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Securities Law

NIN 89/12 - Orders Pursuant to Section 145 of the Securities Act Removal of Trading Exemptions [NIN - Rescinded]

Published Date: 1989-07-21
Effective Date: 1989-07-21

The British Columbia Securities Act contains, in section 145, the power of the British Columbia Securities Commission or Superintendent of Brokers to remove trading exemptions from any person.

Over the past eighteen months orders have been issued pursuant to Section 145 against approximately 70 individuals. A number of inquiries have been received regarding potential relief from these orders, both by persons named in the orders and by registrants trading on their behalf.

The purpose of this notice is to provide guidance regarding the effect of these orders and to outline procedures to be followed for applications for relief.

An order issued under Section 145 of the Act usually removes all of the exemptions described in Sections 30 to 32, 55, 58, 81 and 82 of the Act, effectively making it an offence for a person subject to an order to trade securities in the province. The definition of trade encompasses a number of activities including:

(a) a disposition of a security for valuable consideration whether the terms of payment be on margin, instalment or otherwise...

(c) the receipt by a registrant of an order to buy or sell a security ...

(e) any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of any of the activities specified in paragraphs (a) to (d);".

The staff of the Commission takes the position that given the broad scope of this definition, a person subject to an order pursuant to Section 145 cannot escape the effect of that order by trading indirectly through nominees or intermediaries, such as a company or an account controlled by him. In addition, the order applies to any trade conducted by a person who, at the time of the trade, is in British Columbia, even though the trade might be executed on a stock exchange outside British Columbia and the order placed through a registrant in another jurisdiction.

There is a further implication for registrants who hold accounts for persons subject to such orders. Due to the broad definition of "trade",, registrants who wish to sell securities of a person subject to an order under Section 145 so as to cover a debit in the account require an order of the Commission varying the original order.

The following guidelines are provided to assist individuals and registrants who wish to obtain relief from such orders.

1. In a hearing pursuant to Section 145, the Commission will entertain submissions from counsel and from the Superintendent as to whether the respondent should be permitted to dispose of any of his securities in an orderly and timely fashion through a registrant if an order is issued under Section 145.

2. Where registrants hold securities of a person subject to an order and wish to trade those securities in order to cover debts owed to the registrant, the following guidelines will apply:

(a) If the securities were acquired by the registrant on behalf of the client subsequent to the issuance of a notice of hearing, relief from the order will be provided only in extraordinary circumstances.

(b) If the securities were acquired on behalf of the client prior to the issuance of the notice of hearing, the Commission will normally entertain applications for relief by the registrant, provided the registrant has notified its client of the application.

(c) The application should be directed to the Secretary of the Commission under Section 153 of the Act and accompanied by the required filing fee of $350 and all appropriate documentation relating to the application.

All notices of hearing and orders issued by the Commission pursuant to Section 145 are public. They are widely distributed at the time of issuance and are published in the Weekly Summary. It is the intention of the Commission to publish in the Weekly Summary, on a regular basis, a list of all outstanding notices of hearing and outstanding orders issued under Sections 144, 145 and 145.1. Registrants should refer to this list when deciding whether to conduct trades on behalf of their clients.

DATED at Vancouver, British Columbia, this 21st day of July, 1989.
Neil de Gelder
Superintendent of Brokers