Securities • Issues & Advocacy

PRESENTATION ON THE INTER-PROVINCIAL SECURITIES INITIATIVE
BY
THE PROSPECTORS AND DEVELOPERS ASSOCIATION OF CANADA

(This is an abstract of a presentation made to the Steering Committee of Ministers on the Inter-Provincial Securities Framework by the Prospectors and Developers Association of Canada on Tuesday, July 15, 2003)

The Prospectors and Developers Association of Canada

As you may be aware, the Prospectors and Developers Association of Canada (the “PDAC”) is a national organization whose membership consists of approximately 4,500 individuals and corporations who are engaged in mineral exploration and mining activities throughout the world. 

Mining companies represent approximately 28% of all issuers listed on the Toronto Stock Exchange (“TSX”) and the TSX Venture Exchange (“TSX-V”). In 2002, 32% of the equity capital raised worldwide for mining companies was for TSX and TSX-V issuers and 91% of the number of equity financings worldwide were for TSX and TSX-V listed issuers. Accordingly, the PDAC believes that changes that would benefit mining issuers would be of net benefit to the Canadian capital markets generally.

The PDAC has been supportive of legislation and other regulatory initiatives which foster the responsible development of Canada’s mineral resources. During the last 12 months, the PDAC has had the opportunity to make submissions on securities regulatory reform to the September 2002 Mines Ministers’ Conference, to Mr. Harold MacKay (October 2002), to the Canadian Securities Administrators regarding their Uniform Securities Legislation proposal (May 2003) and to the British Columbia Securities Commission regarding the “BC Model – Draft Legislation and Guides” (the “BC Model”) (June 2003). In addition, the PDAC hosted a panel discussion among Messrs. David Brown, Robert Fabes, Doug Hyndman and Harold MacKay in March 2003 on the issue of securities regulatory reform.

We are pleased to have the opportunity to make a presentation to the Steering Committee of Ministers on the Inter-Provincial Securities Framework, as such framework is described in a discussion paper dated June 2003 (the “Discussion Paper”).

The PDAC’s Views on Securities Regulation

The goal of establishing an effective, streamlined and efficient securities regulatory framework requires an investigation into the substance of the legislation as well as the procedural framework in which the legislation is applied. A more efficient regulatory framework would make the existing securities legislation more efficient. However, outmoded, cumbersome and unduly restrictive legislation will hamper the growth of Canadian companies and make it difficult for them to raise capital. Even the best procedural framework could not correct that. 

Accordingly, we believe that the Ministers should not ignore the substantive provisions of securities legislation in the pursuit of procedural harmonization. 

Substantive Reform

We are at a critical juncture in the substantive development of Canadian securities legislation. On one hand we have the draft USL legislation which has made improvements to the legislation existing in most provinces. On the other hand we have the BC Model which departs from the existing legislation in several areas (most notably in the proposed introduction of Continuous Market Access). The PDAC believes that Continuous Market Access offers a more streamlined and efficient way to access the capital markets than the current prospectus regime maintained in the draft USL legislation. We urge the Ministers to examine whether Continuous Market Access or some other form of integrated disclosure system can be implemented in the draft USL legislation since this will eliminate most filings associated with the preparation and filing of a prospectus. Alternatively, we urge the Ministers to examine how Continuous Market Access could be applied to the portions of an offering conducted outside of British Columbia under the “passport system”. 

Procedural Reform

The complaints which our members have expressed with the current structure are included in the Discussion Paper. We strongly believe that the concerns of commentators expressed in the Discussion Paper make the case for procedural change and urge the Ministers to consider the structural issues in the following priority:

1. Interface Issues: We have been advised by the British Columbia Securities Commission that the BC Model will become law regardless of whether the draft USL legislation proceeds in its current form. In our submissions relating to the BC Model we noted various areas in which the BC Model and the draft USL legislation required amendment in order to permit them to interface together in a more seamless manner. If both the USL legislation and the BC Model proceed then Canada will be faced with two sets of divergent legislation. We believe that harmonizing these two pieces of legislation should be the highest priority goal.

2. Enforcement issues: The investigation and prosecution of securities offences and the enforcement of remedies is one area where a system of multiple regulators and multiple securities acts is unavoidably more cumbersome than a system administered by a single regulatory and a single securities act. The draft USL legislation does not go far enough in terms of harmonizing the enforcement mechanisms. 

3. Local Rules: In our submissions on the draft USL legislation, we disagreed with the need for local rules. Local Rules should not be permitted to change the substantive provisions of securities legislation. Issuers need to be able to look to one source to determine the relevant securities regime across the country. Having to check in each case for Local Rules would result in complication, delay and expense. 

4. Reduce Multiple Filings: The introduction of SEDAR and SEDI have been positive steps towards reducing the number of documents which need to be filed. We note that there are still inefficiencies within these electronic filing systems and that regulators still oblige issuers to pay filing fees in each jurisdiction – even where the same document is being filed with each of them.

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