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1998/99 Legislative Session: 3rd Session, 36th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

HONOURABLE JOY K. MacPHAIL

MINISTER OF FINANCE AND CORPORATE RELATIONS

BILL 64 – 1999

SECURITIES AMENDMENT ACT, 1999

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the

Province of British Columbia, enacts as follows:

Section 1 (1) of the Securities Act, R.S.B.C. 1996, c. 418, is amended

(

a) by adding the following definition:

"commodity" means

(

a) any good, article, service, right or interest of which any

unit is, from its nature or by mercantile custom, treated as the equivalent of any other

unit,

(

b) the currency of any jurisdiction,

(

c) a gem, gemstone, or other precious stone, or

(

d) any other prescribed good, article, service, right or

interest, or a class of any of those; ,

(

b) by repealing the

definitions of "futures contract" and

"mutual fund" and substituting the following:

"futures contract" means any obligation to make

or take future delivery of

(

a) a commodity,

(

b) a security, or

(

c) cash if the amount of cash is derived from, or by reference

to, a variable including

(

i) a price or quote for a commodity or security,

(ii) an interest rate,

(iii) a currency exchange rate, or

(iv) an index or benchmark,

but does not include an obligation, or a class of obligations,

described in an order that the commission may make under

section 3.1;

"mutual fund" includes

(

a) an issuer of a security that entitles the holder to receive on

demand, or within a specified period after demand, an amount computed by reference to the

value of a proportionate interest in the whole or in a part of the net assets, including a

separate fund or trust account, of the issuer of the security,

(

b) an issuer described in an order that the commission may make

under

section 3.2, and

(

c) an issuer that is in a class of prescribed issuers,

but does not include an issuer, or a class of issuers, described

in an order that the commission may make under

section 3.1; ,

(

c) in the definition of "regulation" by striking out "155

(1) (f)," and substituting "155 (1) (d)," ,

(

d) in paragraph (

d) of the definition of "reporting issuer" by

striking out "a corporation" and substituting "an

issuer" , by striking out each subsequent reference to

"corporation" and substituting "issuer" and

by repealing paragraph (

f) and substituting the following:

(

f) has filed a securities exchange take over bid circular under

this Act or the regulations for the acquisition of securities of a reporting issuer and

has taken up and paid for securities subject to the bid in accordance with the circular, ,

and

(

e) in the definition of "trade" by repealing paragraphs (

b) and

(

c) and substituting the following:

(a.1) entering into a futures contract,

(

b) entering into an option that is an exchange contract,

(

c) participation as a trader in a transaction in a security or

exchange contract made on or through the facilities of an exchange or reported through the

facilities of a quotation and trade reporting system, .

Part 1 is amended by adding the following sections:

Exemption orders

3.1

(1) If the commission considers that to do so would not

be prejudicial to the public interest, the commission may, for the purposes of this Act

and the regulations, order that

(

a) an obligation, or a class of obligations, is not a futures

contract, or

(

b) an issuer, or a class of issuers, is not a mutual fund.

(2) An order under subsection (1) may be made on application by an

interested person or on the commission's own motion.

Designated mutual funds

3.2

(1) If the commission considers it to be in the public

interest, the commission may, for the purposes of this Act and the regulations, order that

an issuer is a mutual fund.

(2) An order under subsection (1) may be made on application by an

interested person or on the commission's own motion.

Section 4 is amended by adding the following subsection:

(9.1) The commission may decide all questions of fact or law

arising in the course of a hearing.

Section 9 (

c) is amended by adding "of its members, and the

remuneration" after "determine the remuneration" .

Section 15 (1) is amended

(

a) by adding "from administrative penalties under

section 162 and

any cost recoveries under this Act, but not including revenue" after "limited

to revenue" , and

(

b) in paragraph (

a) by striking out "from administrative penalties

under

section 162 and any cost recoveries under this Act, but not including revenue" .

6 The following

section is added:

Designated exchange

25.1

(1) If a person is not carrying on business as an

exchange, but is carrying on business as a quotation and trade reporting system, or is

otherwise facilitating transactions of securities or exchange contracts, the commission

may, if it considers it to be in the public interest, order that

(

a) the person is an exchange for the purposes of this Act and the

regulations, and

(

b) the person must not carry on business as a quotation and trade

reporting system, or facilitate transactions of securities or exchange contracts, unless

the person is recognized by the commission under

section 24 (2).

(2) An order under subsection (1) may be made on application by an

interested person or on the commission's own motion.

