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2002 Legislative Session: 3rd Session, 37th

Parliament

THIRD READING

The following electronic version is for

informational purposes only.

The printed version remains the official

version.

Certified correct as passed Third Reading on the 2nd day of

May, 2002

Ian D. Izard, Law Clerk

HONOURABLE RICK THORPE

MINISTER OF

COMPETITION, SCIENCE AND ENTERPRISE

BILL 29 – 2002

SECURITIES AMENDMENT ACT, 2002

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 by repealing the

definitions of "designated security" and

"private issuer" .

Section 4 (5) is amended by striking out "one or

2" .

3 The heading to

Part 4 is repealed and the following

substituted:

Part 4 – Self Regulatory Bodies, Exchanges, Quotation and

Trade Reporting Systems and Clearing Agencies .

Section 23 is repealed and the following substituted:

Interpretation

23 A reference in sections 26 to 32 to a self

regulatory body, an exchange, a quotation and trade reporting system or a

clearing agency means a person that has been recognized as a self regulatory

body, an exchange, a quotation and trade reporting system or a clearing agency,

as the case may be, under

section

Section 24 is repealed and the following substituted:

Recognition

24 On application, the commission may recognize a

person as

(

a) a self regulatory body,

(

b) an exchange,

(

c) a quotation and trade reporting system, or

(

d) a clearing agency.

Section 25 is amended by striking out "section 24 (2)"

and substituting "section 24 (b)" .

Section 25.1 (1) (

b) is amended by striking out "section 24

(2)" and substituting "section 24 (b)" .

Section 26 is amended

(

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

(1) Subject to this Act, the regulations and any decision

made by the commission, a self regulatory body, an exchange or a quotation and

trade reporting system must regulate the operations, standards of practice and

business conduct of its members or participants, and the representatives of its

members or participants, in accordance with its bylaws, rules or other

regulatory instruments. ,

(

b) in subsection (2) by striking out "A self regulatory body

or exchange must provide" and substituting "A self regulatory

body, an exchange or a quotation and trade reporting system must

provide" ,

(

c) in subsection (2) (

b) by striking out "in the possession of

the self regulatory body or exchange" and substituting "in the

possession of the self regulatory body, exchange or quotation and trade

reporting system" ,

(

d) in subsection (2) (b) (

v) by striking out "self regulatory

body's or exchange's" and substituting "self regulatory body's,

exchange's or quotation and trade reporting system's" , and

(

e) in subsection (2) (b) (vi) by striking out "self regulatory

body or exchange" and substituting "self regulatory body, exchange

or quotation and trade reporting system" .

Section 27 (1) is amended

(

a) in paragraphs (

a) and (

b) by striking out "or exchange"

and substituting ", an exchange, a quotation and trade reporting system or a

clearing agency" ,

(

b) in paragraph (

d) by adding ", or the trading of securities

on or through the facilities of a quotation and trade reporting system"

after "an exchange" , and

(

c) in paragraphs (

f) and (

g) by adding "or quoted on a

quotation and trade reporting system" after "an exchange"

and by striking out "and posted for trading" .

Section 28 is amended

(

a) in subsection (1) by striking out "or of an exchange"

and substituting ", an exchange, a quotation and trade reporting system,

or a clearing agency" and by striking out "section 165 (3) to

(5)" and substituting "section 165 (3) to (8)" ,

and

(

b) in subsections (2) (

b) and (3) (

a) by striking out "or

exchange" and substituting ", exchange, quotation and trade

reporting system or clearing agency" .

