British Columbia is poised to remove exemptions for MIC and syndicate lenders that block implementation of national rules better protecting investors.
In a notice inviting industry comment, the province's securities commission points to three reasons for revoking key exemptions to NI 31-103.
“(a) The impact on capital raising will be negligible,” concludes the commission, “(b) those relying on the exemptions are not complying with its investor protection conditions; and (c) private placement market investors will be better protected if they purchase securities through registrants.”
National Instrument 31-103 officially came into force in 2009, focused on streamlining registration requirements and exemptions for securities dealers and advisors from one end of the country to the next. At the same time the federal instrument imposed new registration requirements for investment fund managers.
Although most of the Instrument applies uniformly to all Canadian jurisdictions, provinces differed in key areas, with some opting to exempt MICs and syndicates as a way of avoiding any duplication of oversight.
B.C.’s commission says it has now studied the effects of the instrument, concluding it poses little threat to arguably the country’s most vibrant MIC community.
MICs in the western-most province were already regulated under B.C.’s Mortgage Brokers Act, and although those rules largely focus on broker obligations to borrowers, they do regulate the sale of certain mortgages to investors.
There was some concern that NI 31-103 regulations around increased capital, bonding, disclosure and compliance could prove too onerous for managers of smaller MICs to handle. That would effectively slow industry growth.
But the benefits of removing the exemptions outweigh any potential harm, according to the B.C. securities commission, which will receive stakeholder comments up until Feb. 4.