Section 35 (1) is repealed and the following substituted:

(1) Subject to subsection (2), the executive director must grant

an applicant registration, renewal or reinstatement of registration or an amendment to

registration, as the case may be, unless

(

a) the executive director considers that the applicant is not

suitable for registration in the capacity applied for, or that the proposed registration

is objectionable, or

(

b) the applicant has not paid the prescribed fee.

Section 40 is repealed and the following substituted:

Termination or suspension of employment

40 If the employment of an individual registrant is

terminated or suspended, the registration of the individual registrant is immediately

suspended until the executive director reinstates the registration.

Section 42 is amended in subsections (1) (e), (2) (

d) and (3) (

b) by striking

out "material change" and substituting "significant

change" .

Section 45 (2) is amended

(

a) by repealing paragraph (4) and substituting the following:

(4) a trade to a person that

(

i) purchases as principal, and

(ii) is designated as an exempt purchaser in an order that the

executive director may make for the purpose of this paragraph; ,

(

b) in paragraph (9) (iv) by striking out "under applicable

legislation" ,

(

c) in paragraph (9) (

v) by striking out "in accordance with the

requirements of the applicable legislation" , and

(

d) in paragraph (11) (

i) by striking out everything before clause (

A) and

substituting the following:

(

i) permits the holder to direct that dividends, interest or

distributions of capital gains paid in respect of securities of the issuer's own issue be

applied to the purchase of .

Section 47 is amended by striking out "34 (1)" and

substituting "34 (1) (a)" .

Section 50 (1) (

c) is amended

(

a) in subparagraph (

i) by adding "or quoted on any quotation and

trade reporting system" after "exchange" , and

(

b) in subparagraph (ii) by adding "or quote the security on any

quotation and trade reporting system" after "exchange" .

Section 57 is repealed and the following substituted:

Prohibited transactions relating to trading in British Columbia

57 A person in or outside British Columbia must not,

directly or indirectly, engage in or participate in a transaction or series of

transactions relating to a trade in or acquisition of a security or a trade in an exchange

contract if the person knows, or ought reasonably to know, that the transaction or series

of transactions

(

a) results in or contributes to a misleading appearance of

trading activity in, or an artificial price for, any security or exchange contract traded

in British Columbia,

(

b) perpetrates a fraud on any person in British Columbia, or

(

c) perpetrates a fraud on any person anywhere in connection with

trading in or acquiring securities, or trading in exchange contracts, in British Columbia.

14 The following

section is added to

Part 7:

Prohibited transactions by persons in British Columbia

57.1 A person in British Columbia must not, directly or

indirectly, engage in or participate in a transaction or series of transactions relating

to a trade in or acquisition of a security or a trade in an exchange contract if the

person knows, or ought reasonably to know, that the transaction or series of transactions

(

a) results in or contributes to a misleading appearance of

trading activity in, or an artificial price for, any security or exchange contract

anywhere, or

(

b) perpetrates a fraud on any person anywhere.

Section 61 is repealed and the following substituted:

Prospectus required

(1) Unless exempted under this Act or the regulations, a

person must not distribute a security unless

(

a) a preliminary prospectus and a prospectus respecting the

security have been filed with the executive director, and

(

b) the executive director has issued receipts for the preliminary

prospectus and prospectus.

(2) A preliminary prospectus and a prospectus must be in the

required form.

Section 62 is repealed and the following substituted:

Voluntary filing of prospectus

62 Even though a person is not distributing securities, a

preliminary prospectus and a prospectus that are in the required form may be filed for

(

a) the purpose of enabling the issuer to become a reporting

issuer, or

(

b) any other prescribed purpose.

Section 68 is amended by adding the following subsection:

(6) The executive director may permit an issuer to vary the form

or content of the certificate required by subsection (1).

Section 69 is amended by adding the following subsection:

(3) The executive director may permit an underwriter to vary the

form or content of the certificate required by subsection (1).

Section 71 (2) is amended by striking out "under subsection

(1)" and substituting "under subsection (1) of this section" .

Section 74 (2) is amended

(

a) by repealing paragraph (3) and substituting the following:

(3) the trade is made to a person that

(

i) purchases as principal, and

(ii) is designated as an exempt purchaser in an order that the

executive director may make for the purpose of this paragraph; ,

(

b) in paragraph (8) (iv) by striking out "under applicable

legislation" ,

(

c) in paragraph (8) (

v) by striking out "in accordance with the

requirements of the applicable legislation" ,

(

d) in paragraph (10) (

i) by striking out everything before clause (

A) and

substituting the following:

(

i) permits the holder to direct that dividends, interest or

distributions of capital gains paid in respect of securities of the issuer's own issue be

applied to the purchase of , and

(

e) in paragraph (17) by striking out "the security" and

substituting "a security" .