Section 29 is amended

(

a) by repealing subsection (1) and substituting the

following:

(1) The executive director may appoint in writing a person

to review the business and conduct of a self regulatory body, an exchange, a

quotation and trade reporting system or a clearing agency for the purpose of

determining whether the self regulatory body, exchange, quotation and trade

reporting system or clearing agency is

(

a) complying, or has complied, with

(

i) this Act and the regulations,

(ii) any decision made under this Act or the regulations,

(iii) the charter, as defined in

section 1 of the

Financial Institutions Act , of the self regulatory body, exchange,

quotation and trade reporting system or clearing agency, or

(

b) enforcing or administering its bylaws, rules, other

regulatory instruments or policies. ,

(

b) in subsection 2 (

a) by striking out "or exchange" and

substituting ", an exchange, a quotation and trade reporting system, or

a clearing agency" ,

(

c) in subsection 2 (

c) by striking out "or exchange" and

substituting ", exchange, quotation and trade reporting system, or

clearing agency" ,

(

d) in subsections 2 (

e) and 3 (

a) by striking out "or

exchange" and substituting ", exchange, quotation and trade

reporting system, or clearing agency" wherever it appears, and

(

e) in subsection (5) by striking out "or exchange" and

substituting ", an exchange, a quotation and trade reporting system, or

a clearing agency" .

Section 30 is amended

(

a) in subsection (1) by adding "or a quotation and trade

reporting system" after "An exchange" and by adding

"or quotation and trade reporting system" after "the

exchange" , and

(

b) by repealing subsection (2) and substituting the

following:

(2) If a client of a member or participant produces to an

exchange or a quotation and trade reporting system a written confirmation of a

transaction on the exchange or quotation and trade reporting system, the

exchange or quotation and trade reporting system must supply to the client

(

a) particulars of the time at which the transaction was

recorded, and

(

b) verification or otherwise of the matters set out in

the confirmation.

Section 31 (1) is amended by adding "or a quotation and

trade reporting system" after "exchange" .

Section 33 (1) (

a) and (

b) is repealed and the following

substituted:

(

a) a self regulatory body, an exchange or a quotation and

trade reporting system, or

(

b) a class of self regulatory bodies, exchanges or

quotation and trade reporting systems .

Section 34 (3) is repealed.

Section 38 is amended

(

a) by repealing paragraph (

a) and substituting the

following:

(

a) within a specified time, further information or

records to be submitted by

(

i) an applicant,

(ii) a partner, an officer, a director, a governor or a

trustee of, or any person performing a similar function for, an applicant,

(iii) an employee of an applicant, or

(iv) a person who beneficially owns, directly or

indirectly, or exercises control or direction over, 10 percent or more of the

voting securities of an applicant, , and

(

b) in paragraph (

c) by striking out "or" at the end of

subparagraph (ii), by adding ", or" at the end of subparagraph

(iii) and by adding the following:

(iv) a person who beneficially owns, directly or

indirectly, or exercises control or direction over, 10 percent or more of the

voting securities of an applicant.

Section 41 is amended by renumbering the

section as

section 41 (1)

and by adding the following subsections:

(2) Upon receipt of an application to surrender

registration, the executive director may, without a hearing, suspend the

registrant's registration.

(3) An application for surrender of registration must be

made to the executive director in the required form and must be accompanied by

the prescribed fee.

Section 42 is repealed.

Section 45 (2) is amended

(

a) by repealing paragraph (2),

(

b) by repealing paragraph (5),

(

c) by repealing paragraph (9) and substituting the

following:

(9) a trade in a security of an issuer in

connection with an amalgamation, a merger, a reorganization or an arrangement

(

i) the amalgamation, merger, reorganization or

arrangement is under a statutory procedure, or

(ii) the amalgamation, merger, reorganization or

arrangement

(

A) is described in an information circular in the

required form, in a proxy statement or in a similar disclosure record and the

circular, statement or record is delivered to each security holder whose

approval of the amalgamation, merger, reorganization or arrangement is required

before it can proceed, and

(

B) is approved by the security holders referred to in

clause (A); , and

(

d) by repealing paragraph (22) and substituting the following:

(22) a trade in a security of a mutual fund to a

purchaser who is purchasing as principal if

(

i) the aggregate acquisition cost to the purchaser is not

less than a prescribed amount, or

(ii) the net asset value or the aggregate acquisition cost

of the securities in the mutual fund held by the purchaser at the date of the

trade is not less than a prescribed amount; .

Section 46 (

j) is repealed.

