ANNUAL REPORT 2008-2009leg-horizon.gnb.ca/e-repository/monographs/... · 21 27 30 38 38 39 41 44 45...

i NEW BRUNSWICK SECURITIES COMMISSION ANNUAL REPORT 2008 2009

ANNUAL REPORT 2008-2009

Published by:New Brunswick Securities Commission85 Charlotte Street, Suite 300Saint John, NB E2L 2J2 Canadawww.nbsc-cvmnb.ca

30 JUNE 2009

NEW BRUNSWICK SECURITIES COMMISSION ANNUAL REPORT 2008 2009 ii

TRANSMITTAL LETTER

MESSAGE FROM THE CHAIR AND CHIEF EXECUTIVE OFFICER

OUR STRATEGIC DIRECTION AND STRATEGIC PRIORITIES

MESSAGE FROM THE EXECUTIVE DIRECTOR

REPORT ON PERFORMANCE - INVESTOR PROTECTION PRIORITY

REPORT ON PERFORMANCE - CAPITAL MARKETS GROWTH PRIORITY

REPORT ON PERFORMANCE - EDUCATION PRIORITY

REPORT ON PERFORMANCE - CORPORATE EXCELLENCE PRIORITY

STATISTICS AT A GLANCE

ORGANIZATIONAL STRUCTURE

ORGANIZATIONAL CHART

CORPORATE GOVERNANCE

COMMISSION MEMBERS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS

MANAGEMENT’S RESPONSIBILITY LETTER

AUDITOR GENERAL LETTER

AUDITED FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

SCHEDULES TO THE FINANCIAL STATEMENTS

GLOSSARY

PUBLICATIONS

T A B L E O F C O N T E N T S

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1 NEW BRUNSWICK SECURITIES COMMISSION ANNUAL REPORT 2008 2009

30 JUNE 2009

The Honourable Michael Murphy, Q.C.Minister of Justice and Consumer AffairsProvince of New Brunswick

Dear Minister Murphy,

I am pleased to submit the New Brunswick Securities Commission’s AnnualReport - our fifth - to the Legislative Assembly of New Brunswick for the fiscalyear 1 April 2008 to 31 March 2009. This annual report outlines the Commission’svision, mandate, values and our report on performance in meeting our strategicpriorities. It also provides our financial statements and pertinent statistics.

Respectfully submitted,

Donne W. SmithChair and Chief Executive Officer

T R A N S M I T T A L L E T T E R

“original signed by”

“ ON BEHALF OF the Members and staff of theNew Brunswick Securities Commission, I am pleasedto present the Commission’s Annual Report for the fiscalyear 2008-2009.

1 July 2009 marks the fifth anniversary of theestablishment of the Commission. We have created atthe Commission an internationally recognized regulatoryagency whose positive influence and credibility isdisproportionate to New Brunswick’s size and population.That we are viewed nationally and internationally as aneffective and uncompromising regulator is mainly dueto the unique vision of our Members and staff.

The Securities Act sets out our mandate whichhas at its core a requirement to balancecompeting interests. Our traditional roleas a regulator is to protect investors – weare, after all, cops on the securities fraudbeat. But we are also required to fosterthe development and integrity of NewBrunswick’s and Canada’s capital

markets. Accordingly, we havebeen and continue to be

advocates for thosemarkets.

However, our success as a regulator will be judged equallyon both fronts.

During our first three years, we laboured aggressively tocreate a strong foundation for success by attracting to theCommission professional staff whose expertise anddedication are second to none. In the last two years as wehave hit our stride, we have more visibly demonstratedthrough both actions and results the importance andvalue to the province’s economic future of a NewBrunswick-based securities regulator. This annual reportdescribes once again this value.

Our primary regulatory focus is New Brunswick’s capitalmarkets and its retail investors. Over the past five yearsthe Commission refined its objectives to emphasize andstrengthen this vision. Through dialogue with ourstakeholders we learned a great deal about what we needto accomplish and how to go about it. We understandour limitations as a regulator in a small market withina small province, but we are also nimble enough torecognize and embrace global partnerships andopportunities.

I am particularly proud of our Fullsail™ capital marketsinitiative, our strong and aggressive enforcement team,and the way that our Members and staff have graspedthe necessity of pursuing a unique communicationsstrategy in order to support the work of the Commission.

There is still, however, much work to be done. Whilewe have demonstrated a real commitment to theeducation of investors and entrepreneurs, we will notachieve self-sufficiency without the systemic adoptionof programs in our educational institutions that promotefinancial literacy and entrepreneurism. Likewise, ourgoals to achieve financial independence through capitalmarkets growth requires much greater dedication toentrepreneur education as well as public policycommitment to supporting our entrepreneurs.

During the past five years we have clearly shown thatsuccess is possible if we and our stakeholders remaincommitted and visionary.

We are living in interesting times! We are currentlyexperiencing a global financial upheaval unknown tomany of us in living memory. Fortunately, the NewBrunswick Securities Commission and its regulatorypartners in Canada’s national system of regulationoperate within a flexible, responsive regulatory regime.

This report demonstrates the strengths of our nationalsystem. I believe Canada will be successful in meetingthe current economic challenges because of those verystrengths. And arguably, Canada has fared much betterthan our neighbours to the south because of this system.

It is vital to stress that our public interest mandatecannot be achieved unless New Brunswickers controlour securities regulatory processes. Without an activepresence New Brunswick is in danger of losing afundamental tool needed to achieve self-sufficiency.

This annual report outlines successes over the last year.It also helps us celebrate five years of demonstratedcommitment to the regulatory principles set out in theSecurities Act. I wish to express my personal thanks tothose of you who created, built and impassioned theNew Brunswick Securities Commission – and to allNew Brunswickers who support us. It has been a truehonour and privilege to lead the Commission duringthese past exciting and rewarding five years.


M E S S A G E F R O M T H E C H A I R A N D C H I E F E X E C U T I V E O F F I C E R

NEW BRUNSWICK SECURITIES COMMISSION ANNUAL REPORT 2008 2009 2

We have created atthe Commissionan internationallyrecognizedregulatory agencywhose positiveinfluence andcredibility isdisproportionateto New Brunswick’ssize andpopulation.”

DONNE SMITH



OUR VISIONDynamic and confident capital markets for New Brunswick.

OUR MANDATEProvide protection to investors from unfair, improper or fraudulentpractices; and

Foster fair, efficient capital markets and confidence in capital markets.

OUR VALUESEXCELLENCE - as a regulatory leader in New Brunswick, we adhereto best practices and high standards;

SERVICE - we provide proactive, efficient, timely and responsive servicesto our stakeholders;

INTEGRITY - we are fair, ethical, transparent and accountable for allour actions; and

COMMITMENT TO OUR PEOPLE - to ensure excellence, we investin our staff by encouraging innovation and developing expertise,leadership and effective teamwork.

O U R S T R A T E G I C D I R E C T I O N

INVESTOR PROTECTIONTo protect capital markets integrity through active compliance andvigorous enforcement measures.

CAPITAL MARKETS GROWTHTo create economic wealth and independence for New Brunswickthrough capital markets development.

EDUCATIONTo be a reputable source for investor and capital markets educationand information.

CORPORATE EXCELLENCETo ensure we have the infrastructure in place to excel as a Crowncorporation and quasi-judicial tribunal.

O U R S T R A T E G I C P R I O R I T I E S

Our core purposeis investorprotection,capital marketsdevelopmentand education.We strive to bethe best at whatwe do.

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Our work over this past year, our fifth year of operation,has focused on implementing initiatives that impact theprovince and its citizens as investors and entrepreneurs.Our core purpose is investor protection, capital marketsdevelopment and education. We strive to be the best atwhat we do.

We have seen increased risk to New Brunswickinvestors from foreign-based fraudsters whobelieve that they operate outside of ourreach. Our response has been to aggressivelyassert our jurisdiction through ourenforcement actions. We had a number ofcases over the past year that required inter-

jurisdictional cooperation andinformation sharing among

regulators around the globe.Our relationships withother regulators providethe vehicle for thismutual cooperationand communication.

However, ourregulatory poweralone is not enough.Education is one ofthe best ways toprotect against the

threat of fraud. Ourpublic awareness efforts

continue to inform andeducate New Brunswickresidents of this threat.We put an increasedemphasis on our Investin Knowing More™

campaign, theABC’s of Fraud®

program and our Fraud Prevention Month initiatives.We also expanded our other education initiatives such asLearning the Ropes, the Financial Fitness Challenge andInvestor Education Month to increase stakeholderawareness of the capital markets and investing in general.

We are determined to stimulate the development of theprovince’s capital markets. Entrepreneurial opportunitiesin New Brunswick are constrained by a lack of supportinginfrastructure and access to capital. Our capital marketsdevelopment plan has taken a broad approach toimplementing solutions to address these issues. OurFullsail™ Summit 2008 was built on Fullsail Summit2007 efforts and we continue to engage with interestedstakeholders implementing a wide variety ofrecommendations.

We work cooperatively with other securities regulators,both nationally and internationally. We are attuned toglobal developments in securities and financial servicesindustry and to technological advances. We developedstrong linkages with key organizations over the past fiveyears and are able to leverage these relationships to helpmeet our strategic and operational priorities. Our activeinvolvement in provincial, national and internationalassociations ensures that we are aware of issues, trendsand initiatives as they develop.

We are diligent in scanning the landscape for matters ofimportance to New Brunswick investors and citizens,such as enforcement, fraud mitigation and a desire tomore fully develop our capital markets. Our operationaland regulatory flexibility, financial sustainability, strategicpartnerships and commitment to the people of NewBrunswick all contribute to our ability to meet ourmandate.

We are mindful that we do not have the size or ability tobe “all things to all people”. Instead, we consciously targetareas of strength where we can show leadership and have

impact. Our progress, as described in the Report onPerformance section, gives an overview of those areas ofstrength.

I would like to acknowledge the hard work and dedicationof our staff. The knowledge and expertise that they bringto bear on the initiatives we undertake are instrumentalto our success. These individuals are identified on ourorganizational chart.

The 30th of June 2009 marks the end of Donne Smith’sfive-year term as our Chair and Chief Executive Officer.Donne has been actively involved in securities regulationin New Brunswick since 1987 and was instrumental inthe drive to overhaul the province’s antiquated regulatoryframework for securities, which dated back to 1935. Asour first Chair, he led the start-up and rapid growth ofthe organization ensuring it could effectively fulfill itsrole of protecting investors and fostering New Brunswick’sfledgling capital markets.

Under Donne’s stewardship, we demonstrated our roleand relevance as a regulatory partner in Canada’s nationalsystem of securities regulation. This has shown that NewBrunswick’s public interest and pursuit of self-sufficiencyare best served by having control over its securitiesregulatory process.

On behalf of staff, I would like to thank Donne for hisdrive and vision for making the New Brunswick SecuritiesCommission what it is today and for setting a strongfoundation for our future.

Kenrick G. HancoxExecutive Director

M E S S A G E F R O M T H E E X E C U T I V E D I R E C T O R

NEW BRUNSWICK SECURITIES COMMISSION ANNUAL REPORT 2008 2009 4RICK HANCOX



REGISTRATIONRegistration is a key component in securities regulation.The registration process involves assessing the character,financial stability and education of the person seekingregistration to determine whether they should be allowedto deal or advise in securities. Determining the suitabilityof those seeking registration is one of the ways weprotect investors from unfair, improper or fraudulentpractices. In 2008-09, there were 23 new dealer andadviser firms registered and 3280 individual applicationsfor registration. 1809 registered individuals resided inNew Brunswick at year end.

R E P O R T O N P E R F O R M A N C E – I N V E S T O R P R O T E C T I O N P R I O R I T Y

COMPLIANCE REVIEWSRegistrants must conduct themselves in an ethical andbusiness-like manner, placing the interests of the investorfirst. The Securities Act and rules set out the frameworkfor registrants’ conduct. Consequently, anotherfundamental element of securities regulation is ensuringcompliance with these rules.

Using a dual approach, a combination of risk-basedand a rotational schedule, helps us determine theappropriate registrants to review each year. For thoseselected, we review their internal operations andstructures. Our reviews may identify importantcompliance deficiencies such as non-compliant tradingpractices and lack of supervision of registrants.Compliance reviews are carried out on registrants’ headoffice and selected branch office locations in NewBrunswick on a rotational basis. Annual reviews were

also conducted on the audited financial statements andbonding/insurance information filed by our NewBrunswick-based registrants.

Conducting issue-specific reviews is also part of ourcompliance regime. We completed two issue-specificreviews on Mutual Fund Dealers Association of Canada(MFDA) member firms to determine compliance inspecific areas of their operations. Additionally, threefollow up reviews were completed on registered dealersoperating under an exemption to verify compliancewith the terms and conditions imposed.

In addition to internal actions, we rely on self-regulatoryorganizations (SROs) to assist in protecting investors.SROs are non-government organizations charged withregulating various sectors of the securities industry. InJune 2008, we recognized the Investment IndustryRegulatory Organization of Canada (IIROC). IIROC

2006- 2007- 2008-2007 2008 2009

Number of individuals 7012 7349 7555

Number of firms 261 282 283

OVERVIEW The Commission’s objective is to protect New Brunswick’s investors and capital markets from those who pose a threat to the integrity of the capital markets.We have a visible compliance regime, rigorous registration requirements and we conduct registration and compliance reviews regularly. Investigations, enforcement actionsand education play a key role in our investor protection efforts.

We pursued a number of compliance and enforcement actions this year resulting in sanctions against individuals and corporate entities. These sanctions included orders ceasingthe trading of securities (also known as cease-trade orders), financial penalties and costs. In May 2008, the Commission was given additional authority to issue disgorgementorders to assist victims recover money lost as a result of violations of securities laws. In November 2008, the Commission issued its first disgorgement order to a New Brunswickresident and firm for $160,000.

During the 2008-09 fiscal year, the Commission held 15 hearings resulting in four cease-trade orders involving nine parties, and five temporary cease-trade orders involving19 parties, as well as five settlement agreements. The Commission ordered $683,000 in penalties and $64,033 in costs. Penalties are paid into a separate Market EnhancementReserve. The Securities Act mandates that these funds be used for initiatives that enhance New Brunswick’s capital markets. The Executive Director also issued a cease-tradeorder and a management cease-trade order for the failure to file financial statements.

New Brunswick residents continue to be exposed to investment fraud, through the telephone and internet, mostly originating from outside of the province. Our Invest inKnowing More awareness campaign is directed toward educating investors about this kind of fraud. A key objective of this campaign is to communicate the seriousness ofinvestment fraud in New Brunswick. For a more complete discussion of the Invest in Knowing More campaign see our Report on Performance – Education section.

To protect capital markets integrity through active compliance and vigorous enforcement measures.

is the new SRO formed by the merger of the InvestmentDealers’ Association and Market Regulation Services Inc.

