BCN 2006/10 - Amendments to Securities Act [BCN]
- 31-901F - Application for Registration as Dealer, Adviser or Underwriter [F - Rescinded]
- 35-101F1 - Form Of Submission To Jurisdiction And Appointment Of Agent For Service Of Process By Broker-Dealer [F]
- 35-101F2 - Form Of Submission To Jurisdiction And Appointment Of Agent For Service Of Process By Agents Of The Broker-Dealer [F]
On May 18, 2006, Bill 20 Securities Amendment Act, 2006 received Royal Assent. It includes three types of amendments to the Securities Act:
- new powers to enable the adoption of a regulatory passport with the other provinces,
- amendments to harmonize with other provinces, and
- enforcement and administrative provisions adapted from the unproclaimed Securities Act, S.B.C. 2004, c. 43.
Some of the amendments came into force on Royal Assent. Attached is a blacklined version of these amendments. The rest of the amendments will come into force by regulation on a later date.
Amendments that are in effect now
The key amendments that came into force on Royal Assent will do the following:
Regulatory passport amendments
A new Part 19.1 of the Act and related amendments to rule-making authority and other provisions will provide the commission with new powers to further develop the regulatory passport with other provinces.
These amendments will facilitate harmonization of requirements and processes with those in other Canadian jurisdictions. They
- replace the definition of ‘material change’ with a two part definition that incorporates the test specific to investment funds, which is currently in National Instrument 81-106, and harmonizes the definition for other issuers (section 1)
- add definitions of ‘investment fund’, ‘investment fund manager’, ‘non-redeemable investment fund’ (NRIF) and ‘securities regulatory authority’ (section 1)
- allow the commission to designate an issuer not to be a NRIF (section 3.1(1))
- allow the commission to designate a person to be an insider or a NRIF (section 3.2(1))
- require the commission to accept a surrender of registration unless it is prejudicial to the public interest (section 41)
- harmonize the standard of care for mutual fund managers and make the standard apply to all investment funds (section 125)
- modify rule-making authority (sections 183 and 184)
Enforcement and administrative amendments
- make the relevant provisions of the Administrative Tribunals Act apply to the Commission (section 4.1)
- extend powers to require the production of records and to examine financial affairs to cover investment fund managers and custodians (sections 141 and 153)
- increase the maximum penalty that the provincial court can impose for an offence to $3 million (section 155(2))
- hold an investment fund manager responsible for any offence committed by the investment fund or any contravention of the act or regulations or a failure to comply with a decision by the investment fund (section 155(4.1))
- empower the provincial court to order a person convicted of an offence to make restitution or to disgorge profits (section 155.1)
- set out a process for investors to claim money under a disgorgement order (section 15.1)
- authorize the commission to spend unclaimed disgorgement moneys for education (section 15(3))
- entitle an investor or the commission to file in the Supreme Court a restitution or disgorgement order to give it the same effect as if it had been made by the Supreme Court (section 155.2)
- empower the commission or the executive director to make certain enforcement orders after giving a person the opportunity to be heard, but without a full hearing, if the person has been found by another securities regulator or a court in or outside of British Columbia to have contravened securities laws or to have committed serious securities-related offences (section 161(6))
- increase the maximum administrative penalty that the commission may impose to $1 million for each contravention (section 162)
- allow the commission to garnish money owed to a third party by a person who owes the commission money for hearing fees and costs (section 162.1)
- permit the commission and any recognized SRO to collect and use information from certain market participants and other regulatory authorities (section 169.1)
Amendments to come into effect later
The government will bring the other amendments in Bill 20 into force by regulation when the related rules or administrative processes are ready. These amendments:
- repeal the prospectus and registration exemptions (sections 43 - 47 and 73 - 75)
- prohibit making a misleading statement in relation to a trading or advising relationship (section 54(2))
- expand the insider trading and front running prohibitions and related liability (sections 57.2 - 57.4, 136 and 136.1)
- repeal the prospectus disclosure requirements, prospectus amendment requirements, prospectus lapse date regime and prospectus certificates (sections 66 - 71)
- permit, instead of require, the Commission to publish a list of defaulting reporting issuers and drop provisions for the Commission to provide certificates of good standing (section 77)
- require reporting issuers to provide periodic disclosure, disclosure of a material change and other prescribed disclosure (section 85)
- replace the detailed insider reporting requirements with a general requirement to file insider reports (section 87)
- replace the detailed take over bid and issuer bid requirements with a prohibition against making a take over bid or issuer bid except in accordance with the regulations and a requirement for the directors to make a recommendation (sections 98 and 99)
- repeal the self-dealing provisions for mutual funds
Many of these amendments will come into force when we have developed national rules. The amendments related to prospectuses, insider reporting, and take over bids and issuer bids fall in this category. We will implement on a coordinated basis with the other provinces the new prohibition against making a misleading statement in relation to a trading or advising relationship. We will implement the amendments related to the list of defaulting reporting issuer when we have harmonized the related administrative processes across Canadian jurisdictions. We will also need to develop a national or local rule on mutual fund self dealing before implementing the repeal of the self-dealing prohibitions and restrictions in the Act.
We will ask the government to bring into force the repeal of the registration and prospectus exemptions only after publishing a notice asking if we should retain in a local rule any of the exemptions in the Act that are not replaced by exemptions in National Instrument 45-106.
We are working on local changes necessary to bring in the amendment that repeals the material change report requirement and introduces a more general continuous disclosure requirement. It is likely that the changes will come into force in the next few months.
We are also working on amendments to the Securities Rules necessary to implement the new insider trading and front running prohibitions and the related liability and fine provisions. It is likely that these provisions will come into force later in 2006.
Where to find Bill 20
Bill 20 is located on the Commission’s website or the BC Legislative Assembly’s website.
Registration application form
Effective today, the Executive Director is re-specifying existing BC Form 31-901F Application for registration as a dealer, adviser or underwriter under National Instrument 33-109 Registration Information instead of section 34(2) of the Securities Act, which has been repealed.
Submission to jurisdiction forms
Effective today, the Executive Director is re-specifying existing Form 35-101F1 Form of submission to jurisdiction and appointment of agent for service of process by broker-dealer and Form 35-101F2 Form of submission to jurisdiction and appointment of agent for service of process by agents of the broker-dealer under National Instrument 35-101 Conditional exemption from registration for United States broker-dealers and agents (NI 35-101) instead of both section 34(2) of the Securities Act, which has been repealed, and NI 35-101.
Please refer any questions to:
Special Advisor to the Chair
British Columbia Securities Commission
Senior Legal Counsel
British Columbia Securities Commission
May 19, 2006
Douglas M. Hyndman Brenda M. Leong
Chair Executive Director
Ref: BC Form 31-901F Application for registration as a dealer, adviser or underwriter
Index of Forms
Form 35-101F1 Form of submission to jurisdiction and appointment of agent for service of process by broker-dealer
Form 35-101F2 Form of submission to jurisdiction and appointment of agent for service of process by agents of the broker-dealer
This Notice may refer to other documents. These documents can be found at the B.C. Securities Commission public website at www.bcsc.bc.ca in the section Securities Law & Policy: Policies & Instruments.