2002 Legislative Session: 3rd Session, 37th Parliament
FIRST READING
The following electronic version is for informational
purposes only.
The printed version remains the official version.
HONOURABLE RICK THORPE
MINISTER OF COMPETITION, SCIENCE AND ENTERPRISE
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 by repealing the definitions of "designated security" and "private issuer".
2 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3 The heading to Part 4 is repealed and the following substituted: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 .
4 Section 23 is repealed and the following substituted:
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 24.
5 Section 24 is repealed and the following substituted:
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.
6 Section 25 is amended by striking out "section 24 (2)" and substituting "section 24 (b)".
7 Section 25.1 (1) (b) is amended by striking out "section 24 (2)" and substituting "section 24 (b)".
8 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".
9 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".
10 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".
11 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, or
(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".
12 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.
13 Section 31 (1) is amended by adding "or a quotation and trade reporting system" after "exchange".
14 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 .
15 Section 34 (3) is repealed.
16 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.
17 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.
18 Section 42 is repealed.
19 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 if
(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; .
20 Section 46 (j) is repealed.
21 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.
22 Section 58 (1) (a) is amended by striking out "section 24 (2)" and substituting "section 24 (b)".
23 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 if
(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; .
24 Section 90 is repealed and the following substituted:
90 (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:
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:
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:
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.
28 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)".
29 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.
30 Section 154 is repealed.
31 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.
32 Section 162 is repealed and the following substituted:
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 $250 000.
33 The following section is added:
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 of
(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.
34 Section 165 (8) is amended by striking out "or exchange" and substituting ", an exchange, a quotation and trade reporting system or a clearing agency".
35 Section 169 (4) is amended by adding "all or part of" after "hold in confidence".
36 The following section is added:
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).
37 Section 178 is amended by striking out "in accordance with section 16 of the Financial Administration Act".
38 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.
39 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; .
40 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.
41 Section 184 (4) is amended
(a) by striking out "(26) to (29)," and substituting "(26), (28), (29),", and
(b) by striking out "(35),".
42 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".
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; .
44 Sections 18, 19 (b), 23 (b) and 25 to 27 come into force by regulation of the Lieutenant Governor in Council.
SECTION 1: [Securities Act, amends section 1 (1)] repeals the definitions of "designated security" and "private issuer" as those terms are no longer used in the Act.
SECTION 2: [Securities Act, amends section 4 (5)] permits the Lieutenant Governor in Council to designate more than 2 members of the commission as vice chairs.
SECTION 3: [Securities Act, repeals and replaces the heading to Part 4] reflects the changes made by this Bill.
SECTION 4: [Securities Act, re-enacts section 23] limits the application of Part 4 of the Act to securities marketplaces that have been "recognized" under the Act by the commission.
SECTION 5: [Securities Act, re-enacts section 24] clarifies the commission's power to "recognize" securities marketplaces under the Act.
SECTION 6: [Securities Act, amends section 25]
SECTION 7: [Securities Act, amends section 25.1 (1) (b)] is consequential to the amendment to section 24 of the Act by this Bill.
SECTION 8: [Securities Act, amends section 26]
SECTION 9: [Securities Act, amends section 27 (1)] expands the commission's regulatory authority to review the procedures, practices and bylaws not only of exchanges but of quotation and trade reporting systems and clearing agencies.
SECTION 10: [Securities Act, amends section 28] expands the power of the executive director, and of the persons affected, to request a review not only of decisions made by exchanges but also decisions made by quotation and trade reporting systems and clearing agencies.
SECTION 11: [Securities Act, amends section 29] expands the commission's powers to review the business and conduct not only of exchanges but of quotation and trade reporting systems and clearing agencies.
SECTION 12: [Securities Act, amends section 30 (1) and (2)] requires quotation and trade reporting systems to record transactions and to provide particulars to clients.
SECTION 13: [Securities Act, amends section 31 (1] requires quotation and trade reporting systems to appoint auditors.
