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
ENGLISH