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Securities Law

NIN 98/43 - Industry Responsibility Regarding the Year 2000 [NIN - Rescinded]

Published Date: 1998-07-24
Effective Date: 1998-07-22
Staff of the British Columbia Securities Commission recognizes the critical importance of information technology systems to the administration and efficient functioning of the capital markets and is aware that the failure of one or more participants to attain Year 2000 readiness could result in commercial disruption and have a wide reaching and systemic impact on the financial markets.


Staff is publishing this notice to emphasize the importance of all market participants implementing as soon as reasonably possible the necessary plans to ensure a smooth transition come the millennium. At this stage, staff believes that market participants should assign all necessary human and financial resources to deal with the problems associated with the Year 2000 and should give this issue the highest priority and support in their organizations. Staff is also of the view market participants should be moving into the testing phase of their Year 2000 effort as soon as reasonably practicable in order to determine where the problems are and develop alternative solutions on a timely basis should the need arise. It is critical that testing takes place on a timely basis for the benefit of the British Columbia and Canadian financial and capital markets and staff encourages market participants to become involved in the testing and contingency planning initiatives of the Canadian G-30 subcommittee on the Year 2000. Various levels of testing that are prudent are set out below.

Industry Standards

Staff believes that market participants, including SROs, industry associations, reporting issuers and registrants, will move smoothly through the century change by successfully implementing compliant systems and/or developing and implementing contingency plans.

At this time, industry standards suggest that market participants should:
  • have assigned the task of ensuring Year 2000 compliance to a project manager and have established a budget and strategic approach for Year 2000 compliance with oversight by senior management and the Board of Directors;
  • have completed an inventory and assessment with respect to their operations, systems and equipment including the identification of all external providers of software and /or hardware products;
  • have commenced the remediation stage, including renovating or replacing systems, applications and equipment, and be validating the changes through testing;
  • be in the process of implementing tested and compliant systems;
  • have developed strategies to communicate to the public and to their constituents and stakeholders their state of Year 2000 readiness as well as efforts underway to achieve Year 2000 readiness; and
  • be in the process of developing contingency plans that describe the possible actions they could take should a major hardware/software component fail or not be ready.
Recent correspondence from the IOSCO Working Party on the Regulation of Secondary Markets ("WP2") also emphasized the importance of testing and contingency planning. In the WP2’s view, only by well-planned and timely testing will market participants be able to assess:
  • whether the appropriate risks to their systems have been identified and necessary action has been taken;
  • whether their counterparts have made necessary modifications to their systems; and
  • whether internal systems interact appropriately with external systems.

Industry studies suggest that market participants should engage in the following types of testing in order to provide reasonable assurance that individual participants and the Canadian market as a whole will function without significant disruption at the turn of the century1.

1 With the exception of the "IT System Testing", these are the current IOSCO definitions.

IT System Testing: Testing individual information technology systems and components including without limitation equipment, software, hardware and integrated circuits.

Connectivity Testing: Testing of two or more computer systems to determine their compatibility.

End to End Testing: Comprehensive testing of securities transactions from the beginning of the process (placing of the order) to the end of the process (settlement of the transaction).

Point to Point Testing: Testing between two or more market and industry participants that ranges from connectivity testing to end to end testing.

Industry Wide Testing: Testing among a large group of market and industry participants (including a representative portion of all market and/or industry participants within one or more jurisdictions), which ranges from connectivity to end to end testing.

Cross Border Testing: Testing involving two or more jurisdictions. Cross border testing may include point to point testing (between market and industry participants individually) or industry wide testing (between a representative portion of all markets and/or industry participants from each jurisdiction). In addition, cross border testing may involve connectivity testing, and end to end testing.

Implications for Market Participants

As set out in NIN#98/42, published concurrently with this notice, the Commission has taken a number of initiatives to raise awareness of the issues surrounding the century date change and promote prompt and appropriate action within the financial industry. Ultimately, however, it is the responsibility of each market participant to take the steps necessary to be in a position to provide uninterrupted service and protection during the transition to the next century.

Staff believes that most market participants will identify and properly manage the risks related to the century date change. However, should it become clear that adequate testing has not been completed and that prompt remedial action is not being taken by market participants, staff will consider the remedies available to it under the Securities Act to avert or minimize disruption to the British Columbia securities markets and to protect the public interest.

DATED at Vancouver, British Columbia, on July 22, 1998

Brenda J. Benham

REF: NIN#98/42