Securities Law

33-505 - Underwriting Conflicts [BCI - Rescinded]

Published Date: 2001-06-28
Effective Date: 2001-06-29
Rescinded Date: 2002-01-03

BRITISH COLUMBIA SECURITIES COMMISSION

BC INSTRUMENT 33-505

The British Columbia Securities Commission, having considered that to do so would not be prejudicial to the public interest, orders, effective June 29, 2001, that:

  1. the attached BC Instrument 33-505 entitled "Underwriting Conflicts" is made; and
  2. BOR#92/2 is revoked.

 

June 27, 2001.

 

Brent W. Aitken
Member

(This part for administrative purposes only and is not part of the Order)

Authority under which Order is made:

Act and sections: - Securities Act, sections 48 and 171
Other (specify): -

 

UNDERWRITING CONFLICTS

Order Under Section 48 of the Securities Act

Application

1. This Instrument provides relief, subject to certain restrictions, from the underwriting conflicts requirements set out in s.78(2)(b) of the Securities Rules.

This Instrument does not apply to a distribution of securities described in section 46 of the Act or mutual fund securities

Definitions and interpretation

2. Terms that are defined and interpreted in proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts published February 6, 1998 have the same meanings and interpretations in this Instrument.

Restrictions on underwriting

3. No registrant shall act as an underwriter in a distribution of securities in which it is the issuer or selling securityholder, or as a direct underwriter in a distribution of securities of or by a connected issuer, unless

(a) the distribution is made under a prospectus or another document that, in either case, contains the information specified in Appendix A; and

(b) in a distribution made under a prospectus

(i) if at least one registrant acting as direct underwriter acts as principal, an independent underwriter underwrites not less than the lesser of

(A) 20 percent of the dollar value of the distribution, and

(B) the largest portion of the distribution underwritten by a registrant that is not an independent underwriter, or

(ii) if each registrant acting as direct underwriter acts as agent and is not obligated to act as principal, an independent underwriter receives a portion of the total management fees equal to an amount not less than the lesser of

(A) 20 percent of the total management fees for the distribution, and

(B) the largest portion of the management fees paid or payable to a registrant that is not an independent underwriter; and

(c) in a distribution made under a prospectus, the prospectus identifies the independent underwriter and discloses the role of the independent underwriter in the structuring and pricing of the distribution and in the due diligence activities performed by the underwriters for the distribution.

Non-discretionary exemptions

4. Exemption from Disclosure Requirement - Paragraph 3(a) does not apply to a distribution that

(a) is made under a document other than a prospectus if each of the purchasers of the securities

(i) is a related issuer of the registrant,

(ii) purchases as principal, and

(iii) does not purchase as underwriter; or

(b) is made under section 128(d) of the Securities Rules.

5. Exemption from Independent Underwriter Requirement - Paragraph 3(b) does not apply to a distribution of securities of an issuer if

(a) neither the issuer of the securities nor the selling securityholder is the registrant or a related issuer of the registrant; and

(b) either

(i) the issuer is a connected issuer of the registrant and

(A) the issuer is not a specified party, or

(B) if the issuer is a connected issuer of the registrant only because of indebtedness, the issuer’s relationship with the registrant immediately before the distribution was a minor debt relationship, or

(ii) the selling securityholder is a connected issuer of the registrant and

(A) the selling securityholder is not a specified party, or

(B) if the selling securityholder is a connected issuer of the registrant only because of indebtedness, the selling securityholder’s relationship with the registrant immediately before the distribution was a minor debt relationship.

EXEMPTION

6. Exemption - The Executive Director may grant an exemption to this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

7. Evidence of Exemption - Without limiting the manner in which an exemption under section 4.1 may be evidenced, the issuance by the regulator of a receipt for a prospectus or an amendment to a prospectus is evidence of the granting of the exemption if

(a) the person or company that sought the exemption has delivered to the regulator, on or before the date that the preliminary prospectus or an amendment to the preliminary prospectus was filed, a letter or memorandum describing the matters relating to the exemption and indicating why consideration should be given to the granting of the exemption; and

(b) the regulator has not sent written notice to the contrary to the person or company that sought the exemption before, or concurrent with, the issuance of the receipt.

