The British Columbia Securities Commission (BCSC) is going to take a bit longer to contemplate its plan to scrap the so-called Northwest exemption.
Back on January 3, the BCSC published a notice seeking comment on the proposed revocation of the Northwest exemption, which allows firms to trade in the exempt market without registering. It also proposed to revoke a similar exemption regarding trades in mortgage investment entities (MIEs).
The comment period on those proposals was to end on Feb. 4. Now, it is giving prospective commenters until the end of the month (Feb. 28) to get their comments in on the idea.
Initially, the BCSC said that it was planning to revoke the exemption amid an evident lack of compliance with the disclosure requirements that it sets, which, it noted, puts “investors at greater risk.” It also said that investors would be better protected if they bought exempt market securities from a registered dealer with the benefit of advice.
Indeed, the exemption has been controversial with investor advocates, such as the Canadian Foundation for Advancement of Investor Rights (FAIR Canada), which has called for its repeal.
The so-called Northwest exemption was introduced by a handful of Western regulators (including Alberta, BC, Manitoba, Saskatchewan, Northwest Territories, Nunavut, and the Yukon) in the wake of the registration reform that created the new exempt market dealer (EMD) category. It provides an exemption from the requirement to register as an EMD for those that are only selling private placement securities under the capital raising exemptions.
In proposing its revocation, the BCSC said that it adopted the exemption because, at the time, it “did not have the information to understand what impact the EMD registration requirement would have on private enterprise financing or investors.” It has now concluded that not only is investor protection compromised, but that requiring registration likely won’t harm capital raising very much. It estimates that only about 1% of capital (by dollar value) could be impacted.