Bill 58 (Legislature 6, Session 4)

L6 S4 8969

Alberta — Bills

No. 58. FOURTH SESSION, SIXTH LEGISLATURE, ALBERTA 20 GEORGE V, 1930 BILL

An Act for the Prevention of Fraud in connec tion with the Sale of Securities HON. MR. LYMBURN 'EDMONTON: PRINTED BY W. D. McLEAN, KING'S PRINTER

1 BILL No. 58 of 1930.

An Act for the Prevention of Fraud in connection with the Sale of Securities. (Assented to , 1930.) HIS MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of Alberta, enacts as follows:-

Short title ~. This Act may be cited as The Security Ft'auds Pre- 1,ention Act, 1930. Interpreta- Z.

In this Act-tion "Broker" UCompany" "Fraud" (rt) "Broker" shall mean every person other than a salesman who engages either for the whole or part of his time directly or through an agent in the business of trading in securities and shall include a company, and such officials of a company or partnership which trades in securities as may be designated by the Regulations, and shall include a security issuer except where the context clearly indicates the contrary. (b) "Company" means any inco'rporated corporation, association or other organization. (c) "Fraud," "fraudulent" and "fraudulent act" shall, in addition to their ordinary meaning, include: (

i) any intentional misrepresentation by word, conduct or in any manner of any material fact either present or past, and any inten tional omission to disclose any such fact; (ii) any promis.e or representation as to the future which is beyond reasonable expecta tion and not made in good faith; (iii) any fictitious or pretended trade in any security;

EXPLANATORY NOTE. The Act is re-enacted for greater convenience, so that the propel' effect of the amendments may be more readily understood. The amend ments are indicated in blacker type than the body of the Bill.

Section 2 (a). The definition is extended to include a company in order to save repetition later on, and to exclude companies, syndi cates, etc., which issue only their own stock, units, etc. Former refer ence to a trustee capacity is deleted.

Section 2 (b). Rearranged for greater clarity.

-'Person" "Registrar" "Regula tions" "Salesman" 2 (iv) the gammg or attempt to gain, directly or indirectly, through a trade in any security, a commission, fee or gross profit so large and exorbitant as to be unconscionable and un reasonable; (

v) any course of conduct or business which is calculated or put forward with intent to deceive the public or the purchaser or the vendor of any security as to the nature of any transaction or as to the value of such security; (vi) the making of "any material false statement in any application, information, material or evidence submitted or given to the Atto'rney General, his representatiYe or the Registrar under the provisions of this Act or the Regulations; or in any prospectus or return filed with the Provincial Secretary; (vii) the violation of any provision of this Act or of the Regulations relating to trading in securities; (viii) generally any artifice, agreement, device or scheme course of conduct or business to obtain money, profit or property by any of the means hereinbefore set forth or otherwise contrary' to, law and anything specifically designated in the Regulations as coming within the meaning' of this definition; (d) "Person" shall mean an individual, partnership, association, syndicate and any unincorporated 0'1' ganization. (e) "Registrar" shall mean the person appointed by the Lieutenant-Governor in Council to act as Registrar under the pr0visions of this Act and the Regulations. (n "Regulations" shall mean the regulations made from time to time by the Lieutenant-Governor in Council under the provisions of this Act. (g) "Salesman" shall mean every person employed, appointed or authorized by any broker or com pany to trade in securities whether directly or through SUb-agents.

Section 2 (c) (iv). The words "gross profit" prevent any argu ment as to whether "net profit" might have been meant.

Section 2 (c) (v). Amended to include deceit of one who has a security to exchange for what may prove to be one of less value.

Section 2 (c) (vii). More concisely worded.

Section 2 (c) (viii). Rearranged with the addition of the pow~r to add further

definitions.

Section 2 (d). Reference to a trustee capacity is deleted.

"Security" "Security issuer" "Trade" Brokers. officials and salesmen to register 3 (h) "Security" shall include, (

a) any document, instrument or writing com monly known as a security, or (

b) any document constituting evidence of title to or interests in the capital, assets, property, profits, earnings or royalties of any person or company; or (

c) any document constituting evidence of an interest in an association of legatees or heirs, or (

d) any document constituting evidence of an interest in any option given upon a security, or (e) . any document designated as a security by the regulations. (i) "Security issuer" shall include a company or per son, other than an individual, trading in securities of its own issue and not trading generally in other securities. (j) "Trade" or "Trading" shall include any solicita tion or obtaining of a subscription to, disposition of, transaction in, or attempt to deal in, sell or dispose of a security or interest in or option upon a security for any valuable consideration whether the terms of payment be upon margin, instalment or otherwise, and any underwriting of any issue or part of an issue of a security, and any act, ad vertisement, conduct or negotiation directly or indirectly in furtherance of any of the foregoing or specifically designated as "trade" or "trading" in the Regulations.

