Notice

Amendments to The Securities Act, 1988

The Securities Amendment Act, 2006 (No. 2) was given first reading in the Legislative Assembly on November 6, 2006.  The following is a summary of the provisions of the amendment act:

Harmonization amendments

The following amendments will facilitate harmonization of requirements and processes with those in other Canadian jurisdictions:   

• amendments in subsection 2(1) to adopt uniform definitions of “control person”, “decision”, “director”, “futures contract”, “insider”, “material change”, “mutual fund”,  “officer”, “reporting issuer” and “underwriter”
• new definitions in subsection 2(1) of “economic interest”, “related financial instrument” and “self-regulatory organization” 
• repeal of the definition of “senior officer” in subsection 2(1)
• amendment to subsection 2(3) which relates to when an issuer is deemed to be controlled by another person or company
• amendments to  subsection 2(11) to replace “senior officer” with “officer, and “board of directors” with “directors”.  Similar amendments are made to sections 48, 113 and 133.
• amendments to  section 28 which relates to granting registrations
• amendments to section 29 which relates to voluntary surrender of registration
• repeal of section 30 which relates to further applications for registration
• amendments to section 50 relating to representation of registration
• repeal of section 51 relating to a unregistered person holding out that they are registered
• amendments to section 52 that prohibits representing that the Commission or Director has passed on the merits of a registrant, securities offering and other specified things
• repealing of section 81 regarding certificates of status, and adding new section 80.21 that permits the Commission to publish a list of defaulting reporting issuers
• new section 84.1 that requires reporting issuers to comply with continuous disclosure requirements specified in the regulations
• repeal of section 122 that permits the Commission to grant exemptions from sections 120 and 121.  Section 122 is redundant given the general exemption power in section 160.
• adding new section 125 that creates a harmonized standard of care for investment fund managers
• new section 128.1 that exempts an  investment fund manager from the conflict provisions in Part XVII of the Act if the transaction has been approved by an independent committee established under National Instrument 81-106 Independent Review Committee for Investment Funds
• adding new section 139.1 that provides a defense in an action under sections 137, 138, 138.1 and 139 for a misrepresentation in forward looking information if certain conditions are met.
• amendments to subsection 154(1) to add to or change regulation-making heads of authority
• new subsection 158(2.1) giving the Commission and Director to impose conditions on their decisions.
   

Passport regulatory system

The bill includes amendments to Part XIX.1 “Interjurisdictional Compliance”.  Part XIX.1 came into force on June 1, 2006, and contains provisions that permit the Commission to participate in a “one decision” passport system of securities regulation.  The current amendments refine the passport provisions to include the ability of the Commission to incorporate decisions of another regulator by operation of law.  The amendments also include provisions that implement a “modified discretion” mechanism that would permit the Commission to make a decision solely based on a similar decision by another securities commission.   The amendments are:

• amended definition of “decision” in subsection 2(1)

• amended definition of “Saskatchewan securities laws” in subsection 2(1)
• new definition of “securities regulatory authority”  in subsection 2(1)
• amendments to the definitions in section 147.1
• new section 147.2 relating to delegation and acceptance of authority from an extra provincial securities commission
• new section 147.4 relating to adoption and incorporation of extra-provincial securities laws
• new section 147.41 relating to exemptions from compliance with Saskatchewan securities laws
• section 147.42 relating to compliance with foreign securities laws is repealed
• new section 147.5 relating to adoption of decisions of extra provincial securities commissions
   

Civil Liability for Secondary Market Disclosure

New Part XVIII.1 – Civil Liability for Secondary Market Disclosure contains provisions that make reporting issuers civilly liable to investors and the secondary market for misrepresentations in their continuous disclosure, subject to reasonable limitations.  The new provisions are uniform with provisions in the Securities Act (Ontario) that came into force on January 1, 2006.  In addition a new definition of “forward looking information” has been added in subsection 2(1). 

 Financial Compensation Orders

New section 135.2 gives the Commission the power, as part of its jurisdiction at a hearing, to order that a person or company who has contravened Saskatchewan securities laws, repay financial losses to investors of up to $100,000 for each investor.  The provisions are based on those that have been in force in Manitoba since 2003. 

Mineral Lease Brokers

The provisions in Part XX, which require mineral lease brokers to be registered, are repealed.  Mineral lease brokers are agents who acquire oil and gas interests.  Saskatchewan is the only jurisdiction that regulates mineral lease brokers under securities legislation.   There have been no enforcement issues related to the activities of mineral lease brokers.  Owners of mineral interests are more knowledgeable and have better access to information than when the provisions first came into force.  The public interest no longer requires that mineral lease brokers be regulated.  

