NIN 98/42 - Regulatory Initiatives Relating to the Year 2000 [NIN - Rescinded]
| Published Date: | 1998-07-24 |
|---|---|
| Effective Date: | 1998-07-22 |
The Commission wishes to inform market participants of the initiatives it has taken to date to increase Year 2000 awareness and of further initiatives currently under way at the local and national level.
Industry Initiatives
In November 1997, the Commission expressed its concern about the state of readiness of the securities industry in relation to the Year 2000 by publishing, with the other members of the Canadian Securities Administrators ("CSA"), a notice entitled "Year 2000 Challenge" (CSA Notice 31-301). The notice emphasized the interconnection of the securities markets and the importance for all industry participants to be Year 2000 compliant. Attached to the notice was a copy of the statement on the Year 2000 issued by the International Organization of Securities Commissions’ ("IOSCO") Technical Committee. The IOSCO statement suggested that the evaluation, planning and implementation stages of industry participants’ Year 2000 plans should be completed by the end of 1998 in order to allow for a year of testing in 1999.
In December 1997, in a letter to all British Columbia registrants, the Commission emphasized the need for registrants to implement a plan to become Year 2000 compliant on a timely basis and to have all necessary computer system modifications in place in sufficient time to allow for participation in industry-wide testing. The Commission encouraged registrants to keep regulatory authorities apprised of their progress and to notify them immediately if they expect any problems. A copy of the IOSCO statement was distributed with the letter.
In March 1998, the Commission, together with the Vancouver Stock Exchange ("VSE") and the Canadian Depository for Securities Ltd. ("CDS"), participated in a Year 2000 information seminar held for the benefit of member firms and other invited participants. The seminar was used as a platform to stress the need for each participant to evaluate the scope of its Year 2000 problem and to develop and implement plans to deal with it.
In April 1998, the Director, Registration, sent a Year 2000 Readiness Survey to all non-SRO dealers registered in British Columbia asking them to complete and return the survey by May 11, 1998. The Director indicated that the survey responses would be considered as part of the Commission’s ongoing examination program of non-SRO dealers. The letter emphasized that dealers must develop and implement an appropriate action plan to address any and all system changes required to deal with Year 2000 problems.
The Director has received responses from 81% of dealers surveyed and is in the process of following-up with those who have not responded. In his letter, the Director encouraged dealers to contact service providers and vendors of the systems software products they use to ensure they are dealing with the Year 2000 issue. The Director expects to write a further letter to service providers and system vendors in the near future to impress upon them the urgency of implementing appropriate plans to deal with the Year 2000 issue on a timely basis.
The Commission has also been monitoring the efforts of its two recognized self-regulatory organizations - the VSE and the Investment Dealers Association of Canada ("IDA"), Pacific District - in dealing with the Year 2000 readiness of their member firms. Among other initiatives the VSE and the IDA have
- held information sessions to develop awareness of the Year 2000 issue;
- issued surveys to their member firms to assess their current state of preparedness and included an examination of the results of these surveys as part of their annual examination programs of member firms; and
- worked, together with other self-regulatory organizations and industry participants, to promote industry awareness of the issue, gather and share information and coordinate testing.
In June 1998, the CSA created a Year 2000 Committee. The committee includes members from the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission and the Commission des valeurs mobilières du Québec. The committee will provide a forum for coordination of staff initiatives on the Year 2000 and will provide input to the Canadian G-30 subcommittee on the Year 2000.
G-30 Subcommittee on the Year 2000
The Commission also participates in discussions of the Canadian G-30 subcommittee on the Year 2000. The G-30 is an international, private, non-partisan consultative body that works to enhance the understanding of financial and economic issues and has committees in a number of countries, including Canada. The Canadian G-30 committee, aware of the potential impact of the Year 2000 on the Canadian capital markets, has created a subcommittee on the Year 2000 whose mandate is to raise industry awareness of the Year 2000 issue and coordinate industry-wide testing and contingency planning efforts related to the Year 2000.
The subcommittee includes representatives from the securities industry and regulatory bodies such as the Ontario Securities Commission, the Commission des valeurs mobilières du Québec, the VSE, the Montreal Exchange, the Toronto Stock Exchange, the Alberta Stock Exchange, the IDA, the Investment Funds Institute of Canada, the Canadian Derivatives Clearing Corporation, the CDS, the Canadian Payments Association and FundSERV. The subcommittee also includes representatives from the banking and insurance sectors and their regulators such as the Canadian Bankers Association, the Canadian Life and Health Insurance Association, the Office of the Superintendent of Financial Institutions, Canada Trust and the Bank of Canada.