PART 1. REGISTRATION OF BROKERS AND SALESMEN 3.- (1 ) No person shall,- (

a) trade in any security unless he is registered as a broker or salesman of a registered broker, or

Section 2 (h). The definition is merely rearranged.

Section 2 (i). A new definition to distinguish the company selling its own stock from the general broker.

Section 2 (j). Amended to cover the solicitations of subscriptions to capital stock, to overcome any possible restriction upon the scope of the definition. Note.-A former definition of "trustee" is deleted as superfluous.

Section 3 (1). Amended to make it clear that salesman can only do business while employed by a registered broker, and not after dismissal, etc., until they have been employed by another registered broker.

Partnership or company may be registered Exemptions Judicial sales Isolated transactions by o,vner Banks. etc .• Crown, municiDal and public officials. and registered persO'lls. etc. 4 (

b) act as an official of or on behalf of any partner ship or company in connection with any trade in any security by the partnership or company, un less he or the partnership or company is registered as a broker, (

c) act as a salesman of or on behalf of any partner ship or company in connection with any trade in any security by the partnership or company, un less he is registered as a salesman of a partnership or company which is registered as a broker, and such registrations have been made in accordance with the provisions of this Act and the Regulations, and any violation of this

section shall constitute an offence. (2) 'With the approval of the Attorney-General, any partnership or company may be registered as a broker, whereupon the partnership or company may trade in securities, and the members and officials of the partner ship, and the officials of the company other than branch managers or salesmen of the partnership or company, may act as such without separate registration, and the provisions of this Act, and of the Regulations relating to registered persons or companies, shall be deemed to apply to such partnership or company.

(3) Registration shall not be required in respect of any of the following classes of trades or securities,- (

a) A trade in a security taking place at a judicial, executor's, administrator's, guardian's or commit tee's sale, or at a sale by an authorized trustee or assignee, an interim or official receiver or a cus todian under The Bankruptcy Act, a receiver under The Judicature Act, or a liquidator under The Com panies Art, 1929, or The Winding-Up A.ct of the Dominion of Canada. (

b) An isolated trade in a specific security by or on behalf of the owner, for the owner's account, where such trade is not made in the course of continued and successive transactions of a like character, nor by a person whose usual business is trading in securities. (

c) A trade where one of the parties is a bank, loan company, trust company or insurance company, or is an official or employee, in the performance of his

Section 3 (3). Phraseology slightly changed.

Section 3 (3) (b). Amended to cover cases that have arisen of salesmen who have been refused registration trying to evade the Act.

Sale by pledge for debt Stock dividends, etc. Exchange on merger Prospector's '~grub8take" or share in claim Trust Secured bonds Negotiable paper Securities based upon conditiO'l1al sales 5 duties as such, of His Majesty in right of the Dominion or any province or territory of Canada or of any municipal corporation, or public board or commission in Canada or is registered as' a broker under the provisions of this Act. (

d) A trade by or for the account of a pledgee or mort gagee for the purpose of liquidating a bona fidle debt by selling or offering for sale or delivery in good faith in the ordinary course ()f business a security pledged in good faith as security for such debt. (

e) The distribution, is'suance or sale by a company exclusively to the holders of its securities, of capital stock, bonds or other securities as a stock dividend or other distribution out of earnings or surplus, or in the process of a boma firk reorganization of the company, or of additional capital stock where no commission or other remuneration is paid or given in connection therewith. (

f) The exchange by or on account of one company with another company of its own securities in connec tion with a consolidation, amalgamation or merger of either company. (

g) A trade in good faith by an actual prospector of a security issued by him for the purpose of financing a prospecting expedition, or for the purpose of dis posing of any of his interest in a mining claim or property staked by or wholly or partly owned by him. (

h) Securities in which trust funds may lawfully be invested in Alberta. (

i) Securities secured by mortgage upon real estate or tangible personal property where the entire mortgage, together with all of the securities secured thereby or where all of the securities secured thereby are sold at the one time. (

j) Negotiable promissory notes or commercial paper maturing not more than a year from the date of issue. (

k) Securities evidencing indebtedness due under. any contract made pursuant to the provisions of any statute of any province of Canada providing for the

Section 3 (3) (i). Slight amendment to supersede a similar regu lation.