We continue to work closely with SROs in conductingjoint reviews. We participated in two joint compliancereviews this fiscal year with the MFDA. Of particular notewas Legacy Associates Inc. (Legacy), a New Brunswick-based mutual fund dealer. As a result of a series ofcompliance reviews conducted by staff and the lack ofcompliance with the terms and conditions imposed, Legacywas referred to the enforcement division. A panel of theCommission approved a settlement agreement whichsubjected Legacy to a number of additional conditions toensure compliance.

For the first time, the Commission participated in anMFDA oversight review with other Canadian SecuritiesAdministrator jurisdictions that recognize the MFDA asan SRO. This review of the policies and procedurespertaining to compliance, enforcement, and the MFDAinternal financial regime was conducted in January 2009.Two joint reviews of Investment Counsel PortfolioManagers were conducted with other jurisdictions inCanada as well.

We have a continuous disclosure review program for NewBrunswick-based reporting issuers. The program is designedto assess their continuous disclosure documents, such asfinancial statements, management discussion and analysisand annual information forms, to ensure they complywith Canadian generally accepted accounting principlesand the Securities Act. In 2008-09, we conducted threecontinuous disclosure reviews, which resulted in a requestthat an issuer make certain changes or enhancements inits next filing as a result of deficiencies identified. As aresult of failing to file financial statements, a cease-trade

order was issued against a New Brunswick reportingissuer. A cease-trade order was also issued againstmanagement of this issuer.

ENFORCEMENT ACTIONSWe have extensive powers to investigate alleged breachesof the Securities Act and to issue administrative ordersto protect the public and enforce compliance withregulatory requirements.

We have the authority to impose cease-trade orders,freeze bank accounts, remove or prohibit individualsfrom acting as officers and directors of companies, orderdisgorgement, and seek administrative penalties andcosts, among others.

Enforcement proceedings are adjudicated by a panel ofMembers of the Commission. The following respondentswere the subject of hearings during 2008-09.

BERRIE WHITE CAPITAL CORPORATION ET AL.In August 2008, Matthew White (White), an officer,shareholder and Chief Compliance Officer of BerrieWhite Capital Corporation (BWCC), wrote to twoNew Brunswick registered mutual fund dealers andproposed an arrangement to have an unregisteredindividual sell exempt securities and to pay that personillegal commissions. He subsequently failed to disclosethis correspondence to a Commission investigator. InJanuary 2009, the Commission approved a settlementagreement with BWCC and White. The settlementagreement required White to pay an administrativepenalty of $8,000 and costs of $1,000. It also deniedBWCC and White exemptions under New Brunswicksecurities law for periods of two and four years respectively.

FIRST ALLIANCE MANAGEMENT INC. ET AL.New Brunswick residents were solicited by First AllianceManagement Inc. (First Alliance) by telephone, emailand the internet to buy gold options. Investors wereasked to transfer funds to Panama. First Alliance appearedto be related to another company, which was cease-tradedby the Saskatchewan Financial Services Commission inFebruary 2008. The Commission issued a permanentcease-trade order against First Alliance in November 2008.

FIRST GLOBAL VENTURES S.A. ET AL.First Global Ventures (FGV) was a Panama-based entityoperating through two Ontario-based individuals, AlGrossman and Al Shuman. FGV appeared to be targetingthe investors of another company which was previouslycease-traded in New Brunswick. The Commission issuedpenalties totaling $225,000 and costs in the amount of$23,033 against the respondents in this matter after anumber of hearings held in 2007 and 2008.

GOLDPOINT RESOURCES CORPORATION ET AL.Goldpoint Resources Corporation (Goldpoint) allegedlysolicited New Brunswick residents to invest in a purportedgold mine in West Africa. Goldpoint is alleged to haveused a website largely copied from another entity. Theywere not registered and have not filed any documentationwith the Commission. A temporary cease-trade orderwas issued against Goldpoint in May 2008 and extendedin June 2008. The temporary order remains in placepending a final determination in this matter.



6700

7100

7300

7500

2006 -2007

7700

6900

2007 -2008

2008 -2009

7012

7349

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Number of individualsregistered inNew Brunswick[trading or advising]

Number of firms registeredin New Brunswick

250

270

280

290

2006 -2007

260

2007 -2008

2008 -2009

261

282283


ROBERT LANERobert Lane (Lane) was the president of Wealth PoolsInc. of Orlando, Fla. and the mastermind of a pyramid-type investment scheme, which affected over 70,000people in more than 60 countries. The activity in NewBrunswick started when a New Brunswick residentresponded to an email promoting the scheme. It quicklyspread as a result of its promise of large, lifelong returns.At least 109 New Brunswick residents invested in excessof $440,000 in Wealth Pools Inc. In August 2008, theCommission issued a $160,000 administrative penaltyagainst Lane and permanently banned him from tradingin New Brunswick.

LEGACY ASSOCIATES INC.Legacy Associates Inc. (Legacy), a New Brunswick mutualfund dealer, was subject to several compliance reviewswhich identified numerous areas of regulatory non-compliance. In a settlement agreement approved by theCommission in November 2008, Legacy agreed tocertain terms and conditions aimed at ensuring regulatorycompliance. Legacy agreed to pay an administrativepenalty of $15,000 and costs of $5,000.

LOCATE TECHNOLOGIES INC., TUBTRONCONTROLS CORP., 706166 ALBERTA LTD. ANDLORNE DREVEROver $1 million of Locate Technologies Inc. (Locate)and Tubtron Controls Corp. (Tubtron) shares were soldto New Brunswick residents between 2004 and 2006in direct contravention of an order of the Court ofQueen’s Bench issued in 2004. Investors were asked tomake their cheques for shares payable to a companyother than Locate or Tubtron and the funds were nottransferred to purchase shares. Many investors did notreceive share certificates for their investments.


A settlement agreement with these respondents, approvedby the Commission in August 2008, provided anopportunity for investors to have their moneyrefunded if they chose to do so. As a result, these fourAlberta-based respondents were permanently bannedfrom New Brunswick’s capital markets and ordered topay a total of $225,000 in administrative penaltiesand costs.

HARRY NILES AND BRADLEY CORPORATESERVICES LTD.New Brunswick respondents, Harry Niles (Niles) andBradley Corporate Services (BCS), promoted investmentsin Locate and Tubtron. In a settlement agreementapproved by the Commission in November 2008, theyboth admitted to committing serious, repeated violationsof the Securities Act and an order of the Court of QueensBench instructing them not to trade in Locate or Tubtron.As a result, Niles and BCS were permanently bannedfrom New Brunswick capital markets and ordered topay a total of $60,000 in administrative penalties, $5,000in costs and $160,000 in disgorgement. This agreementresulted in the Commission’s first disgorgement orderbeing issued.

MICHAEL CODY AND DONALD NASONNew Brunswick respondents Michael Cody (Cody) andDonald Nason (Nason) also promoted investments inLocate and Tubtron. Cody and Nason who weretemporarily banned from New Brunswick capital marketssigned an agreed statement of facts in January 2009 inwhich they admitted to violations of the Securities Act inrelation to the Locate and Tubtron investments. Ahearing on sanctions regarding the respondents Codyand Nason was pending at the end of the fiscal year2008-09.

WAYNE MALLETTIn January 2009, the Commission issued a temporaryconsent order barring Wayne Mallett (Mallett) fromrelying on certain exemptions under New Brunswicksecurities law, until otherwise ordered by the Commission.Enforcement staff alleged that, during the course of aninvestigation, Mallett made misrepresentations to staff. A hearing has not yet been held in this matter as staffare continuing their investigation.

SANG PARKDuring 2007, Sang Park (Park) promoted and soldsecurities offered by Walton International Inc. to NewBrunswick residents. He made an insufficient effort toensure that those investing in, or considering investingin, the securities he promoted were qualified as accreditedinvestors. On one occasion he forged a signatureacknowledging receipt of an offering document. TheCommission approved a settlement agreement withPark in August 2008. He agreed to pay $15,000 inadministrative penalties and $3,000 in costs, and wasbanned from trading in New Brunswick for 10 years.

STRATEGIC ENERGY PARTNERS ET AL.In 2008 and again in early 2009 a New Brunswickresident was solicited by a company called StrategicEnergy Partners (SEP). SEP appeared to operate out ofGeneva, Switzerland. SEP was not registered with theCommission and had not filed or sought to file aprospectus. The investigation revealed that SEP’s website,used as a sales tool, provided little information andappeared to a large extent to be copied from the websiteof another company. Staff requests for information fromSEP were unanswered. The Commission issued apermanent cease-trade order against SEP inFebruary 2009.



RECIPROCAL ORDERSReciprocal orders are a means for staff to act quicklywhen another jurisdiction has already taken actionand there is a potential threat to New Brunswickinvestors. In 2008-09, the Commission reciprocatedfour orders issued previously in other Canadianjurisdictions, involving 19 parties. Five orders issuedby the Commission were subsequently reciprocatedby other jurisdictions including British Columbia,Alberta and Manitoba.

AD CAPITAL U.S. INC. AND ADCAPITALINDUSTRIES INC.Adcapital Industries Inc., based in Vancouver, BritishColumbia, and AD Capital U.S. Inc., based in Nevada,solicited individuals by telephone to invest in atechnology, which purportedly reduced automobileemissions. The solicitations were done without aprospectus or proper registration. The Commissionissued a reciprocal cease-trade order following a similarorder issued by the British Columbia SecuritiesCommission in July 2008.

GLOBAL ENERGY GROUP LTD. ET AL.New Brunswick residents were solicited bytelephone to purchase Kentucky oil-well-drillingsecurities promoted by Global Energy GroupLtd. (Global), from what appeared to be a boilerroom operating out of Ontario. TheCommission issued a reciprocal cease-trade orderin August 2008 against Global, following asimilar order issued by the Ontario SecuritiesCommission.

GLOBAL PETROLEUM STRATEGIES LLCGlobal Petroleum Strategies LLC (Global Petroleum)solicited investors in a purported oil technology businessthroughout Canada. Global Petroleum was firstinvestigated by the Alberta Securities Commission whoalerted staff that there were New Brunswick investors.The Commission issued a reciprocal cease-tradeorder in August 2008 following a similar order issuedin Alberta.

MALSBURY INVESTMENTCORPORATION ET AL.Malsbury Investment Corporation (Malsbury) solicitedinvestments for land development in the Fort McMurrayarea, including investments by New Brunswick residents.Malsbury was never registered to trade in securities anddid not file or seek to file a prospectus. In August 2008,the Commission issued a reciprocal order banning thisentity from the New Brunswick capital markets aftera similar order was issued by the Alberta SecuritiesCommission.

Reciprocal ordersare a meansfor staff to actquickly whenanotherjurisdiction hasalready takenaction and thereis a potentialthreat toNew Brunswickinvestors.

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FULLSAIL™ CAPITAL MARKETS INITIATIVEFullsail is the Commission's capital marketsdevelopment initiative. The work done on thispriority is a critical part of our mandate.

A pillar of our work on this initiative continues to bethe Fullsail Summit; a forum where entrepreneurs,capital markets experts and other important stakeholderscan meet to discuss, learn and plan improvements toour province’s capital markets.

Fullsail Summit 2008The 2008 Fullsail Summit, held in April in Saint John,was attended by approximately 120 delegates who,over a period of two days, put forward recommendationsto help develop and advance the province’s capitalmarkets.

The recommendations were to:Motivate institutional investors and large corporationsin Atlantic Canada to develop a policy to invest inthe region’s venture capital markets.

Use the New Brunswick Small Business InvestorTax Credit (SBITC) to mobilize citizen investmentin New Brunswick-based small businesses.

Create K-12 education programs that create andmaintain entrepreneurial spirit.

R E P O R T O N P E R F O R M A N C E – C A P I T A L M A R K E T S G R O W T H P R I O R I T Y

Establish a social networking portal to connectentrepreneurs to financing agencies.

Establish projects that encourage and create greaterregional partnerships.

Improve commercialization out of the universitiesand corporate environment.

Effectively connect budding entrepreneurs withmentors through a mentorship program.

Stimulate sources of venture capital through anenhancement to existing programs (including LabourSponsored Venture Capital).

Re-establish a New Brunswick direct air link to amajor US hub city.

Encourage more start-up Information andCommunications Technology (ICT) companies touse the existing PropelICT technology accelerator.

Create an atmosphere among New Brunswickemployers that encourages labour force innovationand transformation through continuous education.

Progress on the ideas generated at Fullsail 2008 wasdetailed in a six month report released in October 2008and an update on the 2007 and 2008 Fullsail Summitideas and recommendations was released in April 2009.

Fullsail delegates, stakeholders and others demonstrateda commitment to improving the economic wealth ofNew Brunswick. Selected Fullsail Summitrecommendations are detailed below:

NETWORKING PORTAL FOR ENTREPRENEURSThe web portal www.mynexia.com was announced atFullsail 2008 and was formally launchedat the National Research Council’sInnovation Forum in October 2008.The website functions, requested by theentrepreneur community, were activatedfor all users at the launch. The site hascontinued to evolve with a “2.0 version”released in early 2009. The site is gainingvisibility as it expands to meetentrepreneur and service providerdemands. In early 2009, there were sixgovernment departments and non-government organizations promotingmynexia. The site had visitors from17 different countries and allowedNew Brunswickers to make newconnections to help with their business.

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To create economic wealth and independence for New Brunswick through capital markets development.

OVERVIEW The overall objective of our capital markets development initiative is to create economic wealth and independence in New Brunswick. We recognize thatadvancing New Brunswick’s economy by continuing to build the infrastructure of our capital markets requires the concerted effort of many stakeholders. We worked in aleadership role with stakeholders to implement action plans to foster this development. Our combined efforts continue to positively impact New Brunswick’s businessculture.

During this time of uncertainty, initiatives that create easier access to capital, both human and financial, become important success factors for our province’s capital markets.This section outlines a selected list of activities that through shared dedication and passion were carried out over the past year.

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MENTORSHIP PROGRAMAt Fullsail 2008, the Wallace McCain Institute announcedits cohort program and introduced the first 15participants. This program is designed to provide coachingand mentorship for experienced entrepreneurs. Further,21inc, a New Brunswick organization established todevelop tomorrow’s leaders, is on the threshold oflaunching its own mentorship program. This programwill link young leaders with seasoned leaders and providetraining for both on the mentoring process and thebenefits of a mentor relationship.

K-12 EDUCATION PROGRAMSThe Department of Education, in collaboration withWallace McCain Institute (WMI), is supporting the useof the École Régionale-de-Saint-André model forentrepreneurial education on the Anglophone side ofthe province’s education system. This model’s goal is todevelop a culture of independent learning and awarenessof entrepreneurship from an early age. The spirit ofentrepreneurism is well integrated by operating a schoolbusiness which includes all grades and subjects. Forexample, in art the children design and make advertising


posters; in math they learn about quality control bymeasuring the size of the finished product; and throughoutthe business process older students mentor youngerstudents.

