On September 15, 2008, the new BC Instrument 51-509 - Issuers Quoted in the U.S. Over-the-Counter Markets (“51-509”) will come into force. According to the British Columbia Securities Commission (the “BCSC”), 51-509 was adopted primarily to improve disclosure and compliance by United States Over-the-Counter (“OTC”) issuers with significant connections to British Columbia (“BC OTC Issuers”), discourage the manufacture and sale of OTC shell companies for abusive purposes, disrupt abusive promotions and hold dealers responsible for their trading activities in the OTC market.

Issuers subject to the new rules will be required to comply with British Columbia’s continuous disclosure requirements for reporting issuers, including timely disclosure of material changes and many other requirements. Directors and officers of these issuers will be required to file personal information forms disclosing their qualifications and backgrounds and file insider reports.

BC OTC Issuers that report under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) will be able to use the documents they file with the U.S. Securities and Exchange Commission (the “SEC”) to satisfy most of the 51-509 continuous disclosure requirements. BC OTC Issuers whose securities are quoted on the Pink Sheets LLC that do not report under the Exchange Act will be required to comply with applicable financial statement, disclosure and other reporting requirements or will be in breach of British Columbia law.

Once the new filing requirements are in force, the BCSC has stated that it intends to carry out continuous disclosure reviews of BC OTC Issuers. Significant non-compliance will likely result in, among other things, a cease trade order of the issuer’s securities in British Columbia and possibly other sanctions. Further, the BCSC has gone to lengths to show that they are co-operating with the SEC in this new endeavour, and we expect that sanctions imposed by the BCSC on a BC OTC Issuer will likely result in increased SEC scrutiny of the company and its insiders.

OTC Issuers

51-509 defines an “OTC issuer” as a company that has issued a class of securities that are quoted on the OTC Bulletin Board or the Pink Sheets LLC and whose securities are not also listed on any of the following exchanges: the Toronto Stock Exchange, TSX Venture Exchange, Canadian Trading and Quotation System Inc., New York Stock Exchange, American Stock Exchange, or NASDAQ Stock Market (the “Prescribed Exchanges”).

OTC issuers that have any of the following connections to BC will be designated as a BC OTC Issuer under 51-509 and will be subject to compliance with BC securities laws and certain public disclosure requirements:

• on or after September 15, 2008, the OTC issuer’s business has been directed or administered in or from British Columbia,

• on or after September 15, 2008, investor relations activities have been carried on in or from British Columbia by or on behalf of the OTC issuer, or

• the OTC issuer’s ticker-symbol date is on or after September 15, 2008, and, on or before the ticker-symbol date, the issuer distributed a security to a person resident in British Columbia and that security is of the class of securities that became the issuer’s OTC-quoted securities. (An issuer’s ticker-symbol date is the date that an OTC issuer is first assigned a ticker symbol for any class of its securities on the OTC Bulletin Board or the Pink Sheets.)

The phrase “investor relations activities” is defined in the BC Securities Act. In addition, the Companion Policy to 51-509 provides guidance by what is meant by that phrase as well as the phrase “directed or administered”. However, determining what are considered to be “investor relations activities” and what “directed or administered” means under 51-509 are matters of fact which each OTC reporting issuer should discuss with qualified legal counsel.

Disclosure Requirements

Disclosure Required for OTC Issuers Deemed to be Reporting Issuers

Except as otherwise provided in 51-509, a BC OTC Issuer must comply with all provisions of securities legislation that applies to a BC reporting issuer. The following are some examples of Canadian National Instruments that will apply to an OTC reporting issuer:

• National Instrument (“NI”) 43-101 Standards of Disclosure for Mineral Projects, which will require a BC OTC Issuer in the mineral resource business to file a technical report for each material mineral property and to meet other requirements regarding public disclosure about its mineral properties;

• National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities, which will require BC OTC Issuers in the oil and gas business to file, when they first file audited annual financial statements, a statement of reserves data and other information, a report of an independent qualified reserves auditor and to meet other requirements regarding public disclosure about its oil and gas properties;

• National Instrument 51-102 Continuous Disclosure Obligations which, among other things, will require the filing of press releases on SEDAR and material change reports for all material events and for certain OTC reporting issuers, additional disclosures to MD&A, proxy statements and the filing of a business acquisition report every time the company makes a significant acquisition;

• National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, which sets out the accounting principles and auditing standards an OTC reporting issuer will have to follow; and

• National Instrument 52-110 Audit Committees (“NI 52-110”)and National Instrument 52-108 (“NI 52-108”) Auditor Oversight, which requires reporting issuers to establish and maintain independent audit committees, an audit committee charter and disclose corporate governance practices.