Shares of non-profit !::\haring companies Trades or securities exempted by Regu lations Registration within ten days unless Attorney General objects Temporary registration Expiration. change and renewal of registration Application to be upon forms with proper fees and bands Address for service Further infol'mation 6 acquisition of personal property under conditional sale contracts. (

l) Securities issued by a person or company organized exclusively for educational, benevolent, fraternal, charitable, or recreational purposes and not for pecuniary profit, where no part of the net earnings thereof enure to the benefit of any security holder. (

m) Any class of trade or security specifically exempted from the application of subsections 1 and 2 of this

section by the Regulations. 4.-

(1) Unless the Attorney-General otherwise directs the Registrar may after the receipt by him of any applica tion for registration cause to be entered in a book kept for such purpose and open to public inspection, hereinafter called the "Register," the name and address for service of such applicant, whereupon such applicant shall be deemed to be registered as a broker or salesman as the case may be.

(2) The Registrar may cause a temporary entry to be made, designated as such, in the register, subject to can cellation at any time upon the order of the Attorney-Gen eral.

(3) Registrations shall expire, and may be changed or renewed as the Regulations shall provide. 5.-

(1) Every application under this Act or the Regu lations shall be made in writing upon the forms provided by the Registrar, and shall be accompanied by the fee pre scribed by the Regulations and such bond as may be re quired.

(2) Every applicant, whether domiciled in Alberta 0]' not, shall state in every application an address for service in Alberta, and all notices under this Act or the Regula tions and all legal process issued by 01' on behalf of any person 01' company shall be sufficiently served for all pur poses if posted by register~d mail to the applicant at the latest address for service so stated, and in the case of a non-registered company where the officials are registered to the latest address of the person registered as the senior official of such company in Alberta.

(3) The Registrar may from time to time and shall when so directed by the Attorney-General require any further information or material to be submitted by any applicant 01' any registered person or company within a specified time limit and may require verification by affidavit or otherwise of any matter then or previously submitted.

Section 4 (1). Words "within ten days" aft~r "may" in line 2, deleted to conform to practice.

Section 4 (2). The requirement of a special direction for a "tem porary registration" is dispensed with to conform to practice.

$500 bond by every broker and applicant Bond by a surety company if required New bond Forfeiture of bonds $500 bond Bond by surety company 7 6.-

(1) Every applicant for registration as a broker shall before registration submit a bond by the applicant or the person or company he represents as the Registrar may require, such bond to be in the sum of $500 and in such form and upon such condition as the Regulations shall prescribe.

(2) The Registrar may and when so directed by the Attorney-General shall require any applicant or any regis tered pers'on or company within a specified time limit to deliver a bond by a surety company approved by the Attorney-General or any other bond in such form and upon such condition as the Regulations shall prescribe, and in such amount as the Regulations or the Attorney-General shall require.

(3) The Registrar may and when so directed by the Attorney-General shall require a new bond of the kind mentioned in subsections 1 or 2 to be filed within a speci fied time limit. 7.-

(1) Any bond mentioned in

section 6 shall be forfeit and the sum named therein shall become due and owing by the person or company bound thereby as a debt to His Majesty in right of the Province of Alberta when there has been filed with the Registrar the Attorney-General's cer tificate that the broker in respect of whose conduct the bond is conditioned, or any official of the broker has, in connection with a trade in a security, been- (

a) in the case of the bond mentioned in subsection 1 of

section 6, (

i) charged with any criminal offence, or, (ii) found upon investigation by the Attol"ney General or his representative to have commit ted a fraudulent act, or (

b) in the case of the bond mentioned in subsection 2 of

section 6, (

i) convicted of a criminal offence, or (ii) convicted of an offence against any provision of this Act or the Regulations, or (iii) enJoined by the Supreme Court or a Judge thereof otherwise than by an interim in junction. (iv) a party to civil proceedings in the courts as a result of which final judgment has been

Section 7 (1). Deletion of words "employee or salesman" after "official" in line 7, removes a somewhat unreasonable responsibility from the surety companies. "Broker" replaces "person or company."

Section 7 (1) (b) (iv). This makes the surety bond available to a judgment creditor who has obtained judgment from a broker who has defrauded him.

"Forfeiture upon bank ruptcy <>1' winding up proceedings Assignment Df bDnd Dr payment af moneys to creditors AttDrney General's orders con cerning applications Deceptive names ~r~mpOl'al'Y entries Regi.tration reduced or cancelled 8 given against such person; company or official in connection with a trade in a security where such judgment is based upon a finding of fraud.

(2) Any bond mentioned in

section 6 shall be forfeit and the sum named therein shall become due and o ... ving by the person or company bound thereby as a debt to His Majesty in right of the Province of Alberta when there has been filed with the Registrar a certificate signed by the Attorney-Ceneral that proceedings by or in respect of the broker or salesman in respect of whose conduct the bond is conditioned have been taken under The Bankruptcy Act, or by way of winding up.

