British Columbia weighs in…
By David Feldman at 31 July, 2008, 8:51 am
A fellow blogger clued me in to this. Our British Columbian neighbors to the north are concerned about protecting the reputation of the province’s issuers, investment dealers, and other market participants who legitimately trade on the U.S. OTCBB and Pink Sheets, and they may soon have better legal tools to improve disclosure of OTC issuers with connections to B.C.
Canada has produced some amazing companies who have gone public through reverse mergers and other IPO alternatives. Unfortunately, Canada has also spawned a good number of questionable players involved in shady shells and deals. Indeed, a significant number of footnote 32 shells (shell companies that claim they intend to develop a real business to avoid shell restrictions) emanate from Canada. In part this is due to the fact that the regulatory oversight of the securities world up there is more lax than here in the U.S.
The B.C. Securities Commission, the independent provincial government agency responsible for regulating trading in securities within the province, has proposed rules intended in part to discourage the manufacture and sale of shell companies that may be used for less than legitimate purposes.
Several new proposed initiatives in proposed instrument 51-509 (“Issuers Quoted in the U.S. Over-the-Counter Markets”) have been announced. The instrument is designed to avoid abusive practices involving companies that have a significant connection to B.C. and trade in the U.S. over-the-counter markets, by providing for greater disclosure requirements and the restriction of once available exemptions under Canadian securities law. These initiatives are focused on OTCBB and Pink Sheet listed issuers not cross-listed on other more senior markets, such as the New York Stock Exchange or the Toronto Stock Exchange in Canada.
Impacted most will be the Pink Sheet issuers, now potentially subjected to reporting requirements once only strictly voluntary.
For more information on the proposed instrument, see BCSC’s website.
Thanks to summer associate Matthew Kutner for help in preparing this blog entry.
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