Section 99 (

a) is amended by striking out "if" before "the

securities are acquired" .

Section 104 (1) is amended by striking out "Except pursuant to a

bid," and substituting "Except pursuant to the bid," .

Section 131 is amended

(

a) in subsection (15) by striking out "summary statement of a

mutual fund filed with" and substituting "record incorporated by

reference in, or deemed incorporated into," , and

(

b) by repealing subsection (16).

Section 141 is amended

(

a) in subsection (1) by adding "or exchange contracts"

after "securities" wherever it appears,

(

b) in subsection (2) by adding the following paragraph:

(

m) a person providing record keeping services to a registrant. ,

and

(

c) by adding the following subsection:

(4) The executive director may require that the information that

is provided or the records that are produced under an order made under subsection (2) be

delivered in an electronic form or in any other form that facilitates the electronic

storage of the information or records.

Section 148 (1) is amended by adding "or sought to be

obtained" after "evidence obtained" .

Section 152 (4) (

a) is amended by striking out "must be"

and substituting "is" .

Section 155 is amended

(

a) by repealing subsection (1) and substituting the following:

(1) A person who does any of the following commits an offence:

(

a) fails to file, provide, deliver or send a record that

(

i) is required to be filed, provided, delivered or sent under

this Act or the regulations, or

(ii) is required to be filed, provided, delivered or sent under

this Act or the regulations within the time required under this Act or the regulations;

(

b) contravenes any of

section 29 (6), 34, 39 (6), 49 to 57, 57.1,

58, 59, 61, 70 (1), 85 to 87, 100 to 112, 117 (1) and (2), 121, 122, 124, 125, 127, 128,

143 (7), 148, 153 (3) or 168.1 (1) of this Act;

(

c) fails to comply with a decision made under this Act;

(

d) contravenes any of the provisions of the regulations that are

specified by regulation for the purpose of this paragraph;

(

e) contravenes any of the provisions of the commission rules that

are specified by regulation for the purpose of this paragraph. , and

(

b) by repealing subsection (3).

Section 157 is amended

(

a) by repealing subsection (1) and substituting the following:

(1) In addition to any other powers it may have, if the commission

considers that a person has contravened or is contravening a provision of this Act or of

the regulations, or has failed to comply or is not complying with a decision, and the

commission considers it in the public interest to do so, the commission may apply to the

Supreme Court for one or more of the following:

(

a) an order that

(

i) the person comply with or cease contravening the provision or

decision, and

(ii) the directors and senior officers of the person cause the

person to comply with or to cease contravening the provision or decision;

(

b) an order that the person pay to the minister for payment into

the consolidated revenue fund one or both of the following:

(

i) any money obtained by the person directly or indirectly as a

result of the failure to comply or the contravention;

(ii) the amount of any payments or losses avoided by the person

directly or indirectly as a result of the failure to comply or the contravention;

(

c) an order setting aside a transaction relating to trading in

securities or exchange contracts;

(

d) an order that a security or exchange contract be issued or

cancelled;

(

e) an order that a security or exchange contract be purchased,

disposed of or exchanged;

(

f) an order prohibiting the voting of a security or the exercise

of a right attaching to a security or exchange contract;

(

g) an order appointing a director of the person that is the

subject of the application;

(

h) an order that the person repay a holder of a security or an

exchange contract money paid by the holder for the security or exchange contract;

(

i) an order that the person compensate or make restitution to any

other person;

(

j) an order that the person pay general or punitive damages to

any other person. ,

(

b) by repealing subsection (2) and substituting the following:

(2) On an application under subsection (1), the Supreme Court may

make the order applied for and any other order the court considers appropriate. ,

and

(

c) in subsection (3) by striking out "violation" and

substituting "contravention" .

Section 161 (1) (

b) is amended by adding "any securities or

exchange contracts," after "prohibited from purchasing," .

30 The following sections are added:

False or misleading statements prohibited

168.1

(1) A person must not

(

a) make a statement in evidence or submit or give information

under this Act or the regulations to the commission, the executive director or any person

appointed under this Act or the regulations that, in a material respect and at the time

and in light of circumstances under which it is made, is false or misleading, or omit

facts from the statement or information necessary to make that statement or information

not false or misleading, or

(

b) make a statement or provide information in any record required

to be filed, provided, delivered or sent under this Act or the regulations that, in a

material respect and at the time and in light of circumstances under which it is made, is

false or misleading, or omit facts from the statement or information necessary to make

that statement or information not false or misleading.