(3) The Attorney-General may assign any bond forfeited under the provisions of subsections 1 or 2, or may pay over any moneys recovered thereunder to any person, or to the accountant of the Supreme Court in trust for such persons and companies as may become judgment creditors of the person or company bonded, or to any trustee, custo dian, interim receiver, receiver or liquidator of such person or company, as the case may be, such assignment or pay ment over to be in accordance with and upon conditions set forth in the Regulations or in any special order of the Lieutenant-Governor in Council. 8.-

(1) The Attorney-General may order that,- (

a) any application for registration, renewal. or change of registration shall or shall not be granted for any reason which he may deem sufficient, or that (

b) the application of any person for registration shall not be granted where it appears that such person proposes to use or is using a trading name other than his own, or that of his partner, where such trading name is apt to lead the public to believe it is that of a business firm of longer established standing in Alberta, or is calculated to conceal from the public the identity of the applicant, or is for any reason objectionable, or that (

c) any temporary entry in the register shall be made, suspended or cancelled for any reason which he may deem sufficient, or that (

d) any registration shall be reduced to a temporary registration or suspended or cancelled upon,-

Section 8 (1) (d). Extension of the power to reduce registration to temporary registration. "Broker" replaces "person or company."

Suspension or cancel .. · lation for default Suspension under

Part II. Entry of suspension or cancel lation Further applications Investi gation by Attorney General 9 (

i) any proceedings being taken by or in respect of the broker under The Bankruptcy Act or by way of winding up, or (ii) suspension from any stock exchange of any broker or any representative upon any stock exchange of any broker, or (iii) institution of criminal proceedings against the broker or any official of the broker, or (iv) conviction of the broker or an official of the broker of an offence against this Act or the Regulations. (

e) the registration of any broker or salesman shall be suspended for any period or cancelled by reason of default in filing a bond when required under the provisions of subsections 2 and 3 of

section 6, or that (

f) the registration of any broker or salesman shall be suspended as provided in

section 10, and no order of the Attorney-General shall be subject to review in any way in any court.

(2) The Registrar upon receiving any order of the Attorney-General suspending or cancelling any registra tion shall cause immediate entry thereof to be made in the register whereupon the suspension or cancellation shall become effective forthwith, but notice thereof and of the refusal of any application shall be sent to the broker or salesman concerned.

(3) Notwithstanding any order of the Attorney General a further application may be made upon new or other material, or where it is clear that material circum stances have changed.

PART II. INVESTIGATION AND ACTION BY THE ATTORNEY-GENERAL. D -

(1) The Attorney-General, or any person or per sons to whom as his representative or representatives he may in writing delegate such authority, may examine any person, company, property or thing whatsoever at any time in order to ascertain whether any fraudulent act, or any offence against this Act or of the RegUlations has

Section 8 (1) (e), (I);

Section 8 (2). "Broker or salesman" re places "person or company."

Section 9 (1). The meaning of the section. enaoling the Attorney General to examine any person "at any ~ime" is clarified, and the question of privilege, which was misunderstood by the trial judge in a recent case is set forth better. The Act takes away the common laW' privilege of objecting to produce documents on the ground that they might incriminate, as this was untouch.ed by The Evidence Act. The right to object under that Act is retained, and only interfered with in

section 11 (3).

Appoint ment of accountants and other experts Failure to give infor mation, etc., an offence and also prima facie evidence Evidence not to be disclosed 10 been, is being, or is about to be committed, and for such purpose shall have the same power to summon and en force the attendance of witnesses and compel them to give evidence on oath and to produce documents, records and things as is vested in the Supreme Court or a Judge thereof for the trial of civil cases, save that the provisions of rules of court or of law' relating to the, service of sub poenas upon and to the payment of conduct money or witness fees to witnesses shall not apply and save further that 1110 person shall be entitled to claim any privilege in respect of any document, record or thing asked for, given or produced on the ground that he might be incriminated or exposed to a penalty or to civil litigation thereby and no evidence given shall be privileged except under The A.lberta Evidence Act and The Canada E1Jidence Act, and save further that no provisions of The Alberta Evidence Act shall exempt any bank ·or any officer or employee thereof from the operation of this section.

(2) When the' Attorney-General, or his representative, is about to examine or is examining any person or com pany under this

section the Attorney-General may appoint an accountant or other expert to examine documents, records, properties and matters and report thereon to him.

(3) The failure without reasonable excuse of any person or company to furnish information required by the Regis trar under

Part I within the time limited, or the failure without reasonable excuse of any person summoned for examination under subsection 1 to appear or his refusal to give evidence or to answer any question, or the failure without reasonable excuse or refusal of any person or com pany to produce anything where the evidence, answer or production would be required in an action shall constitute an offence and shall also be prima facie evidence upon which,- (

a) the Attorney-General, or his representative, may base an affirmative finding concerning any fraudu lent act to which he may deem it relevant, or (

b) the Supreme Court, or a Judge thereof, may grant an interim or permanent injunction, or (

c) a police magistrate may base a conviction for an offence against this Act or the Regulations.

