Securities Law & Instruments

 


NOTICE OF PROPOSED AMENDMENT TO RULE 32-502

UNDER THE SECURITIES ACT

REGISTRATION EXEMPTION FOR CERTAIN TRADES

BY FINANCIAL INTERMEDIARIES

Substance and Purpose of Proposed Amendment

Rule 32-502 Registration Exemption for Certain Trades by Financial Intermediaries (the "Rule") was published in the Ontario Securities Commission Bulletin onDecember 20, 1996 ((1996), 19 OSCB 6926). The Rule provides relief from the registration requirements of the Act for certain trades up to and including March31, 1998. The purpose of the proposed amendment is to remove the "sunset" date of March 31, 1998 so that the registration relief provided by the Rule will notbe time limited.

Summary of Proposed Amendment

The Rule came into effect on January 1, 1997 and carried forward the relief contained in a deemed rule of the Commission In the Matter of Certain Amendmentsto Regulation 1015 of the Revised Regulations of Ontario 1990 Made Under the Securities Act (1994), 17 OSCB 5516. Subsection 1.1(1) of the Rule providesthat up to and including March 31, 1998, section 25 of the Act does not apply to a trade by a financial intermediary of the type described in subsection 35(1) ofthe Act or section 151 of the Regulation or in securities described in subsection 35(2) of the Act.

Subsection 1.1(2) of the Rule provides that up to and including March 31, 1998 clause 25(1)(b) of the Act does not apply to a trade by a financial intermediaryof the type described in subsection 209(1) of the Regulation.

The Commission proposes to amend the Rule by deleting the "sunset" date of March 31, 1998 and deleting Part 2 of the Rule which contains the effective date ofJanuary 1, 1997. If the amendments are made, there will be no time limitation on the relief provided in the Rule.

Authority for the Proposed Rule

Paragraph 143(1)8 of the Act authorizes the Commission to make rules that, among other things, provide for exemptions from the registration requirements ofthe Act.

Alternatives Considered

The Commission considered whether after March 31, 1998, financial intermediaries should be required to be registered to engage in trades described in the Rule.The Commission determined that, at the present time, it would not be appropriate to impose a registration requirement on financial intermediaries for the tradescontemplated by the Rule. The Commission notes that ongoing initiatives in the registration and derivatives areas may result in the Commission revisiting thisposition in the future.

Unpublished Materials

In proposing this amendment, the Commission has not relied on any significant unpublished study, report or other material.

Anticipated Costs and Benefits

The Rule benefits financial intermediaries trading in certain securities in that those financial intermediaries are not required to be registered to trade in thosesecurities. The Rule imposes no costs on those financial intermediaries. In considering whether to allow the relief provided by the Rule to lapse, the Commissionwas of the view that if it did not amend the Rule, federally regulated financial intermediaries would be exempt from registration under subsection 209(10) of theRegulation, while financial intermediaries not regulated federally would be required to register. This would impose significant costs on those institutions andwould have a disproportionate effect on them that the Commission does not believe is justified in the circumstances.

Regulations to be Amended

The Commission proposes to amend subsection 206(1) of the Regulation by deleting the reference to the deemed rule and another deemed rule replaced by Rule32-503 Registration and Prospectus Exemption for Trades by Financial Intermediaries in Mutual Fund Securities to Corporate Sponsored Plans so that thefollowing words of subsection 206(1) will be deleted: "Except as otherwise provided in the Rules entitled "In the Matter of Certain Amendments to Regulation1015 of the Revised Regulations of Ontario, 1990 made under the Securities Act" (1994), 17 OSCB 5516 and "In the Matter of Certain Amendments toRegulation 1015 of the Revised Regulations of Ontario, 1990 made under the Securities Act" (1994), 17 OSCB 5517,".

Comments

Interested parties are invited to make written submissions with respect to the proposed amendment. Submissions received by February 6, 1998 will beconsidered.

Submissions should be made in duplicate to:

Daniel P. Iggers, SecretaryOntario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario
M5H 3S8

 

A diskette containing the submissions (in DOS or Windows format, preferably Word Perfect) should also be submitted. As the Securities Act requires that asummary of written comments received during the comment period be published, confidentiality of submissions received cannot be maintained.

Questions may be referred to:

Tanis MacLaren
Associate General Counsel
Ontario Securities Commission
(416) 593-8259

Proposed Amendment

The text of the proposed amendment follows.

DATED:November 7, 1997.

AMENDMENT TO ONTARIO SECURITIES COMMISSION RULES

RULE 32-502

REGISTRATION EXEMPTION FOR CERTAIN TRADES

BY FINANCIAL INTERMEDIARIES

1.1 Amendments - Rule 32-502 Registration Exemption for Certain Trades by Financial Intermediaries is amended by

(a) deleting the words in subsection 1.1(1) "Up to and including March 31, 1998,";

(b) deleting the words in subsection 1.1(2) "Up to and including March 31, 1998,"; and

(c) deleting Part 2 of the Rule.