Recommended Changes ToNew Brunswick’s Tax SystemIn the spring of 2008, the New Brunswick governmentreleased a Green Paper on the province’s tax system. InAugust 2008, we responded to the call for input withthe Submission Paper to the Select Committee on Tax Review,Response to a Discussion Paper on New Brunswick’s TaxSystem. Our response highlighted feedback from capitalmarkets stakeholders. We recommended that governmentcontinue to offer and increase the availability of certaintax incentives deemed to help the capital markets. Ofnote were the Small Business Investor Tax Credit (SBITC)and tax credits surrounding Labour Sponsored VentureCapital (LSVC) funds.

We took a leadership role in cooperating with the WallaceMcCain Institute and the New Brunswick BusinessCouncil to advise the New Brunswick Department of

Finance to make changes to the SBITC program. Suchprograms are critical to enable growth of early-stagecompanies in provinces with limited capital marketsaccess, such as New Brunswick.

Many of our proposed amendments to the SBITCprogram were incorporated in the March 2009 provincialbudget. The changes included an increase in themaximum investment eligible from $80,000 to$250,000. It is expected that amendments to allow fora larger number of investors to participate in aninvestment project will be explained in more detail inthe summer of 2009.

It was also announced in the 2009 budget that effectiveimmediately the tax credit rate applied to investmentsin LSVC funds would be increased from 15% to 20%and that the maximum investment that qualifies forthe LSVC tax credit be doubled from $5,000 to $10,000.Stimulating sources of venture capital throughenhancement to existing programs, including LSVC,was an action-step proposed at the 2008 Fullsail Summit.

Sidecar Financing ReportFollowing recommendations made during Fullsail 2007and after researching trends and novel approaches toaccessing capital, we commissioned a study in thesummer of 2008 on the global experience with sidecaror co-investment funds. Co-investment funds investalong side angel networks and provide matching fundsin return for an equity stake in a company. Also knownas sidecar funds, they are a readily accepted fundingmechanism for early stage companies. In Canada, theprovinces of Ontario and Alberta have launched theirown government sponsored funds.


Our combinedefforts continue topositively impactNew Brunswick’sbusiness culture.

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The report identified various sidecar financing modelsincluding publicly and privately managed and financedexamples. The report was shared with stakeholders with theintent to generate discussion. Staff continue to promote theidea to gain support for the creation of a New Brunswick-based sidecar or co-investment fund.

MEASURING GROWTHGrowth and progress in New Brunswick’s capital marketsare demonstrated by measuring various segments of theprivate equity markets. These metrics are considered indicatorsfor the state of the public equity market.

40,000

45,000

2002 2003 2004 2005 2006 2007 2008

Prince Edward IslandCanada New Brunswick

Nova ScotiaNewfoundland

35,000

30,000

25,000

20,000

Gross Domestic Product Per Capita(GDP)

Overall indicator of capital market growth –Real Gross Domestic Product (GDP) per capitaGDP per capita is measured in real terms and is considered to be a moreaccurate reflection of the change in overall wealth created fromentrepreneurial activities as well as changes in the capital markets. RealGDP per capita measures personal wealth as opposed to state or provincialwealth. An ideal objective would be to move New Brunswick’s real GDPto the Canadian average in the next ten years.

Last year, New Brunswick had a slight increase in GDP per capita whilethe Canadian average remained virtually unchanged. This is attributedto an increase in economic activity. This could also suggest that workerproductivity in the province increased over the period.

Source: Statistics Canada


Early stage private equity investmentSMALL BUSINESS INVESTOR TAX CREDIT(SBITC)The SBITC is a provincial tax credit program. Measuringthe value of investment through the SBITC providesinformation about job creation and potential futureinvestment through venture capital or public equity, orboth. This program also allows more New Brunswickersto invest in New Brunswick business generating additionalprovincial wealth.

Participation in the SBITC increased by 32% comparedto last year and the number of investors increased by 8%for a total of 290 investors making use of the tax credit.

2008 2007Province Amount Amount

($ million) Rank ($ million) Rank

ON 570 1 950 1QC 349 2 642 2BC 259 3 316 3AL 77 4 47 5NB 26 5 16 8SK 21 6 59 4NS 17 7 18 6MN 4 8 18 7NL 2 9 0 9PEI 0 10 0 10Canada 1,325 2,066

Source: Thomson/Reuters

New Brunswick Small BusinessInvestor Tax Credit

$0

$4,000,000

$8,000,000

$10,000,000

$2,000,000

$6,000,000

0

100

200

250

50

150

300

2003 2004 2005 2006 2007 2008

Value of Investments ($)Number of Investors

Source: New Brunswick Department of Finance

In the spring of 2008 the government of New Brunswickraised the maximum investment limit per investor togain the maximum tax credit to $80,000 from $50,000.The maximum investment limit per investor to gainthe maximum tax credit was again raised from $80,000to $250,000 in March 2009.

ANGEL INVESTMENTThe amount of angel investment and growth of angelinvestment networks serve as an indicator of futureventure capital activity. Angels typically exit theirinvestment when the company receives venture capitalinvestment. Angel investment is an important part ofearly stage growth because it leverages additionalinvestment for entrepreneurs. These metrics indicateawareness about the supply and demand of angel equityinvestment.

The First Angel Network (FAN) is the only knownregional angel network serving the Maritime provinces.There are currently 33 New Brunswick angels in thenetwork. FAN recorded two deals in 2008 with$300,000 invested in two New Brunswick companies,down from $1.1 million invested in two companieslast year. Indications are that the decline is caused bythe growing uncertainty of the economic environment.

We continue to work with entrepreneurs and variousbusiness groups to promote the development of moreangel networks to grow New Brunswick companies.


VENTURE CAPITAL INVESTMENTVenture capital (VC) investment is a natural successorto angel financing. Early stage VC is needed to helpcarry entrepreneurs to their next stage of growth andsecure the equity needed to commercialize theirresearch and development and to pursue marketreadiness and entry.

A lack of sufficient return on investment in an uncertaineconomy may have caused the total VC investmentin Canada to decrease by 36%. However, NewBrunswick was able to counter this trend and witnessedVC investment increasing from $16 million to $26million this year – up 62%. This jump placed NewBrunswick fifth overall in Canada for the total amountof VC invested and made New Brunswick one ofonly three provinces to mark an increase in 2008.However, VC investment continues to be inconsistentand no discernable trends have developed in NewBrunswick.


INVESTOR EDUCATION – PROGRAMS ANDINITIATIVESFollowing the plan outlined in our education strategyand our objective to provide the investors of today andthose of tomorrow with impartial educational resources,we led the following education initiatives in 2008-09:

Invest in Knowing More™ campaignInvestment scams are real and are a serious concern forCanadian investors, including New Brunswickers. Weknow that fraud artists follow the headlines and haveused the economic crisis as an enticement for investorsto experiment outside their usual comfort zone to “getthose losses back quickly at low risk”.

Invest in Knowing More is our public awareness campaignthat has run since 2006. It not only creates awarenessof the seriousness and reality of investment fraud in NewBrunswick but also helps to influence investor behaviourto report suspected investment fraud to us.

WINTER 2008 CAMPAIGNIn April 2008, we commissioned a survey to evaluate thefamiliarity with and impact of our January to March2008 Invest in Knowing More campaign. The survey datashowed that the campaign modestly increased awarenessof the Commission and its role, which was up slightlyover the previous survey results in 2007.

Almost two-thirds of New Brunswickers recalled ouradvertising through their exposure to a television, radioor newspaper advertisement at some point during the

R E P O R T O N P E R F O R M A N C E – E D U C A T I O N P R I O R I T Y

three month campaign. On an unaided basis, 25% ofrespondents recalled genuinely seeing or hearing the message.When provided with a description of the advertising, anadditional 36% of respondents recalled the campaign.Overall awareness (unaided and aided combined) was 61%.For both, the most common source of exposure wastelevision and the most frequently recalled message was awarning about being aware of fraudulent activity.

This data was used when assessing how best to meetobjectives in developing our 2009 Invest in Knowing Moremessage.

WINTER 2009 CAMPAIGNAdvertisements, launched in January 2009, were themedaround the tagline “answering the telephone could costyou your life savings…calling us could save it - the NewBrunswick Securities Commission.” Television commercials,billboards throughout the province, transit shelters inFredericton, internet ads on www.canadaeast.com andwww.capacadie.com, and print advertisements in majorNew Brunswick newspapers were part of the campaign.The television commercial demonstrated the reality thatoften fraud is perpetrated over a series of calls after buildinga level of trust with the fraud victim.

The strong messaging of Invest in Knowing More was alsoused during March Fraud Prevention Month, to reinforceto the investing public that fraud exists, and that we arethe place to call should any suspicious investment relatedactivity take place.

WebsiteOur website www.nbsc-cvmnb.caunderwent a major restructuring andredesign in 2008. The goal of this projectwas to create a site that was welcoming forusers with a more intuitive navigationstructure as well as infuse educational materialand information throughout.

The content in the investor section now focuseson important issues facing investors. As definedin our education strategy, our overall messageInvest in Knowing More includes the followingfive ‘Knows’ that address our investor educationgoals:

º Know where you’re going financially –understanding the basics of investing, goalsetting and risk tolerance;

º Know who you’re dealing with – understandingthe role of registration, choosing an advisorand recognizing fraud;

º Know what you’re investing in – understandingthe importance of researching investmentopportunities and where to find information;

º Know the red flags that could signal a fraud– understanding and recognizing the warningsigns and characteristics of scams; and

º Know where to go for help – understandingthe importance of reporting fraud and the roleof the Commission in preventing fraud andmanaging complaints.

To be a reputable source for investor and capital markets education and information.

OVERVIEW Our education priority is focused on providing access to appropriate and impartial investment and capital markets information and tools. We help NewBrunswickers gain the knowledge, skills and confidence they need to make sound financial decisions for their future and protect themselves from fraud and inappropriateinvestments. Our role also includes providing information to capital markets participants including entrepreneurs, public companies and those involved in supporting activitiesrelated to accessing capital such as lawyers, accountants, securities dealers and advisers.


Financial Fitness Challenge 2009The Financial Fitness Challenge contest ran during themonth of February 2009 through the websitewww.financialfitnesschallenge.ca. This was the third yearof this CSA investor education initiative. The web-basedquiz was developed for a youth audience, and targetedthe 15 to 21 age group. We delivered classroompresentations about the Financial Fitness Challenge toSaint John and Bouctouche high school classrooms.

The strategic objectives of the Financial Fitness Challengewere to capture the interest of Canadian youth, effectivelycommunicate the importance of financial literacy andpromote youth engagement in financial matters. In NewBrunswick, 673 youth successfully completed the challengeand registered for the chance to win a scholarship prizeof $750.

Results of a survey showed that while only 30% ofparticipants were very interested in personal financebefore completing the online challenge, 62% were veryinterested afterward. The survey also showed that morethan 90% of participants indicated that after taking thechallenge they knew more about how to budget, saveand invest, and 95% indicated that they had a heightenedawareness of how to be financially healthy. They alsoreported being more comfortable with the terms anddefinitions related to money and investing.

The CityThe City is a financial life skills program offered throughthe Financial Consumer Agency of Canada’s (FCAC)online portal, www.TheMoneyBelt.ca. It is targeted to high

school students and their families.We partnered with the FCAC todeliver training materials to over100 high school and communitycollege teachers interested inimplementing The City in theirclassrooms. We also promotewww.TheMoneyBelt.ca and The City

on the youth section of our website.

Complaints ResourcesIn an effort to provide investors with easy access toinformation and resources, a brochure was developed toaddress questions about complaints such as ‘How do Iknow if I have a complaint?’ or ‘Can I get my money back?’ This brochure is available in English and French on ourwebsite and in printed format.

Investor Education MonthOctober is Investor Education Month in Canada. Giventhe downturn in the economy, we developed an educationalcampaign focused on sharing tips for investing in volatilemarkets. Print advertisements were placed in the TelegraphJournal and L’Acadie Nouvelle and public serviceannouncements were printed in many weekly papersthroughout the province. Recorded public serviceannouncements were sent to New Brunswick radio stationsand played in both official languages. In addition, an articlewas placed in a Dieppe community college paper and ananimated image highlighting investor tips was posted onour website.

INVESTOR EDUCATION –FRAUD PREVENTIONAs part of our role to protect investors, we look forstrategic alliances to help us deliver fraud preventionmessages.

ABC’s of Fraud®We sponsored New Brunswick’s ABC’s of Fraud®

program through the Saint John Volunteer Centrefor the second year in a row. The program is runby volunteers who deliver fraud awareness educationthroughout the province to various audiences.Through this sponsorship, a coordinator was hiredto develop the program for a Francophone audience.Total participation in the presentations in Englishand in French topped 1832 attendees in 2008-09.


Attendance at ABC’s of Fraud®

Presentations

0Apr 07 -Oct 07

130

375

1369

2207

500

1000

1500

2000

2500

Nov 07 -Mar 08

Apr 08 -Oct 08

Nov 08 -Mar 09

We helpNew Brunswickersgain theknowledge,skills andconfidence theyneed to protectthemselves fromfraud andinappropriateinvestments.

“

”


Fraud Prevention MonthMarch is Fraud Prevention Month in Canada.This year we put together a comprehensivecampaign using our Invest in Knowing Morematerials and messaging. The program includeddirect mail, public service announcements in printand on television and radio, and outreach to UNBSaint John, public libraries and the New BrunswickCommunity College Saint John. The Invest InKnowing More television advertisement was shownin Moncton area movie theatres and the printadvertisement was used as a transit shelter ad andshown in movie theatres in Saint John. Directmail had significant reach with delivery of bilingualpost cards to 71,000 households in Northern NewBrunswick and 33,000 in the Fredericton area.


CAPITAL MARKETS PARTICIPANTS –PROGRAMS AND INITIATIVESLearning the RopesOur capital markets education program, Learning theRopes, focuses on presenting capital raising and equityfinancing options to entrepreneurs and capital marketsstakeholders. It responded to entrepreneur and capitalmarkets participants’ requests at the 2007 Fullsail Summitfor a sustainable approach to educating stakeholders aboutall aspects of capital markets, including capital raisingoptions.

CHART YOUR COURSE TOBUSINESS GROWTHThis two-hour workshop was a part of the Fullsail Summit2008 program. It was attended by approximately 40entrepreneurs, students and Fullsail Summit delegates.The topics presented at the workshop included:

º where to go for financing and at what stageof growth;

º personal experience with financing from anentrepreneur’s point of view;

º angel financing;º expectations of angels; andº what the Commission is doing to help.

GROW YOUR BUSINESS WITHOUTGROWING DEBTFrench language Learning the Ropes events were held inEdmundston and Shippagan in November 2008.56 entrepreneurs, accountants, lawyers and other capitalmarkets participants attended these breakfast sessions.

Department of Finance staff provided an introductionto the SBITC program, which was then followed by apresentation by a local entrepreneur and an accountant,both of whom had significant experience with the program.Commission staff ended the workshop with a presentationabout capital raising exemptions.

EDUCATION OUTREACH INITIATIVESWe worked with a number of educational institutionsand professional organizations to introduce securities-related information to students and professionals. Thelaw schools at both the University of New Brunswickand the Université de Moncton continue to offer asecurities law course. Our General Counsel staff deliveredlectures for the course at the Université de Moncton andour Regulatoy Affairs staff presented to law students atthe University of New Brunswick. General Counsel staffalso participated in a roundtable discussion during theUniversité de Moncton’s orientation week for first yearlaw students discussing securities law as a career option.