(4) Disclosure by any person other than the Attorney General, his representative or the Registrar, without the consent of anyone of them, of any information or evidence

To remove any doubt as to whether or not a bank is ex~mpt from examination, it is expressly provided that The Alberta Evidence Act shall not affect the operation of the section.

Section 9 (2). This is to enable the appointment of expert ac countants, engineers, etc., to investigate.

Attorney General may suspend for over ten days and proceed by injunc tion Notice of fraud Supreme CO'Urt (fr , Judge may enjoin from trading in securities 11 obtained or the name of any witness examined or· sought to be examined under subsection 1 shall constitute an offence. 10. If the Attorney-General or his representative upon investigation finds that any fraudulent act, or that any offence against this Act or the Regulations', has been, is being, or is about to be committed, the Attorney-General (

a) may where a registered broker, company or sales man is in his opinion concerned therein, order that the broker, company or salesman and any other registered broker, company or salesman connected with the same organization, be suspended from registration for any period not exceeding ten days, or (

b) may where he considers a suspension for ten days inadequate, or where any unregistered person or company is in his opinion concerned in such fraudu lent act or in such offence, proceed under the provi sions of

section 11, or, otherwise under this Act or the Regulations, or (

c) may give notice of the fraudulent act to the public by advertisement or otherwise or to any individual by letter or otherwise, whenever he deems it ad visable. 11.-

(1) The Supreme Court or any judge thereof is hereby empowered upon the application of the Attorney General, where it is made to appear upon the material filed or evidence adduced that any fraudulent act, or any offence against this Act or the Regulations has been, is being or is about to be committed may by order enjoin,- (

a) any registered broker, company or salesman or any person or company implicated with any of them in the same matter from trading in any security what ever absolutely or for such period of time,as shall seem just, and any such injunction shall ipso facto suspend the registration of any registered person or company 'named in the order during the same period, or (

b) any person or company from trading in any security whatever, or in any specific security, or from com mitting any specific fraudulent act or series of fraudulent acts absolutely or for such period of time as shall seem just.

Application may be ex parte or by originating notice Evidence Attorney General may order funds. etc .. to be held 12

(2) The application of the Attorney-General under sub

section 1 may be made without any action being instituted, either,- (

n) by an ex p(u·te motion for an interim injunction which shall, if granted, remain in full force for ten days from the date thereof unless the time is ex tended or the originating motion mentioned in clause (

b) hereof is sooner heard and determined. or (

b) by an originating notice of motion, which, if an interim injunction has been granted, shall be served within five and returnable within ten days from the date of such interim injunction.

(3) Any information, evidence, exhibit or thing obtained by the Attorney-General or his representative or the Reg istrar under the provisions of this Act or the Regulations, or copies thereof, or statement that a person or company is or is not registered or other data concerning registra tion certified by the Attorney-General or the Registrar without proof of the office or signature o,f the person certifying, shall, so far as relevant, be receivable in evi dence for all purposes in any action, proceeding or prose cution and, in proceedings under this

section only, the evidence of a witness may be used against him notwith standing anything in The Alberta Evidence Act contained. 12 -

(1) The Attorney-General may,- «(

t) when he is about to examine or during or after the examination of any person or company under the provisions of

section 9, or (

b) when he is about to apply for or has applied for or has· obtained an injunction interim or otherwise against any person or company under the provis ions of

section 11, or (

c) where criminal proceedings which in his opll11O'n are connected with or arise out of any security or any trade therein, or out of any business conducted by the accused are about to be or have been insti tuted against any person, in writing or by telegram direct any person or company having in Alberta on deposit or under control or for safe keeping any funds or securities of the person or company so to be or actually examined, enjoined or charged, to hold such funds or securities or direct the person or company

Section 11 (3). The Registrar is enabled to certify as to registra tion without having to attend and give evidence. S~ction 12 (1). The power to hold funds and securities is extended somewhat.

Proviso Application for direction Notice to Registrars, etc. 13 so to be or actually examined, enjoined or charged to re frain from withdrawing any such funds or securities from any other person or company having any of them on de posit, under control or for safe keeping, or to hold all funds or securities of clients or others in his possession or control in trust for any interim receiYer, custodian, trustee, receiver or liquidator appointed under the pro visions of The BCLnkl'uptcy Act, The Judicature Act, The Companies Act, 1929, or The Winding-Up Act of the Domin ion of Canada" or until the Attorney-General in writing re vokes such direction or consents to release any particular fund or security from such direction, and failure without r.easonable excuse by any person or company to comply with any such direction shall constitute an offence, provided that no such directJon shall apply to funds or securities in a stock exchange clearing house nor to securities in process of trans fer by a transfer agent unless such direction expressly so states, and in the case of a bank, loan or trust company the direction shall only apply to the offices, branches or agencies thereof named in the direction.