Section 50 is amended

(

a) in subsection (1) by adding the following paragraph:

(

e) engage in an unfair practice. ,

(

b) in subsection (3) by adding the following paragraph:

(

d) engage in an unfair practice. , and

(

c) by adding the following subsection:

(4) For the purposes of this section, an "unfair

practice" includes any of the following:

(

a) putting unreasonable pressure on a person to purchase,

hold or sell a security;

(

b) taking advantage of the person's inability or

incapacity to reasonably protect his or her own interest because of physical or

mental infirmity, ignorance, illiteracy, age or inability to understand the

character, nature or language of any matter relating to a decision to purchase,

hold or sell a security;

(

c) imposing terms or conditions that make a transaction

inequitable.

Section 58 (1) (

a) is amended by striking out "section 24

(2)" and substituting "section 24 (b)" .

Section 74 (2) is amended

(

a) by repealing paragraph (1),

(

b) by repealing paragraph (4),

(

c) by repealing paragraph (8) and substituting the

following:

(8) a trade in a security of an issuer in

connection with an amalgamation, a merger, a reorganization or an arrangement

(

i) the amalgamation, merger, reorganization or

arrangement is under a statutory procedure, or

(ii) the amalgamation, merger, reorganization or

arrangement

(

A) is described in an information circular in the

required form, in a proxy statement or in a similar disclosure record and the

circular, statement or record is delivered to each security holder whose

approval of the amalgamation, merger, reorganization or arrangement is required

before it can proceed, and

(

B) is approved by the security holders referred to in

clause (A); , and

(

d) by repealing paragraph (19) and substituting the following:

(19) a trade in a security of a mutual fund to a

purchaser who is purchasing as principal if

(

i) the aggregate acquisition cost to the purchaser is not

less than a prescribed amount, or

(ii) the net asset value or the aggregate acquisition cost

of the securities in the mutual fund held by the purchaser at the date of the

trade is not less than a prescribed amount; .

Section 90 is repealed and the following substituted:

Further information from directors, officers, promoters

or control persons

(1) The commission or the executive director may

require a director, an officer, a promoter or a control person of an issuer,

within the time the commission or executive director specifies, to submit

information.

(2) Information submitted under subsection (1) must be in

the required form.

25 The following

section is added:

Liability for misrepresentation in prescribed disclosure

document

132.1

(1) If a prescribed disclosure document

contains a misrepresentation, a purchaser who purchases a security offered by

the disclosure document

(

a) is deemed to have relied on the misrepresentation if

it was a misrepresentation at the time of purchase, and

(

b) has a right of action for damages against

(

i) the issuer,

(ii) every director of the issuer at the date of the

disclosure document, and

(iii) every person who signed the disclosure document.

(2) The purchaser may elect to exercise a right of

rescission against the issuer, in which case the purchaser has no right of

action for damages against the issuer.

(3) A person is not liable under subsection (1) if the

person proves that the purchaser had knowledge of the misrepresentation.

(4) A person is not liable under subsection (1) if the

person proves that

(

a) the disclosure document was delivered to purchasers

without the person's knowledge or consent and that, on becoming aware of its

delivery, the person gave written notice to the issuer that it was delivered

without the person's knowledge or consent,

(

b) on becoming aware of any misrepresentation in the

disclosure document, the person withdrew the person's consent to the disclosure

document and gave written notice to the issuer of the withdrawal and the reason

for it, or

(

c) with respect to any part of the disclosure document

purporting

(

i) to be made on the authority of an expert, or

(ii) to be a copy of, or an extract from, a report, an

opinion or a statement of an expert,

the person had no reasonable grounds to believe and did

not believe that

(iii) there had been a misrepresentation, or

(iv) the relevant part of the disclosure document

(

A) did not fairly represent the report, opinion or

statement of the expert, or

(

B) was not a fair copy of, or an extract from, the

report, opinion or statement of the expert.

(5) A person is not liable under subsection (1) with

respect to any part of a disclosure document not purporting

(

a) to be made on the authority of an expert, or

(

b) to be a copy of, or an extract from, a report, opinion

or statement of an expert

unless the person

(

c) failed to conduct a reasonable investigation to

provide reasonable grounds for a belief that there had been no

misrepresentation, or

(

d) believed that there had been a misrepresentation.

