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:

1 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, .

2 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.

3 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.

4 Section 9 (c) is amended by adding "of its members, and the remuneration" after "determine the remuneration".

5 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.

7 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.

8 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.

9 Section 42 is amended in subsections (1) (e), (2) (d) and (3) (b) by striking out "material change" and substituting "significant change".

10 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 .

11 Section 47 is amended by striking out "34 (1)" and substituting "34 (1) (a)".

12 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".

13 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.

15 Section 61 is repealed and the following substituted:

Prospectus required

61 (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.

16 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.

17 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).

18 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).

19 Section 71 (2) is amended by striking out "under subsection (1)" and substituting "under subsection (1) of this section".

20 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".

21 Section 99 (a) is amended by striking out "if" before "the securities are acquired".

22 Section 104 (1) is amended by striking out "Except pursuant to a bid," and substituting "Except pursuant to the bid,".

23 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).

24 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.

25 Section 148 (1) is amended by adding "or sought to be obtained" after "evidence obtained".

26 Section 152 (4) (a) is amended by striking out "must be" and substituting "is".

27 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).

28 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".

29 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.

31 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"

(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: [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]

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]

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]

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.


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