Securities Law

BCN 2004/32 - Publication for Comment of Forms and Guides Related to the New Securities Act [BCN - Lapsed]

Published Date: 2004-06-25
Rescinded Date: 2012-07-03
Related Document(s):

On May 13, 2004, the new Securities Act S.B.C. 2004, c. 43 received royal assent. The Act will come into force on proclamation (expected in the late fall) and will repeal the Securities Act R.S.B.C. 1996, c. 418. On June 21, 2004, the Commission published for comment the proposed rules and other instruments that are necessary to implement the new legislation (see BC Notice 2004/31). We are now publishing for comment proposed Forms that we intend to specify, where the Act or Rules contemplate the use of a Form.

We are also publishing for comment two guides, one for issuers and one for dealers and advisers. These are written in plain language and are intended to help market participants to understand and comply with the new legislation.

Interface Exemptions
Most market participants are subject to securities regulation in more than one province. To avoid imposing different requirements on those who are subject to the securities legislation in other provinces, the proposed Rules include “interface” exemptions that generally allow those market participants to satisfy the requirements in British Columbia by complying with the requirements of another province, filing in British Columbia what they file in that province, and providing investors here with what they provide investors in that province. Market participants who rely on these interface exemptions will generally be able to file the forms they use in other jurisdictions instead of the proposed Forms. In addition, we expect we will accept some forms used by market participants to comply with the requirements of other regulatory organizations (for example, the personal information form for directors and officers of companies used by the TSX Venture Exchange).

Proposed Forms
The proposed Forms would replace all existing forms specified under the Act and Rules. The proposed Forms fall into three categories: those designed to provide investors with information, those designed to provide information so that the Commission can make a decision under the legislation, and those designed to provide the Commission with information to administer the legislation.

Forms designed to provide investors with information
Forms in this category are:

41-901F/51-905F Prospectus/Annual Information Form (and Instructions)
45-907F Offering Memorandum (and Instructions)
45-908F Risk Acknowledgment - Non Public Issuers
45-909F Risk Acknowledgement - Public Issuers
52-901F Management’s Discussion & Analysis (and Instructions)
54-902F Information Circular (and Instructions)
62-502F1 Takeover Bid Circular
62-502F2 Issuer Bid Circular
62-502F3 Directors’ Circular
62-502F4 Director’s or Officer’s Circular
62-502F5 Notice of Intention to Make an Issuer Bid
71-502F1 Foreign Dealers and Advisers - Risk Warning
71-502F2 Notice by Exempt Foreign Issuer - Offering
71-502F3 Notice by Foreign Issuer - Continuous Disclosure
71-502F4 Notice by Person Making Takeover Bid for Foreign Issuer
71-502F5 Notice by Person Soliciting Proxies from Securityholders of Foreign Issuer
71-502F6 Foreign Mutual Funds - Risk Warning

The prospectus/AIF form, the offering memorandum form and the information circular complement the disclosure regime embodied in the CMA system. In some ways they are simplified compared to today’s forms, and give the issuer more choice over how to organize and present information. However they still require the disclosure of all material information about the issuer (or, in the case of the Information Circular, all information the securityholder needs to make an informed voting decision at the meeting). The disclosure required by a proposed Form sometimes goes beyond current requirements. For example, the approach to executive compensation disclosure in the Information Circular is intended to put the facts related to compensation into a context that includes the issuer’s compensation approval processes and the compensation paid for comparable positions at other issuers.

Others of the proposed Forms in this category, such as the bid circulars and the MD&A form, correspond closely to the current forms, and those used elsewhere in Canada.

The proposed Rules require that Forms be prepared in plain language.

Forms designed to provide the Commission with information necessary to make a decision
Forms in this category are:

31-901F Application for Registration as a Dealer or Adviser
31-902F Personal Information Form
44-901F/81-904F Notice by Canadian Reporting Issuer to Become a Public Issuer/Mutual Fund

The proposed forms in this category are more streamlined and simplified compared to the current forms, but require the information necessary for the Commission to make the decision needed.

