BCSC seeks regulation overhaul
By RICHARD BLACKWELL
Monday, February 18, 2002 – Print Edition, Page B1
The British Columbia Securities Commission is proposing a massive overhaul to Canadian securities regulation that would eliminate prospectuses, reform insider trading disclosure and give investors much broader rights to sue market participants.
The proposals, in a paper to be released today, will feed into efforts being spearheaded by the Alberta Securities Commission to create a uniform securities act for the whole country.
The BCSC paper says the overall goal of the changes is to reduce the regulatory burden on the investment industry by cutting down on rigid rules, while giving investors more rights to go after market participants for fraud, misrepresentation or illegal insider trading.
If the changes were implemented, investors would have broader rights to sue companies that file inaccurate information, or brokers who don't follow an industry code of conduct. They would also be able to sue individuals who trade illegally on insider information. And they could recover losses through individual or class actions.
"It's almost impossible to successfully sue someone who trades illegally now because you have to prove you were on the other side of the trade," said Brent Aitken, a BCSC commissioner who spearheaded the report.
Under the proposals, an investor would just have to prove that he or she traded on the day the manipulation occurred in order to get redress.
The proposals also suggest that the current prospectus system, where a complex document is filed for every new securities issue, be dumped. Instead, when a company first goes public, a "prospectus-like document" would be filed, Mr. Aitken said. After that, however, new securities could be sold merely by issuing a press release.
The tradeoff is that companies would have to rigorously maintain their continuous disclosure of material changes in their operations.
Several regulators have beefed up requirements for continuous disclosure, Mr. Aitken said, but "we said, if you're going to get to the 10-yard line, why not take the ball in and remove the prospectus requirement all together?"
Another proposal says the definition of company insiders should be altered to include anyone with access to material non-public information -- for example, employees in the firm's finance department.
Companies would have to maintain a list of these people thatwould be broader than the current rigid list of directors, officers and owners. All would have to report their trades.
Other proposals include:
Securities commissions would be allowed to order transgressors to disgorge profits or make restitution to people who have been harmed.
The detailed rules that currently govern the registration of industry participants would be replaced with a code of conduct. If this code is breached, companies would be "absolutely liable for the conduct of their employees," Mr. Aitken said. "That means no defences." This should motivate firms "to take considerable care in deciding who they hire," he said.
Anyone, including individual investors, could apply to a securities commission for a restraining order, if they think a market participant is breaking the law or engaging in an unfair practice.
A broker or adviser registered in one province would be allowed to do business across Canada.
The report said that simplifying rules is the best way to reduce the regulatory burden on the investment industry.
From:
globeandmail.com
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