(2) Any person or company in receipt of a direction given under sUbsection 1, if in doubt as to the application of such direction to any funds or security, or in case of a claim being made thereto by any person or company not named in such direction, may apply to the Supreme Court or a judge thereof who may direct the disposition of such fund' or security and may make such order as to costs as may seem just.

(3) In any of the circumstances mentioned in clauses (a), (b), or (

c) of subsection 1, the Attorney-General may in writing or by telegram notify any Registrar of Land Titles or other proper officer that proceedings are being or are about to be taken which may affect land belonging to the person or company referred to in the said notice which notice shall be registered against the lands mentioned there in and shall hav.e the same effect as the registration of a certificate of lis pendens, save that the Attorney-General may in writing revoke or modify such notice. and may

(4) The Attorney-General, whenever His Majesty be take bank· comes a creditor of any person or company in respect of a ~~!'cif:g~~~tc .. debt to the Crown arising from the provisions of sections 6 and 7, may take such proceedings as he shall see fit under The Bankruptcy Act, The Judicature Act, The Companies A.ct, 1929, or The Winding-Up Act of the Dominion of Can ada for the appointment of an interim receiver, custodian, trustee, receiver or liquidator as the case may be.

Interpre tation "Brokers' Auditor" "Exchang-e Auditor" "Executive Committee" Panel of brokers' auditors Exchange auditor Allotment of audits Duties of auditor 14

PART III. Audit, Accounts, Information. :13.-

(1) In this Part: (a) "Brokers' Auditor" shall mean an accountant whose name is on the panel of accountants ap proved by an executive committee. (b) "Exchange Auditor" shall mean an accountant who shall have practiced as such in the Province for not less than ten years and who is employed by the executive committee. (c) "Executive Committee" shall include the board of directors, managing committee or other gov erning committee of a stock exchange in Alberta.

(2) Every executive committee shall from time to time select a panel of accountants each of whom shall have practised as such in Alberta for not less than five years and shall be known as a brokers' auditor, and shall also employ an exchange auditor.

(3) The executive committee shall allot to each brokers' auditor the persons or companies, whether mem bers of or represented upon the exchange, which are to be audited by him, and aU of the expenses of every audit are to be paid to the brokers' auditor by the executive committee, subject to full repayment forthwith by the person or company audited, and until such repayment is made the executive committee shall have a lien upon the seat belonging to or controlled by the person or company so indebted to the executive committee.

(4) Every brokers' auditor shall in each year audit the assets and liabilities as at a permanent date in each year fixed by the executive committee and prepare a balance sheet showing the position as at such date of the business and affairs of each person or company allotted to him, and shall also in each year make a like audit and prep'are a like balance sheet as of a date designated by the executive committee, such last mentioned date to be not earlier than four months nor later than eight months from the permanent date in such year, and shall also make such further audit and prepare such further state ments and make such further reports as such auditor may think advisable or as the executive committee may direct; no warning or notice shall in any way be given of any auJit, other than that of the permanent date.

Section 13 (2). As the principal exchanges have put this audit into effect, it is well to force the smaller ones to comply.

Section 13 (4). One audit will be at a fixed date in order to let it be used as the end of a fiscal year, for purposes of income tax, etc. The other audit will be at random.

Special audit Powers of ' auditors Auditors' reports Power to examine Change of accounting system 15

(5) The executive committee of a stock exchange may at any time require any brokers' auditor upon the panel of accountants of the exchange to make any general or special audit or report upon the whole or any aspect of the business or affairs of any person or company who is o,r has been a member of or in any way represented upon the exchange.

(6) Every brokers' auditor, for the purpose of any audit under the provisions of this

section shall be entitled to free access to all books of account, securities, cash, documents, bank accounts, vouchers, correspondence and records of every description of the person or company be ing audited, and any person or company withholding, destroying, concealing or refusing to give any informa tion or thing reasonably required by the auditor for the purpose of his audit, shall be guilty of an offence.

(7) Every brokers' auditor during or upon the comple tion of every statement and audit under the provisions of this

section shall send a copy of every report whether interim or 'final to the exchange auditor and shall in ad dition specially report to such auditor any particular in formation which may be required under the by-laws, rules or regulations of the exchange and any further info·rmation which the brokers' auditor deems it to be in the public interest ~o to report, and the exchange auditor shall summarize all informa tion so received, and report thereon to the executive committee for scrutiny, identify ing the person or company affected thereby by number only until the executive committee decides to take action in respect of any such person or company, or until the exchange auditor thinks it advisable in the public interest or in the interests of the exchange ,to disclose such name to the executive committee.