(6) Subsections (4) and (5) do not apply to the

issuer.

(7) In an action for damages under subsection (1), the

defendant is not liable for all or any part of the damages that the defendant

proves does not represent the depreciation in value of the security resulting

from the misrepresentation.

(8) The liability of all persons referred to in subsection

(1) (

b) is joint and several as between themselves with respect to the same

cause of action.

(9) A defendant who is found liable to pay a sum in

damages may recover a contribution, in whole or in part, from a person who is

jointly and severally liable under this

section to make the same payment in the

same cause of action unless, in all the circumstances of the case, the court is

satisfied that it would not be just and equitable.

(10) The amount recoverable by a plaintiff under this

section must not exceed the price at which the securities were offered under the

disclosure document.

(11) The right of action for rescission or damages

conferred by this

section is in addition to and not in derogation from any other

right the purchaser may have.

(12) If a misrepresentation is contained in a record

incorporated by reference in, or deemed incorporated into, a disclosure

document, the misrepresentation is deemed to be contained in the disclosure

document.

26 The following

section is added:

Right of action for failure to deliver prescribed

disclosure documents

135.1 A person who is a purchaser of a security

distributed under a prescribed disclosure document has a right of action for

damages or rescission against the issuer if the person did not receive the

disclosure document within the prescribed time.

27 The following

section is added:

Rescission of purchase of security under prescribed

disclosure document

138.1 A purchaser of a security may rescind the

purchase if

(

a) the security is acquired under an exemption from

section 34 (1) (

a) or 61,

(

b) the exemption requires the delivery of a prescribed

disclosure document, and

(

c) the purchaser delivers a notice to the issuer not

later than midnight on the second business day after the purchaser signs the

agreement to purchase the securities.

Section 143 (2) (

a) is amended

(

a) in subparagraph (ii) by striking out "section 24 (1)"

and substituting "section 24 (a)" , and

(

b) in subparagraph (iii) by striking out "section 24

(2)" and substituting "section 24 (b)" .

Section 152 is amended by adding the following

subsection:

(5) On an application under this section, the court may

admit as evidence

(

a) any hearsay evidence that the court considers

reliable, or

(

b) any oral or written statement, record or report the

court considers relevant.

Section 154 is repealed.

Section 155 is amended

(

a) in subsection (5) by striking out "section 86 (1)"

and substituting "section 57, 57.1 or 86 (1)" wherever it appears,

and

(

b) in subsection (7) by adding the following paragraph:

(

d) profit of a person in circumstances not set out in

paragraph (a), (

b) or (c), means the amount determined by the court.

Section 162 is repealed and the following substituted:

Administrative penalty

162 If the commission, after a hearing,

(

a) determines that a person has contravened

(

i) a provision of this Act or of the regulations, or

(ii) a decision, whether or not the decision has been

filed under

section 163, and

(

b) considers it to be in the public interest to make the

order,

the commission may order the person to pay the commission

an administrative penalty of,

(

c) in the case of a person other than an individual, not

more than $500 000, or

(

d) in the case of an individual, not more than $250

33 The following

section is added:

Demand on third party

162.1

(1) If a person owes money to the commission

under

section 160 or 162 and the commission receives information that a third

party is, or is about to become, indebted to the person, the commission may

demand of the third party that the money be paid to the commission on account of

the person's liability to the commission.

(2) The third party must pay the money demanded under

subsection (1) to the commission as soon as practicable after the later of

(

a) the receipt of the demand, and

(

b) the date the money is due to be paid to the person

named in the demand.

(3) Money paid to the commission under this

section

discharges the indebtedness of the third party to the person named in the demand

to the extent of the amount of money paid to the commission.

(4) If, after receipt of a demand under this section, a

third party

(

a) fails to pay the money to the commission as required

under subsection (2), or

(

b) makes a payment to the person named in the demand,

the third party is liable to the commission for the lesser

(

c) the third party's indebtedness to the person plus the

amount of the indebtedness paid by the third party to the person, and

(

d) the amount owed to the commission by the person,

including any interest and penalty.

