Professing hope that the rest of Canada’s regulators would come to their senses and follow British Columbia’s lead, Doug Hyndman, chairman of the B.C. Securities Commission, pitched his province’s regulatory reform plans to the Investment Dealers Association of Canada’s annual conference in Mont-Tremblant, Que.

The province’s new Securities Act passed quickly through the B.C. legislature in May, and, Hyndman says, the BCSC expects to publish the all-important rules accompanying the act by the end of June. It plans to implement the new act by Nov. 15 and will begin
industry education this fall.

Hyndman stresses that while the B.C. model does propose a novel approach in several areas — such as registration and capital raising — it is founded on the traditional regulatory principles of investor protection and market integrity. And it uses traditional regulatory tools, such as disclosure and conduct rules. However, it attempts to apply those rules in a less prescriptive way, using plainer language.

Along with firm-only registration and a continuous market access system for raising capital (essentially scrapping prospectuses for companies that are already public), it will introduce a code of conduct for dealers, tougher enforcement measures and enhanced ability for investors to sue.

The code of conduct contains 28 rules, under eight basic principles, and will apply to firms and reps alike. Hyndman says it will raise or preserve standards in areas such as fee disclosure, resolving/disclosing conflicts of interest and plain language usage.

The firm-only registration provision means that reps will be exempt from registration on an individual basis. Hyndman says that this aims to emphasize the firms’ responsibility for the conduct of their reps, while also easing the administrative burden of registrations. Existing proficiency requirements will be maintained. Similarly, the CMA system will essentially provide prospectus exemptions for public companies.

Hyndman says that for firms that belong to self-regulatory organizations, complying with the SRO rules should be sufficient for complying with most of B.C.’s new act and rules. The only added burdens will be in ensuring compliance with its demands for more disclosure of fees and conflicts, and to use plain language. He reports that it is currently working with the IDA and the Mutual Fund Dealers Association to develop interfaces between its new rules and the SROs’ rules. It hopes to have these in place by 2005.

On the enforcement side, Hyndman says that the new model adds a prohibition against
misrepresentation in the firm/client relationship. It also promises broader prohibitions against insider trading and front-running. And it raises the fines the BCSC can levy to $1 million while provincial court fines will be as high as $3 million. The commission will also have disgorgement power, with penalties paid either going into the BCSC’s education fund, or a fund that investors can tap for redress.

Notwithstanding its novel approach, Hyndman insists that the BCSC’s new model is evolutionary, not revolutionary. And, he says, it expects to continue to work with the Canadian Securities Administrators — both to ensure that its model fits in with the CSA system and to contribute to future CSA policy development.

Hyndman closed his remarks by saying that the industry should support B.C.’s new model, calling it the “most advanced regulatory reform project in Canada.”