(8) Any person designated in writing by an executive committee may examine under oath any member of the exchange or any officer o,f any company represented thereon, or any associate or employee of any such person or company upon any matter arising out of any report of a brokers' auditor and fo·r the purposes of such inquiry the person so designated shall have all the powers which a representative of the Attorney-General may exercise under

section 9 hereof.

(9) Any executive committee may in writing, require any person or company whose affairs have been audited or are being audited to alter, supplement or replace any system of book or record keeping in any manner and to comply with any recommendation made by the exchange auditor, and any requirement of such executive commit tee.

Section 13 (9). Gives the exchanges absolute power to enforce the recommendations of the exchange auditor.

Failure to comply No action against auditors, etc. Selling against customers' buying orders Customel"~ contract voidable An offence Exercise of optiO'1l Confirmation to customers 16

(10) Failure by any person or company, a member of or represented upon any stock exchange, to comply with any requirement of the executive committee of the ex change, or any person designated by it under subsection 8 hereof, shall constitute an offence and shall entitle the executive committee to suspend such person or member representing such company for such period as the said committee shall determine.

(11) No action shall lie against any stock exchange, executive committee or any member thereof, or any person designated by it under subsection 8 he.reaf, o,r against any brokers' or exchange auditor in respect of any act or proceeding, under the provisions of this section.

PART IV. Regulation of Trading 14.-

(1) Whenever a person, or a member or em ployee of a partnership, or a director, officer or employee of a corporation, while he, or the partnership or corpora tion is employed as a broker by any customer to buy and carry upon margin any securities of any incorporated or unincorporated company or undertaking either in Can ada or elsewhere, thereafter sells or causes to be sold, securities of the same company or undertaking for any account in which (

a) he, or (

b) his firm or a partner thereof, or (

c) the corporation or a director thereof, has a direct or indirect interest, if the effect of such sale shall otherwise than unintentionally be to reduce the amount of such securities in the hands of the broker or under his control in the ordinary course of business be low the amount of such securities which he should be carrying for all customers, any such contract with a cus tomer shall at the option of such customer be void, and the customer may recover from the broker all moneys paid with interest thereon or securities deposited in re spect thereof, and the broker shall be guilty of an offence.

(2) The customer may exercise such option by a regis tered letter to that effect addressed to the broker at his address for service in this Province. 15. Every broker who has acted as an agent for a customer shall promptly send or deliver to each customer

Section 1:3 (11). Protects the exchanges also.

Section 14. This is directed at the practice of a broker selling for his own account against a custom~r's buying order, thus preventing the purchase from having any effect upon th.e market, and relieving the broker from carrying the stock. The customer who has been so treated may elect to treat the con tract as void, and recover whatever he paid with interest. The act is ·also an offence.

Section 15. Provides more extensive information so customers can trace transactions and ascertain whether they were charged higher than the price paid by the broker.

Judge not persona designata nOr Attorney General JUdicature Act and Rules apply 17 for whom any security has been bought or sold by the broker, a written confirmation of the transaction, setting forth: (

a) the quantity and description of the security. (

b) the name of the person or company from or to whom the security was bought or sold. (

c) the day, and in the case of a member of a stock exchange, the half hours between which, and the name of the stock exchange upon which the transaction took place, and failure, without reasonable excuse, to comply here with shall constitute an offence. 16. Every stock exchange shall keep a record showing the time at which each transaction on such exchange took place and shall supply to any customer of any member of such exchange, up,on production of any writ ten confirmation of any transaction with any such member, particulars of the time at which such trans action took place and certification or otherwise of the matte'rs set forth in' such confirmation.

PART V. GENERAL PROVISIONS. 17.-

(1) A judge of the Supreme Court in exerClsmg any of the powers conferred upon such judge by this Act shall be deemed so to act as a judge of such court and not as persona desig1Ul.tct.

(2) The Attorney-General shall in all proceedings under this Act 01' the Regulations be deemed to be acting as the representative of His Majesty in the right of the Province of Alberta, and not as persona designata.

(3) The provisions of The Judicature Act and so far as they are applicable to proceedings of a like nature, includ ing those relating to appeals and to the enforcement of judgments and orders, shall apply to every proceeding be fore the Supreme Court or a judge thereof under the provi sions of this Act, save that service of notices and other legal process shall be in accordance with subsection 2 of

section 5 and save that costs may be awarded to but not against the Attorney-General.

No action. etc., againl-'t persons ad ministering this Act. Regulation.::;, general powers Penalties Companies Apportion ment of penalty on company among officer~. etc. Consent of the Attorney General requireu 18 1.8.

