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BCSC tightens exempt market rules

Date: Tuesday, March 20, 2012
Author: James Langton

Regulator adding two new conditions to its rules regarding registration exemptions

The British Columbia Securities Commission is tightening its exempt market rules to limit who can sell exempt securities without registering.

The BCSC announced that it is adding two new conditions to its rules regarding registration exemptions for exempt market distributions. Under the new conditions, the exemption will not be available to former registrants, or to those who have provided "financial services" to the purchaser.

The exemption is not available to those already registered, in any jurisdiction, including foreign jurisdictions. And now it will not be available to former registrants either. "We feel this restriction is necessary because of the role registrants play in our regulatory regime and consequently the reliance a purchaser may place on a former registrant," the BCSC's revised companion policy states.

Additionally, now if a market participant has provided financial services to the purchaser at any time, the market participant cannot rely on this exemption. "When a purchaser has previously received financial services from a market participant, we think there is an unacceptably high risk that the purchaser will assume that the market participant is necessarily acting on behalf of the purchaser's best interest in any subsequent transactions," the policy says. Examples of financial services include acting as: a financial planner, an insurance agent, or, a mortgage broker, it notes.

The commission says the changes, which are due to take effect April 16, are being made "to further protect investors and improve market integrity."

For those who can't rely on the exemption under the new rules, to continue their businesses, they will now have to register under the Securities Act, it says.