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News and Publications : Regulatory Updates

Alberta Securities Commission Notice and Request for Comment Rule 15-503 Production of Records

January-21-13  
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ALBERTA SECURITIES COMMISSION
NOTICE AND REQUEST FOR COMMENT
RULE 15-503 PRODUCTION OF RECORDS

1. Introduction

The Alberta Securities Commission (Commission or ASC) is pleased to publish and request comment on the following:
  • Proposed Rule 15-503 Production of Records (Rule 15-503 or the Rule)
  • Proposed Companion Policy 15-503CP Production of Records (15-503CP or the Companion Policy).
Rule 15-503 will implement specific requirements for how documents and other records must be produced to Commission staff in the course of investigative activities. The objectives of the Rule include ensuring that electronic records are produced in electronic form (rather than being printed and provided in paper format), providing consistency and clarity for both ASC staff and those who are required to produce records, and ensuring that the process of tracking potential evidence begins with the initial record identification and organization by those who produce records.

ASC staff invite public comment on Rule 15-503 and its Companion Policy. Both substantive and technical comments are helpful, and significantly contribute towards ensuring that we implement a practical, beneficial rule. Comments should be provided in writing (as set out at the end of this Notice), and may be made up to and including 17 March 2012.

2. Background

Rule 15-503 has been developed in response to explosive growth in the use and retention of "electronic” forms of information, coupled with the increasing challenges faced by securities commission investigators around obtaining, identifying and tracking records received in the course of an investigation.

Organizations such as the Sedona Conference have, since the late 1990s, dedicated enormous effort to identifying issues and establishing principles relating to electronic "discovery” and production of records. In the civil litigation context, the Alberta Rules of Court (and the corresponding rules in other jurisdictions) set out rules, practice notes, and recommendations on how parties and their lawyers should deal with procuring and producing electronic and physical records, including how records should be listed and identified. In the securities regulatory context, both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the United States issue multi-page "Data Delivery Standards” documents along with their record production orders or subpoenas, directing recipients in great detail as to how they are to provide the records in question. What these initiatives recognize is, first, that the information in electronic records is not accurately captured by simply printing those records, and second, that the proper management of records produced in investigative and litigation contexts requires standards for identification, description, and processing of such records.

ASC Rule 15-503 is intended to address both of these issues in a manner that is results-oriented, flexible, and pragmatic.

3. Highlights of the Rule

Rule 15-503 is relatively short and intentionally aimed at prescribing desired results, while leaving some flexibility in terms of how those results may be achieved. Its application is limited to circumstances where a formal demand for records is made under s.40 or s.42(1) of the Alberta Securities Act (the Act).

It has five parts: interpretation, general provisions (applicable to the production of all records), provisions applicable to only "physical” records, provisions applicable to only "electronic” records, and exemptions.

Various terms are defined so as to ensure that the Rule is broad and flexible enough to apply to the wide range of records and circumstances that Enforcement staff encounter. For example, "record” is defined broadly, to encompass the "information, documents or records” language used in section 40, as well as the "documents, records, securities, exchange contracts, contracts or things” language found in subsection 42(1). Similarly, we have used the term "respondent” (which is not defined in the Act), instead of "party” or "witness” as used in sections 40 and 42, respectively, to address both categories of potential recipients of an ASC demand to provide records.

Other definitions address the modern reality of electronic information. Terms like "metadata”, "load file”, and "remote electronic custodian” are included so that provisions in the Rule can expressly deal with how electronic information is to be produced.

The Rule includes a basic "legal hold” requirement. Section 93.4 of the Act already sets out a generic prohibition on "destroying” or "withholding” any information, property or thing reasonably required for a hearing, review or investigation, but staff believe that a more specific obligation is appropriate in circumstances where a formal demand for information has been made.

Currently, there is little consistency in how respondents provide staff with records. To address this, the Rule includes a requirement for respondents to deliver records along with a cover letter that clearly lists what has been provided, cross-referenced to the source records and the "custodians” from whom the records were obtained. A declaration by or on behalf of the respondent is also required in the cover letter, with the objective of ensuring that the record-production obligation is taken seriously and fulfilled reasonably and responsibly.

The Rule specifies that in general "true copies” of records are to be produced instead of originals, but that the original records must be retained and available should the need arise.

Because the ASC’s internal handling of "physical” records is different than its handling of "electronic” records, Rule 15-503 imposes different obligations with respect to these different types of records. Records that exist in paper form may be photocopied and produced in paper form, or may be scanned to electronic images and produced as a database of images, identifying reference files, and corresponding "load” files that provide the context and organization present in the original paper records. Basic record or document numbering is expected for records produced in paper format, while more detailed page numbering is expected for records scanned to images.

Wherever possible, respondents are strongly encouraged to produce records electronically, as they are more efficiently and effectively reviewed or searched for relevant information; and they are easier to track, store, disclose (as appropriate), and use for hearing purposes.

Recognizing that there are varying levels of sophistication amongst recipients of production orders, the Rule permits staff to give written authorization to deviate from the prescribed methods of producing paper records. Staff may, for instance, authorize an investor who is a prospective witness in a proceeding to simply initial the copy of the Offering Memorandum or sales brochure he or she provides to staff, without any numbering requirement.

With respect to electronic records, the key requirements of the Rule are aimed at ensuring staff receive "original” or "native format” records, and that staff have access to all of the electronic information associated with the electronic records in question.

4. Proposed Companion Policy 15-503CP

In support of the Rule, and with a view to providing market participants and other respondents with guidance regarding its application, ASC staff also are publishing for comment the Companion Policy. The Companion Policy provides explanatory notes on the purposes behind various provisions in the Rule, includes examples of preferred or acceptable formats for certain steps, and gives guidance for the benefit of those in the position of having to respond to a production order.

Comments

You may provide written comments in paper or electronic form. The comment period expires 17 March 2013.Please send your comments to the following address:

Elaine Balestra
Electronic Evidence Specialist
Alberta Securities Commission
Suite 600, 250-5th Street SW
Calgary, AB, T2P 0R4
Email: elaine.balestra@asc.ca

Source: The Alberta Securities Commission


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