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Thank you for your invitation to give your committee a few observations on the
securities regulatory régime from a New Brunswick perspective.
Like other corporate-commercial lawyers in New Brunswick, much of our securities
experience has been with multi-jurisdiction transactions originating in another province –
often Alberta or Ontario. In straight-forward agency filings for issues originating outside
New Brunswick there is rarely any problem. The New Brunswick Administrator is most
accommodating in the exercise of his discretion so that where an exemption is relied on in
another province a discretionary order is available here when necessary. The cost to out-of-province
issuers for legal opinion work on securities matters in the Atlantic Provinces has
probably come down in the last decade as competitive forces have led law firms to offer one-stop
shopping for the four provinces.
The main sources of our frustration with securities work are the antiquity of the New
Brunswick legislative régime and the lack of uniformity in the legislation as between the
provinces.
You have likely been told by other correspondents that the administrative irritants
and inconveniences faced by a TSX Venture Exchange listed company are discouraging.
This is even more so for a New Brunswick based company listed on that exchange. One
typical example is the necessity of making separate applications to more than one
jurisdiction to become a reporting issuer.
From a compliance point of view the disparity in resources between the provinces
means that the Atlantic Provinces have fewer personnel to monitor the industry and are
slower to make legislative amendments to deal with emerging compliance problems. This
encourages forum-shopping by fringe players in the industry.
The exemption system is a mess. In order to meet the needs of issuers who may have
only one purchaser in each of the four Atlantic Provinces, it is often necessary to navigate
through the shoals of the subtle but real differences that distinguish the exemption rules in
one province from those in another. Moreover, fundamental distinctions between the
systems in Nova Scotia and Newfoundland on the one hand and the systems in New
Brunswick and PEI on the other make the practice unnecessarily complex, especially where
resale restrictions are concerned.
The relatively miniscule capital markets in the Atlantic Provinces would be better
served by the elimination of the $97,000 (or $150,000 in Nova Scotia) threshold for the
sophisticated investor exemption. Often, local issuers are unable to take advantage of
available capital because the threshold is too high. An astute and experienced investor who
would not risk $100,000 might happily risk between $5,000 and $25,000 without a
prospectus or offering memorandum. There should be a national solution to this problem.
The needs of the Atlantic Provinces appear at first blush to be different from those of
the larger provinces. We have relatively few listed companies, many small-sized to medium-sized
businesses that are not closely-held enough to be considered “private”, and a small but
motivated capital pool to draw on. Our regulatory resources are modest. However, the focus
on the provincial boundary is misplaced. Our needs and resources are probably quite similar
to the less populous regions of the larger provinces. It seems to me less important that there
be a niche in the hoped-for national regulatory régime for each province to exercise some
local autonomy than that there be a single national system that distinguishes between the
small and the large issuer.
Whatever results from the recent interest in a national securities régime, New
Brunswick needs modern securities legislation that meshes more readily with that of Nova
Scotia and Newfoundland as well as that of the larger provinces. A single Atlantic Canadian
regulator would be an incentive to uniformity and harmonisation in a region where the BNA
Act seems to be the only rational justification for provincial boundaries in securities
regulation. Maybe a single national regulator would provide a similar incentive.
Yours very truly,
EDDY & DOWNS
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