We sponsored the “Outstanding Achiever Spirit Award”for the four Junior Achievement banquets held throughoutthe province. Junior Achievement (JA) is an internationalorganization with strong links in New Brunswick. JA’sexperiential programs teach the key concepts of workreadiness, entrepreneurship and financial literacy to youngpeople all over the world.*

*Source: www.ja.org/


We endeavour tofind the balancebetween asupportivebusinessdevelopmentculture and aneffective investorprotectionmandate.

“

”

R E P O R T O N P E R F O R M A N C E – C O R P O R A T E E X C E L L E N C E P R I O R I T Y

REGULATORY COMMUNITIESWe monitor the global regulatory system through ourmemberships with national and international regulatorybodies. The regulation of New Brunswick’s capitalmarkets is seamlessly integrated into the larger Canadianmarket. With global outreach, we continue to best serveand protect the interests of our investors and capitalmarkets participants.

CANADIAN SECURITIES ADMINISTRATORSAs in previous years, we worked closely with CanadianSecurities Administrators (CSA) partners to improvethe existing harmonized national regulatory system,called the Passport System.

This year, we demonstrated that cooperation with otherCSA jurisdictions enhances our work in enforcement.As well as cooperating on joint investigations and sharingintelligence, we used reciprocal orders to protect investorsand the capital markets in New Brunswick from thosewho have been sanctioned in another province.

Our work to bring the small jurisdiction perspective toCSA activities includes being active on over 30 permanentand project committees with particular attention in theareas of regulatory policy, investor education andenforcement. In 2008-09, we became a standing memberof the Policy Coordination Committee, which directsCSA activity. Our Executive Director completed histwo year term as Chair of the Executive Directors’Committee and our General Counsel was appointed asCo-chair of the Legislative and Regulatory CoordinationCommittee.

NORTH AMERICAN SECURITIESADMINISTRATORS ASSOCIATIONContacts made through our membership in the NorthAmerican Securities Administrators Association (NASAA)helped us pursue enforcement actions across Canadianboundaries into the United States. We also contributedto and learned from NASAA investor education initiativesby participating in conferences and learning events. Oneof our Senior Legal Counsels was designated as theCanadian representative on the NASAA CorporateFinance Committee; our Director of Enforcement sitson the Enforcement Committee; and our ExecutiveDirector serves on NASAA’s board GovernanceCommittee.

COUNCIL OF SECURITIES REGULATORS OFTHE AMERICASWe completed our first full year as a member of theCouncil of Securities Regulators of the Americas(COSRA). Our COSRA membership increases ourknowledge of the global perspective and internationalregulatory concerns, issues, trends and initiatives.COSRA exposes us to North, South and CentralAmerican as well as Carribean regulators, expandingour reach and improving access to enforcement andcapital markets information and resources.

COMMUNITY PARTNERSHIPSWe continue to partner with community groups andorganizations to support and execute our capital marketsdevelopment and investor protection mandate. Ourwork in these areas is further detailed in Report onPerformance – Capital Markets Growth and Educationsections.

We undertook efforts to demonstrate our expertise inareas of regulatory cooperation, education and corporategovernance including establishing an articling programfor a law student among the Commission, WorkSafeNew Brunswick, the Energy and Utilities Board andLegal Aid New Brunswick. Additionally, weimplemented a detailed communications andgovernment relations strategy and a communicationscrisis plan to demonstrate our operational and legislativeflexibility in responding to capital markets, regulatoryand enforcement issues.

COMMUNITY ENGAGEMENT ANDPUBLIC OUTREACHWe worked diligently to inform New Brunswickersabout our role, function and relevance through newsreleases, media relations, advertising campaigns,educational events and our Fullsail Summits. Tools suchas our publications, website and annual report as wellas our outreach efforts also help us communicate thismessage.

Of particular note this year, our Chair and Membersmet with key influencers to share our mandate andprovide relevant examples of our work in the province.In 2008-09, we held meetings with a diverse range ofstakeholders and community members, including federaland provincial government officials, policy makers,industry professionals, as well as Boards of Trade andChambers of Commerce members.

To ensure we have the infrastructure in place to excel as a Crown corporation and quasi-judicial tribunal.

OVERVIEW Our corporate excellence objective is to be recognized as a leading-edge organization, supported by expertise and resources that enable us to maintain acost-effective regulatory framework to meet the needs of the capital markets.

As we endeavour to find the balance between a supportive business development culture and an effective investor protection mandate, relationships with our communities,whether they be formal partnerships or networks, are extremely important to the work of the Commission.

The Commission’senforcement actions areproportional to theseverity of the violationand are used to send aclear deterrent message.We have imposed$107,783 in costs andover $1.2 million inadministrativepenalties since 2004.

“

”


S T A T I S T I C S A T A G L A N C E

2008-09 2007-08 2006-07

Enforcement ActivityComplaints received1 41 81 71New investigations 53 35 29Concluded investigations 43 20 22Average length of investigation (in days) 114 88 160Interim cease-trade orders 5 4 13Permanent cease-trade orders 4 4 5Reciprocal cease-trade orders 4 1 -Registrants and other market participants prohibited or limited from participating in market 15 1 2Settlements approved 5 5 2Hearing days (excludes hearings on requests for investigative orders) 20 16 24Costs levied $64,033 $29,000 $5,000Costs recovered $34,000 $3,750 $0Administrative penalties levied $683,000 $401,100 $55,000Administrative penalties recovered $238,000 $51,100 $10,000Disgorgement ordered $160,000 - -Disgorgement recovered $25,090 - -Disgorgement paid out $23,090 - -

(19 parties)(11 parties)

(24 parties)(4 parties)

The method for tracking new complaints has changed. The new measurement is more reflective of the enforcement mandateand represents complaints which were assessed and / or investigated and which were securities related.The complaintsstatistic does not include referrals from other regulators or self-generated matters (which accounts for the difference betweenthis number and the number of new investigations).

1


S T A T I S T I C S A T A G L A N C E

Filing declining due to the Passport regime, effective on 17 March 2008.

Growth is slowing due to firm amalgamation.NOTE :Data for fiscal year end.

1

2

Registration ActivityNew dealer and adviser firms 23 24 34New individual registration applications 3280 3615 3689Applications of registration transfer 314 315 261Applications of registration termination 2059 1795 1728Applications to change previously filed registration information 12760 12110 15328Registered individuals (trading or advising) 7555 7349 7012Registered individuals (trading or advising, New Brunswick residence) 1809 1681 1602Registered firms 2 283 282 261Registered firms (New Brunswick head office) 7 7 7Branches/sub-branches in New Brunswick 2 551 541 496

2008-09 2007-08 2006-07

Corporate Finance ActivityReporting issuers 4287 3937 3568Reporting issuers (New Brunswick-based) 7 7 6Prospectus filings 352 507 532Investment fund prospectus filings 224 225 213Annual information forms 1395 1299 926Exempt distribution reports 291 264 265Rights offering circulars 20 17 11Exemption applications 1 218 442 604Cease-trade order 1 - -Management cease-trade order 1 - -


O R G A N I Z A T I O N A L S T R U C T U R E

THE COMMISSION’S MANDATEOur legislative mandate, as defined in Section 2 of theSecurities Act, is to provide protection to investors fromunfair, improper or fraudulent practices and foster fairand efficient capital markets and confidence in thosemarkets.

We perform the following functions in support of ourmandate:Enforcement – we ensure that those who violate securitieslegislation are held accountable and we protect investorsand capital markets through deterrence measures.

Regulatory compliance – we ensure participants in thesecurities marketplace meet the regulatory requirements.

Rule-making – we establish the rules that governsecurities markets and investment activities.

Education – we provide access to appropriateinformation to help investors know how to makeinformed investment decisions and to help marketparticipants understand how to access and operate inNew Brunswick’s capital markets.

Capital markets development – we foster developmentand growth of the capital markets to encourage capitalinvestments in New Brunswick companies andentrepreneurs, which contribute to the economicwell-being of New Brunswick.

DIVISIONSExecutive ManagementThe Executive Management division consists of theExecutive Director and direct reports. This divisionexercises statutory regulatory authority and otherresponsibilities delegated by the Commission. It providesdirection to staff while ensuring cost-effective servicedelivery, efficient regulatory function, administrativesupport and streamlined management of theorganization. The division also undertakes long-termstrategic planning for the Commission.

Regulatory Affairs DivisionThe Regulatory Affairs division was created in the springof 2008 by bringing together the Corporate Financeand Market Regulation divisions. The principal role ofRegulatory Affairs is to ensure that registrants andreporting issuers adhere to the Securities Act and otherregulatory instruments. The three main functions ofthe division are corporate finance, market regulationand accounting.

Education and Market DevelopmentThe Education and Market Development division focuseson two of our strategic priorities – education and capitalmarkets growth. This includes the implementation ofour educational programs for the general public, investorsand other stakeholders and our capital marketsdevelopment initiatives. Communications is an over-

arching theme connecting these priorities, and ourcommunications and media relations functions are alsoan integral part of this division.

EnforcementThe Enforcement division responds to investorcomplaints and inquiries, investigates and prosecutesviolations of the Securities Act and minimizes fraudulentactivity against the investing public through proactiveand vigorous enforcement of legislation. TheEnforcement division generates and evaluatesinformation it receives on potential violations of theSecurities Act and works with staff from other divisionsto advance public awareness about fraud.

General CounselThe General Counsel division acts as both our legaland policy branch. This team provides advice toMembers and staff on corporate, operational, regulatoryand adjudicative matters and acts as the regulatorypolicy coordination division. The General Counseldivision also leads certain major regulatory policyprojects.

The General Counsel is the Secretary of the Commissionand is responsible for organizing our board meetingsand administrative hearings and ensuring their efficientoperation.

OVERVIEW We are an independent, self-funded Crown corporation listed under Part IV of the Public Service Labour Relations Act. We are responsible for administeringand enforcing the New Brunswick Securities Act and performing the duties assigned to us under the Act. We are a two-tiered body corporate, comprised of a quasi-judicialtribunal of six Members and a second operational tier of permanent specialized staff. Our Members, acting as the board of directors, have the authority to carry out allresponsibilities for the operation of the organization as set out in the legislation.

The Members apply their expertise in the areas of management oversight, policy development and adjudication. The Chair is our Chief Executive Officer, while the ExecutiveDirector is our Chief Administrative Officer. Management is accountable to the organization and also, in the case of the Chair, to the Government and Legislature. TheMembers are accountable to the Government, and by extension through the Legislature, to the public for the proper administration of the Securities Act and the effectivegovernance of the Commission.

To ensure excellence,we invest in our staffby encouraginginnovation anddeveloping expertise,leadership andeffective teamwork.

“

”


O R G A N I Z A T I O N A L C H A R T

Government andLegislature

Donne SmithChair and ChiefExecutive Officer

Members andSupplementary

Members

Rick HancoxExecutive Director

Linda RickardExecutive Assistant

Jackie GomesHuman Resources

Officer

Kevin HoytDirector, Regulatory Affairsand Chief Financial Officer

Andrew NicholsonDirector, Education andMarket Development

Jake van der LaanDirector, Enforcement

Manon LosierGeneral Counsel and

Secretary to the Commission

Susan PowellSenior Legal Counsel

Neil SandlerLegal Counsel

Pierre ThibodeauSenior Securities Analyst

Jeff HarrimanSecurities Analyst

Alex WuSenior

Regulatory Affairs Officer

Wendy MorganRegulatory Affairs Officer

Kelly TurcotteCompliance Officer

Margaret ThompsonAccounting Officer

Nathalie ThibodeauSystems Clerk

Janique VallisAdministrative Support

Wendy Connors-BeckettSenior

Communications Specialist

Michelle RobichaudCommunications Officer

Michael ArbowCapital Markets Specialist

Marissa RignanesiEducation Coordinator

France BouchardAdministrative Support

Mark McElmanLegal Counsel

VacantLegal Counsel

Ed LeBlancSenior Investigator

Gordon FortnerInvestigator

VacantTechnology Specialist

VacantCase Management Officer

Suzanne BallSenior Legal Counsel

Erin TooleLegal Counsel

Jason AlcornPolicy Coordinator

Lise NoëlSenior

Administrative Support

VacantAdministrative Support

Chelsea CusackReceptionist/

Administrative Support

As at 31 March 2009

C O R P O R A T E G O V E R N A N C E

COMMISSION GOVERNANCE PRACTICESRole of Commission MembersAs directors of the Commission, Members are responsiblefor overseeing the management of the business and affairsof the Commission, including approval of the annualstrategic business plan and annual budget. As well, Membersreview resource allocation, risk management, financialreporting policies and the effectiveness of internal controlsand management information systems.

As policy-makers, the Members meet to consider regulatoryinitiatives and determine regulatory priorities, review andapprove rules and policies, and recommend changes tothe Securities Act, particularly in areas that harmonize withother jurisdictions. In this fiscal year, the Commissionrecommended amendments to the Securities Act to promotethe framework for the national Passport System forregistration. The Commission also brought into force alocal rule governing hearing procedures and adopted anumber of national rules and policies.

Members adjudicated 15 enforcement matters andconsidered 32 applications for exemptions from therequirements of the legislation.

Role of Supplementary MembersSupplementary Members serve on adjudicative panelsthat conduct hearings and make decisions as anadministrative tribunal.

Role of the ChairThe Chair, also the Chief Executive Officer, is responsiblefor the administration of the Securities Act and for theoverall performance and management of the organization.

He reports to the provincial legislature through theMinister of Justice and Consumer Affairs, the Ministerresponsible for securities regulation.

The Chair presides over Commission meetings. He actsas the Commission’s chief spokesperson and exercisesleadership by representing the organization to the generalpublic. At a senior level, he also manages relationshipswith national organizations, such as the CanadianSecurities Administrators, and international organizations,such as the Council of Securities Regulators of theAmericas, as well as self-regulatory organizations, advisorycommittees and senior industry organizations.

Composition of the Commission and thenomination processAlthough Members are appointed by Order-in-Council,the Commission plays an active role in recommendingcandidates to the Minister for selection, pursuant to aMemorandum of Understanding with the Departmentof Justice and Consumer Affairs.

An organizational profile, contained in our GovernancePolicy, reflects our need for appropriate skills and expertiseamong our Members, along with a reasonable geographicaland linguistic representation that reflects the diversity ofthe province.

The Human Resources and Governance Committeereviews the organizational profile on a regular basis toassess the strengths of our current Members against theprofile. This allows us to prepare for the expiry of theterms of our Members. In July 2008, two Members anda Supplementary Member were appointed and one

Member was reappointed following an extensivenomination process. The Human Resources andGovernance Committee also commenced the nominationprocess in anticipation of the 30 June 2009 expiry of theterms of one Member and the Chair.

