BCN 2001/85 - Adoption of National Instrument 33-105 Underwriting Conflicts [BCN - Rescinded]
Effective January 3, 2002 the Commission, together with other members of the Canadian Securities Administrators (CSA), has adopted National Instrument 33-105 Underwriting Conflicts (B.C. Reg. 310/2001) and Companion Policy 33-105CP (the documents). The text of the documents is attached.
NI 33-105 replaces the underwriting conflicts provisions in section 78 of the Securities Rules and BCI 33-505, which provides partial relief from section 78.
We published for comment previous versions of the documents in February 1998 (see NIN 98/06) and in June 2001 (see BCN 2001/51). On October 26, 2001, we published advance notice that, subject to government approval, we expected to adopt the instrument as a rule effective January 3, 2002 (BCN 2001/74).
Substance and purpose
NI 33-105 provides a framework of appropriate regulation to decrease risks associated with actual or potential conflicts of interest between underwriters’, issuers’, or selling securityholders’ interests and investors’ interests.
NI 33-105 recognizes there are varying relationships between issuers and underwriters. The Instrument’s rules are most careful when the relationship is closest, and more relaxed when the relationship is less close.
When issuers and underwriters are related by significant cross-ownership or power to nominate directors, the issuer must disclose the relationship in the prospectus or other offering document and an independent underwriter must participate in the offering. In some cases, the issuer must obtain and disclose a valuation.
When issuers and underwriters are not related but are connected, so that a prospective investor might question their independence from each other, the issuer must disclose the relationship in the prospectus or other offering document. However, there is no requirement that an independent underwriter participate in the securities offering.
We made consequential amendments to the Securities Rules to ensure consistency with NI 33-105. The amendments include repealing most of section 75 and all of section 78, and making the language in sections 77 and 85 consistent. The text of the amendments (BC Reg. 311/2001) is attached.
Other documents affected
Effective January 3, 2002, we have rescinded BCI 33-505 Underwriting Conflicts.
Questions may be referred to:
Senior Legal Counsel
British Columbia Securities Commission
(800) 373-6393 (in B.C.)
December 21, 2001
Douglas M. Hyndman
Ref: NIN # 98/06
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 Commission Documents database or the Historical Documents database.
Consequential amendments to the Securities Rules
1. Section 75 of the Securities Rules, B.C. Reg. 194/97, is amended
(a) in subsection (1) by deleting the definitions of “connected party”, “registrant”, and “related party”, and substituting the following:
“connected party” has the meaning ascribed to the definition of “connected issuer” in National Instrument 33-105 Underwriting Conflicts;
“registrant” has the meaning ascribed to that term in National Instrument 33-105 Underwriting Conflicts;
“related party” has the meaning ascribed to the definition of “related issuer” in National Instrument 33-105 Underwriting Conflicts; , and
(b) by repealing subsections (2) to (6).
2. Section 77 (4) is amended by
(a) striking out “78,”, and
(b) adding “, or in National Instrument 33-105 Underwriting Conflicts,” after “83”.
3. Section 78 is repealed.
4. Section 85 is amended
(a) by repealing subsection (1), and
(b) in subsection (2), by striking out “and section 78”.