Securities Law

LPS 3-30 - Underwriter's Conflict Of Interest [Rescinded]

Published Date: 1987-01-16
Effective Date: 1987-02-01
Rescinded Date: 1996-01-01

1.0          IMPLEMENTATION

1.1          This Local Policy Statement has been revised solely to conform with the Securities Act S.B.C. 1985 c.83 and the Regulations thereto. Other than consequential amendments, there have been no changes of a substantive nature to this policy.  It becomes effective upon proclamation of the Act on February 1, 1987.

2.0          DEFINITION OF "UNDERWRITER"

2.1          For the purposes of this Local Policy Statement, the term "underwriter" means any registrant permitted to act as an underwriter under Section 20(l)(b) of the Act, or any person authorized to act as an underwriter in another securities jurisdiction and includes shareholders, partners, employees and associates of such registrant or such individual or entity.

2.2          Where an issuer has never had its equity securities listed on an exchange, the term "underwriter" shall mean any underwriter, not solely those underwriter(s) involved in the offering made on a specific prospectus.

2.3          Where an issuer has had its equity securities listed or currently has its equity securities listed on any exchange, the term "underwriter" shall mean any underwriter involved in the offering made by statement of material facts or prospectus.

3.0          LIMITS ON PURCHASES OF SHARES ISSUED BY A ISSUER PRIOR TO THE FILING OF A FIRST PROSPECTUS

Registrants for trading in securities should avoid conflicts of interest arising from acquisition of shares distributed by an issuer prior to making a first public offering by prospectus.

The Superintendent has accordingly imposed the following restrictions on the number of shares of such an issuer to be held by persons falling within the Section 2.0 definition of an "underwriter":

3.1          The maximum number of shares held by all underwriters prior to the first distribution to the public of an issuer shall not in the aggregate exceed the lesser of 150,000 shares or 10% of the issued shares to be outstanding after the said distribution.  The same principle shall apply upon the completion of the said distribution.

3.2          The maximum number of shares held by any one person (other than a brokerage firm) on conclusion of an issuer's initial public offering shall be the lesser of 50,000 shares or 5% of the issuer's outstanding share capital on conclusion of the said distribution.

3.3          No underwriter may participate in a principals' share position or other escrow share position.

3.4          Underwriters may receive compensation in other forms when they take the initiative and an active role in reorganization of an issuer.

4.0          DISCLOSURE

4.1          Unlisted

When an unlisted issuer issues a prospectus, there must be a disclosure on the face page of the prospectus or in the body of the prospectus with a cross-reference on the face page of the aggregate number of shares owned, directly or indirectly, by underwriters and the prices at which such shares were purchased.

4.2          Listed

In a statement of material facts or prospectus of a listed issuer, disclosure must be made of the aggregate number of shares of the issuer owned directly or indirectly by the underwriters) involved in the offering, excluding the employees thereof and associates of such employees.

5.0          SALES AND UNDERTAKING BY UNDERWRITERS

5.1          Each person falling within the Section 2.0 definition of "underwriter" will be required to file an undertaking (see sample following) with the Superintendent and the Vancouver Stock Exchange to the effect that no shares acquired by him will be sold prior to the expiry of six months from the listing of the issuer's shares on the Vancouver Stock Exchange.

5.2          Where the person in Section 5.1 has acquired, directly or indirectly or together with his associates, more than 10,000 shares, the following will have to be added to the undertaking filed:

5.2.1       sales of shares in the 3-month period following the expiry of six months from the listing of the issuer's shares on the Vancouver Stock Exchange will be limited to 25% of such shares acquired,

5.2.2       sales of shares in each 3-month period thereafter will be limited to 25,000 shares,

5.2.3       no shares will be sold until at least seven (7) days after notice of the intended sale is filed with the Superintendent and the Vancouver Stock Exchange.

5.3          Where such sale or other dealing does not take place within 120 days from the date of the notice referred to in Section 5.2.3, further notice will be required.

6.0          POOLING BY UNDERWRITERS

Underwriters should also refer to Section 3.0 of Local Policy Statement 3-08 which sets out pooling requirements for shares purchased for cash prior to the first public offering of shares by prospectus.

 

DATED at Vancouver, B.C. this _________  day  of ___________ 19__.

 

Jill Bodkin
Chairman
B.C. Securities Commission


 

LOCAL POLICY STATEMENT  3-30  -  APPENDIX

Sample Undertaking For An Underwriter

 

TO:                         The Office of the Superintendent of Brokers

AND TO:              The Vancouver Stock Exchange

RE:                         XYZ RESOURCES INC. (the issuer)

WHEREAS the undersigned is an underwriter within the meaning of Local Policy Statement 3-30;

AND WHEREAS the said underwriter has acquired, directly or indirectly or together with his associates, more than 10,000 shares of the issuer during the non-reporting stage of the issuer (delete this paragraph where it is not applicable);

NOW THEREFORE THIS LETTER WITNESSETH that ___________________  the undersigned hereby undertakes the following:

  1. No sale or other dealing in the said shares so acquired shall take place prior to the expiry of six months from the date of listing of the issuer's shares on the Vancouver Stock Exchange (delete statements 2, 3 and 4 where they are not applicable).

  2. Sales of the undersigned's holdings of the issuer's shares in the 3-month period following the expiry of six months from the date of listing of the issuer's shares on the Vancouver Stock Exchange shall be limited to 25% of such holdings.

  3. Sales of the undersigned's holdings in each 3-month period thereafter will be limited to a maximum of 25,000 shares.

  4. None of the holdings will be sold until at least seven (7) days after notice of the intended sale is filed with the Superintendent of Brokers and the Vancouver Stock Exchange.  Where such sale or other dealing does not take place within 120 days from the date of notice, further notice will be given.

 

DATED at Vancouver, B.C. this ________  day of _____________ 19___.

 

_______________________
Signature

_______________________
Name (printed)

_______________________
Address