Commission Approval of Rule (effective January 28, 1998): OSC Rule - 33-504 - Compliance with Section 42

 

NOTICE OF RULE AND RESCISSION OF NOTICE UNDER THE

SECURITIES ACT

RULE 33-504

COMPLIANCE WITH SECTION 42

 

Notice of Rule and Rescission of Policy

The Commission has, under Section 143 of the Securities Act (the "Act"), made Rule 33-504 Compliance with Section 42 (the "Rule").

The Rule, and the material required by the Act to be delivered to the Minister of Finance were delivered on January 28, 1998. If the Minister does not approvethe Rule, reject the Rule or return it to the Commission for further consideration, the Rule will come into force on April 13, 1998. If the Minister approves theRule, the Rule will come into force fifteen days after it is approved.

The Commission has also on the date on which the Rule comes into force rescinded the policy notice of the Commission entitled "Compliance with Section 41 ofthe Securities Act".

Substance and Purpose of Rule

Section 42 of the Act requires a registered dealer to name every person or company with an interest of five percent or more in the capital of the dealer on allletterheads, circulars and stationery that contain any offer or solicitation respecting a trade in securities or in a preliminary prospectus or prospectus upon or inwhich the name of the dealer appears as underwriter. Section 42 of the Act further provides that the Commission may exempt a registered dealer or class ofregistered dealers from the requirements of Section 42 if the Commission determines that a registered dealer or class of registered dealers is subject to conditionsof registration or to regulations imposed by a self-regulatory organization that require provision to customers in the same or some other manner of theappropriate information.

In 1988, the Commission published a policy notice entitled Compliance with Section 41 of the Securities Act in (1988), 11 OSCB 2217 (the "Section 42Notice"). In the Section 42 Notice, the Commission notified dealers and their advisers that compliance with the provisions of the General By-Law of TheToronto Stock Exchange (the "TSE") or the By-Laws of the Investment Dealers Association of Canada (the "IDA") which provide for a dealer making itsfinancial statements and the names of its partners or directors and senior officers available to its clients, provide an alternative means of complying with Section41 (now Section 42) of the Act.

The Rule replaces the Section 42 Notice which will be rescinded.

Summary of Rule

The Rule provides an exemption from the requirements of Section 42 of the Act for members of the TSE and IDA and their affiliates who comply with Section18.14 of the General By-Law of the TSE or Regulation 1400 to the By-Laws of the IDA, or certain of their respective successor provisions, as applicable.

In addition, the Section 42 Notice will be rescinded.

Summary of Written Comments Received by the Commission

The Commission received one written comment on the Rule from Osler, Hoskin & Harcourt. The Commentator suggested that the Commission should requestthat Section 42 of the Act be repealed, or in the alternative, that the Rule provide for an equivalent exemption for affiliates of members of the TSE or the IDA.The Commission did not believe that it was appropriate to repeal Section 42 of the Act but has implemented the proposed alternative in the Rule as made.

Text of Rule

The text of the Rule follows.

Text of Rescission of Policy

The text of the rescission of the Section 42 Notice is as follows:

"The policy notice of the Commission entitled "Compliance with Section 41 of the Securities Act" is rescinded."

DATED January 30, 1998.

ONTARIO SECURITIES COMMISSION RULE 33-504 - COMPLIANCE WITH SECTION 42

1.1 Compliance with Section 42

(1) Section 42 of the Act does not apply to a person or company that is a member of The Toronto Stock Exchange or to an affiliate of that member if the personor company complies with section 18.14 of the General By-Law of The Toronto Stock Exchange as it exists on the effective date and every successor to thatsection that does not reduce the information required to be made available by dealers to their clients under the section of the by-law.

(2) Section 42 of the Act does not apply to a person or company that is a member of the Investment Dealers Association of Canada or to an affiliate of thatmember if the person or company complies with Regulation 1400 of the By-Laws of the Investment Dealers Association of Canada as it exists on the effectivedate and every successor to that regulation that does not reduce the information required to be made available by dealers to their clients under the regulation.

(3) In this Rule, "effective date" means the date on which this Rule comes into force.