Amendments to The Securities Act, 1988
Bill
19 was passed by the Saskatchewan legislature on May 17, 2007,
and is expected to be proclaimed in force on July 1, 2007, except
for some provisions that are set out in this notice. Bill 19 was
introduced as The Securities Amendment Act, 2006 (No. 2),
but was passed as The Securities Amendment Act, 2007.
Summary
Bill 19 reflects
the following initiatives:
-
Harmonizing of Saskatchewan
securities laws with those of other jurisdictions. Many
provisions are amended to harmonize the provisions with those in
other jurisdictions.
-
Passport regulatory system.
Bill 19 refines provisions in Part XIX.1 that contains
refinements to provisions that permit the Commission to
participate in a “one decision” passport system of securities
regulation.
-
Civil
liability of secondary market disclosure. New Part
XVIII.1 contains provisions that make reporting issuers civilly
liable to investors in the secondary market for misrepresentations
in their continuous disclosure information.
-
Financial compensation.
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.
-
Mineral lease brokers.
The provisions in Part XX, that require mineral lease brokers to
be registered, are repealed.
-
Enforcement and compliance. Some
enforcement and administrative provisions have been amended and
updated to make them consistent with similar provisions in other
jurisdictions.
-
Adoption of
national instruments. Bill 19 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.
-
Housekeeping amendments.
Bill 19 also contains a number of housekeeping amendments.
Coming into
force
The provisions of
Bill 19 are expected to come into force on July 1, 2007, except
for:
-
Provisions
related to civil liability for secondary market disclosure which
are expected to come into force on January 1, 2008, and
-
Provisions are related to the implementation of proposed
national instruments discussed under
Adoption of
national instruments.
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 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 81-107
Independent Review Committee for Investment Funds
-
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.
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 “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
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. Part
XVIII.1 is expected to come into force in Saskatchewan on January
1, 2008. Amendments to The Securities Regulations are
required to set out new definitions of the following terms that
are used in Part XVIII.1:
-
market capitalization,
-
principal market, and
-
trading price.
The new
provisions are uniform with provisions in the Securities Act
(Ontario) that came into force on January 1, 2006 except for
provisions relating to limitation periods and costs.
In addition there
are the following related amendments:
-
a new definition of
“forward looking information” in subsection 2(1)
-
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.
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 to each investor. The
provisions are based on those that have been in force in Manitoba
since 2003. Staff
Notice 11-704 Claims for Financial Compensation sets
out more information.
Subsection 135.2(7) will not be proclaimed in force. Subsection
(7) provides that the Commission shall not make an order if
the claimant has commenced an action or proceeding for
compensation for the same loss. It has been determined that
claimants should not be confined to only making a claim for
financial compensation to the Commission. They should continue to
have the right to pursue their claims in the courts because:
-
the
Commission may find that there has been no contravention of
Saskatchewan securities laws, and can therefore not make a
compensation order. The claimant should be entitled to entitled
to pursue their claim in the courts based on the common law.
-
they
should be entitled to pursue a claim for losses over $100,000.
The provisions in
Part XX, which required mineral lease brokers to be registered, is
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.
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:
-
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;
-
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 ceased to be a member or the individual cease to be a
representative of the member. Subsection 21(5.1) will not be
proclaimed in force. Instead a harmonized provision will be
developed in cooperation with securities regulators in other
jurisdictions.
-
subsection 44(3.1)
(prohibiting misrepresentations) is repealed, and replaced
with new section 55.11
-
the following new
sections are added, based on equivalent provisions in other
jurisdictions:
-
section 55.1 prohibiting
fraud and market manipulations
-
section 55.11
prohibiting misleading and untrue statements
-
section 55.12
prohibiting front running
-
section 55.13
prohibiting making false or misleading statements in evidence or
records
-
section 55.14 imposing a
requirement to comply with decisions of the Commission or Director
-
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 from $1 million to $5 million and a
term of imprisonment from 2 years to 5 years
-
section 134(1) is
amended to:
-
add new clause (d.1)
allowing the Commission to order that a person or company be
prohibited from acquiring securities
-
amend clause (h) to
include “investment fund manager”
-
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
-
add new clause (i)
allowing the Commission to order that registration or recognition
be suspended or restricted
-
add new subsection
131(5) 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 is
terminated or lapsed
-
new section 135.7 is
added prohibiting the destruction of evidence.
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 on the subject. Details are as
follows:
National
Instrument 31-103 Registration Requirements – expected to come
into force in June 2008. Sections 32 and 33 will be repealed
National
Instrument 41-101 General Prospectus Requirements – expected
to come into force in March 2008
-
new section 60.1 will be
added permitting the Director to issue receipts for prospectuses
that are subject to conditions
-
sections 62 to 69 will be repealed
-
section 70 regarding
grounds for refusing a prospectus receipt will be repealed and replaced
with provisions that are uniform with other jurisdictions
-
section 71 regarding
lapse dates will be repealed
-
section 74 and 75
regarding distribution of preliminary prospectuses and
distribution lists will be repealed
-
section 76 regarding
defective preliminary prospectuses will be amended
-
section 78 regarding
orders to cease trading will be amended
-
section 79 regarding
obligations to deliver a prospectus will be repealed
-
new section 79.1
regarding revocation of purchase of securities under a prospectus
will be added
-
section 80 regarding the obligation to
deliver an amended prospectus will be repealed
-
consequential amendments
to sections 137, 138.1 and 141(2)(a)
National
Instrument 62-104 Take-over Bids and Issuer Bids – expected to
be in force March 2008. Part XVI “Take-over Bids and Issuer Bids”
will be 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 – expected to be in force in
2009
-
the definitions in section 115 will be repealed
-
section 116 will be 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 will be repealed
The bill also
contains 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 a
self-regulatory organization. It replaces current subsections
21(8), (9) and (10)
-
sections 55 is amended
to replace “mutual fund” with “investment fund”
May 27, 2007
Contact:
Barbara Shourounis
Director, Securities Division
(306) 787-5842
bshourounis@sfsc.gov.sk.ca