(5) If a demand is made on a third party under this

section, the commission must, in the same manner and at the same time, notify

the person of the demand and give the person the particulars of it.

Section 165 (8) is amended by striking out "or

exchange" and substituting ", an exchange, a quotation and trade

reporting system or a clearing agency" .

Section 169 (4) is amended by adding "all or part of"

after "hold in confidence" .

36 The following

section is added:

Exchange of information

169.1

(1) The commission or executive director may

collect information from, disclose information to, or share information with, a

self regulatory body, an exchange, a quotation and trade reporting system, a law

enforcement agency, a government or a governmental authority, in British

Columbia or elsewhere.

(2) The commission or executive director may enter into an

arrangement or agreement for the purpose of subsection (1).

Section 178 is amended by striking out "in accordance with

section 16 of the Financial Administration Act " .

Section 180 (2) is amended by striking out "or" at the

end of paragraph (a), by adding ", or" at the end of paragraph (

b) and by adding the following:

(

c) at the address of the person's solicitor if the

person, or the solicitor, has advised that the solicitor is acting for the

person.

Section 183 is amended

(

a) in paragraphs (1) and (2) by striking out "section 24

(2)" and substituting "section 24 (b)" ,

(

b) in paragraph (32) by striking out "and standards" and

substituting ", standards, bylaws, rules and other regulatory

instruments" ,

(

c) in paragraph (36) by striking out "authorizing the

commission to recognize" and substituting "recognizing or

designating" , and

(

d) by adding the following paragraphs:

(36.1) designating one or more persons to perform a

function relating to market integration, market transparency or the clearing and

settlement of trades;

(45.1) authorizing the commission or executive

director to disclose personal information in a manner, or to a person,

government or governmental authority, or a class of any of those, in British

Columbia or elsewhere, not otherwise contemplated by sections 169 (3) and

169.1;

(45.2) authorizing the commission or executive

director to collect personal information indirectly from a person, or a class of

persons, in British Columbia or elsewhere, not otherwise contemplated by

section

169.1;

(45.3) authorizing the commission or executive

director to enter into an arrangement or agreement with a person, or a class of

persons, in British Columbia or elsewhere, regarding or involving the

collection, sharing or disclosure of personal information, not otherwise

contemplated by

section 169.1; .

Section 184 (2) is amended

(

a) in paragraph (

c) by adding " (27) ," after

" (25) ," , by adding " (35) ," after

" (34) ," , and by adding " (36.1) ," after

" (36) ," ,

(

b) in paragraph (

d) by striking out "and standards" and

substituting ", standards, bylaws, rules and other regulatory

instruments" , and

(

c) in paragraph (

g) by striking out "and" at the end of

subparagraph (

i) and substituting "or" and by repealing

subparagraph (ii) and substituting the following:

(ii) a record or a notice that is required to be filed or

submitted under this Act or the regulations to be delivered to a designated

organization.

Section 184 (4) is amended

(

a) by striking out " (26) to (29) ," and

substituting " (26) , (28) , (29) ," ,

and

(

b) by striking out " (35) ," .

Consequential Amendments

Company Act

Section 87 of the Company Act, R.S.B.C. 1996, c. 62, is amended by

striking out "section 45 (2) (2) , (3) or (4) of the

Securities Act or any comparable provision of a former Securities

Act " and substituting "the Securities

Act " .

Members' Conflict of Interest Act

43 The definition of "private corporation" in

section 1 of the Members' Conflict of Interest Act, R.S.B.C. 1996,

c. 287, is repealed and the following substituted:

"private corporation" means a corporation, all of

whose issued and outstanding securities are subject to restrictions on transfer

and are beneficially owned directly or indirectly by not more than 50 persons;

Commencement

44 Sections 18, 19 (b), 23 (

b) and 25 to 27 come

into force by regulation of the Lieutenant Governor in Council.

Copyright (c) 2002:

Queen's Printer, Victoria, British Columbia, Canada