1-Jul-2004
Effective July 1, 2004, New Brunswick has brought into force a new Securities Act replacing the seventy year old Security Frauds Prevention Act and harmonizing New Brunswick’s securities laws with those in effect in other Canadian jurisdictions. Stewart McKelvey Stirling Scales was the lead consultant to the New Brunswick Department of Justice's securities law reform project.
The legislation is generally modelled after the Ontario Securities Act with some departures from that Act being made and provides for the establishment of a new Securities Commission which will be an industry funded, arms length crown corporation consisting of two components: a quasi judicial tribunal and a separate group of permanent staff.
The Securities Commission will have broad rule making authority in order to provide legislative flexibility enabling a quick response to emerging regulatory trends.
Registration of Market Participants
The new New Brunswick legislation provides for mandatory registration of dealers (which include underwriters) and advisors. There is no separate category of registration for underwriters. Registration is also required by partners and officers of dealers and advisors who act on behalf of a corporate registrant. New Brunswick has not however adopted the Ontario system of "universal registration".
Prospectus and Distribution
The new legislation has generally adopted uniform act prospectus and distribution provisions following the Ontario model. At the same time, to allow for flexibility, the legislation gives broad authority to the Securities Commission to recognize forms of prospectus which comply with requirements of other jurisdictions. In settling on wording for the related definitions of "security", "trade" and "distribution", drafters of the legislation have extracted various features from the legislation found in the other Canadian jurisdictions in an effort to arrive at definitions that advance a modern approach. For instance, security has been defined in the manner which expands it beyond the underlying paper-based concept of securities reflected in the legislation of most other jurisdictions.
Continuous Disclosure
With the coming in to effect of the new legislation, New Brunswick will join other Canadian jurisdictions by introducing a "reporting issuer" concept and continuous disclosure obligations. In this respect, effective July 1, 2004, any issuer that has issued voting securities in respect of which a prospectus was filed and a certificate was issued under the former legislation is deemed to be a reporting issuer. The legislation also provides that an issuer whose securities have been listed on a stock exchange recognized by the Commission is a reporting issuer (although, as of now, no stock exchanges have been recognized for this purpose) and contains typical provisions to provide that a corporation which results from an amalgamation, arrangement or reorganization is a reporting issuer where one of the amalgamating or merged or continuing corporations was a reporting issuer for at least twelve months. The legislation also allows the Securities Commission to deem an issuer to be a reporting issuer or to make an order that an issuer has ceased to be a reporting issuer.
Prospectus and Registration Exemptions
In an effort to provide an extremely flexible environment and to reflect current reality, the legislation does not enumerate any categories of registration or prospectus exemptions but rather provides for all such exemptions to be dealt with by the Securities Commission through rules. While the Act has come into force on July 1, 2004, an exemption rule has yet to be adopted and, given the rule making process required to be followed by the Commission, we expect it may be up to several months before such a rule is in place. In the interim, the Securities Commission has announced that until such time as rules are adopted it will, by administrative policy, continue to apply and recognize the exemptions that were in effect under the former legislation and will issue "no actions letters" in circumstances if requested to do so.
National and Multilateral Instruments - Administrative Practice
The Securities Commission has also announced that it intends to adopt various national and multilateral instruments as rules. A complete list of the instruments which are intended to be adopted can be found at the Securities Commission's website at www.nbsc-cvmnb.ca. Until such time as the Securities Commission has adopted the applicable rules, it has announced that it expects issuers to comply with such instruments.
Fees
The Commission has, effective July 1, adopted a fee rule – Rule 11-501 which can (or should shortly) be found at the Commission's website.
For further information you may contact the writer or any other member of our New Brunswick Securities Practice Group.
New Brunswick Securities Practice Group