Independence of the Commission as aboard of directorsOur Governance Policy requires that a Member mustnot have a direct or indirect association with theCommission that, in the board’s opinion, couldreasonably interfere with the exercise of his or herindependent judgment. With the exception of theChair, who is also the Chief Executive Officer, allMembers are considered to be independent.

As part of every Commission and committee meeting,the Chair meets in private with the independentMembers. This part of the meeting is followed by anin camera meeting of the independent Members only,chaired by the Lead Member or, in the case of committeemeetings, by the committee chair.

Role of the Lead MemberOur Governance Policy provides that independentMembers must designate one of the Members as theLead Member. The Lead Member is responsible forensuring that Members function independently ofmanagement. Anne La Forest was appointed as LeadMember in September 2008. The details of theresponsibilities of the Lead Member are set out in ourGovernance Policy.

We are committed to the pursuit of the highest standards of corporate governance. Our governance policy allows for practical, effectivemanagement and oversight. The full text of our governance policy is found on our website at www.nbsc-cvmnb.ca.



Donne W. Smith 11 4 6 8 1 7 29 0

Anne La Forest 10 3 4 4 0 11 5 18

Hugh J. Flemming, Q.C. 3 0 2 1 0 3 8 4

David Hashey, Q.C. 3 0 2 1 0 1 0 4

Sheldon Lee 8 4 4 2 1 2 3 12

Kenneth Savage, CA 11 4 6 10 1 11 7 26

Céline Trifts 11 4 0 9 1 12 8 29

Harry H. Williamson, Q.C. 8 4 0 6 1 1 3 24

Supplementary Member

Robert Shannon, CA N/A N/A N/A N/A 1 4 N/A 6

Denise LeBlanc, Q.C. N/A N/A N/A N/A 1 3 N/A 7

James Lockyer, Q.C. N/A N/A N/A N/A 1 0 N/A 2

Member

Commissionmeetings

(11)

Specialmeetingsincludingstrategicplanning,

andeducationsessions

(4)

AuditCommitteemeetings

(6)

HumanResources

andGovernanceCommitteemeetings

(10)

AdjudicativeCommittee

meeting(1)

Enforcementhearings

(24)

Hearings onexemption

requests(32)

Note 1

Note 1

Note 2

Note 2 Note 2

Note 3

Note 1

Note 2

Note 1

Note 3


ATTENDANCE

Note 4 Note 4

Note 5

Note 4

Miscellaneoustravel,

preparation,orientation

We arecommitted to thepursuit of thehighest standardsof corporategovernance. Ourgovernance policyallows forpractical, effectivemanagement andoversight.

“

”

Note 1 Outgoing – The terms of Mr. Flemming and Mr. Hashey expired on 14 July 2008.Note 2 Incoming – The terms of Mr. Lee and Mr. Williamson commenced on 15 July 2008.Note 3 Mr. Smith and Ms. Trifts absented themselves from meetings to avoid a conflict of interest.Note 4 Ms. La Forest became a member of the Audit Committee on 19 August 2008 and ceased to be a member of the Human Resources and Governance Committee on that day.Note 5 The education sessions did not relate to the role performed by the supplementary members.

Note 5

Note 5



COMMITTEESThe Commission has three standing committees : Audit,Human Resources and Governance, and Adjudicative.The terms of reference are in our Governance Policy.Bylaw No 1 - General Business Affairs, establishes theremuneration for the Chair and Members, and outlinescommittee structure and operation. The Audit andHuman Resources and Governance Committees mustmeet a minimum of four times per year while theAdjudicative Committee meets twice a year. Committeemembers are independent. The Chair sits ex officio onthe Audit and Human Resources and GovernanceCommittees and does not vote. The Chair presides aschair of the Adjudicative Committee which consists ofall Members and Supplementary Members.

Committee members are expected to confirm, prior toaccepting their appointment, that they have the time,experience and education to serve on a committee andthat their ability to participate is not compromised byservice on other external boards or committees.

Audit CommitteeThe Audit Committee is responsible for financial reportingand public disclosure, internal controls, audits and riskmanagement.

Members of the Audit Committee are required to befinancially literate, which includes the ability to readand understand a set of financial statements that presenta breadth and level of complexity of accounting issues

that are generally comparable to the issues that mightbe raised by our financial statements. All AuditCommittee members have attested to their financialliteracy.

In addition to the annual review of its mandate, thisyear the Audit Committee approved revisions to severalfinancial policies and a new policy on disgorgement,oversaw a successful audit, reviewed the budget,management’s reports on risks and internal controlsand conducted monthly reviews of our financialstatements and quarterly reviews of the forecasts andof Members’ expenses.

Human Resources and GovernanceCommitteeThe Human Resources and Governance Committeeis responsible for compensation, nomination of seniormanagement, nomination of Members andSupplementary Members, and assessment of theorganizational structure and performance, humanresources policies and procedures, and governance.

The Human Resources and Governance Committeeconducted the annual review of its mandate, the humanresources policies and the Governance Policy. It alsoconducted the annual assessment of the performanceand effectiveness of the Commission, our committees,individual Members and our Chair. The Committeereviewed the staff succession plan and identified theskill sets required for the appointment or reappointmentof the Member and the Chair whose terms are set toexpire in June 2009. The Committee also consideredthe proposal for the addition of an Adjudicative

Committee and considered and approved anorganizational restructure. The Committee also reviewedthe Chair’s statement of priorities.

Adjudicative CommitteeThis year we established an Adjudicative Committeeto review and evaluate our adjudicative procedures andpractices and recommend improvements whereappropriate. The Adjudicative Committee also providesa forum for discussion of hearing processes and recentcase law. All Members and Supplementary Membersare members of this Committee.

The Committee conducted an annual review of thesupport role of the office of the Secretary to theCommission in relation to hearings. It also consideredprocesses related to compensation, disgorgement andreciprocal orders as well as settlement agreements.

MEMBERS’ REMUNERATION ANDEXPENSESBylaw No 1, General Business Affairs provides the salary,retainers and service fees for the Chair, Members, LeadMember, Committee chairs and Supplementary Membersas set out below.

Salary Annual ServiceRetainer Fee

Chair and CEO Up to $175,000 N/A N/A

Members N/A $10,000 $350

Supplementary Members N/A $ 5,000 $350

Note 1 The Lead Member and Committee chairsreceive an additional retainer of $2,000.

Note 1



MembersThe Members’ retainers, service fees and expenses related to travel, meals, hotel, parking and education forthe fiscal year 2008-09 are included below.

Hugh J. Flemming, Q.C. 1 July 2004 14 July 2008 $ 3,457 $ 7,350 $10,807 $ 1,170

David Hashey, Q.C. 1 July 2004 14 July 2008 $ 3,457 $ 3,850 $ 7,307 $ 1,824

Anne La Forest 1 July 2004 14 July 2012 $11,821 $19,250 $31,071 $ 3,229(Lead Member) 15 July 2008

Sheldon Lee 15 July 2008 14 July 2013 $ 7,120 $12,600 $19,720 $ 6,329

Kenneth Savage, CA 16 August 2007 30 June 2010 $11,228 $26,600 $37,828 $10,893(Committee chair)

Céline Trifts 16 August 2007 30 June 2009 $11,228 $25,900 $37,128 $10,176(Committee chair)

Harry Williamson, Q.C. 15 July 2008 14 July 2013 $ 7,120 $16,450 $23,570 $ 7,430

Appointed orreappointed

Term End Retainer ServiceFees

TotalRemuneration

Expenses

Supplementary Member

Denise A. LeBlanc, Q.C. 15 July 2008 14 July 2011 $3,560 $3,850 $7,410 $ 960

James Lockyer, Q.C. 15 November 2007 31 October 2010 $5,000 $1,050 $6,050 $ 424

Robert Shannon, CA 15 November 2007 31 October 2010 $5,000 $3,850 $8,850 $4,264

Appointed orreappointed

Term End Retainer ServiceFees

TotalRemuneration

Expenses

Note 1 The Supplementary Members service fees include payment for participation inorientation or education sessions relevant to the adjudicative functions they perform.

Note 1

Bylaw No 1 -General BusinessAffairs, establishesthe remunerationfor the chair andmembers,and outlinescommitteestructure andoperation.

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Member



CHAIR AND CEOThe Chair received a basic salary of $171,590 plusemployment benefits which include health, dental andlife insurance, pension and supplemental pension,retirement allowance, leave, parking and the use of avehicle. The Chair’s expenses, which include theoperating costs of a vehicle, travel, meals, hotel, parkingand education, were in the amount of $31,731 for theyear.

SENIOR MANAGEMENT REMUNERATIONSenior Management of the Commission consists ofthe Executive Director and four division heads. Theircompensation and benefits are determined by theCommission based on advice from an independentconsultant. In addition to salary, senior managementreceives the same employment benefits received by allCommission employees which include health, dentaland life insurance, pension, leave and parking. Salariesfor senior management in 2008-09 are set out in thetable below.

ORIENTATIONNew Members undergo extensive mandatoryorientation. The orientation program provides Memberswith an overview of the Canadian and New Brunswicksecurities regulatory landscape, our operations, financialaffairs, legal framework, governance practices and ourrole as a quasi-judicial tribunal. Members also receivea detailed binder on our operations and the orientationis provided in half-day modules to provide flexibility.The program provides Members with an opportunityto meet senior management, tour our offices and bebriefed on our operations, human resource and financialpolicies and rule-making authority.

New Supplementary Members are also required toparticipate in an orientation program before participatingin Commission hearings. Since the SupplementaryMembers only participate in Commission hearings, theday-long program is focused on introducing them tohearing enforcement matters and our role as a tribunal,along with the basics of securities law and administrativelaw. Briefings on our legal framework, compliance andenforcement functions are included. A tour of our officesalso gives Supplementary Members an opportunity tomeet senior management and staff.

CONTINUING EDUCATIONThe continuing education program consists of acombination of common training sessions and individualtraining. This year an extensive session on riskmanagement was provided to Members. In addition,five Members attended a national securities conferencewhich provided a forum for discussion of current issuesin securities regulation. One Supplementary Memberattended an investigative and forensic accounting course. As well, Members received presentations from staff onself-regulatory organizations and derivatives.

As part of the Members’ annual self-evaluation andinterview with the Chair, each Member is asked toidentify the skill and knowledge areas they would liketo enhance. Subject areas for recommended traininginclude financial literacy, administrative law, directorcompetency and securities / investment industry.

Name Position Salary

Kenrick Hancox

Kevin Hoyt

Manon Losier

Andrew Nicholson

Jake van der Laan

Executive Director

Director, RegulatoryAffairs and ChiefFinancial Officer

General Counsel andSecretary to theCommission

Director, Education andMarket Development

Director, Enforcement

$136,738

$119,766

$128,849

$108,523

$116,994

Financial Fitness Challenge winnercheque presentation



ASSESSMENT OF THE COMMISSION,COMMITTEES AND MEMBERSIn 2008, Members completed a self-assessmentquestionnaire in addition to a questionnaire on theperformance of the Commission, its committees andMembers. The results of the latter questionnaire weresent in confidence to the Chair of the Human Resourcesand Governance Committee who assembled a reportthat was discussed at an in camera session of theCommittee and then of the Commission. The Chairprepared a report with recommendations for management.

The results of the self-assessment questionnaire were sentin confidence to the Chair of the Commission. He thenmet individually with each of the Members to discussthe individual’s training needs as well as ways of improvingthe Commission’s performance.

CODE OF CONDUCTOur governance policy states that the highest ethical standardsare expected of our Members, Supplementary Members,senior management and staff. We have adopted a code ofconduct for Members which stipulates that Members mustnot act in a manner that might result in the loss of publicconfidence in the integrity of the Commission. The codeincludes provisions designed to minimize the possibility ofbias and conflict of interest. Senior management and staffare also expected to comply with the Employee Code ofConduct and the General Regulation. These codes and theGeneral Regulation ensure a process for disclosing real orpotential conflicts of interest and a system for detecting andmitigating unethical activities by Members, SupplementaryMembers, senior management or staff.

CONFLICT OF INTERESTOur Members and staff are regularly exposed to confidentialinformation. Both are subject to rigorous conflict of interestdisclosures which include the disclosure of securities holdingsalong with the reporting of any changes in holdings as wellas the immediate reporting of conflicts or perceived conflictsthat may influence decisions.

Our governancepolicy states thatthe highestethical standardsare expected ofour Members,SupplementaryMembers, seniormanagementand staff.

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THE NEW BRUNSWICK SECURITIES COMMISSION consists of Members and operational staff. Members act as our board of directors, set policy and act asa tribunal on enforcement and exemption matters. The Chair, a full-time Member, acts as our Chief Executive Officer and is responsible for the overall operation of theorganization. Members are appointed by the Lieutenant-Governor in Council for terms not exceeding five years, and they may be reappointed. Supplementary Membersare appointed by the Lieutenant-Governor in Council for terms not exceeding three years and may also be reappointed.

C O M M I S S I O N M E M B E R S

KENNETH SAVAGE, CA, CFPResidence: Fredericton

Mr. Savage is a Chartered Accountant and a CertifiedFinancial Planner. He was a partner in KPMG and servedon a number of the firm’s internal committees. He wasin public practice for over 40 years before retiring in2005. Mr. Savage is currently Comptroller of a corporationin the construction industry of which he is also a directorand shareholder. He served as Treasurer of the FrederictonChamber of Commerce, and was a member of the boardof directors of Via Rail Canada Inc. where he served asChair of the Audit and Risk Committee and as a memberof the Planning and Finance Committee and theInvestment Committee. He is a member of the NewBrunswick Institute of Chartered Accountants, theCanadian Institute of Chartered Accountants and theFinancial Planners Standards Council.

Appointed: 16 August 2007Term expires: 30 June 2010Committees:• Audit (Chair)• Human Resources and Governance• AdjudicativeProfessional and industry experience:• Financial• Accounting• Auditing• Business Advisory• GovernanceEducation:• CA, New Brunswick Institute of Chartered Accountants• CFP

HARRY H. WILLIAMSON, Q.C., BA, BEd, LLBResidence: Bathurst

Mr. Williamson has practiced law in Bathurst for over30 years and was appointed Queen’s Counsel in 1991.Mr. Williamson is a Past President of the New BrunswickLaw Society, past chairman of the New Brunswick LawFoundation and has served as Chairman of theDisciplinary Committee, and member of the JudicialAppointments Review Committee as well as lecturer atthe Bar Admission Course. He was President of theBathurst Rotary Club, a Director of the UNB AlumniAssociation and the Chairman of the Belledune PortAuthority and currently serves as Chairman of theBathurst Public Trust Funds Inc. and as a director of theBelledune Port Authority.

