NIN 98/66 - Adoption of Rule Restricting Exemption to Mortgages on Land in British Columbia [NIN - Rescinded]
| Published Date: | 1998-10-23 |
|---|---|
| Effective Date: | 1998-10-21 |
- mortgages on land situated only in British Columbia, or
- where the purchaser is an institutional purchaser,
will continue to be required to comply fully with the registration and prospectus requirements of the Act, or to rely on another exemption from these requirements. Many of these other exemptions require the use of an offering memorandum. Interim Form 43C, specified under NIN#98/8 in February 1998, continues to be the required form of offering memorandum under section 133(1)(c) of the Securities Rules for a distribution of mortgage securities.
The full text of the Mortgage Rule, B.C. Reg. 340/98, which came into effect on October 19, 1998, is being published in the Weekly Summary of October 23, 1998. The Mortgage Rule replaces and revokes an interim urgent rule, B.C. Reg. 18/98 (the "Urgent Rule"), that was published on February 6, 1998 (NIN#98/7) and that came into effect on February 23, 1998.
Offerings of mortgage securities are subject to the advertising restrictions currently imposed on other types of securities offerings. In addition, persons relying on section 46(e) of the Securities Act, which provides an exemption only from the requirement in the Act to register to trade, can rely on a blanket order issued by the Commission (BOR#95/15) that permits them to advise with respect to mortgages sold under the exemption. As the exemption in section 46(e) of the Securities Act will continue to cover only mortgages on land situated wholly in British Columbia, persons wishing to trade in mortgages on land situated outside British Columbia and other encumbrances on property are not be able to rely on this blanket order and will be required to register to advise on these securities or to rely on another exemption from adviser registration.
Syndicated Mortgage Rule and Amendments to Mortgage Brokers Act
In February 1998, the Commission also published the Urgent Rule as a proposed rule for comment and a separate proposed rule for comment relating to syndicated mortgages (the "Syndicated Mortgage Rule"). The comment period for both expired on April 15, 1998. While the Commission received significant comments on the Syndicated Mortgage Rule, only one comment was received on the Urgent Rule. The commenter suggested that the proposed restriction on the use of the mortgage exemption in the Act should not apply if the purchaser were an institutional purchaser. As a result, the text of the Mortgage Rule differs from that of the Urgent Rule in providing that the exemption in the Securities Act continues to apply where the purchaser is an institutional purchaser.
On May 13, 1998, the Finance and Corporate Relations Statutes Amendment Act, 1998, S.B.C. 1998, c. 7 ("Bill 9"), which contained amendments to the Mortgage Brokers Act (the "MBA") as well as the Securities Act, received royal assent (see NIN#98/28). It has not yet been proclaimed in force. The amendments to the MBA contained in Bill 9 will result in the regulation by the Registrar of Mortgage Brokers of the actions of registered mortgage brokers with respect to mortgages arranged on land situated outside British Columbia and require investor disclosure for all mortgages, both syndicated and non-syndicated. These amendments to the MBA, however, are not yet in force. They are expected to come into force upon finalization of the new MBA regulations and investor disclosure form. At that time, the Commission would be able to revoke the Mortgage Rule and finalize the Syndicated Mortgage Rule, which will replace it.
The Commission is considering the comments received on the Syndicated Mortgage Rule and is working closely with the Deputy Registrar of Mortgage Brokers and the Policy and Legislation Branch of the Ministry of Finance and Corporate Relations to ensure that the Syndicated Mortgage Rule does not overlap with the new provisions of the MBA.
Questions
Questions may be referred to:
Simon Millner
Legal Counsel, Policy and Legislation
British Columbia Securities Commission
200 - 865 Hornby Street
Vancouver, BC V6Z 2H4
(604)899-6642
or (800)373-6393
E-mail: smillner@bcsc.bc.ca
DATED at Vancouver, British Columbia, on October 21, 1998.
Joyce C. Maykut, Q.C.
Vice Chair
NIN#98/7
NIN#98/8
NIN#98/28
BOR#95/15
SCHEDULE
1. Section 92 of the Securities Rules, B.C. Reg. 194/97, is repealed and the following substituted:
Restrictions on exemptions under section 46 of the Act
92 (1) The exemption under section 46 (e) of the Act does not apply to a person making a trade of securities unless
(a)the securitiesare mortgages on land situated only in British Columbia, or
(b) the purchaser of the securities is an institutional purchaser as defined in section 134 (1).
(2) The exemption under section 46 (g) of the Act does not apply to a person making a trade of securities unless
(a) the person making the trade is the issuer,
(b) the purchaser is the issuer or a security holder of the issuer, or
(c) the person making the trade is not the issuer and, before the trade is made, the person
(i) notifies the issuer of the proposed trade, and
(ii) provides the purchaser with a copy of any applicable information statement and financial and other information concerning the issuer’s affairs that the issuer provided to the person during the 2 years immediately preceding the date of the proposed trade.
2.Section 131 is repealed and the following substituted:
Restrictions on exemption under section 75 (a) of the Act
131 (1) The exemption under section 75 (a) of the Act does not apply to a person making a distri-bution of securities described in section 46 (e) of the Act unless
(a) the securitiesare mortgages on land situated only in British Columbia, or
(b) the purchaser of the securities is an institutional purchaser as defined in section 134(1).
(2) The exemption under section 75 (a) of the Act does not apply to a person making a distri-bution of securities described in section 46 (g) of the Act unless
(a) the person making the distribution is the issuer,
(b) the purchaser is the issuer or a security holder of the issuer, or
(c) the person making the distribution is not the issuer and, before the distribution is made, the person
(i) notifies the issuer of the proposed distribution, and
(ii) provides the purchaser with a copy of any applicable information statement and financial and other information concerning the issuer’s affairs that the issuer provided to the person during the 2 years immediately preceding the date of the proposed distribution.