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______________________________________________________________________________Stewart McKelveyDoing Business in Atlantic CanadaRegulatory OverviewCHAPTER 8 – SECURITIES LAWEvery province and territory in Canada has its own securities regulatory system, including separatesecurities legislation and governing authorities. As a result, national securities transactions requirecompliance with several regulatory schemes administered by different authorities. In recent years, thesubstantive requirements of these different regulatory schemes have largely been harmonized under asystem of national instruments adopted as rules by the regulatory authorities in most or all of thejurisdictions. The federal government has proposed creating a single national securities regulatorysystem, however, this initiative remains a proposal at this time.Each of the four Atlantic Provinces has its own Securities Act, which while not identical, share manycommon features. Provincial securities legislation creates a “closed system” for the trade of securitiesand regulates both the issuance and distribution of securities by the issuing company, as well assecondary trading by security holders in the respective provinces.The purpose of securities legislation is to protect investors, which is accomplished in two basic ways.First, securities legislation strives to ensure that all investors and security holders have as muchinformation as possible concerning the securities that they are acquiring or selling. This is accomplishedby both initial and continuous disclosure requirements. Second, trades are required to be made throughprofessionals registered under the legislation. This ensures that investors are advised by knowledgeablepersons prior to making an investment.Disclosure of Material InformationCompanies which issue securities to the public (“reporting issuers”) must provide both initial andcontinuous disclosure. The key to initial disclosure is the “prospectus” - a detailed document whichdescribes the company’s business, financial position and securities. Provincial securities legislation alsorequires that continuously updated information on the reporting issuer be made publicly available,including details on any material changes to the business of the company, insider trading information,early warnings for take-overs, and up-to-date financial information. These disclosure requirements aregenerally consistent across the provinces.Listing RequirementsIssuers who wish to list their securities for trading on stock exchanges must satisfy minimum listingrequirements set by the stock exchange relating to their business, management, issued capital,distribution of securities and financial resources. Issuers must sign a listing contract with the stockexchange and agree to comply with the rules of the stock exchange.Listed issuers must notify, and in some cases obtain the consent of, the stock exchange before makingcorporate changes or entering certain transactions, such as (i) changes in capital structure, (ii) materialtransactions such as business combinations, and (iii) issues of shares or options. Listed issuers mustalso make regular filings with the exchanges, pay annual fees and satisfy timely disclosure requirementsin addition to the continuous disclosure requirements under provincial securities laws.Exempt TransactionsThe general rule under securities legislation is that a company may not issue securities unless it files aprospectus and the issue is completed through a registered person. However, it is recognized that not allinvestors require such protection for all kinds of securities, so the legislation and rules adopted under thenational instruments contain a number exemptions from the registration and prospectus requirements.Additional exemptions may be granted at the discretion of the various provincial securities regulatoryauthorities.It is important to note that although one of the advantages of issuing securities under the exemptionsnoted below is that the issuer is not required to issue a prospectus, in some circumstances it is necessaryPage 45