(2) A person does not contravene subsection (1) if the person

(

a) did not know, and

(

b) in the exercise of reasonable diligence, could not have known

that the statement or information was false or misleading.

Contraventions attributable to employees,

officers, directors and agents

168.2 If a person, other than an individual, contravenes a

provision of this Act or of the regulations, or fails to comply with a decision, an

employee, officer, director or agent of the person who authorizes, permits or acquiesces

in the contravention or non-compliance also contravenes the provision or fails to comply

with the decision, as the case may be.

Section 183 is amended

(

a) by repealing paragraph (12) and substituting the following:

(12) respecting any matter necessary or advisable to carry

out effectively the intent and purpose of

Part 9, including, but not limited to,

(

i) prescribing disclosure requirements in respect of

distributions, including the use of particular forms or of particular types of documents,

(ii) prescribing procedures for distributions of securities on an

expedited basis including modifying or varying the application of this Act as may be

necessary for the purpose of permitting expedited distributions to occur,

(iii) prescribing circumstances in which a record may be, or is

deemed to be, incorporated by reference into any other record,

(iv) prescribing procedures respecting the issuance of receipts,

(

v) prescribing periods in which receipts, or classes of receipts,

are effective and circumstances in which receipts, or a class of receipts, may be revoked,

(vi) prescribing circumstances in which a distribution of

securities may occur on a continuous or delayed basis,

(vii) prescribing additional requirements that must be satisfied

before a receipt may be issued or before a distribution may occur,

(viii) establishing, for the purposes of

section 162, that a

contravention of an undertaking given by an issuer constitutes a contravention of the

regulation requiring the undertaking, and

(ix) varying the form and content of the certificates required by

sections 68 and 69 and prescribing additional classes of persons that are required to sign

a certificate required by

section 68 or 69; ,

(

b) in paragraph (19) by striking out "and" at

the end of subparagraph (ii) and by adding the following subparagraphs:

(iv) prescribing procedures for the integration of the disclosure

required under

Part 9 with that required under

Part 12 including modifying or varying the

application of this Act as may be necessary for the purpose of permitting integrated

disclosure, and

(

v) prescribing disclosure requirements, including the use of

particular forms or of particular types of documents; ,

(

c) in paragraph (36) by inserting "or a quotation and trade

reporting system" after "recognize an exchange" ,

(

d) in paragraph (48) by striking out "155 (1) (f)"

wherever it appears and substituting "155 (1) (d)" , and

(

e) in paragraph (49) by striking out "155 (1) (g)"

wherever it appears and substituting "155 (1) (e)" .

Explanatory Notes

SECTION 1: [Securities Act, amends

section 1 (1)]

(

a) is consequential to the proposed amendment to the definition

of "futures contract";

(

b) redefines "futures contract" and "mutual

fund"

to exclude commercial purchase and sale agreements, and other similar

instruments, from the definition of "futures contract" and to clarify the

application of the Act to currency contracts;

to clarify the application of the Act with respect to mutual funds;

(

c) is consequential to the amendment made to

section 155 of the

Act ;

(

d) redefines "reporting issuer" to include

non-corporate entities and to clarify when an entity can achieve reporting issuer status

as a result of a take over bid;

(

e) is consequential to the proposed amendment to the definition

of "futures contract" and the amendments effecting quotation and trade reporting

systems.

SECTION 2: [Securities Act, enacts sections 3.1 and 3.2]

section 3.1: allows the commission to exempt futures contracts and mutual

funds from the provisions of the Act relating exclusively to those

matters;

section 3.2: establishes the commission power to designate an entity as

a mutual fund for the purposes of the Act.

SECTION 3: [Securities Act, adds

section 4 (9.1)] clarifies the

commission's jurisdiction to consider matters of law that arise in a proceeding before it.

The amendment does not affect the right of parties to appeal a decision of the commission

on a matter of law to the Court of Appeal.

SECTION 4: [Securities Act, amends

section 9 (c)] clarifies the

commission's power to set the remuneration of its members.

SECTION 5: [Securities Act, amends

section 15 (1)] clarifies that revenue

from fines and orders of court are not paid to the commission.

SECTION 6: [Securities Act, enacts

section 25.1]

is consequential to the proposed amendments regarding the regulation of

quotation and trade reporting systems;

establishes the commission power to regulate quotation and trade reporting

systems, and other entities that facilitate security transactions, as exchanges

for the purposes of the Act .

SECTION 7: [Securities Act, repeals and replaces

section 35 (1)] conforms

the wording with other jurisdictions to facilitate the implementation of a mutual reliance

review system for registration.