In order to comply with the continuous disclosure and public filing requirements under the new rules, all OTC reporting issuers will be required to become filers on the System for Electronic Document Analysis and Retrieval (“SEDAR”). Documents required to be filed on SEDAR are extensive and include financial statements, annual and interim reports, material change reports, documents related to shareholder meetings, prospectuses and certain other documents and correspondence as required by Canadian securities regulators.

Exemptions for SEC Filers

Under the new 51-509 and related rules, BC OTC Issuers that meet the definition of a “foreign reporting issuer” in NI 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers are provided with exemptions from many of the additional disclosure requirements required under the new rules including the filing of insider reports, business acquisition reports and the provision of additional disclosure in proxy statements and periodic reports, so long as they comply with the Exchange Act and file on SEDAR those documents they file on EDGAR.

A “foreign reporting issuer” under NI 71-102 is defined as a reporting issuer, other than an investment fund, that is incorporated or organized under the laws of a jurisdiction outside of Canada, unless:

1. outstanding voting securities carrying more than 50% of the votes for the election of directors are owned, directly or indirectly, by residents of Canada; and

2. any one of the following is true:

1. the majority of the executive officers and directors of the company are residents of Canada,

2. more than 50% of the consolidated assets of the company are located in Canada, or

3. the business of the company is administered principally from Canada.

OTC reporting issuers should consult with counsel as to whether or not they meet the category of a “foreign reporting issuer” as this will determine what additional disclosures and filings the issuer and its insiders will have to file in Canada.

All BC OTC Issuers will be able to use certain existing exemptions that allow for the filing of quarterly and annual reports that are prepared in accordance with applicable U.S. regulations, however, those BC OTC Issuers that are not foreign reporting issuers will be required to add additional disclosure to their periodic reports and proxy statements to comply with the Canadian disclosure requirements. Also, all BC OTC Issuers must comply with the same timely disclosure requirements for material change reporting as other reporting issuers. The requirements, in section 85(b) of the BC Securities Act and Part 7 of NI 51-102 Continuous Disclosure Obligations, are to immediately issue and file a news release and then file a material change report on SEDAR within 10 days.

Audit Committees

Once the new rules are implemented, NI 52-110 Audit Committees and NI 52-108 Auditor Oversight, will require all BC OTC Issuers to establish and maintain an audit committee and adopt an audit committee charter. If the BC OTC Issuer is not a reporting issuer in any other jurisdiction in Canada, the requirement to establish an audit committee will apply on the earlier of (i) their first annual general meeting after September 30, 2008, or (ii) September 30, 2009. BC OTC Issuers will also have to add the disclosure set out on Form 52-110F2 in their proxy statement if management for the issuer solicits proxies from security holders for the purposes of electing directors. If the issuer is not required to send a proxy statement, it must include the information in its annual information form or annual MD&A.

Personal Information Forms

Under 51-509, effective September 30, 2008, the BCSC requires a personal information form in the required form from:

• each director, officer, promoter and control person of an OTC issuer that becomes a reporting issuer under 51-109 to provide information within 10 days of the OTC issuer becoming a reporting issuer under the instrument, except for a promoter of an OTC issuer that becomes an OTC reporting issuer more than two years after its ticker-symbol date, and

• each person that becomes a director, officer or control person of an OTC reporting issuer to provide information within 10 days of the person becoming a director, officer or control person of an OTC reporting issuer.

Personal information forms are prescribed under 51-509 but are not required to be filed before December 31, 2008, unless the BCSC otherwise specifically requires.

Registration Statements and Investor Relations

Following the implementation of the new rules, certain BC OTC Issuers must electronically file, within 5 days of the date it became a “reporting issuer”, a copy of the most recent registration statement it filed with the SEC. Generally, this will be a registration statement to register the sale of previously issued, restricted securities.

Also, if the BC OTC Issuer engages a person to carry on investor relations activities under an agreement, arrangement, commitment or understanding with such issuer, the OTC reporting issuer must publicly file a form describing the activities and the relationship of the BC OTC Issuer with the person.

Resale of Private Placement Securities

Securities Acquired Before Ticker Symbol Date - Resale of Seed Stock

As soon as practicable after the ticker-symbol date, a BC OTC Issuer must place the following legend on each certificate representing a security issued before the ticker-symbol date, and on each ownership statement issued under a direct registration system or other electronic book entry system relating to a security issued before the ticker-symbol date:

This legend must be placed on all certificates issued by a BC OTC Issuer, regardless of the residence of the shareholder.

Subject to compliance with the applicable legend, a person who acquires securities of an OTC reporting issuer after September 15, 2008 and before the issuer’s ticker-symbol date, may sell his or her securities in a private transaction using any available exemption until the issuer’s ticker-symbol date.

A person who acquired securities of a BC OTC Issuer after September 15, 2008 and before the ticker symbol date may trade those securities only if the securities contain the prescribed legend above, and:

• the securities are traded through a formal take-over bid using the exemption in section 2.16 of National Instrument 45-106 Prospectus and Registration Exemptions, or

• the securities are sold from an account in the person’s own name through an investment dealer who executes the trade through the OTC Bulletin Board or Pink Sheets.

Private resales may be made only if an exemption from prospectus requirements is available under BC law.

Securities Acquired After Ticker Symbol Date - Resale of Private Placement Stock

51-509 deems every first trade by a person of a security acquired by that person in a private placement after the issuer’s ticker-symbol date a distribution, unless all of the following conditions of Section 12(2) of 51-509 are met:

• a four month period has passed from the date: (i) the BC OTC Issuer distributed the security, or (ii) a control person distributed the security, unless the security was acquired under a director or employee stock option,

• if the person trading the security is a control person of the BC OTC Issuer, the person has held the security for at least 6 months,

• the number of securities the person proposes to trade, plus the number of securities of the OTC reporting issuer of the same class that the person has traded in the preceding 12-month period, does not exceed 5% of the BC OTC Issuer’s outstanding securities of the same class,

• the person trades the security through an investment dealer,

• the investment dealer executes the trade through the OTC Bulletin Board or the Pink Sheets,

• there has been no unusual effort made to prepare the market or create a demand for the security,

• no extraordinary commission or other consideration is paid to a person for the trade,

• if the person trading the security is an insider of the BC OTC Issuer, the person reasonably believes that the BC OTC Issuer is not in default of securities legislation, and

• the certificate representing the security carries a legend, or the ownership statement issued under a direct registration system or other electronic book entry system relating to the security bears a legend restriction notation, stating the following:

“Unless otherwise permitted under securities legislation, the holder of this security must not trade the security in or from British Columbia unless the conditions in section 12 (2) of BC Instrument 51-509 Issuers Quoted in the U.S. Over-the-Counter Market are met.”

This legend must be placed on all certificates issued by a BC OTC Issuer, regardless of the residence of the shareholder. Private resales may be made only if an exemption from prospectus requirements is available under BC law.

Ceasing to be a OTC Reporting Issuer under 51-509

There are three circumstances in which a BC OTC Issuer will cease to be a reporting issuer. First, an OTC reporting issuer will cease to be a reporting issuer if it satisfies all of the following four conditions and does not otherwise meet the definition of reporting issuer:

• its business is not directed or administered, and has not been directed or administered for at least one year, in or from British Columbia,

• investor relations activities, by or on behalf of it, are not carried on, and have not been carried on for at least one year, in or from British Columbia,

• more than one year has passed since its ticker-symbol date, and

• it has filed a notice using form 51-509F1.

Second, a BC OTC Issuer will cease to be a reporting issuer if a class of its securities becomes listed or quoted on one of the Prescribed Exchanges and it does not otherwise meet the definition of reporting issuer.

Third, a BC OTC Issuer will cease to be a reporting issuer if it receives an order from the BCSC that it is no longer a reporting issuer.

A BC OTC Issuer that ceases to be an OTC issuer must file the prescribed form at least 10 days before it is next required to file a document on SEDAR.

Summary for SEC Compliant OTC Issuers

SEC compliant U.S. reporting issuers can use many of their SEC filings to satisfy the continuous disclosure obligations imposed under 51-509, and securities can still be resold by shareholders of these companies under prospectus exemptions.

Assuming a BC OTC Issuer is a foreign reporting issuer and complies with its SEC obligations, the following are the most substantial additional regulatory requirements under 51-509:

• file the profile of the company on SEDAR;

• directors, officers and insiders file PIFs;

• file news releases and material change reports on SEDAR;

• file all SEC filed documents on SEDAR;

• file all material contracts on SEDAR;

• file additional disclosure regarding forward looking information, corporate governance practices and investor relations activities;

• establish an audit committee and adopt an audit committee charter;

• all securities issued must contain the appropriate 51-109 legend;

• mining companies must comply with NI 43-101; and

• oil and gas companies must comply with NI 51-101.

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