Appointed: 15 July 2008Term expires: 14 July 2013Committees:• Human Resources and Governance• AdjudicativeProfessional and industry experience:• Commercial law• Administrative law• Tribunal memberEducation:• BA, University of New Brunswick• BEd, University of New Brunswick• LLB, University of New Brunswick

CÉLINE TRIFTS, BSc, MBAResidence: Bass River

Ms. Trifts is a pharmacist and has recently retiredafter more than 30 years in the health caresector. She is a Past President of the NewBrunswick Branch of the Canadian Society ofHospital Pharmacists and was a member of theTask Force on Standards for Hospital PharmacyPractice and the Task Force for MembershipStructure for the Canadian Society of HospitalPharmacists. Ms. Trifts is a former lecturer inthe Pharmacy Technician program at theMemramcook Institute. She is currently aCommissioner and a member of the executiveof the Kent Regional Planning Commission,and a member of the board of directors of theRexton Area Health Care Foundation.

Appointed: 16 August 2007Term expires: 30 June 2009Committees:• Human Resources and Governance (Chair)• AdjudicativeProfessional and industry experience:• Business• Education• ManagementEducation:• BSc (Pharmacy), Dalhousie University• MBA, Université de Moncton• Certificate in Health Services Management, the Canadian Hospital Association

KENNETH SAVAGE | HARRY H. WILLIAMSON | CÉLINE TRIFTS


DONNE W. SMITH, BA, LLBChair and Chief Executive OfficerResidence: St. Andrews

Mr. Smith has over 25 years of experience insecurities law. Previously, he was Administratorand Director of the Securities AdministrationBranch of the Department of Justice underthe Security Frauds Prevention Act. For severalyears, he concurrently held the role of secretaryof the Board of Commissioners of PublicUtilities and Motor Carrier Board. Mr. Smithwas also acting Chair of the Public UtilitiesBoard in 2006. He is a member of the NewBrunswick Law Society, the Canadian BarAssociation and is a former vice-chair of theCanadian Securities Administrators.

Appointed: 1 July 2004Term expires: 30 June 2009Committees:• Human Resources and Governance (ex officio, non-voting)• Audit (ex officio, non-voting)• Adjudicative (Chair)Professional and industry experience:• Securities law• Administrative law• Tribunal memberEducation:• BA, Mount Allison University• LLB, University of New Brunswick

Members areappointed bythe Lieutenant-Governor inCouncil forterms notexceeding fiveyears, and theymay bereappointed.

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ANNE LA FOREST, LLB, LLMResidence: Fredericton

After many years in private practice and as a professor,Ms. La Forest was appointed Dean of the Universityof New Brunswick’s Faculty of Law and remainedDean until 2004. Professor La Forest teaches in theareas of property law, international law, comparativelaw, commercial law, conflict of laws and securitieslaw. In 1995, she received the Dalhousie Law AlumniAssociation and Law Students’ Society TeachingAward. She is a member of the Law Society of NewBrunswick, the Canadian Bar Association and ofthe bars of Nova Scotia and Ontario. She hasextensive experience as an arbitrator, has been amember of the Nova Scotia Human Rights Tribunaland is a Fellow of the Cambridge CommonwealthSociety. She is currently a member of the PatentedMedicines Prices Review Board and the Board ofGovernors of the National Judicial Institute.

Appointed: 1 July 2004Reappointed: 15 July 2008Term expires: 14 July 2012Committees:• Lead Member• Audit• AdjudicativeProfessional and industry experience:• Securities law• Administrative law• Tribunal memberEducation:• LLB, University of New Brunswick• LLM, Cambridge University (Emmanuel College)

C O M M I S S I O N M E M B E R S

SHELDON LEEResidence: Bonny River

Mr. Lee is a retired businessman and served inthe Legislature of New Brunswick for 25 years.He was Minister of Transportation from 1987to 1999 and from 1999 to 2003 served asChairman of the Public Accounts Committee ofthe Legislature. He was also a member of theLegislature’s Standing Committee on theOmbudsman, the Committee to Review Ratesand Policies in the Insurance Industry in NewBrunswick and the Select Committee for NaturalResources and Energy on Crown Lands andWildlife Habitat. Mr. Lee was the recipient in1992 of the 125th Anniversary of theConfederation of Canada Medal and in 2002 ofthe Queen Elizabeth II Golden Jubilee Medal.He has played an active role in his community,where he was a Director of the St. George RotaryClub and the Charlotte County Chamber ofCommerce.

Appointed: 15 July 2008Term expires: 14 July 2013Committees:• Audit• AdjudicativeProfessional and industry experience:• Business• Management

SHELDON LEE | DONNE W. SMITH | ANNE LA FOREST


C O M M I S S I O N M E M B E R S – S U P P L E M E N T A R Y M E M B E R S

ROBERT SHANNON, CAResidence: Douglas

Mr. Shannon is a partner in the accounting firm ofShannon and Buffet. He has practiced for over 35 yearsspecializing in accounting, auditing and taxation, firstwith the Office of the Auditor General and later witha private accounting firm. Mr. Shannon is a formerChair of the New Brunswick Farm Products Commissionand a former member of the New Brunswick Board ofCommissioners of Public Utilities and the Motor CarrierBoard. He is a member of the New Brunswick Instituteof Chartered Accountants and serves on several of itscommittees.

Appointed: 15 November 2007Term expires: 31 October 2010Professional and industry experience:• Accounting• Administrative law• Tribunal memberEducation:• Diploma of Technology in Business Administration, Saint John Institute of Technology• CA, New Brunswick Institute of Chartered Accountants

JAMES E. LOCKYER, Q.C., BA, LLB, LLM, DEAResidence: Moncton

Mr. Lockyer is a law professor and former Dean of Lawat the Faculté de droit of the Université de Moncton.He is a past President of the Law Society of NewBrunswick. He was a member of the Legislative Assemblyof New Brunswick and served as Attorney General andMinister of Justice. He is a member of the Board ofDirectors and Executive of the Moncton Flight College.He is a member of the Law Society of New Brunswickand Canadian Bar Association. Professor Lockyer wasrecipient of the American College of Trial Lawyers “Awardof Merit” for his work with students in the field of trialand appellate advocacy.

Appointed: 15 November 2007Term expires: 31 October 2010Professional and industry experience:• Administrative law• Tribunal memberEducation:• BA, Mount Allison University• LLB, University of New Brunswick• LLM, London School of Economics and Political Science• DEA, Université de Paris 1 (Panthéon Sorbonne)

DENISE A. LEBLANC, Q.C., MPA, LLB, BPEResidence: Moncton

Ms. LeBlanc has been practicing law for over 20 yearsand is a partner in the law firm of McInnes Cooper,focusing on the areas of asset recovery, insolvency andcorporate and business law. She is a member of theLaw Society of New Brunswick and the Canadian BarAssociation. Ms. LeBlanc was an arbitrator/adjudicatorin the New Brunswick Small Claims Court, as well asa lecturer at the Bar Admission Course and the Facultéde droit of the Université de Moncton. She sits on theboards of several community organizations.

Appointed: 15 July 2008Term expires: 14 July 2011Professional and industry experience:• Commercial law• Commercial litigation• Administrative law• AdjudicatorEducation:• MPA, Université de Moncton• LLB, Université de Moncton• BPE, Université de Moncton


RevenuesOur revenues consist of:

º filing, registration and application fees paid bysecurities market participants;

º amounts collected from administrative penalties,disgorgement orders and settlements for breachesof the Securities Act, as well as associated cost recoveries;and

º investment income and miscellaneous charges.

We obtain revenues primarily from reporting issuersand registrants.

There were no changes to the fee schedule this year.Revenue increases from market participants during theyear are a result of market activity and growth in thenumber of registrations. Almost all of our operationalfunding comes from fees paid by market participants.These fees amounted to approximately 96.4% of totalrevenue in the year (97.6% in the prior period) andrelate primarily to capital raising activities and securities


The following discussion and analysis provides asummary review of the operating results of the NewBrunswick Securities Commission for the year ended31 March 2009. This review should be read inconjunction with the financial statements andaccompanying notes.

Readers should note that some assumptions, althoughreasonable at the date of publication, are not guaranteesof future performance.

OVERVIEWThe Commission is a corporation without share capital.It was established through the Securities Act of NewBrunswick and began operations on 1 July 2004. TheCommission functions as an independent regulatoryagency and administrative tribunal, responsible foroverseeing the securities industry in New Brunswick.As a provincial Crown corporation, we are exempt fromincome taxes. Our operations are funded through feespaid by securities market participants.

We maintain accounting and internal control systemsto provide reasonable assurance that our financialinformation is complete, reliable and accurate, and thatour assets are adequately protected. The CommissionMembers, in conjunction with the Audit Committee,have an oversight role regarding the integrity of thereported information. We budget to generate a surpluswith a planned distribution of surplus operating fundsto the Government of New Brunswick. The surplusgenerated in the fiscal period 2008-09 exceeded thebudgeted amount.

For the fiscal year ended 31 March 2009 | Dated 1 May 2009

Revenue 10,774,950 11,244,220 10,818,368

Expenses 5,172,400 5,095,168 4,371,032

Excess of revenue over expenses 5,602,550 6,149,052 6,447,336

Total assets 4,169,417 3,129,117

Total liabilities 2,202,661 741,031

Total funds’ balance 1,966,756 2,388,086

Distributions to government 6,570,382 6,261,278

Budget2008-09

$

Actual2008-09

$

Actual2007-08

$

trading in New Brunswick. There are several groupsthat contribute significantly to our revenue. Feespaid by mutual funds to distribute their securitiesin New Brunswick were about $5.9 million or 52.6%of revenue, up from $5.5 million in the prior period.In addition, fees paid by the six largest Canadianbank-owned investment firms for the registrationrenewal of their representatives and firms were about$1.27 million or 11.3% of revenue, basicallyunchanged from $1.22 million in the prior period.

THE MUTUAL FUND INDUSTRYOf the 4,287 reporting issuers in New Brunswick,approximately 2,797 or 65% of them are mutualfund issuers. Revenues generated by the mutual fundindustry in the year included approximately:$5.38 million from prospectus filings; $476,500from annual financial statements and annualinformation forms; and $905,200 from MFDAmembers’ registration fees. These fees totaled $6.8million or 61% of total fee revenues.

The Commissionfunctions as anindependentregulatory agencyand administrativetribunal,responsible foroverseeing thesecuritiesindustry inNew Brunswick.

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FEE REVENUE SENSITIVITYOur fee revenues fluctuate with market activity. We aremost dependent on fees paid by mutual funds todistribute securities. Mutual fund prospectus filingsincreased by 13% over the last fiscal year, from $4.77million in 2007-08 to $5.38 million in 2008-09. Weexpect this revenue stream to remain stable during thenext fiscal year, as active mutual funds are required tofile a prospectus annually in order to continue distributionof their securities. We also rely heavily on fees paid bythe six largest Canadian bank-owned investment firmsto register their representatives and firms with us.Registration fees rose from $1.22 million in 2007-08to $1.27 million in 2008-09, representing an increaseof 3.4%.

Securities distribution fees for 2008-09 are showing anapproximate 10.1% increase from 2007-08. This islargely due to an increase in the number of mutualfund prospectus filings and additional classes of securitiesoffered by these funds. Our fee schedule commands anadditional fee when mutual funds offer more than oneclass of security with their prospectus filing. Registrationfees for 2008-09 are showing a 1.6% increase from2007-08. This is primarily attributable to acommensurate growth in the number of registrants. Itis now easier for them to register in multiple jurisdictionsunder the National Registration System.

Financial filings for 2008-09 are showing a decreaseof 4.0% from the prior year. Much of this decrease isattributable to decreased filings for material changereports, take over bid and a change in year end forseveral families of mutual funds. Revenue fromexemptions and other orders for 2008-09 isshowing a 74% decrease from the prior year.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTSFor the fiscal year ended 31 March 2009 | Dated 1 May 2009

ANALYSIS OF TOTAL REVENUE

Distribution fees

Registration fees

Financial filing fees

Exemptions and otherorders

Other fees

Total fees

Administrative penalties

Disgorged funds

Enforcement costrecoveries

Investment income

Miscellaneous income

Total revenue

Paid by securities issuers whenfiling distribution documents

Paid by individuals and firmsto register with the Commissionto sell or advise on securities

Paid by public companies andtrusts when filing annualfinancial statements and annualinformation forms

Paid by market participantsprimarily to request exemptionsfrom Securities Act requirements

Paid by market participants forlate filing and othermiscellaneous fees

Paid pursuant to a hearing panelruling



Earned on cash balances

Primarily conference fees

5,878,175 52.3 5,338,950

3,035,500 27.0 2,987,800

1,806,625 16.1 1,881,125

74,700 0.7 289,450

40,044 0.3 68,990

10,835,044 96.4 10,566,315

238,000 2.1 51,100

25,090 0.2 -

34,000 0.3 3,750

84,846 0.8 146,320

27,240 0.2 50,883

11,244,220 100.0 10,818,368

Category Description 2008-09 2008-09 2007-08Amount % of Amount

$ Revenue $Total


make periodic and orderly distributions to theGovernment of New Brunswick. Consequently,investment returns are generated from the bank balanceat prime less 2% as part of our banking agreement.

Miscellaneous revenue relates primarily to delegaterevenue for Fullsail Summit 2008, the capital marketdevelopment conference that was held during 6 – 8April 2008.

OPERATING EXPENSESWe take our responsibility to manage our expenses overthe fiscal year seriously. We do this by:

º preparing an annual budget and strategic planthat is approved by the Commission Members;

º translating the annual budget into monthlybudgets;

º reporting actual versus budget amounts tomanagement every month;


On 17 March 2009, Multilateral Instrument 11-102Passport System was implemented nationally, except inOntario. Under the Passport System, an issuer needonly file an application with its principal regulator (andOntario) instead of filing in all jurisdictions where it isseeking relief. This has resulted in a very large decreasein the number of filings from the previous year. It isprobable that the amount received in 2008-09approximates the amount that will be received each yeargoing forward.

Receipts from administrative penalties are for the benefitof the Market Enhancement Reserve. As required bythe Securities Act, these funds are to be spent only onendeavours or activities that enhance the capital marketsin New Brunswick. Enforcement revenues, comprisedof receipts of administrative penalties, disgorgementorders and administrative cost recoveries, areunpredictable. These revenues depend on the timing ofenforcement actions completed during the year and onour ability to collect the assessed amounts. This sourceof revenue was up significantly during the year from$54,850 in 2007-08 to $297,090 in 2008-09. Severalorders for administrative penalties, disgorgements orhearing costs were issued during the year (total of$609,943); they have not been recognized as revenueas there is a reasonable probability that the total amountwill be uncollectible. Receipts designated as cost recoveriesare recognized as operating revenue.

We do not budget an amount for enforcement revenueso as to avoid the appearance of impropriety. Duringthe 2008-09 year, there was $57,030 in disbursementsfrom the Market Enhancement Reserve. In general, ourportfolio generates modest returns. We do not makespeculative investments with our surplus funds and we


º providing a budget variance analysis each monthto the Audit Committee or at each Commissionmeeting (a written report is sent to CommissionMembers on those months where no meeting isheld);

º preparing quarterly financial forecasts formanagement and the Commission Members;

º requiring Commission Member approval ofsignificant expenses or contracts; and

º continually improving our processes.