Enforcement and Compliance

A number of enforcement and administrative provisions have been amended and updated to make them consistent with similar provisions in other jurisdictions.  Those provisions are as follows: 

• section 12 is amended by:

o  adding new subsection (4.1) to make it clear that documents and records can be examined even if they are not in the possession of the person or company that is being investigated;
o  amending subsection (9) to expand the scope of search warrants to cover “building, receptacle or place”, not just “place”.  Amended subsection (9) parallels equivalent provisions in the Criminal Code.

• new section 20.1 is added to give the Commission the express power to conduct continuous disclosure reviews
• subsection 21 is amended by adding new subsection (5.1) giving self-regulatory organizations the power to commence proceedings against former members and their representatives for up to two years after the member ceases to be a member or the individual ceases to be a representative of the member.
• subsection 44(3.1) prohibiting fraud and market manipulation is repealed, and replaced with new section 55.1
• the following new sections are added, based on equivalent provisions in other jurisdictions:

o  section 55.1 prohibiting fraud and market manipulations
o  section 55.11 prohibiting misleading and untrue statements
o  section 55.12 prohibiting front running
o  section 55.13 prohibiting making false or misleading statements in evidence given under or records filed under the Act
o  section 55.14 imposing a requirement to comply with decisions of the Commission or Director
o  section 55.15 imposing a requirement to comply with undertakings to the Commission or Director

• adding new subsection (3.1) to section 85 prohibiting a person or company in a special relationship with a reporting issuer from recommending or encouraging someone else to purchase a security based on undisclosed material information
• section 131 is amended to harmonize it with offence provisions in other jurisdictions and increase maximum penalties to $5 million and a term of imprisonment of up to 5 years

• section 134(1) is amended to:

o  add new clause (d.1) allowing the Commission to order that a person or company be prohibited from acquiring securities
o  amend clause (h) to include “investment fund manager”
o  add new clause (h.1) allowing the Commission to order that a person or company be prohibited from acting as a registrant, an investment fund manager or a promoter
o  add new clause (i) allowing the Commission to order that registration or recognition be suspended or restricted

• new subsection 134(5) is added allowing the Commission to make an enforcement order under section 134 based on an order made by a regulator or court in another jurisdiction
• section 135.2 is amended to allow the Commission to make enforcement orders against a person or company notwithstanding that a registration their is terminated or lapsed
• new section 135.7 is added prohibiting the destruction of evidence.

Adoption of new national instruments

The bill includes the repeal of provisions in the Act relating to registration, prospectuses, insider reporting and take-over and issuer bids.  These provisions will be replaced by national instruments that will contain uniform provisions in the area.  Details are as follows:

National Instrument 31-103 Registration Requirements

Sections 32 (address for service) and 33 (bonding) will be repealed when proposed NI 31-103 comes into force.

National Instrument 41-101 General Prospectus Requirements

• new section 60.1 is added permitting the Director to issue receipts for prospectuses that are subject to conditions
• sections 62 to 69 regarding amendments and certificates are repealed
• section 70 regarding grounds for refusing a prospectus receipt is repealed and replaced with provisions that are uniform with other jurisdictions
• section 71 regarding lapse dates is repealed
• section 74 and 75 regarding distribution of preliminary prospectuses and distribution lists are repealed
• section 76 regarding defective preliminary prospectuses is amended
• section 78 regarding orders to cease trading is amended
• section 79 regarding obligations to deliver a prospectus is repealed
• new section 79.1 regarding revocation of purchase of securities under a prospectus is added
• section 80 regarding the obligation to deliver an amended prospectus is repealed
• there are consequential amendments to sections 137, 138.1 and 141(2)(a)  

National Instrument 62-104 Take-over Bids and Issuer Bids

Part XVI “Take-over Bids and Issuer Bids” is repealed and replaced with the following provisions:

• section 98  - definitions
• section 99 – making a bid
• section 110 – directors’ or director’s or officer’s recommendation
• section 101 – applications to the Commission
• section 102 – applications to the Court of Queen’s Bench

National Instrument 55-101 Insider Reports

• the definitions in section 115 are repealed
• section 116 is repealed and replaced with new sections 116 and 116.1 regarding reports of insiders and early warnings
• sections 117 and 118 regarding reports of transfer by an insider and reports of transfer by agent are repealed
   

Housekeeping amendments    

The bill also contains the a number of housekeeping amendments.  The main ones are:

• new section 2.1 that deems certain persons and companies to be insiders of income trusts;
• amendments to section 11 regarding appeals from decisions of the Commission to the Court of Appeal.
• amendment to section 11.1 regarding the power of the Commission to designate certain persons or companies to be or not to be a reporting issuer, an insider, a mutual fund and the like
• new section 21.1 regarding delegation of functions by the Commission to an SRO.  It replaces current subsections 21(8), (9) and (10)
• sections 55 is amended to replace “mutual fund” with “investment fund”

  November 8, 2006

 Contact: 

Barbara Shourounis 
Director, Securities Division
(306) 787-5842
bshourounis@sfsc.gov.sk.ca