BCN 2003/39 - Adoption of BCI 32-505 Exemption for Mutual Fund Dealers to Sell Securities of Certain Employee Venture Capital Corporations and Venture Capital Corporations [BCN - Rescinded]
Effective September 30, 2003, the Commission has made BC Instrument 32-505 Exemption for Mutual Fund Dealers to Sell Securities of Certain Employee Venture Capital Corporations and Venture Capital Corporations.
Substance and purpose of the Instrument
In B.C., employee venture capital corporations (labour sponsored funds) and venture capital corporations are companies that the Government of British Columbia allows to offer certain income tax credits for purchasing their securities. While these companies have many similarities to mutual funds, security holders cannot redeem their securities on demand. This means that these companies are not mutual funds under the Act and mutual fund dealers cannot sell these securities under the terms of their registration.
Over the past year, the Commission has received a number of applications from labour sponsored funds and venture capital corporations asking for relief to allow mutual fund dealers to sell their prospectus-qualified securities. The Commission has decided that because of the differences between this product and conventional mutual funds, in order for mutual fund salespersons to properly analyze the suitability of the product for their clients, the salesperson must have successfully completed either the
- Canadian Securities Course, or
- the Labour Sponsored Investment Funds Course offered by The Investment Funds Institute of Canada.
The Commission recognizes that it will take some time before mutual fund dealers are able to successfully complete these courses. For this reason, the Commission is allowing mutual fund salespersons to sell labour sponsored funds and venture capital corporations during the 2003 RRSP season without having taken one of these courses, provided the mutual fund dealer has arranged for additional supervision of salespersons selling these products.
The level of supervision depends on how much the purchaser is investing. If the purchase price is $15,000 or less, the person responsible for monitoring trading must review each trade to ensure it is suitable for the purchaser. The supervisor can conduct his or her review using the dealer’s usual trade supervision procedures. If the supervisor is not satisfied that the product is suitable for the particular purchaser, the dealer must reverse the trade.
If the purchaser is purchasing more than $15,000, the supervisor must review suitability before the trade is completed. If the supervisor is not satisfied that the trade is suitable for the client, the trade must not be completed. The supervisor must document his or her conclusion following the review for each potential trade.
These conditions only apply during this interim period. After March 1, 2004, mutual fund salespersons and their supervisors must have successfully completed one of the designated courses set out in the Instrument in order to sell labour sponsored funds or venture capital corporations.
If a mutual fund dealer wants to rely on this exemption, it must first notify the Commission. Following the initial notice, if the dealer wants to continue to use this exemption, it must notify the Commission annually.
This exemption only applies to securities of labour sponsored funds or venture capital corporations that are being offered by prospectus. This exemption does not extend to exempt market offerings of these securities.
You may refer questions to:
Senior Legal Counsel
Legal and Market Initiatives
British Columbia Securities Commission
(800) 373-6393 (in B.C. and Alberta)
October 2, 2003
Brent W. Aitken
Ref: BC Instrument 32-505
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.