Review of BC Securities Commission Decisions and Orders

Version 1.1.1, March 11, 2011

What is the British Columbia Security Commission (BCSC)?

The British Columbia Securities Commission (BCSC) is the independent provincial government agency responsible for regulating securities trading in British Columbia through the administration of the Securities Act. [About BCSC webpage]

What Is The Scope of The BCSC?

The BCSC is a powerful commission with scope to affect many/most of the Canadian gold and silver mining companies, independent of whether or not they are headquartered or mining in British Columbia. The BCSC reviews a company when the company has some connection with British Columbia.

A question to the BCSC about the number of reviews initiated by the BCSC yielded the following response from Mr. Robert T. Holland, P.Geo, Chief Mining Advisor, Corporate Finance at the British Columbia Securities Commission:

Since 2004 we have reviewed, at least to some degree, the continuous disclosure record of many mining issuers. We do this through our continuous disclosure review and prospectus review programs. The level and detail of these reviews varies substantially based on the circumstances and reasons for our review and what we see on our initial assessment. We do not publish lists of issuers that we have reviewed and we do not certify that such issuers are in compliance even if we do not identify any problems. The large majority of our reviews do not result in any public decision. Where we identify deficiencies in compliance with NI 43-101 or even just misleading disclosure, we have a number of options we can consider. For relatively minor breaches, we may take no action or simply send the issuer a warning for future reference. There is no public record of these reviews. For more significant issues, we may require the issuer to issue a clarifying news release correcting the non-compliant disclosure. While we do not publish a record of these reviews, we generally ask the issuer to state in the clarifying news release that the news release is being issued as a result of our review. We may also put the issuer on our defaulting issuers list, the details of which you can find on our website. For more serious breaches, such as not filing a compliant technical report, we can issue a cease trade order, effectively preventing trading of the securities in BC until the problem is fixed. While compliance related CTO decisions are included in your search, you will also find a separate list of current and previous cease trade orders on our website.

You should not assume that our Decision and Orders list is restricted to compliance related matters, If you read through these, you will see that many of these relate to routine relief applications or exemptions orders that have nothing to do with allegations of misconduct.

I believe the list of Decisions and Orders as presented below reasonably capture the Mr. Hollands guidance. In addition to the list only capturing Decisions and Orders that contain the key word "43-101", I emphasis that the filings in the Routine Business Decisions and Orders subsection are not related to any disclosure misconduct.

What Does This Blog Consider?

This blog looks at the BCSC's BCSC Decisions and Orders filings (select Enforcement and then Decisions & Orders on the home page menu) and attempts to reverse engineer the working policies the commission follows in its review of NI43-101 reports. Specifically, when and for what type of reasons has the BCSC acted in the past.

On March 10, 2011, a query on the keyword "43-101" returned 111 Decisions and Orders that have been issued by the BCSC since 2004. I have broken the search results down into the following classifications and mapped the BCSC Decision and Orders into the best fitting of the following categories (more details for each order are provided in a subsequent sub sections):

Interesting Decisions and Orders: 10.8% of decisions and orders fall in this category.

Routine Business Decisions and Orders (Discretionary): 31.5% of decisioins and orders is this category.
Did Not File Decisions and Orders: 44.1% of decisions and orders is in this category.
Decisions and Orders for Companies Without a Sedar Presence (OTCBB Listed Companies that do NOT file at Sedar): 13.5% of decisions and orders is in this category.

Note: If you search the key word "43-101" using the advanced search option on March 11, 2011, you see 171 results under Decisions & Orders. Of the 171, 60 results are from the year 2003 or earlier and were not included in the above counts.

Interesting Decisions and Orders

Decisions and orders in the category are typically initiated by the BCSC and which deal with some aspect of an NI43-101 report. Specific quotes are included to provide further insight. In my opinion, the following orders fall in this category:

D&O 2010/11/04 Ross Stanfield, Bul River Mineral Corporation and Gallowai Metal Mining Corporation [Variation Order] -- order to disseminate a technical report, that is fully compliant with National Instrument 43-101.
D&O 2009/11/27 Getty Copper Inc. [Cease Trade Order] -- Preliminary Feasibility Study Technical Report of the Getty Copper Project June 9, 2009 (207 pages) was amended as Preliminary Feasibility Study Technical Report of the Getty Copper Project June 9, 2009 as amended May 3, 2010 (217 pages). The June 2009 document presented 321.27 million pounds of copper in the Indicated category (unchanged in the May 2010 document). The June 2009 document presented 64.64 million pounds of copper in the Inferred category (unchanged in the May 2010 document). Similary the Molybdenum Resource was unchanged between the June 2009 and May 2010 documents. However, the Indicated (Inferred) copper grade shown in Summary of Getty Indicated and Inferred Mineral Resources was 0.400% (0.352%) in the the June 2009 version but 0.373% (0.275%) in the May 2010 update.
My conclusion is that the BCSC tested the report's ore grade, ore tonnes and contained metal quantities, spotted inconsistencies and requrested a correction. The consequences for Getty Copper shareholders was however material -- GTC.v didn't trade between November 25, 2009 and June 8, 2010.
D&O 2009/06/24 John Gregory Paterson [Order & Settlement Agreement] -- the agreed facts of the case include the fact that John Gregory Paterson, a professional geologist, and CEO of Southwestern, was responsible for the erroneous and excessive gold grades reported in a Southwestern�s press releases. The order included a stipulation that Paterson be permanently prohibited from acting as a director or officer of any issuer except an issuer of which all the securities are owned beneficially by him or his spouse.
D&O 2007/10/04 Brent Glen Jardine [Order and Settlement Agreement] -- this settlement centered around misrepresentation in a news letter, quoting from the D&O: "Newsletter contained highly promotional statements about Aberdene�s Tuscarora gold property". Mr. Jardine was order to resign from any director or officer positions and is prohibited from engaing in investor relations active for a period of two year. Mr. Jardine also paid a $50,000 fine to the BCSC.
D&O 2007/07/31 Robert Weicker [Settlement Agreement] -- Mr. Weicker a professional geologist issued misleading news releases, including failing to disclose a resource had not been demonstrated to be current under NI 43-101. Mr. Weicker was ordered to pay the commission to $30,000, take courses about mining disclosure for public companies, and barred from certain activities for 1 year.
D&O 2007/08/02 Andean American Mining Corp. [Cease Trade Order] -- commission staff reivewed a technical report and found it was not completed in accordance with National Instrument 43-101 � Standards of Disclosure for Mineral Projects and Form 43-101F1 Technical Report.
D&O 2005/01/13 Stewart Jackson [Settlement Agrmnt] -- issues included improper disclosure of exploration target. The bulk tonnage statements viloated section 2.3(2) of the NI 43-101 because potential quantity and grade of the deposit as ranges, they did not include proximate statements that the potential quantity and grade was conceptual in nature, that there had been insufficient exploration to define a mineral resource on the Project and they did not disclose the basis on which the potential quantity and grade were determined. A company web site was at issue as well. Settelemnts include a 3 year ban from disseminating mining disclosures and a $10,000 fine paged to the commission.
D&O 2004/12/24 Barry Whelan [Settlement Agreement] -- Mr. Whelan was a director of a natural resource company. The ruling included charges of improper disclosure of exploration target (potential quantity and grade should have been disclosed as ranges, failed to state the potential quanntity and grade were conceptual in nature, and the like). Undertakings included restrictions on disseminating mining disclosures for 2 years except under the supervision of a director and paying the commission $5,000.
D&O 2004/11/24 Stewart Jackson, et al. [Amended Notice of Hearing] -- failure to disclose qualified person and improper disclusre of exploration target.
D&O 2004/11/17 Yvonne Cole [Settlement Agrmnt] -- failure to disclose qualified person, improper disclosure of exploration target, misleading statements... It is worth noting that the BCSC had warned the company to stop making misleading statements, they agreed to stop but then continued to make misleading statements. The undertakings included paying a fine of $2,500 and to undertake study concerning the duties and responsibilities of directors and officers of public companies.
D&O 2004/11/10 Canadian Metals Exploration Ltd. [Settlement Agrmnt] -- failure to file, failure to disclose qualified person, improper disclouser of exploration target, misleading statemnts, ignoring warnings about misleading statements... Undertakings included a $20,000 payment to the commission plus restrictions on future activities.
D&O 2004/03/08 Neil Russel Swift [Sec. 161 & Settlement Agrmnt] -- disclosures were not in compliance with National Policy 43-101. Order included a $10,000 payment to the BCSC and a three year restriction on acting as a director or officer of any issuer.

Routine Business Decisions and Orders

Companies may request decisions from the BCSC in the ordinary conduct of business. Typically, companies are requesting exceptions for certain policies. In my opinion, the following orders fall in this category:

Did Not File Decisions and Orders

Failure to file required documents is most common reason for the BCSC to take action. In my opinion, the following orders fall in this category because a company failed to file the required 43-101 compliant technical reports:

Decisions and Orders for Companies Without a Sedar Presence

Companies that have no presents at Sedar are grouped in this category. These companies are of no interest since documents that OTC and other companies might call NI43-101 reports have in my experience shown little resemblence to any of the 1000s NI43-101 compliant documents Canadian mining companies have filed at Sedar. In my opinion, the following orders fall in this category: