BOR 96/19 - Optional Rental Pool Securities [Rescinded]

IN THE MATTER OF THE SECURITIES ACT S.B.C. 1985, c. 83

AND

IN THE MATTER OF OPTIONAL RENTAL POOL SECURITIES

Order Under Sections 33 and 59

WHEREAS securities are defined in section 1(1) of the Securities Act, S.B.C. 1985, c. 83, to include investment contracts;

AND WHEREAS an "Optional Rental Pool Security" is an investment contract

(a) comprised of a direct interest in a residential property and an option to enter into a rental pool agreement for that property, pursuant to which revenues derived from, and/or expenses relating to, that property and other properties are pooled and profits or losses from the pool are shared among the owners of the properties in accordance with their proportionate interests in the pool,

(b) without any ancillary rental or cash flow guarantee, or other financial commitment on the part of any person connected with the offering,

(c) where the rental pool is entered into at the sole discretion of the owner and is terminable by the owner at any time at the owner's sole discretion, with reasonable notice or on other reasonable conditions, and

(d) where the owner has the right to occupy the property at any time, with reasonable notice;

AND WHEREAS an offering of an Optional Rental Pool Security is subject to regulation by both the Real Estate Act, R.S.B.C. 1979, c. 356 and the Securities Act;

AND WHEREAS section 20(1)(a) of the Securities Act requires a person who is trading in a security to be registered as a dealer, or as a salesperson, partner, director or officer of a registered dealer;

AND WHEREAS section 42(1) of the Securities Act provides that a person shall not distribute a security unless a preliminary prospectus and a prospectus respecting that security have been filed with, and receipts obtained for them from, the executive director;

AND WHEREAS the Commission considers that to do so would not be prejudicial to the public interest;

IT IS ORDERED

1. under sections 33 and 59 of the Securities Act that an intended trade by a developer, or a real estate agent acting on its behalf, of an Optional Rental Pool Security is exempt from the requirements of sections 20(1)(a) and 42 of the Securities Act provided that
   
   (a) the developer has filed with the Superintendent of Real Estate, under Part 2 of the Real Estate Act, and delivered to the purchaser, a disclosure statement or prospectus in the form required by Form 43B, excluding Items 4 (2), (3), (4), 6, 8, 14, 18 and 19,
   
   (b) the rental pool agreement requires the manager of the rental pool to provide a purchaser with access to reasonably detailed information as to revenues and expenses for the rental pool for the two year period before the date of the initial trade or any subsequent trades, as the case may be, to the extent that the rental pool has been operating during that two year period,
   
   (c) there is no marketing or promotion of the expected economic benefits of the rental pool, and
   
   (d) the developer and any real estate agent acting on its behalf complies with all applicable provisions of the Real Estate Act;
   
2. under section 59 of the Securities Act that a trade in an Optional Rental Pool Security acquired under this order is deemed to be a distribution unless the seller complies with the Real Estate Act where applicable, and there is no marketing or promotion of the expected economic benefits of the rental pool; and
   
3. under section 33 of the Securities Act that a subsequent trade by a holder of an Optional Rental Pool Security is exempt from the requirements of section 20(1)(a) of the Securities Act provided that the seller complies with the Real Estate Act where applicable, and there is no marketing or promotion of the expected economic benefits of the rental pool.

DATED at Vancouver, British Columbia on October 10, 1996.

Douglas M. Hyndman
Chair