SECTION 14: [Securities Act, repeals and replaces 33 (1) (a) and (b)] enables the commission to exempt a quotation and trade reporting system from a requirement imposed under the Act as amended by this Bill.
SECTION 15: [Securities Act, repeals section 34 (3)] repeals an unnecessary subsection.
SECTION 16: [Securities Act, amends section 38] permits the executive director to specify time limits, and to perform examinations under oath, with respect to the provision of additional information regarding applications for registration.
SECTION 17: [Securities Act, adds section 41 (2) and (3)]
SECTION 18: [Securities Act, repeals section 42] repeals an unnecessary section as its subject matter will be dealt with under regulations to the Act.
SECTION 19: [Securities Act, amends section 45 (2)]
SECTION 20: [Securities Act, repeals section 46 (j)] repeals an unnecessary subsection as its subject matter will be dealt with under regulations to the Act.
SECTION 21: [Securities Act, amends section 50] prohibits a person from using unfair practices when promoting the purchase or sale of a security or exchange contract.
SECTION 22: [Securities Act, amends section 58 (1) (a)] is consequential to the amendment to section 24 of the Act by this Bill.
SECTION 23: [Securities Act, amends section 74 (2)]
SECTION 24: [Securities Act, re-enacts section 90] clarifies that the commission or executive director can require a person that is connected to an issuer to submit information, including personal information, to the commission, and that the information must be submitted within a certain period and in the required form.
SECTION 25: [Securities Act, enacts section 132.1] provides investors with a statutory right of damages or rescission against an issuer and other related persons if the securities were issued under an exemption from the prospectus requirement and the required disclosure documents contain a misrepresentation.
SECTION 26: [Securities Act, enacts section 135.1] provides investors with a statutory right of damages or rescission against an issuer that has issued securities under an exemption from the prospectus requirement but has failed to deliver to the investor the required disclosure documents.
SECTION 27: [Securities Act, enacts section 138.1] allows investors that have entered into an agreement to purchase securities to rescind the agreement without cause. The investor must exercise the right within 2 days of signing the agreement to purchase the securities.
SECTION 28: [Securities Act, amends section 143 (2) (a) (ii) and (iii)] is consequential to the amendment to section 24 of the Act by this Bill.
SECTION 29: [Securities Act, adds section 152 (5)] permits a court to consider hearsay and affidavit evidence in an application for the appointment of a receiver or trustee.
SECTION 30: [Securities Act, repeals section 154] repeals a section made obsolete by the expanded version of its subject matter included in section 169.1 of the Act enacted by this Bill.
SECTION 31: [Securities Act, amends section 155 (5) and (7)] permits a court to impose increased fines in cases of fraud or market manipulation.
SECTION 32: [Securities Act, re-enacts section 162] permits the commission to impose increased administrative penalties for contraventions of the Act, regulations or decisions of the commission or executive director.
SECTION 33: [Securities Act, enacts section 162.1] permits the commission to demand that a third party pay the commission any money that the third party owes to a person if the person, in turn, owes money to the commission.
SECTION 34: [Securities Act, amends section 165 (8)] permits a quotation and trade reporting system to participate in a review of its decision by the commission.
SECTION 35 [Securities Act, amends section 169 (4)] permits the commission to sever confidential information from a record in order to disclose the balance of the record.
SECTION 36: [Securities Act, enacts section 169.1]
SECTION 37: [Securities Act, amends section 178] removes the requirement that the executive director comply with section 16 of the Financial Administration Act when refunding a fee.
SECTION 38: [Securities Act, amends section 180 (2)] permits a record to be served on a person by sending the record to the person's solicitor.
SECTION 39: [Securities Act, amends section 183]
SECTION 40: [Securities Act, amends section 184 (2)]
SECTION 41: [Securities Act, amends section 184 (4)] is consequential to the amendments to section 184 (2) of the Act by this Bill.
SECTION 42: [Company Act, amends section 87] is consequential to the repeal of section 45 (2) (2) of the Securities Act by this Bill.
SECTION 43: [Members' Conflict of Interest Act, amends section 1]
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