An investor’s guide to the BC Securities Act

The responsibility of regulating investments falls with the provinces or territories in Canada. British Columbia has its own statute on securities and derivatives called the BC Securities Act. It regulates trading or distribution, imposing requirements for persons and entities engaged in such business.

Jeffrey A. Hart, an Associate from Farris LLP, has provided some insights on what is BC's Securities Act and what it does.

"Its primary focus is to regulate trading in securities and derivatives in British Columbia with view to protect investors, to promote fair, efficient and competitive capital markets and to ensure the integrity and stability of the financial system", Hart says.

What is the British Columbia Securities Commission?

The British Columbia Securities Commission (BCSC)  is established by the BC Securities Act. It is also the main agency for its enforcement and implementation.

The 2023 amendments made in BC Securities Act provided the BCSC with stronger compliance and enforcement powers, said Hart.

"Overall, British Columbia’s amendments to the Act provide additional enforcement options and powers to investigate market misconduct to the BCSC with an aim to better protect investors and their investments while promoting investor confidence." 

Here are some powers of the BCSC, including the new ones after the amendments made to the BC Securities Act:

• issue exemption orders
• enforce the Act’s provisions on civil and criminal offences, such as illegal distributions, fraud, or market misconduct
• handle administrative proceedings, make market conduct orders, and order administrative penalties for failure to comply with summonses
• apply for compliance orders before the court after a conviction under the Criminal Code for securities-related offences

Hart also gave some examples of the recent amendments to the BC Securities Act. "For example, the BCSC now has the power to make certain market conduct orders in instances of non-compliance of a summons or document production demand (including cease-trade orders, registration bans, director and officer bans, among others) where such orders were previously only available following a successful application to the BC Supreme Court."

Who needs to be registered with the BC Securities Commission?

Part 5 of the BC Securities Act requires that persons and firms who want to engage in the following activities must register first with the BCSC:

• trading in securities or derivatives
• acting as an adviser for securities and derivatives, an investment fund manager, or an underwriter

Registration is based on the following categories:

• categories for individuals:
  • dealing representative
  • advising representative
  • associate advising representative
  • ultimate designated person
  • chief compliance officer
• categories for firms:
  • dealer (investment, mutual fund, scholarship plan, exempt market, and restricted dealers)
  • adviser (portfolio manager, and restricted portfolio manager)
  • investment fund manager

Application forms must be submitted to BCSC according to these categories. Afterwards, BCSC’s compliance team may visit the registrant’s office for post registration inspection.

Exempted from registration requirement

The BC Securities Act also provides that BCSC  may allow certain persons or firms to be exempted from the registration requirement.

The person or firm who wants to be exempted must apply with the BCSC for an exemption order. Applying for exemption can either be a local application (relief only applies in BC) or a multiple jurisdiction application.

This video from the BCSC will explain more about this registration requirement, from the perspective of an investor:

To know more about the BC Securities Act, reach out to the best corporate finance and securities lawyers in BC as ranked by Lexpert.

How can companies follow the BC Securities Act?

Aside from the registration requirement, the following are the common requirements or features of securities laws across the provinces and territories related to securities:

1. prospectus requirement
2. reporting obligations
3. fraud and misrepresentations

These are also applicable in BC, as provided by the BC Securities Act. Although, these are also subject to certain exceptions.

1. Prospectus requirement

A prospectus is a document that discloses all important information about the issuer’s business and the securities that it offers.

Under Section 61(1) of the BC Securities Act, persons and companies that distribute or sell new securities issued for the first time must file a prospectus with BCSC. They are also required to get a receipt for the submitted prospectus from the BCSC.

The person or company that was issued a receipt is now called a “reporting issuer”, which is then subject to other regulations under the BC Securities Act.

Exemptions from the prospectus requirement

The BCSC can issue an exemption order to a person or entity to be exempted from the law’s prospectus requirements.

Below are some of these exempted transactions or entities:

• private issuer: an entity is a private issuer if:
  • the securities are subject to transfer restrictions;
  • the securities are owned by not more than 50 persons; and
  • it is not a reporting issuer or an investment fund
• family, friends and, business associates: when the principal purchaser is:
  • the issuer’s director, executive, control person, founder, or affiliate; or
  • the family, friends, or business associates of the persons first mentioned
• employee, executive officer, director, and consultant:
  • if the issuer distributes securities to its own employee, executive officer, director, or consultant; and
  • the distribution is purely voluntary
• minimum amount investment: if the principal purchaser of the security is a:
  • non-individual; and
  • the purchased security’s acquisition cost is less than $150,000 in cash
• offering memorandum: if the issuer:
  • delivers an offering memorandum to the purchaser of a security; and
  • receives a signed risk acknowledgement from the purchaser
• crowdfunding: allows an issuer to raise limited funds from the public by using an online funding portal without a prospectus, but subject to the following restrictions:
  • maximum amount that can be raised by the issuer is only at $250,000 twice a year
  • minimum amount must be set and must be raised within 90 days; otherwise, investments must be returned
  • an investor can only invest a maximum amount of $5,000
  • investors can withdraw their offer to buy within 48 hours
  • only certain types of shares can be sold
• accredited investor: if the purchaser of the security is an accredited investor, which includes:

2. Reporting obligations

Part 12 of the BCSC establishes the continuous disclosure obligations of issuers in the province. Also called reporting obligations, it states that reporting issuers must file:

• annual financial statements
• periodic disclosure about its business and affairs
• disclosure about any material changes in its affairs
• management's discussion and analysis (MD&A)
• business acquisition reports (BARs)
• information circulars
• proxies and proxy solicitation
• restricted share disclosure

As with any other requirements, a reporting issuer may be exempted from the disclosure obligations upon application with the BCSC.

3. Fraud and misrepresentations

The BC Securities Act provides for prohibitions on the use of fraud and misrepresentations when individuals and firms deal with securities and derivatives.

The law also provides for the accompanying administrative, civil, and/or criminal liabilities for those found guilty of these offences.

Interested in learning more about the counterpart laws of the BC Securities Act in other provinces and territories? Reach out to any of the Lexpert-ranked best corporate finance and securities lawyers in Canada.