NIN 94/16 - Draft Amended Local Policy Statement 3-22 Registration Requirements [NIN - Rescinded]

The Commission is publishing for comment draft amended Local Policy Statement 3-22, "Registration Requirements" (the "Draft Policy"). This notice provides background to the Draft Policy, which is intended to replace Interim Local Policy Statement 3-22, "Requirements for Registration for Trading in Securities", adopted by the Commission on February 10, 1989.

The Draft Policy sets out, in plain language and convenient form, the principal requirements for registration in British Columbia as a dealer, underwriter or adviser and for registration as an individual acting on behalf of a dealer or adviser.

The Commission is also publishing for comment, under cover of a separate notice, proposed amendments to the Securities Regulation (the "Draft Regulation") that relate, in part, to registration issues. The Draft Policy restates many of the provisions set out in the Draft Regulation as if those provisions were in force, and cites references to both the Draft Policy and to the Securities Act as authority for various registration requirements. The references are for convenience only.

Categories of Registration and Proficiency Requirements

The Draft Regulation has created a new category of registration, "exchange contracts dealer" (discussed in the next section), and the Draft Policy reflects this change. The existing categories of registration of mutual fund dealer, security issuer, real estate securities dealer and scholarship plan dealer, together with exchange contracts dealer, have been grouped under a new general category of "limited dealer". The existing categories of underwriter, portfolio manager, investment counsel and securities adviser remain. Because the Draft Regulation does not set out education and experience requirements for individuals acting on behalf of each category of registration, these are now set out in detail in the Draft Policy.

Exchange Contracts

The Securities Act was amended by the Securities Amendment Act, 1990, to incorporate provisions, not yet in force, regulating the trading of exchange contracts, which are defined to include futures and options and are now regulated under the Commodity Contract Act. In anticipation of these provisions coming into force, the Draft Policy incorporates registration requirements for persons that trade in, or advise on, exchange contracts.

For example, the Draft Policy sets out registration requirements for a new category of registrant, limited dealer - exchange contracts dealer, that is authorized to trade in any combination of exchange contracts or forward contracts. Similarly, the Draft Policy sets out registration requirements for portfolio managers, investment counsel and securities advisers that advise on exchange contracts or forward contracts.

Underwriting

The Draft Regulation imposes a requirement for separate registration of underwriters, that is, a broker, investment dealer or securities dealer would no longer be deemed to have been granted registration as an underwriter. As a consequence, the Draft Policy establishes registration requirements for underwriters, including proficiency requirements for an underwriter's compliance officer. An underwriter must be a member of a self regulatory body or exchange in Canada. The Draft Regulation also imposes an obligation on an underwriter to conduct due diligence reviews of distributions that it underwrites and the Draft Policy sets out guidelines on how an underwriter may discharge that obligation.

Capital Requirements and Financial Reporting Requirements

The Draft Policy, conforming to the Draft Regulation, sets out increased capital requirements. For example, it is proposed that a securities dealer be required to maintain excess risk adjusted capital on the basis of a minimum capital requirement of $100,000 (up from $50,000) and a limited dealer - mutual fund dealer be required to maintain working capital of at least $75,000 (up from $25,000).

Section 19 of the Securities Act was repealed by provisions of the Securities Amendment Act, 1989, not yet in force. As a consequence, financial reporting requirements have been moved to, and clarified in, the Draft Regulation.
The Draft Policy sets out the requirement for a registered dealer (except a security issuer), underwriter or adviser to file audited annual financial statements and for a registered dealer (except a broker, investment dealer or security issuer), underwriter or adviser to file quarterly, and in some cases monthly, unaudited financial statements.

Request for Comments

Direct written comments by November 17, 1994 to:

Susan Adams
A/Director
Policy and Legislation
British Columbia Securities Commission
1100 - 865 Hornby Street
Vancouver, B.C. V6Z 2H4

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.


DATED at Vancouver, British Columbia, on October 5, 1994.

"Douglas M. Hyndman"
Chair

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