to the Securities Amendment Act, 1990 and Securities Amendment Act, 1992; address abuses and inequities in the market; simplify the regulatory regime through reorganizing some provisions and repealing others; codify existing practices; and incorporate plain language.
The proposed amendments can be grouped into a number of areas:
Exchange Contracts
The Securities Act was amended by the Securities Amendment Act, 1990, S.B.C. 1990, c. 25, to incorporate provisions regulating the trading of exchange contracts, which are defined to include futures and options. These amendments are not yet in force and trading in futures and options continues to be regulated under the Commodity Contract Act, R.S.B.C. 1979, c. 56. The proposed amendments to the Securities Regulation dealing with exchange contracts are consequential to the Securities Amendment Act, 1990 and will facilitate bringing the regulation of exchange contracts under the Securities Act. See particularly Part 4 of the Securities Regulation, which provides for a number of new registration categories relating to exchange contracts.
Financial Reporting
The amendments clarify the financial reporting provisions and make them consistent, where appropriate, with national policies concerning mutual funds and future oriented financial information. One amendment prohibits issuers, during a distribution, from using "future oriented financial information", defined more broadly than "forecast", unless the future oriented financial information is contained in a prospectus. A second amendment requires foreign issuers to obtain the consent of the Superintendent (executive director) to use non-Canadian and non-United States generally accepted accounting principles ("GAAP"), with respect to financial statements included in a prospectus, and requires foreign issuers to reconcile their continuous disclosure material, as well as any financial statements filed with a prospectus, to Canadian GAAP.
Registration
The Commission proposes a rewrite of Part 4 of the Securities Regulation to codify existing practices; simplify the record keeping requirements; increase capital requirements for registrants; rationalize categories of registration (e.g., by the creation of a new category of "advising employee"); and move certain provisions from Part 6 into Part 4 of the Securities Regulation. The proposed amendments also impose a requirement for separate registration of underwriters, that is, a broker, investment dealer or securities dealer will no longer be deemed to have been granted registration as an underwriter. Under the proposed amendments, an underwriter must be a member of a self regulatory body or exchange in Canada.
The Commission is issuing for comment, under cover of a separate notice, draft amendments to Local Policy Statement 3-22. This draft policy contains specific proficiency and qualification requirements to replace those proposed to be deleted from Division 7 of Part 4 of the Securities Regulation.
Prospectus Renewals
The proposed amendments contain a new Division 4 of Part 7 which, together with section 7 of the Securities Amendment Act, 1992, clarifies the existing rules for prospectus renewals. By moving many of the substantive requirements into the Securities Regulation, the Commission can move to a more streamlined procedure in the future at the same time as other Canadian jurisdictions.
Exemptions
The proposed amendments to Parts 5 and 8 of the Securities Regulation tighten the existing rules for exempt market transactions, clarify drafting and simplify the resale rules. Among other things, these proposed amendments would:
(a) define sophisticated purchaser with a "bright line" test;
(b) remove certain exemptions the Commission no longer considers appropriate;
(c) impose hold periods on securities issued by exchange issuers under a number of exemptions to which hold periods do not currently apply; and
(d) restrict trades by insiders during periods of unusual promotional activity.
Miscellaneous
The most significant series of miscellaneous amendments concern the proposal of the Canadian Securities Administrators to facilitate electronic filing of records under the Securities Act and Securities Regulation. These amendments address signatures, "red herrings", graphs and photographs, and multiple copies. Some amendments to the Securities Act will also be required to facilitate electronic filing.
Another significant proposed amendment is the requirement for a person holding securities of a reporting issuer on behalf of another person to disclose to the issuer the name, address and holdings of the person, except where the person has given instructions to the contrary and in accordance with any requirements that the Commission may impose. This proposal is intended to facilitate communication by a reporting issuer to non-registered holders of its securities.
The proposed amendments also exempt individual security holders from filing an insider report where the transaction affects the security holders as a class and an officer of the issuer files written notice within ten days. Examples of affected transactions include stock dividends, stock splits, consolidations, amalgamations, reorganizations and mergers.
The Commission has not proposed any amendments to Part 2 of the Securities Regulation at this time. However, it anticipates that it will propose amendments to this Part in the near future.
Proposed amendments to the Registration Transfer Regulation, B.C. Reg. 286/86, made under section 159(2) of the Securities Act, to Form 20A and to the form of demand for production under section 128 of the Securities Act are also being released for comment as part of the package of proposed amendments.
Request for Comments
Direct written comments by November 17, 1994 to:
Comment letters submitted in response to Requests for Comment are placed in the public file and form part of the public record, unless confidentiality is requested. Although comment letters requesting confidentiality will not be placed on the public file, freedom of information legislation may require the Commission to make comment letters available. Persons submitting comment letters should therefore be aware that the press and members of the public may be able to obtain access to any comment letter.Susan Adams
A/Director
Policy and Legislation
British Columbia Securities Commission
1100 - 865 Hornby Street
Vancouver, B.C. V6Z 2H4
Due to the extensive nature of the amendments proposed to the Securities Regulation, there is no black-lined draft of the proposed amendments. Instead, refer to the explanatory notes that accompany the proposed amendments in order to identify changes.
DATED at Vancouver, British Columbia, on October 5, 1994.
Douglas M. Hyndman
Chair
Attachment