Our total expenses during the year were $5,095,168,compared to a budget of $5,172,400, a positive differenceof $77,232. This result was achieved despite a distortionthat arises from our budgeting process. The Commissiondoes not budget for enforcement revenue so as to avoid

Revenue Analysis

Distribution of securities

Registrations

Financial filings

Exemption orders and others

Administrativepenalties, investment incomeand miscellaneous

52%

27%

16%

1% 4%

Salaries and benefits 3,248,947 3,479,200 63.7 65.9

Administrative* 935,880 917,900 18.3 18.4

Market enhancement 57,030 44,500 1.1 0.6

Disgorged funds 25,090 - 0.5 -

Professional services 216,959 116,500 4.3 2.6

Travel 190,082 170,700 3.7 3.5

CSA initiatives 50,164 80,000 1.0 1.2

Premises 260,488 268,700 5.1 5.5

Amortization 110,528 94,900 2.3 2.3

Total 5,095,168 5,172,400 100.0 100.0

* See Schedule 1 of the financial statements

Expenses$

BudgetedExpenses

$

% ofTotal

Expenses

% of TotalExpensesPrior Year

Expense Category


negative perceptions. Consequently, we also do notbudget for expenses that may result from enforcementrevenue that is received. For instance, the MarketEnhancement Reserve may fund initiatives that supportthe capital markets in New Brunswick with administrativepenalty revenue. During the year, an additional $37,620of expenses was incurred based upon unbudgetedenforcement revenues. The most significant was a returnof $25,090 to New Brunswick investors as a result ofan enforcement action.

The largest expense item, totaling $3,248,947 or 63.8%of total expenses, was salaries and benefits. As a percentageof total expense, this ratio is lower than the 65.9% forthe prior year. We had 31 staff on payroll at year end,compared to the 32 that were on payroll one year before.On an annualized or “person-year” payroll basis, wehad 33.0 person-years of employment in 2008-09 versus29.0 in 2007-08. A 2.5% cost of living adjustment wasapplied to the salary grid at the start of the fiscal period.We do not administer a performance-based incentiveprogram.

Administration expenses were our second largest categoryat $935,880 or 18.3% of total expenses, the percentageof which is marginally less than was incurred in theprior year. These expenses pertain to informationtechnology, training, communication, printing,advertising, other general office expense items as wellas expenses for the Fullsail conference. The Invest inKnowing More campaign was the largest expense forthis category at $232,775. These costs included thedevelopment and placement of television, radio, internet,print and billboard and bus shelter advertisements.Fullsail conference expenses incurred in the fiscal yearwere about $180,000 while sponsorships, such as for


period. With a higher staff complement, the aggregatetravel cost increase year over year was $37,355 or24.5%. Travel was primarily related to attendance atpolicy and other regulatory meetings of partners ofthe Canadian Securities Administrators (CSA) andfor training purposes.

Expenses for CSA initiatives were slightly lower at$50,164 or 1.0% of total expenses, compared to$51,357 incurred in 2007-08. These initiatives supportCanada’s national system of securities regulationthrough a cooperative approach with our provincialand territorial regulatory partners. CSA projects arecoordinated through a permanent secretariat locatedin Montréal and operating costs are apportioned toCSA members based on a formula correlated topopulation. We pay about 2.2% of the total costs asour share.

Premise costs increased to $260,488. This represents5.1% of total expenses, down slightly from 5.5% theprevious year. The increase in premise costs ($19,398)was primarily attributable to additional lease spacethat was acquired in the year. Our office lease expiresin February 2016. Amortization expenses increasedfrom $102,820 to $110,528 year over year. Our largestdepreciable asset involves our leasehold improvements,which are being amortized over ten years for theoriginal space and about eight years for the additionalspace acquired in the year. This accounts for about35% ($39,052) of the total expense. Furniture,information technology hardware, informationtechnology software and vehicle assets follow indescending order to make up the remainder of theamortization expense.

Junior Achievement and Breakthru totaled $40,000.Information technology costs were $118,508 duringthe period, and were used for network support, datasecurity and back-up, website costs and software licenses.

This is the third year that we have transferred fundsfrom the Market Enhancement Reserve towardseligible expenses that enhance the capital markets inNew Brunswick. A contract was signed with theSaint John Volunteer Centre to provide presentationsin both official languages for the ABC’s of Fraud®

campaign throughout the province. A total of $57,030was provided during the fiscal year. This campaign isexpected to run for three years in total.

Disgorged funds correspond to a new expense categoryfor the Commission and represent money that we havereceived from market participants arising from anenforcement action. This money may be turned overto specific investors that were financially harmed bythose market participants. In this case, $25,090 wasexpensed to be provided to eight investors.

Professional services expenses increased significantlyyear over year, rising from $114,105 to $216,959. Arecords management study was the largest expense itemfor this category ($63,493), followed by translationcosts ($45,995). Other significant initiatives that haddirect professional services expenses during the yearwere for the Commission’s comments to theGovernment’s proposal for tax reform, communicationsconsultants, media monitoring, strategic planning anda report on co-investment funds.

Travel costs were $190,082 or 3.7% of total expenses,a slight increase over the 3.5% incurred in the prior


during the fiscal year. Of that amount, $6,570,382 wasdistributed to the Government of New Brunswick. Thecombined cash balance at year end was $3,602,009. Thisincludes amounts from the Commission’s two reserves.

We maintain a Fee Stabilization Reserve. The maximumvalue of the reserve was increased by $500,000 to$1,500,000 during the fiscal period. The Fee StabilizationReserve allows us to maintain an operating contingencyto absorb revenue shortfalls or unexpected expenditures.We take revenue generated from the reserve into generaloperations. The reserve was fully-funded at year end.

RISKS AND UNCERTAINTIESOperational and infrastructure riskWe are exposed to many types of operational risks,including the risk of fraud by employees or others,unauthorized transactions by employees and operationalor human error. We also face the risk that computer ortelecommunications systems could fail, despite our effortsto maintain these systems in good working order.Shortcomings or failures of our internal processes,employees or systems, including any of our financial,accounting or other data processing systems, could leadto financial loss and damage to our reputation. Ourability to conduct business may be adversely affected bya disruption in the infrastructure that supports ouroperations and the communities in which we do business.

We have policies and processes in place to manage andcontrol these risks. Key components include:

º Commission Members operating as a Board ofDirectors who place a priority on sound corporategovernance;

º an active and effective Audit Committee;


Market Enhancement ReserveThe Market Enhancement Reserve represents externally-restricted equity as its funding and purpose is definedby the Securities Act. The funds are to be used forendeavours or activities that enhance the capital marketsin New Brunswick. The funds associated with thereserve are maintained in a separate bank account andgenerate their own bank interest. In 2008-09,administrative penalties totaling $238,000 were assessedand determined to be collectible, while the prior periodcollectible assessments totaled $51,100. A further $445,000in administrative penalties was assessed in the year, butis not reflected on the financial statements as there is areasonable probability that the amount will be uncollectible.

DISPOSITION OF SURPLUSOPERATING FUNDSWe made total payments of $6,570,382 to theGovernment of New Brunswick during the year. Thepayment amount is calculated annually and is includedin our strategic business plan. The total contributionincluded a budgeted amount of $5,250,000 as well asan additional $1,320,382. The $1,320,382 representsthe balance of the general surplus as at 31 March 2008.The contribution is payable each year providing thatdoing so does not impair our ability to pay our liabilities,meet our obligations as they become due or fulfill ourcontractual commitments. Since we were established inJuly 2004, we have made contributions of $28,146,255to the Government of New Brunswick.

LIQUIDITY AND FINANCIAL POSITIONWe have sufficient liquidity to finance our operationsand capital purchases. The net increase in cash prior tothe disposition of surplus operating funds was $7,510,892


º an annual review of internal controls and legislativecompliance;

º an annual review of risks facing the Commission;º the adoption of a Risk Management Policy; andº the effective communication of policies to staff and

new Members on matters such as Conflict of Interestand Code of Conduct with various channels forreporting concerns.

Reputation riskWe actively manage our reputation risk through ourcorporate governance practices, code of conduct and riskmanagement framework. The activities of ourcommunications staff and our General Counsel’s officeare key participants in managing our reputation risk.

People riskAs a knowledge-based entity, our ability to attract andretain people is critical to our success. We track a rangeof measures (e.g., turnover and compensation surveys)to manage this risk. Knowledge management is a keyfocus and we continue to pursue initiatives to improveour ability to retain corporate memory and to ensureeffective knowledge transfer.

SECURITIES REGULATORY REFORMHarmonization of securities laws and thePassport SystemWe continue to support the Government of NewBrunswick’s work to implement securities regulatoryreforms outlined in the Provincial/TerritorialMemorandum of Understanding Regarding SecuritiesRegulation (MOU), signed on 30 September 2004 byall (except Ontario) of Canada’s provincial ministersresponsible for securities regulation. The MOU proposeda single window of access to capital markets in participating

Expense Analysis

Salaries and benefits

Administration

Market Enhancement

Disgorged funds

Professional services

1%

65%

18%

0%4%

4%

Travel

1%

CSA initiatives

5%

Premises

Amortization

2%


jurisdictions and a review of regulatory fees. A keyfoundation to the MOU’s success is a set of nationallyharmonized regulatory requirements, consistentlyinterpreted and applied throughout Canada. We havecoordinated our work with the other Canadian securitiesregulators to adopt harmonized legislation.

A significant set of legislative amendments receivedRoyal Assent on 30 May 2007. Since that time, specificsections have been proclaimed in conjunction withsimilar initiatives across the country. We have alsoadopted rules that support the MOU. Effective19 September 2005, Multilateral Instrument 11-101Principal Regulator System was approved in NewBrunswick. This first phase materially affected ourresponsibilities as we became recognized as a principaljurisdiction under this instrument. This significantlyincreased our national role and responsibility for securitiesregulation.

The second phase was implemented with the adoptionof Multilateral Instrument 11-102 Passport System on17 March 2008 by all provincial and territorial Canadianjurisdictions, except Ontario. This instrument furtherenhanced the Principal Regulator System by enablingmarket participants to access the capital markets inmultiple jurisdictions by filing prospectuses, to filecontinuous disclosure and exemptive relief applicationswith their principal regulator and to adhere to therequirements of one set of harmonized securities laws.

There is still significant ongoing effort associated withthe MOU’s implementation. We continue to work onPhase 3 of the Passport System. This will enable firmsand persons who wish to advise or trade in securities toaccess clients in multiple jurisdictions by obtaining


in order to harmonize fees. A new fee schedule istentatively planned for 1 April 2010. This will result inchanges to our fee rule as we attempt to simplify ourfee schedule.

NATIONAL ELECTRONIC FILING SYSTEMSUnder various agreements with the CSA, CDS Inc.(CDS) operates the following electronic systems:

º System for Electronic Document Analysis andRetrieval (SEDAR), an electronic system forsecurities market participants to file regulatorydocuments and pay fees;

º National Registration Database (NRD), anelectronic system for registrants to register and payfees; and

º System for Electronic Disclosure by Insiders (SEDI),an internet-based system for insiders to report theirtrades.

About 95% of our fee revenue is collected throughSEDAR and NRD. Should CDS become unable orunwilling to continue to operate these systems, the CSAwould have to contract with another party. Thisrepresents a revenue and regulatory risk as the systemsfacilitate effective and efficient regulatory processes.However, the CSA has a robust governance andmanagement structure to manage this risk.

RISK-BASED COMPLIANCEIn delivering on our mandate, we take a risk-basedapproach for many of our disclosure review andcompliance activities. Our Regulatory Affairs divisioncontinues to enhance its risk-based screening proceduresso that its review population receives meaningfulassessment each year.

approval from their principal regulator. Legislativeamendments designed to harmonize and to support theadoption of Phase 3 received Royal Assent on 30 April2008. It is expected that this phase of the PassportSystem will be implemented in the fall of 2009 whenseveral rules are expected to come into force. At thepresent time, we have the requisite human resources tomanage this initiative.

The single regulator approach to securitiesregulationThere is continued effort underway by some entities tocreate a single, centralized federal securities regulator.Stated support for this initiative comes from theGovernment of Canada and the Government of Ontario.The disposition of this initiative is indeterminate at thistime, and its formation poses risk to the Commission.

FEE REVENUEMarket conditionsWe fund operations primarily from filing fees paid bymarket participants. Fee revenue is generally not thatsensitive to market conditions, although there have beensome market effects with the recent economic decline.

Passport SystemPhases 1 and 2 of the Passport System have not materiallyaffected our operations to date, although it may ultimatelychange what we do and how we fund our operations.The most significant revenue impact to date has beenexemptive relief applications, which have been reducedby about $200,000 per year. The proposed changes tothe registration system as a result of the Passport initiativeand harmonization efforts are also expected to havesome negative impact on registration revenue. TheCommission is also cooperating with other jurisdictions


Employee liabilitiesOur employees accrue vacation and other leaveentitlements based on their years of service. We haveestimated the value of employee leaves not yet takenbased on our employee records and attributed benefitcosts to those leaves based on our experience. The actualvalue of employee leaves taken will vary depending ontheir particular circumstances.

The most significant employee liability pertains to ourretirement allowance benefit. This benefit is calculatedfor those employees with five or more years of service.It is only payable if an employee retires at the time heor she concludes employment with us. It is difficult,therefore, to estimate this liability with precision. Weapply a discount factor of 3% for each year that theeligible employee is below the minimum retirementage of 55. Another area of significant estimate lies withthe accrual for an enhanced pension benefit for ourChief Executive Officer (CEO). This benefit will bepaid to the CEO during retirement. We rely upon theexpertise of the Office of Human Resources for theGovernment of New Brunswick to determine thisamount.

CHANGES IN ACCOUNTING POLICIESManagement is responsible for selecting the significantaccounting policies and preparing the financial statements,including the accompanying notes, in accordance withCanadian generally accepted accounting principles(GAAP). The significant accounting policies and theirapplications have not changed. There were no newaccounting or reporting standards introduced in2008-09 that would materially impact our statements.


Enforcement also uses a risk-based approach to ensurecases that are brought forward are fully investigated andthat allegations made are firmly supported by the evidence.Enforcement policy and procedures are sought to beconsistent with, or exceed, best practices in the industry.

CRITICAL ACCOUNTING ESTIMATESManagement must make estimates and assumptionswhen preparing the financial statements. Managementmakes those assumptions based on experience and currentconditions, and believes that they are reasonable. However,actual results may differ from management’s estimates.In our financial statements, management has estimatedthe portion of accounts receivable that we will receive,the useful lives of our capital assets, and the value ofemployee leave liabilities.

Accounts receivableWe accrue amounts due when they meet generallyaccepted revenue recognition criteria. During the fiscalperiod 2008-09, a total of $445,000 of administrativepenalties, $134,910 in disgorgement orders and $30,033in awarded costs were not recognized as revenue as theamounts appeared to be uncollectible.

Capital assetsWe capitalize goods and services when their cost is greaterthan $2,500 and their benefit extends beyond the currentfiscal year. We amortize the cost of our capital assets overtheir expected useful lives. Our capital assets consistprimarily of leasehold improvements, furniture andinformation technology. New information could leadus to reduce or eliminate an asset’s value or expecteduseful life.