Because the proposed Rules would implement the ‘firm-only’ registration system - an exemption from the registration requirement for individuals who are retained to represent registered firms - the proposed Forms do not include an individual registration application. This information is currently gathered under the National Registration Database system (NRD). Theoretically, NRD would not be required in a firm-only registration system, but firms will be using NRD for individuals who are registered elsewhere and act as representatives in British Columbia. In addition, we require some information about representatives, and SROs use the data gathered under NRD to design and administer their compliance review systems. We are currently studying the best way to integrate these informational requirements; to the extent that NRD plays a role in that, NRD forms will continue to be a part of the BC system.

Forms designed to provide the Commission with information necessary to administer the legislation
Forms in this category are:

45-910F Report of Exempt Offering
45-911F Report of Section 18(3) Offering by Public Issuer
51-906F Notice of Change of Status
51-907F Notice of Change in Year-End
71-502F7 Notice by Foreign Issuer of Intention to Rely on BC Instrument 71-502
71-502F8 Notice of Change of Status - Foreign Issuer
81-509F Report of Exempt Offering of Pooled Fund(s)

The proposed forms in this category are more streamlined and simplified compared to the current forms, but require the information necessary for the Commission to monitor compliance with the legislation. Most are similar to existing forms, but two are new:

51-906F Notice of Change of Status
71-502F8 Notice of Change of Status - Foreign Issuers

These forms require disclosure of change of name, listing status, takeover bid and other transactions.

We are now designing the format, layout and “look” of the forms, as well as determining which of the forms can and should be in electronic form. When reviewing the forms, you should therefore ignore format issues and focus your attention and comments on whether the substantive information requirements in the forms are appropriate.

Proposed Guides
A key objective of our new legislation is that market participants be able to understand and apply regulatory requirements using their own judgment and experience. Securities regulation is necessarily complex, because the markets we regulate are complex, so market participants will sometimes need professional advice. However, professional advice should not be necessary for routine compliance matters. We want to make the system clearer and simpler so that the market participant is able to manage routine compliance without professional advice, make better judgments about when to get professional advice, and provide clearer instruction to professional advisers when they are needed.

To help market participants understand their obligations, the Commission is planning an intensive industry education program to coincide with the proclamation of the new legislation. The Guides are an important part of that, and will also support industry education on an ongoing basis. We are interested in comments that will help us assess whether the Guides will be helpful to market participants who wish to understand and apply the legislation. We are particularly interested in feedback on the portions of the Guides identified below:

For Issuers - Your Guide to Securities Regulation in British Columbia

  • Issuers that Report in Other Provinces - description of interface exemptions
  • Offerings After the IPO - how the CMA system works
  • Offerings in Other Jurisdictions - how to do an offering in British Columbia and another jurisdiction
  • Private Placements - how to use the offering exemptions
  • Timely Disclosure - when and how to make disclosure
  • Handling Inside Information - how to ensure that inside information is handled appropriately

For Dealers and Advisers - Your Guide to Securities Regulation in British Columbia

  • Dealers and Advisers Registered in other Provinces - description of interface exemptions
  • Firm-only Registration - how the system works, and the responsibilities of the firm
  • Code section 7 - the expectations about the keeping client informed of matters that bear on the dealer/adviser relationship
  • Code sections 12 and 13 - the expectations about ‘know your client’ and suitability
  • Code sections 15, 16 and 17 - handling conflicts of interest, including disclosure about fees
  • Code sections 20 and 21 - the expectations about compliance management and supervision

You can deliver comment letters in hard copy, by fax or by e-mail. Please address your submission to:

Brenda J. Benham
Project Head, New Legislation Project
British Columbia Securities Commission
P.O. Box 10142, Pacific Centre
701 West Georgia Street
Vancouver, BC V7Y 1L2
Fax: (604) 899-6506

All comments received by August 23, 2004 will be considered.

Your comment letter will be part of the public record, unless you request confidentiality. If you request confidentiality, we will not put your letter in the public file, but we might still have to disclose it if someone makes a request under freedom of information legislation.

If you have any questions, please contact:

Brent Aitken
Commission Vice Chair
(604) 899-6749

Brenda Benham
Head, New Legislation Project
(604) 899-6635

Sandy Jakab
Senior Legal Counsel
(604) 899-6869

Leigh Anne Mercier
Senior Legal Counsel
(604) 899-6643

Sheryl Thomson
Senior Legal Counsel
(604) 899-6778

June 25, 2004

Brent W. Aitken
Vice Chair

This Notice may refer to other documents. These documents can be found at the BC Securities Commission public website at in the Commission Documents database or the Historical Documents database.