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Thursday, October 30, 2014
Saskatchewan Justice

The Securities Act, 1988, ensures the securities market is fair and protects the investing public. It is administered by the Financial and Consumer Affairs Authority (FCAA)- Securities Division.

The Authority regulates people trading in, or advising about securities and exchange contracts in Saskatchewan.

Securities are forms of investments, such as shares, bond, debentures, mutual funds, and investment contracts.

An exchange contract is a futures contract or an option that trades on an exchange (e.g., le Bourse de Montréal, the Chicago Mercantile Exchange) under standardized terms and conditions.

A trade is any transfer, sale or disposition of a security for a valuable consideration, but does not include the purchase of a security.
The Act requires that all persons selling or advising on securities or exchange contracts be registered. There are initial and ongoing requirements that dealers, advisers and their employees must meet, including:

  • capital, bonding and insurance requirements; 
  • membership in compensation or contingency funds; 
  • record keeping; and 
  • educational qualifications and experience.

The Act requires a company intending to sell its securities to file a prospectus - a document that contains full, true and plain disclosure of all material facts about the company, its operations and the securities offered.

FCAA staff review a prospectus primarily for proper disclosure. Staff also do a "merit" review to ensure the offering meets basic fairness standards. These include issues such as whether sufficient funds are being raised for the purpose set out in the prospectus, and whether there is anything in the background of the promoters that might indicate the business of the issuer will not be conducted with integrity.

After issuing securities under a prospectus, a company becomes a "reporting issuer" and is subject to the continuous disclosure provisions of Saskatchewan securities laws. These provisions are intended to ensure that buyers and sellers in the secondary market have sufficient, equal and timely information so that everyone can buy and sell securities using the same information, available at the same time.

In the secondary market people buy and sell shares already issued by a company either on a stock exchange or through brokers. The primary market is where issuers sell their new securities.

Companies must make the material available to their security holders and to the public by filing them on SEDAR, an electronic filing system, where it is available for review. Continuous disclosure materials include information that must be distributed at regular intervals, such as financial statements, and information such as material change reports, which are distributed irregularly when changes occur. A material change is a change in the business operations or capital of an issuer that would be expected to have a significant effect on the issuer's share value.

The insider trading rules are intended to ensure that no one buys or sells shares based on information that has not been generally disclosed to the public. Insiders of a reporting issuer must file reports of their trades in the securities of that reporting issuer. Anyone in a special relationship with a reporting issuer is prohibited from buying or selling securities using undisclosed information or from passing on such information to anyone else.

The take-over and issuer bid provisions are not strictly part of the continuous disclosure regime but are based on the same principles. A take-over bid occurs when a third party makes a bid to security holders of a company to purchase their shares. An issuer bid occurs when a company offers to buy back its own shares from the security holders. The provisions in the Act ensure that security holders of the target company are all treated equally. They also ensure that security holders receive adequate, relevant information and have 35 days within which to assess such information.

In most cases, a company intending to make a distribution of securities to the public must first file a prospectus with the FCAA and receive a receipt for it. Registered salespersons must sell the securities; however, there are a number of exemptions from this relatively complex process. The policy underlying most of these exemptions is that purchasers are already knowledgeable because of existing relationships as employees or shareholders or because they are able to obtain the information on their own. Some securities are exempt from the registration and prospectus requirements because they are essentially risk free, such as debt securities issued by the federal government or regulated institutions like banks or trust companies. In addition to these exemptions, the FCAA has the power to grant discretionary exemptions when it is satisfied that it would not be prejudicial to the public interest.

Amendments to the Act, which came into force in June 2006, facilitate implementation of the "Passport" system. This is an inter-provincial securities framework agreement entered into by all provinces and territories with the exception of Ontario.

The "Passport" amendments allow the Securities Commissions in participating Canadian jurisdictions to provide market participants with access to Canadian capital markets based on one set of laws and the decision of one regulator. These amendments:

  • permit the FCAA to delegate certain duties, functions and power to another regulator; 
  • allow the FCAA to accept the delegation of duties, functions and powers from another Canadian securities regulator; 
  • allow the FCAA to incorporate or adopt laws of another Canadian jurisdiction as Saskatchewan securities law; 
  • allow the FCAA to deem the securities law of another Canadian jurisdiction as satisfying Saskatchewan securities law; and 
  • allow the FCAA, under certain circumstances, to deem the securities law of a foreign jurisdiction as satisfying Saskatchewan securities law.

 The Act gives the FCAA powers to investigate suspected wrongdoing. When it is necessary to protect the public interest, the FCAA may make a number of orders. The FCAA may order that persons or companies cannot use exemptions from the registration and prospectus requirements in the Act, or it may order that individuals or companies cease trading in securities. The FCAA has the power to order that a person or company pay an administrative penalty of up to $100,000. It may also apply to a Queen's Bench judge for an order directing a person to comply with the legislation.

The FCAA has the power, as part of its jurisdiction at a hearing, to order that a person or company who has contravened Saskatchewan securities laws, repay financial losses to investors.

With respect to the offence provisions in the Act, a person or company may be guilty of a summary conviction offence for contravening Saskatchewan securities laws. The penalties on conviction include a fine of up to $5,000,000 or imprisonment for up to five years or both.

Under the Act, investors have a number of civil remedies by which they can seek compensation. These remedies include the right to withdraw from a purchase of securities by giving written notice within two business days after receiving the offering document, and the right to bring an action for damages or rescission if they purchased securities under a prospectus or offering memorandum that contained a misrepresentation.



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