NIN 95/23 - Securities Amendment Act (No. 1), 1995 [NIN - Rescinded]

The Securities Amendment Act (No. 1), 1995, S.B.C. 1995, c. 15 (the "Amendment Act") received Royal Assent on June 8, 1995. The Amendment Act is now in effect, retroactive to the end of March 31, 1995.

Amendments

The Amendment Act is intended to make the Commission more financially autonomous. The British Columbia Securities Commission is continued as a corporation and is no longer subject to the requirements imposed on government ministries by the Public Service Act and the Financial Administration Act. As a crown agency, the Commission will have more flexibility in financial and personnel management and more certainty in planning for long term expenditures. A copy of the Amendment Act is attached to this notice.

Under the Amendment Act the Commission will appoint officers and employees of the Commission as necessary to enable the Commission and Superintendent to perform their duties and exercise their powers under the Securities Act. Employee classification and remuneration will still be subject to the prior approval of the Treasury Board. Revenue received under the Securities Act including administrative penalties and cost recoveries will be paid to the Commission and with the exception noted below, money received by the Commission may be expended for costs involved in the administration and enforcement of the Securities Act. The exception to this is that revenue from administrative penalties under section 144.1 of the Act may be expended only for the purpose of educating participants in the market (as is currently the case under section 9.1(5) of the Securities Act).

At least once every fiscal year the Commission will be responsible to provide Treasury Board with a business plan and to submit to the Minister within 90 days of each fiscal year end an annual report containing a summary of the Commission's operations for the fiscal year of the report, a financial statement, and any other information that the Minister may specify.

Other Legislative Initiatives

The Vancouver Stock Exchange Amendment Act, 1995, S.B.C. 1995, c. 17 (the "VSE Act") received Royal Assent on June 8, 1995. The Securities Amendment Act (No.2), 1995 ("Bill 44") received second reading on June 5, 1995.

The VSE Act requires that one-third of the Vancouver Stock Exchange's Board of Governors be public governors and requires the VSE board to elect one of these public governors as its chair. The amendments also define the purpose of the VSE as being to contribute to the provincial economy and requires the VSE to file an annual report with the Minister to be tabled in the Legislature.

Bill 44 contains a number of significant changes to the Securities Act, including those required to implement the government's response to the Matkin Commission report.

Major elements of Bill 44 include:

• an increase to the size of the commission from 9 to 11 members, provision for a second vice-chair and provision of statutory authority for the appointment of the new Securities Policy Advisory Committee;
• power for the Commission to enact binding rules which have the same force and effect as regulations enacted by the lieutenant governor in council;
• strengthening the regulation of investor relations activity;
• additional powers to compel production of documents and to conduct searches;
• power to conduct on-site audits of self-regulatory organizations and registrants;
• power to seek the court-ordered forfeiture of ill-gotten gains;
• power to make enforcement orders prohibiting a person from purchasing securities and prohibiting a person from engaging in investor relations activities;
• some tightening and clarification of the scope of registration exemptions for trading and advising, including removing the exemption for the sale of short term promissory notes and commercial paper to individuals (as recommended in the Ombudsman's report on the Principal Group promissory notes), and
• tighter rules for related party transactions of mutual funds.

Bill 44 does not include the imposition of a statutory obligation for registrants and directors of issuers to conduct due diligence nor any changes to statutory civil remedies. Proposals previously made in these areas raised significant concerns about their effect on the industry and about the risks of departing from a uniform national approach. While the government did not proceed with the imposition of a positive due diligence obligation on registrants or directors of issuers, the Commission will be working with the self regulatory organizations to develop by-laws or rules that balance the concerns with the adequacy of due diligence with the concerns of underwriters about non-uniformity and non-competitiveness. In addition, the Commission recently adopted Local Policy Statement 3-17, which has as its stated purpose the improvement of and documentation of the due diligence process of underwriters in respect of offerings of junior issuers. Changes to statutory civil remedies have been deferred pending further study and consultation. The Government announced in its 6 month report on its response to the Matkin Commission recommendations that it would be publishing revised draft legislation for comment in October.

The Commission anticipates that Bill 44 will come into force later this year, concurrently with an amendment package to the Securities Regulation. The Commission is still considering the vast number of comments received on the proposed regulation amendments that were published for comment in October 1994 and is working with legislative counsel to finalize the draft regulations. The regulations will be published when they have received cabinet approval but with a transition period before they become effective. Immediately prior to proclamation of Bill 44, all unproclaimed sections of the Securities Amendment Act, 1990 (except section 34, which Bill 44 repeals) and the Securities Amendment Act, 1992 will be proclaimed. The Securities Amendment Act, 1990 generally incorporates provisions dealing with exchange contracts into the Securities Act and repeals the Commodity Contract Act. The unproclaimed sections of the Securities Amendment Act, 1992 include significant amendments to the provisions dealing with prospectus renewals and deletion of the prospectus exemption for statements of material facts (to be replaced by exchange offering prospectuses).

The Commission will issue a further notice when Bill 44 receives Royal Assent and another notice when Bill 44 is proclaimed in force.

DATED at Vancouver, British Columbia, on June 14, 1995.

Douglas M. Hyndman
Chair

see hard copy for Securities Amendment Act, 1995