B.C. regulator wants tougher insider rules
Forced repayments
Sinclair Stewart and Derek DeCloet
Financial Post
The British Columbia Securities Commission is proposing a rule change that would make it easier for Canadian investors to sue market participants who commit insider trading or fail to maintain adequate disclosure requirements.
The measures, which would also include a streamlined class-action system, are part of a number of regulatory recommendations outlined in a concept paper to be released today by the provincial securities watchdog.
The BCSC Deregulation Project suggested a number of ways to improve the efficacy and efficiency of the Canadian securities industry, which is slowly migrating toward a uniform set of rules that would apply to all jurisdictions across the country.
Investor protection was one of the focal points of the paper, along with the expansion of the various Commissions' enforcement powers.
One concept proposed that regulators be given the ability to force individuals who break securities law to give up their profits or repay those who lost money because of a violation. In addition, anyone who can demonstrate a breach of securities law would be able to apply to a commission for compliance or restraining orders.
"It's a question of how far we could go that would give investors that much more benefit than they would otherwise have through the courts," explained Brent Aitken, chair of the BCSC's deregulation project. "It would be a power that -- if we were to do that at the commission level -- hasn't happened in Canada before."
Mr. Aitken said a new class-action regime would also help investors to better mobilize themselves, although he stressed that the ideas are still at the concept phase.
In keeping with technological change and an increasing public focus on disclosure, the project has also recommended that the current prospectus system be scrapped in favour of a more flexible "continuous market access system."
The BCSC initiative also stressed that registration rules, like many others in securities legislation, have to be greatly simplified, and openly questioned whether it was in fact necessary for individuals to be registered. "Many of our existing rules are so complex that industry needs professional assistance even for routine compliance matters," the commission noted. "Part of this complexity comes from the detailed and prescriptive approach in many rules."
In some cases, however, the paper actually favours the addition of rules and regulations. With trade disclosure, for instance, the BCSC project suggested that shareholders with 10% or more of a company's outstanding stock be required to report both sales and purchases of 2% blocks. Currently, large shareholders only have to report purchases.
"We think that people are interested in knowing when they buy into a company who has the large blocks, or at least if there are large blocks of stock, because that can affect control and it can affect the ownership profile of the company," said Mr. Aitken. "Our approach is not all slash and burn. We'll probably be taking away a lot of rules when they don't seem necessary, but if we need to add some rules to get an effective system, we'd do that too." |