No action whatever, and no proceedings by way of injunction, mandamus, prohibition or other extraordinary remedy shall lie or be instituted against any person whether in his public or private capacity or against any company in respect of any act or omission in connection with the ad: ministration or carrying out of the provisions of this Act or the Regulations where such person is the Attorney Gen eral or his representative, or the Registrar or where such person or company was proceeding under the written or verbal direction or consent of anyone of them, or under an order of the Supreme Court or a judge thereof made under the provisions of this Act. 1.9.

The Lieutenant Governor in Council may make and from time to time amend, alter or repeal regulations not in consistent with this Act for the better carrying out of the provisions of this Act, for the more efficient administration thereof and for the prevention of fraud in trading in secUl'i ties whether upon any stock exchange or elsewhere in Al berta for the creation of offences, and for any other purpos~ elsewhere indicated in this Act, and all such regulations and any amendment, alteration or repeal thereof shall become effective in all respects as if enacted in this Act upon the publication thereof in The AlbertCL G(~zette. 20.-

(1) Every person who violates' any prOVISIOn of this Act or the Regulations designated as an oifence, or who dOes any fraudulent act not punishable under the provisions of The CriminCLl Code of CCLnCLdCL, shall be liable upon sum mary conviction thereof to a penalty of not more than $1,000 for a first offence, nor $2,000 for a second or subsequent offence, and in case of either a first or a subsequent offence either in default of payment of any penalty imposed, or in addition to such penalty, to imprisonment for a term not exceeding six months.

(2) The provisions of subsection (1) shall be deemed to apply, mutcdis mutCLnd'is, to any company save that the money penalties may be increased in the discretion of the magistrate to a sum not exceeding $25,000.

(3) Where any company is convicted under this Act the magistrate may direct that, in default of payment of the penalty imposed, proportionate parts thereof shall be paid by such officers, directors, officials or employees of the company, and in such amounts as he shall designate, and in default of payment by any person so designated the magistrate may impose a penalty of imprisonment for a term not exceeding six months.

(4) No proceedings under this

section shall be institut ed except with the consent 0'1' under the direction of the Attorney General.

CO'lIeetiO'n of costs of in vestigation ExeeutiO'n of warrant issued in another province Prisoner in transit 19 21. Where in consequence of an investigation under

Part II of this Act, any person or company has been- (

a) convicted of a criminal offence; or (

b) convicted of an offence against any provision of this Act or the Regulations; or (

c) enjoined by the Supreme Court or a judge thereof otherwise than by an interim injunction; or (

d) examined and documents, records, properties or matters have been examined by an accountant or other expert appointed by the Attorney Gen eral- the Attorney General may certify in writing as to the costs of the investigation and shall be entitled to take such pro ceedings as are available to a judgment creditor for the collection from such person or company of the sum set forth in such certificate, which sum shall bea debt to His Majesty in right of the Province of Alberta. 22.-( 1) Where a police magistrate or justice of an other province issues a warrant for the arrest of any person on a charge of violating any provision of The Security Frauds Prevention Act or any similar statute of that province, any police magistrate or justice of Alberta within whose jurisdiction that person is or is suspected to be may upon satisfactory proof of the handwriting of the police magistrate or justice who issues the warrant make an endorsement thereon in the form prescribed by the regulations, and a warrant so endorsed shall be sufficient authority to the person bringing the warrant and to all other persons to whom it was originally directed and to all police constables within the territorial jurisdiction of the police magistrate or justice so endorsing the warrant to execute it within that jurisdiction and to take the per son arrested thereunder either out of or anywhere in Al berta and to rearrest such person anywhere in Alberta.

(2) Any police constable of Alberta or of any other province of Canada who is passing through Alberta hav ing in his custody a person arrested in another province under a warrant endorsed in pursuance of subsection (1) hereof shall be entitled to hold, take and rearrest the accused anywhere in Alberta under such warrant without proof of the warrant or the endorsement thereof. 23. The Security Fmucls Prevention Act, 1929, is here by repealed. Royal Assent 24. This Act shall come into force on the day upon which it receives the Royal Assent.

Section 22. This corresponds largely to

section 662 of The Crim inal Code, and will enable the Provinces to aid each other in captur ing undesirables accused of offences against this Act.

No. 58. BILL

An Act for the Prevention of Fraud in connection with the Sale of Securities. 1.'It Reading 2nd Reading' 3'rd Reading HON. MR. LYMBURN 1930 Title: 1930 (6th, 4th) Bill 58,

An Act for the Prevention of Fraud in connection with the Sale of Securities

Document details

Collection	Alberta — Bills
Citation	L6 S4 8969
Type	bill
Volume / chapter	L6 S4 8969
Language	en
Format	json
Source	PROVINCIAL
Identifier	0d135f4eb2fb18cc774595dd0383c597ed447459

Source file is stored in the law ingest library (json).