Disclosure Initiatives
In January 1998, the Commission, together with the other members of the CSA, published a CSA staff notice entitled "The Year 2000 Challenge - Disclosure Issues" (CSA Notice 41-301 and 51-302). The notice sets out the views of the staff of each of the members of the CSA with respect to matters that a reporting issuer would be expected to consider in assessing the nature and extent of its disclosure obligations concerning the implications of the Year 2000 issue. The notice also sets out a minimum standard of disclosure staff expects reporting issuers to meet in relation to the risks and uncertainties arising from the Year 2000 issue and how those risks and uncertainties are being managed. The notice discusses reporting issuers’ obligations for both continuous disclosure purposes and offerings of securities under a prospectus.
At the same time, the Commission published NIN#98/4 in which staff indicated that the considerations set out in the CSA staff notice apply equally to exchange issuers filing a Form 61 Quarterly Report with their annual and interim financial statements.
Staff of the Corporate Finance Division of the Commission has started reviewing Year 2000 disclosure provided in any prospectus or continuous disclosure document selected for review and is providing comments to reporting issuers.
The VSE has amended Policy 6 (Filing Requirements) of its Corporate Financial Services Policy and Procedures manual to require disclosure of material information concerning information systems and related business implications and uncertainties for listed companies resulting from the year 2000 century change and any remedial actions the companies are taking in this regard in all annual reports mailed to shareholders until December 31, 1999. To help the VSE assess the level of disclosure provided by listed companies under this disclosure requirement, the VSE has sent a survey on the Year 2000 to all its listed companies to gather information on their state of readiness and how they plan to achieve readiness for the Year 2000. Responses to the survey are due on July 24, 1998. The VSE is recommending that listed companies accomplish all systems changes required to meet the Year 2000 challenge by the end of 1998 so that 1999 can be used to monitor the operations of all converted systems and to perform quality assurance and interface tests with other organizations.
State of Readiness of the Commission and its SROs
Year 2000 compliance will be an integral part of all systems initiatives in the Commission over the next two years. The Commission’s registration system, its largest system, was completely redesigned and a new system installed and made operational in December 1997. The Commission is in the process of replacing its two remaining mission-critical applications that are not Year 2000 compliant (a mainframe tracking and information sharing system, and an insider reporting database) and expects to have replaced these systems before the end of March 1999. The Commission will then assess its remaining systems (none of which are essential to the Commission’s operations) to determine whether they should be discarded, modified or replaced; the Commission expects to have completed all necessary modifications or replacements prior to the end of 1999.
The Commission has been advised by the VSE that its internal Year 2000 readiness program is well under way. The VSE’s trading system is already Year 2000 compliant and the VSE expects its other internal systems and infrastructure to be fully Year 2000 compliant by December 31, 1998 and, in the same time frame and on into 1999, to engage in point-to-point testing with external parties. The VSE is also working closely with its external service and technology providers, the Canadian G-30 subcommittee on the Year 2000 and other industry participants to coordinate industry-wide Year 2000 initiatives and testing.
The Commission also understands that the IDA is seeking to have its internal systems Year 2000 compliant by December 31, 1998 and is working with external service providers to make sure other systems provided to it are compliant by that date. The IDA is also involved in coordinating member and industry compliance efforts and, to that end, is working closely with major systems suppliers, the major Canadian stock exchanges, CDS and the Canadian G-30 subcommittee on the Year 2000.
Future Steps
The Commission intends to continue to
- promote awareness of the Year 2000 issue;
- promote testing and contingency planning within the British Columbia capital markets and, with its colleagues of the CSA, the Canadian capital markets; and
- monitor industry progress in dealing with the challenge posed by the Year 2000.
Staff of the Commission is publishing concurrently with this notice NIN#98/43, in which staff sets out its views as to the steps market participants should have taken in addressing the Year 2000 problem and of the potential consequences to market participants of not dealing adequately with this problem. Readers are directed to NIN#98/43.
Questions may be directed to
Ross McLennan
Director, Registration
(604) 899-6685
Or (800) 373-6393 (in B.C)
Wayne Redwick
Director, Corporate Finance
(604) 899-6699
Or (800) 373-6393 (in B.C.)
Carla-Marie Hait
Chief Accountant
(604) 899-6726
Or (800) 373-6393 (in B.C.)
Louyse Gauvin
Executive Assistant to the Chair
(604) 899-6538
Or (800) 373-6393 (in B.C.)
DATED at Vancouver, British Columbia, on July 22, 1998
Douglas M. Hyndman
Chair
REF: CSA Notice 31-301
CSA Notice 41-301 and 51-302
NIN#98/4
NIN#98/43