The British Columbia Securities Commission (BCSC) recently announced that it is proposing to revoke the dealer registration exemptions contained in BC Instrument 32-513 Registration Exemption for Trades in Connection with Certain Prospectus–Exempt Distributions (BCI 32-513) and BC Instrument 32-517 Exemption from Dealer Registration Requirement for Trades in Securities of Mortgage Investment Entities (BCI 32-517).
Background
In 2009, the Canadian Securities Administrators changed the dealer registration trigger requirements and removed the vast majority of the dealer registration exemptions available. They also created a new category of registration for exempt market dealers. At that time, the BCSC along with a number of other securities regulators, provided an exemption from the requirement to register as a dealer for persons that only sell private placement securities under certain capital raising exemptions.
These capital raising exemptions cover prospectus exemptions contained in section 2.3 (accredited investor), section 2.5 (family, friends and business associates), section 2.9 (offering memorandum) and section 2.10 (minimum investment amount) prospectus exemptions (together, the capital raising exemptions) in National Instrument 45-106 Prospectus and Registration Exemptions. The dealer registration exemption for persons that only sell private placement securities under the capital raising exemptions is contained in BCI 32-513 and is subject to compliance with certain conditions detailed therein.
In the BCSC notice of the proposed revocation, the BCSC noted that at the time the exemptions were adopted the BCSC did not have the information to understand the impact that the new registration requirements would have on private enterprise financing or investors. The BCSC also noted that the securities regulators in Alberta, Manitoba, Saskatchewan, Northwest Territories, Nunavut, and Yukon have similar exemptions.
The BCSC also issued similar dealer registration relief specifically for trades in securities of mortgage investment entities under BCI 32-517.
Revocation
In the BCSC notice and request for comment, the BCSC set out the following reasons for revoking the registration exemptions contained in BCI 32-513 and BCI 32-517:
- the BCSC believes that the impact on capital raising will be negligible;
- based on the BCSC's compliance review, the BCSC is of the view that those relying on the exemptions are not complying with its investor protection conditions; and
- the BCSC believes that private placement market investors will be better protected if they purchase securities through registrants.
Deadline for Comments
The deadline for the submission of comments on the proposed revocation is February 4, 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