BC INSTRUMENT 33-505

APPENDIX A

REQUIRED INFORMATION

REQUIRED INFORMATION FOR THE FRONT PAGE OF THE PROSPECTUS OR OTHER DOCUMENT

1. A statement in bold type, naming the relevant registrant or registrants, that the issuer or the selling securityholder is a connected issuer of a registrant or registrants in connection with the distribution.

2. A summary, naming the relevant registrant or registrants, of the basis on which the issuer or selling securityholder is a connected issuer of the registrant or registrants.

3. A cross-reference to the applicable section in the body of the prospectus or other document where further information concerning the relationship between the issuer or selling securityholder and registrant or registrants is provided.

REQUIRED INFORMATION FOR THE BODY OF THE PROSPECTUS OR OTHER DOCUMENT

4. A statement, naming the relevant registrant or registrants, that the issuer or the selling securityholder is a connected issuer of a registrant or registrants for the distribution.

5. The basis on which the issuer or selling securityholder is a connected issuer for each registrant referred to in paragraph 4, including

(a) if the issuer or selling securityholder is a related issuer of the registrant, the details of the holding, power to direct voting, or direct or indirect beneficial ownership of, securities that cause the issuer or selling securityholder to be a related issuer;

(b) if the issuer or selling securityholder is a connected issuer of the registrant because of indebtedness, the disclosure required by paragraph 6 of this Appendix; and

(c) if the issuer or selling securityholder is a connected issuer of the registrant because of a relationship other than indebtedness, the details of that relationship.

6. If the issuer or selling securityholder is a connected issuer of the registrant because of indebtedness,

(a) the amount of the indebtedness;

(b) the extent to which the issuer or selling securityholder is in compliance with the terms of the agreement governing the indebtedness,

(c) the extent to which a related issuer has waived a breach of the agreement since its execution;

(d) the nature of any security for the indebtedness; and

(e) the extent to which the financial position of the issuer or selling securityholder or the value of the security has changed since the indebtedness was incurred.

7. The involvement of each registrant referred to in paragraph 4 and of each related issuer of the registrant in the decision to distribute the securities being offered and the determination of the terms of the distribution, including disclosure concerning whether the issue was required, suggested or consented to by the registrant or a related issuer of the registrant and, if so, on what basis.

8. The effect of the issue on each registrant referred to in paragraph 4 and each related issuer of that registrant, including

(a) information about the extent to which the proceeds of the issue will be applied, directly or indirectly, for the benefit of the registrant or a related issuer of the registrant, or

(b) if the proceeds will not be applied for the benefit of the registrant or a connected issuer of the registrant, a statement to that effect.

9. If a portion of the proceeds of the distribution is to be directly or indirectly applied to or towards

(a) the payment of indebtedness or interest owed by the issuer, an associate or related issuer of the issuer, a person or company of which the issuer is an associate, the selling securityholder, an associate or related issuer of the selling securityholder, a person or company of which the selling securityholder is an associate, to the registrant or a related issuer of the registrant, or

(b) the redemption, purchase for cancellation or for treasury, or other retirement of shares other than equity securities of the issuer, an associate or related issuer of the issuer, a person or company of which the issuer is an associate, the selling securityholder, an associate or related issuer of the selling securityholder, or of a person or company of which the selling securityholder is an associate, held by the registrant or a related issuer of the registrant

particulars of the indebtedness or shares in respect of which the payment is to be made and of the payment proposed to be made.

10. Any other material facts with respect to the relationship or connection between each registrant referred to in paragraph 4, a related issuer of each registrant and the issuer that are not required to be described by the foregoing.

REGISTRANT AS ISSUER OR SELLING SECURITYHOLDER

11. If the registrant is the issuer or selling securityholder in the distribution, then the information required by this Appendix shall be provided to the extent applicable.

VALUATION DISCLOSURE

12. If

(a) the issuer in the distribution

(i) is not a reporting issuer,

(ii) is a registered dealer or an issuer all or substantially all of whose assets are securities of a registered dealer,

(iii) is issuing voting securities or equity securities, and

(iv) is effecting the distribution other than under a prospectus, and

(b) there is no portion of the distribution being underwritten by at least one registrant in respect of which the issuer is not a related issuer in the amount specified in paragraph 2.1(b) of the Instrument

then each purchaser of securities offered in the distribution shall be given a disclosure document or other document containing a summary of a valuation of the issuer by chartered accountants or by a registered dealer of which the issuer is not a related issuer, and describing a reasonable time and place at which the valuation may be inspected during the distribution.