SECTION 8: [Securities Act, re-enacts

section 40] clarifies that

section

40 of the Act applies to all registration categories.

SECTION 9: [Securities Act, amends

section 42] clarifies the on-going

requirement for registrants to report all significant information to the commission.

SECTION 10: [Securities Act, amends

section 45 (2)] clarifies the

statutory exemptions from the registration requirements of the Act.

SECTION 11: [Securities Act, amends

section 47] clarifies that the

exemption is limited to persons described in

section 34 (1) (

a) of the Act .

SECTION 12: [Securities Act, amends

section 50 (1) (c)] prohibits persons

from representing that securities will be quoted on a quotation and trade reporting

system.

SECTION 13: [Securities Act, re-enacts

section 57]

clarifies that persons anywhere cannot engage in trades of securities or

exchange contracts in British Columbia for the purpose of manipulating the

market in British Columbia, committing fraud in British Columbia, or committing

fraud anywhere in relation to trading in British Columbia;

in order to accommodate recent changes in securities markets, eliminates

the requirement that the trade must occur on an "exchange" in British Columbia.

SECTION 14: [Securities Act, enacts

section 57.1] clarifies that a person

in British Columbia cannot engage in trades of securities or exchange contracts for the

purpose of manipulating a market or committing fraud regardless of where the manipulation

or fraud occurs.

SECTION 15: [Securities Act, re-enacts

section 61] conforms the wording

with other jurisdictions in order to facilitate the implementation of a mutual reliance

review system for prospectuses.

SECTION 16: [Securities Act, re-enacts

section 62] expands the

circumstances in which a prospectus may be filed.

SECTION 17: [Securities Act, adds

section 68 (6)] allows the executive

director to permit variations of the required certificate in order to accommodate unique

circumstances.

SECTION 18: [Securities Act, adds

section 69 (3)] allows the executive

director to permit variations of the required certificate in order to accommodate unique

circumstances.

SECTION 19: [Securities Act, amends

section 71 (2)] clarifies the intent

of the provision.

SECTION 20: [Securities Act, amends

section 74 (2)] clarifies the

statutory exemptions from the requirement under the Securities Act to file a

prospectus .

SECTION 21: [Securities Act, amends

section 99 (a)] clarifies the intent

of the provision.

SECTION 22: [Securities Act, amends

section 104 (1)] clarifies the intent

of the provision.

SECTION 23: [Securities Act, amends

section 131] clarifies that the

liability imposed by

section 131 of the Act applies to misrepresentations in documents

incorporated by reference into prospectuses.

SECTION 24: [Securities Act, amends

section 141]

(

a) expands the application of the provision to exchange

contracts;

(

b) clarifies that persons providing record keeping services are

subject to orders requiring the provision of information;

(

c) allows the executive director to permit or require that

information be filed electronically.

SECTION 25: [Securities Act, amends

section 148 (1)] clarifies the

requirement not to disclose information.

SECTION 26: [Securities Act, amends

section 152 (4) (a)] clarifies the

status of appointed entities.

SECTION 27: [Securities Act, amends

section 155] in conjunction with

section 30 of this Bill, provides that making a materially false or misleading statement

is an offence. Previously, in order for an offence to have occurred, the false or

misleading statement had to be of a nature that could significantly affect the market

price or value of securities.

SECTION 28: [Securities Act, amends

section 157] allows the commission to

apply to the court for additional remedies concerning investor transactions.

SECTION 29: [Securities Act, amends

section 161 (1) (b)] clarifies the

intent of the provision.

SECTION 30: [Securities Act, enacts sections 168.1 and 168.2]

provides that making a materially false or misleading statement is a contravention

of the Act;

clarifies the jurisdiction of the commission to impose sanctions on an individual

who authorizes, permits or acquiesces in the contravention of the Act by a

company or other entity.

SECTION 31: [Securities Act, amends

section 183]

(

a) clarifies that the Lieutenant Governor in Council and the

commission have the authority to make regulations to establish alternative systems for

prospectus offerings;

(

b) clarifies that the Lieutenant Governor in Council and the

commission have the authority to make regulations to establish systems to integrate

prospectus and continuous disclosure;

(

c) clarifies that the Lieutenant Governor in Council and the

commission have the authority to make regulations for the recognition of quotation and

trade reporting systems under the Act;

(

d) is consequential to the proposed amendment to

section

155 of the Act;

(

e) is consequential to the proposed amendment to

section 155 of

the Act.

Copyright © 1999: Queen's Printer, Victoria, British Columbia, Canada