A Corporate Finance \ Securities Law Update May 2001
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"BCI 72-502
reverses the position
held by the
BCSC
until now that it
was
"protecting the
public" by not
allowing
British
Columbia
shareholders to sell
their shares
acquired
through a
private
placement in a
non-B.C.
reporting
issuer even
outside
British
Columbia"
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B.C. SHAREHOLDERS MAY NOW LEGALLY SELL
OTCBB PRIVATE PLACEMENT STOCK, IF CONDITIONS MET The British Columbia Securities Commission ("BCSC") on May 18, 2001 issued B.C. Instrument 72-502 ("BCI 72-502") allowing for resale by British Columbia shareholders of securities acquired in a private placement from United States Securities Exchange Act of 1934 (the "1934 Act") reporting issuers. As other resale exemptions apply to 1934 Act reporting issuers who trade on a recognized stock exchange, relief under BCI 72-502 applies primarily to 1934 Act issuers who trade on the United States Over-The-Counter Bulletin Board (the "OTCBB"). BCI 72-502 reverses the position held by the BCSC until now that it was "protecting the public" by not allowing British Columbia shareholders to sell their shares acquired through a private placement in a non-B.C. reporting issuer even outside British Columbia. In the past, many investors who acquired privately placed shares in an OTCBB company sold their shares outside of British Columbia and ignored the BCSC policy. Investors may now sell legally under B.C. law so long as the conditions set out under BCI 72-502 are met. Freely tradable securities acquired on an exchange or quotation system remain freely tradable and are not affected by BCI 72-502. In order for a seller to resell his/her private placement securities, the following conditions must be met:
In addition, if a security acquired under a prospectus exemption is converted or exchanged into another security, the converted or exchanged security is considered the same security under BCI 72-502. If you have any questions as to the application of BCI 72-502, please do not hesitate to contact any member of Clark Wilson LLP’s Corporate Finance/Securities Group.
B.C. SECURITIES COMMISSION TO TAKE TOUGH ACTION AGAINST LATE-FILING COMPANIES
The B.C. Securities Commission is taking tough measures against companies that file their financial statements late, including imposing cease trade orders on delinquent companies without warning. In a news release dated May 7, 2000, Wayne Redwick, BCSC Director of Corporate Finance stated, "We are taking a more proactive approach to encourage companies to file their financial statements on time. But there still are a significant number of late-filing companies that may need a stronger message such as a cease trade order." A cease trade order, which bars any further selling of a company’s securities, can seriously affect the company’s capacity to do business, including hampering their ability to raise additional capital and meet financial obligations to creditors. They may also find it persuades potential investors to look elsewhere. "Investors should take note of companies that fail to meet their filing deadline because it could signal the firm is having cash flow problems or is being mismanaged." Redwick said. "If a company’s management can’t even muster the funds to pay for the audit or are disorganized to remember to file their financial statements on time, how confident can investors be that they are running the business effectively?" Last year, the commissions issued 161 cease trade orders against late-filing companies and allowed 75 of those to resume trading after they and addressed the problem.
UPCOMING FREE SEMINAR : On June 27, 2001 at 2 pm, Clark Wilson LLP will be presenting a seminar focused on understanding the SEC’s new Regulation FD (fair disclosure) and avoiding the pitfalls associated with Regulation FD. Regulation FD regulates the informal exchange of information between companies and securities analysts, portfolio managers, other investors and the financial press. The principle underlying Regulation FD is simple: it precludes companies from disclosing material information selectively (ie. without contemporaneously disseminating the same information to the public). However, applying the principle is difficult as companies must respond to constant demands for information. Learn more about Regulation FD by attending Clark Wilson LLP’s upcoming free seminar. If you are interested in attending, please express your interest by contacting Virgil Hlus at 891-7707 or by sending a return email to vzh@cwilson.com. We would like to send you Securities Bulletin via e-mail
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our website, www.cwilson.com . QUESTIONS / COMMENTS For more information on any article contained in this issue of Clark Wilson LLP’s Securities Law Bulletin or on any other Corporate Finance or Securities matter, please contact any member of the Clark Wilson LLP Corporate Finance/Securities Group listed in the box on this page. |
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Clark Wilson LLP's Securities Law Bulletin is published periodically by The
Corporate Finance / Securities Practice Group at Clark Wilson LLP. The information
contained in this newsletter should not be treated by readers as legal advice
and ought not be relied on without detailed legal counsel being
sought. Editor: Bernard Pinsky.
© 2001, Clark Wilson LLP. All Rights Reserved. |