The British Columbia government introduced its streamlined new Securities Act in the legislature today.

The B.C. Securities Commission has been working on the new act as part of the B.C. government’s push to reduce the regulatory burden for that province.

Highlights of the new securities regulatory framework include:

  • plain-language disclosure;
  • increased enforcement powers for the BCSC;
  • stronger sanctions and penalties;
  • broader remedies for investors to sue for damages; and
  • prohibitions against misrepresentation, fraud, market manipulation, unfair practices, and trading on inside information.

. The B.C. Securities Commission spent two years reviewing the problems posed by overly complex regulatory requirements, and consulted with more than 2,000 market participants across Canada.

The new framework reflects the results of that process. “The new legislation strengthens investor protection through increased enforcement powers, stronger sanctions and penalties, and broader remedies for investors to sue for damages from misleading disclosure,” said BCSC chair Doug Hyndman.

Many securities dealers voiced support for B.C.’s approach, although there is concern that B.C.’s rules will be too different from the rest of the country.

“A lot of the rules our industry works under are outdated and ineffective at achieving results in a cost effective way,” said Ross Sherwood, president and CEO of the Vancouver-based investment firm, Odlum Brown. “If it works as well as it should, the B.C. legislation will bring in stronger enforcement, real cost savings and become a template for the rest of Canada.”

John Les, Minister of Small Business and Economic Development, said that the new act will improve investor protection and make it easier for business to raise capital. “The new act, together with the rules and regulations that the act will enable, will replace the current overly prescriptive requirements with a more streamlined and results-based approach to securities regulation. The new legislation is founded on time-tested principles of investor protection — disclosure to investors, and the regulation of dealers and advisers,” said Les.

“We think the changes that have been introduced today will save companies money and speed up their access to the capital markets,” said Bruce McLeod, president of the Canadian Listed Company Association. “These are two critical issues for any public company trying to raise money and grow their business.”

Bill 38

The new Securities Act, introduced as Bill 38, purports to offer a streamlined and simplified, plain-language approach to securities regulation.

The new act aims to save costs by cutting down on rules and focusing on principles instead. It mandates improved, plain-language disclosure; provides for greater increased enforcement powers and stronger sanctions and penalties; and gives broader remedies for investors to sue for damages.

The act contains prohibitions against misrepresentation, fraud, market manipulation, unfair practices, trading on inside information, and front running.

The maximum administrative penalty that the B.C. Securities Commission may order is increased to $1 million per contravention of the legislation. The BCSC will be authorized for the first time to order disgorgement of ill-gotten gains.

The maximum fine that the provincial court may order for conviction of an offence under the legislation is increased to $3 million, and the court may also make restitution and disgorgement orders against a person who commits an offence. Higher penalties apply in insider trading cases.

Under the new legislation, investors will have broader rights to sue. They will be able to sue market participants for misrepresentation in offering and bid documents and in news releases, other disclosure documents and oral statements by company officers.

Investors will also have improved remedies for damages caused by illegal insider trading or front running. The new act also contains a process for investors to make claims against ill-gotten gains under commission or court orders.

The act also contains provisions to enable a Code of Conduct approach to compliance among registered dealers and advisers and to introduce Firm-Only Registration. And, it contains provisions to enable a new system of capital-raising, using the continuous market access system to raise capital on the strength of their continuous disclosure record.

The complete legislative framework consists of the act, rules, and forms. The rules, which complement the act, will contain the more detailed, although still results-based, regulatory requirements.

In the act are two of the major changes to the regulatory system (increased administrative and quasi-criminal sanctions, and enhanced investor remedies).

The rules will contain the specific provisions for the other three major changes (the continuous market access system, a code of conduct for dealers and advisers, and firm-only registration).