In February 2008, the Canadian Institute of CharteredAccountants confirmed that Canadian reporting issuerswill be required to report under International FinancialReporting Standards (IFRS) effective 1 January 2011.Reporting issuers will be required to provide IFRScomparative information for the previous year. IFRS usesa conceptual framework similar to Canadian GAAP, butthere are significant differences on recognition,measurement and disclosures.

The change-over to IFRS applies to interim and annualfinancial statements relating to fiscal years beginningon or after 1 January 2011. On that date in 2011, IFRSwill replace current Canadian GAAP for PubliclyAccountable Enterprises.

The Commission has established a project plan forimplementing IFRS which includes determining:

º changes to accounting policies and implementationdecisions;

º disclosure requirements;º changes to information systems and accounting

processes;º changes to internal control over financial reporting

and disclosure controls and procedures;º training requirements; andº external stakeholder communications.

The Commission implementation plan has not included,to date, a quantification of the effects of adopting IFRS.It is important to understand that the financialperformance and financial position as disclosed in ourcurrent GAAP financial statements may be significantlydifferent when presented in accordance with IFRS. Thepotential impacts on our financial statements from the

We havecoordinated ourwork with theother Canadiansecurities regulatorsto adoptharmonizedlegislation.

“

”


adoption of IFRS will depend on accounting policychoices made by the Commission.

Our assessment to date has identified these areas forconsideration and review; this list identifies the mostsignificant items noted to date:

º IFRS 1 – provides entities with optional andmandatory exemptions upon initial implementationof the standards. The choices are being reviewedand the Commission will implement thosedetermined to be most appropriate.

º Property, plant and equipment – InternationalAccounting Standards (IAS) 16 requires an entityto present their assets broken down into theirsignificant parts upon initial measurement asopposed to current Canadian GAAP which requiresassets to be measured as a whole.

º Impairment of assets – IAS 36 uses a one stepapproach for both testing and measurement ofimpairment, with assets carrying values compareddirectly with the higher of fair value less costs tosell or value in use (which uses discounted cashflows). This may potentially result in more write-downs where carrying values of assets underCanadian GAAP were tested for impairment onan undiscounted cash flow basis.

º Liabilities and provisions – an assessment of ourliabilities will be required as their measurementcriteria and the definitions within IFRS in relationto liabilities vary from current Canadian GAAP.


new staff, full year salary budgets for some positionswhich had partial vacancies in the prior year and stepincreases for staff within their pay bands. A 2.0% costof living adjustment was also budgeted but was notgranted.

The budgeted subsequent surplus for 2009-10 is about$190,000, after the budgeted contribution of $5.25million to the Government of New Brunswick and a$239,000 allocation from the Market EnhancementReserve. The budgeted contribution is the same as thebudgeted amount in the prior year.

º Our current information system provider is planningto provide full and complete upgrades for ourcurrent accounting system, and we anticipate thatthese upgrades will allow us to transition efficientlyand effectively to IFRS.

º Our current internal control structure will requiresome changes. However, our structure appearsadequate and will be effective during theimplementation phase and continuing under IFRS.Further review will be completed throughout theentire implementation process.

In addition to the sections noted above, there aregenerally more extensive presentation and disclosurerequirements under IFRS compared to Canadian GAAP. These will be noted in a future analysis and will resultin additional data collection where required. Otherimpacts include the potential for increased volatility ofreporting results, and potentially an increase intransparency and comparability.

OUTLOOKBudgeted revenue is $10.72 million for the 2009-10fiscal year. This represents a decrease of about $520,000,or 4.7%, from 2008-09 actual revenue of $11.24million. This decrease is primarily the result of notbudgeting for enforcement revenue, which totaled$297,090 in 2008-09. The decline is also impacted bythe proposed change in the registration regime.

Operating expenses are budgeted to be $5.52 millionfor the 2009-10 fiscal year. This represents an increaseof $0.42 million over 2008-09 actual expenses. Thisincrease is primarily attributable to salary and benefitincreases. This reflects the budgeted addition of two


MANAGEMENT’S RESPONSIBILITY LETTER AUDITOR GENERAL LETTER

Management’s responsibilityfor financial reporting

Management is responsible for the integrity, consistency and reliability of the financialstatements and other information presented in the annual report. The financialstatements have been prepared by management in accordance with Canadiangenerally accepted accounting principles.

Based on our knowledge, the financial statements and financial information containedin the annual report fairly present in all material respects the financial condition,results of operations and cash flows of the New Brunswick Securities Commissionas at the dates and for the periods presented. The preparation of financial statementsinvolves transactions affecting the current period which cannot be finalized withcertainty until future periods. Estimates and assumptions are based on historicalexperience and current conditions, and are believed to be reasonable.

The New Brunswick Securities Commission maintains an accounting system andrelated controls designed to provide the Commission with reasonable assurance thatreliable financial information is available on a timely basis.

The Members of the Commission ensure that management fulfills its responsibilityfor financial information and internal control. The financial statements and annualreport have been reviewed by the Audit Committee and approved by the Commission.The report of the Auditor General of New Brunswick, outlines the scope of theAuditor’s examination and opinion on the financial statements.


Kenrick G. HancoxExecutive Director

Kevin HoytDirector, Corporate Finance and Chief Financial Officer

1 May 2009





2009 2008ASSETS

Current AssetsCash (Note 3) $ 1,851.396 $ 1,593,795 Accounts receivable 39,874 37,496 Prepaid expenses 113,757 72,229

2,005,027 1,703,520

Investments held for designated purposes (Note 3) 1,750,613 1,067,704 Capital assets (Note 5) 413,777 357,893

$ 4,169,417 $ 3,129,117

LIABILITIES AND FUND BALANCES

Current LiabilitiesAccounts payable and accrued liabilities $ 1,532,817 $ 186,742 Accrued salaries and benefits 143,092 124,908Accrued benefit liabilities (Note 8) 179,431Accrued vacation liabilities 29,635 36,890

1,884,975 348,540

Accrued benefit liabilities (Note 8) 317,686 392,491

Total liabilities $ 2,202,661 $ 741,031

Fund balancesGeneral 215,143 1,320,382 Fee stabilization reserve (Note 4) 1,500,000 1,000,000 Market enhancement reserve (Note 4) 215,613 67,704

1,966,756 2,388,086

$ 4,169,417 $ 3,129,117

B A L A N C E S H E E TAs at 31 March 2009

2009 2008REVENUE

FeesDistribution of securities $ 5,878,175 $ 5,338,950Registrations 3,035,500 2,987,800Financial filings 1,806,625 1,881,125Exemptions and orders 74,700 289,450Other 40,044 68,990

Administrative penalties and settlements 238,000 51,100Disgorged funds 25,090 -Enforcement cost recoveries 34,000 3,750Investment income 84,846 146,320Miscellaneous 27,240 50,883

$ 11,244,220 $ 10,818,368

EXPENSES

Salaries and benefits $ 3,248,947 $ 2,879,363Administration (Schedule 1) 935,880 802,570Market enhancement (Schedule 2) 57,030 27,000Disgorged funds 25,090 - Professional services 216,959 114,105 Travel 190,082 152,727Canadian Securities Administrators’ initiatives 50,164 51,357Premises 260,488 241,090Amortization 110,528 102,820

$ 5,095,168 $ 4,371,032

EXCESS OF REVENUE OVER EXPENSES $ 6,149,052 $ 6,447,336

For the year ended 31 March 2009

S T A T E M E N T O F I N C O M E

The accompanying notes and schedules are part of these financial statements.

APPROVED BY THE COMMISSION


-

Kenneth SavageChair, Audit Committee

“original signed by” “original signed by”


S T A T E M E N T O F F U N D B A L A N C E SFor the year ended 31 March 2009 For the year ended 31 March 2009

S T A T E M E N T O F C A S H F L O W S

General Fee Market Disgorged TotalStabilization Enhancement funds

Reserve Reserve

Balance 31 March 2008 $ 1,320,382 $ 1,000,000 $ 67,704 $ - $ 2,388,086

Excess of revenue over expenses 6,149,052 - - - 6,149,052

Disposition of surplusoperating funds (Note 6) (6,570,382) - - - (6,570,382)

Investment income reallocation (2,939) - 2,939 - -

Allocation (to) reserves (Note 4) (763,090) 500,000 238,000 25,090 -

Allocation from reserves (Note 4) 82,120 - (57,030) (25,090) -

Balance 31 March 2009 $ 215,143 $1,500,000 $ 251,613 $ - $ 1,966,756

2009 2008CASH FLOWS FROM OPERATING ACTIVITIES

Excess of revenue over expenses $ 6,149,052 $ 6,447,336Adjustment for amortization - capital assets 110,528 102,820Accrued benefit liabilities (74,805) 118,142Gain on disposal of capital asset - (6,450)

$ 6,184,775 $ 6,661,848Changes in non-cash working capitalAccounts receivable (2,378) 11,494Prepaid expenses (41,528) (34,151)Accounts payable and accrued liabilities 1,346,074 (10,344)Accrued salaries and benefits 18,184 42,526Accrued vacation liabilities (7,255) 133Accrued benefit liabilities 179,431 -

$ 7,677,303 $ 6,671,506

CASH FLOWS FROM FINANCING ACTIVITIES

Disposition of surplus operating funds (6,570,382) (6,261,278) CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of capital assets (166,411) (61,279)Proceeds on disposal of capital asset - 13,500

$ (166,411) $ (47,779)

NET INCREASE IN CASH ANDCASH EQUIVALENTS 940,510 362,449

CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 2,661,499 2,299,050

CASH AND CASH EQUIVALENTS,END OF YEAR $ 3,602,009 $ 2,661,499

Represented by:

Cash $ 1,851,396 $ 1,593,795Investments held for designated purposes 1,750,613 1,067,704

$ 3,602,009 $ 2,661,499


1. Nature of the CorporationThe New Brunswick Securities Commission is aProvincial Corporation operating under the Securities Act(New Brunswick) established on 1 July 2004. The businessof the Commission is the regulation of the New Brunswickcapital markets, including the administration of the SecuritiesAct, the General Regulation and the New BrunswickSecurities Commission rules.

The purpose of the Commission is to foster fair and efficientcapital markets in New Brunswick and confidence in thosemarkets, and to provide protection to investors from unfair,improper or fraudulent practices.

As a Crown corporation, the Commission is exempt fromincome taxes.

2. Significant accounting policiesThese financial statements are prepared in accordance withCanadian generally accepted accounting principles. Theaccounting policies of significance to the Commission areas follows:

(a) Revenue recognitionFees are recognized when earned, which is normally uponreceipt.

Recovery of the costs of investigations and administrativepenalty revenue are recognized upon the date of decisionunless management determines there is no reasonableassurance as to ultimate collection, in which case recoveryis recognized when cash is received.

Investment income is recorded on the accrual basis.

(b) Capital assetsCapital assets are recorded at cost and amortized using thestraight line method starting in the year of acquisition overtheir estimated useful lives as follows:

Office furniture and equipment: 4 yearsInformation technology infrastructure: 3 yearsSoftware: 4 years

N O T E S T O T H E F I N A N C I A L S T A T E M E N T SFor the year ended 31 March 2009

Financial assets and financial liabilities are initially recognizedat fair value and their subsequent measurement is dependenton their classification. The classification depends on thepurpose for which the financial instruments were acquiredor issued, their characteristics and the Commission’sdesignation of such instruments. The standards require thatall financial assets be classified as either held for trading,available-for-sale, held-to-maturity, or loans and receivables.The standards require that all financial assets, including allderivatives, be measured at fair value with the exception ofloans and receivables, debt securities classified as held-to-maturity, and available-for-sale financial assets that do nothave quoted market prices in an active market.

The Commission’s financial assets and financial liabilitiesare classified and measured as follows:

I. Cash and restricted cash are classified as “held fortrading”. These financial assets, carried at fair value,are marked-to-market through net earnings eachperiod end.

II. Accounts receivable are classified as “loans andreceivables”. After their initial fair value measurement,they are measured at amortized cost using the effectiveinterest method.

III. Accounts payable and accrued liabilities andregistration fees included in deferred revenue areclassified as “other financial liabilities”. After theirinitial fair value measurement, they are measured atamortized cost using the effective interest method.

(g) Recently adopted accounting standardsCapital disclosuresIn December 2006, the AcSB issued new accountingstandards relating to capital disclosures. This additionaldisclosure will include quantitative and qualitativeinformation regarding an entity’s objectives, policies andprocesses for managing capital. This section is applicablefor the Commission’s fiscal year beginning 1 April 2008.

Automobile: 4 yearsLeasehold improvements: over term of lease

(c) Use of estimatesThe preparation of financial statements in conformity withCanadian generally accepted accounting principles requiresmanagement to make estimates and assumptions that affectthe amounts reported in the financial statements andaccompanying notes. Actual results could differ from theseestimates.

(d) Restricted cashConsistent with sub-section 25(4) of the Securities Act,revenue received by the Commission from administrativepenalties shall not be used for the normal operatingexpenditures of the Commission and must only be usedfor endeavours or activities that, in the opinion of theCommission, enhance the capital markets in NewBrunswick.

(e) Employee benefit planThe Commission provides pension benefits to its full-timeemployees through participation in the Public ServiceSuperannuation Plan, which is a multi-employer definedbenefit pension plan. This plan is accounted for as a definedcontribution plan, as the Commission has insufficientinformation to apply defined benefit accounting to thispension plan. Pension costs included in these financialstatements comprise the cost of employer contributions forcurrent service of employees during the year and additionalemployer contributions for service relating to prior years.

(f) Financial instrumentsThe Commission's financial instruments consist of cashand restricted cash, accounts receivable, accounts payableand accrued liabilities. It is management's opinion that theCommission is not exposed to significant interest, currencyor credit risks arising from these financial instruments. Thefair values of these financial instruments approximate theircarrying values.


Foreign exchange riskThe Commission was not exposed to any significant foreignexchange risk since its operations are in Canada. From timeto time, it receives payment and pays supplies in foreigncurrency.

(h) New Canadian accounting standards effective in 2009 and beyondIntangible assetsIn February 2008, the AcSB issued new accounting standardsrelating to goodwill and other intangible assets. This sectionis applicable for the Commission’s fiscal year beginning1 April 2009 and is not expected to have a material impacton the Commission’s financial position and statement ofincome.

International Financial Reporting Standards (IFRS)In February 2008, the AcSB confirmed that generallyaccepted accounting principles (GAAP) for publiclyaccountable enterprises will be converged with IFRS effectivein calendar year 2011, with early adoption allowed startingin calendar year 2009. In March 2008, the AcSB clearlyidentified the applicability of this conversion to Crowncorporations and other government business enterprises.This definition includes the Commission. An AcSB exposuredraft released in April 2008 provides further details of thisconversion.

The conversion to IFRS will be required for the Commission,for interim and annual financial statements beginning on1 April 2011. IFRS uses a conceptual framework similar toCanadian GAAP, but there are significant differences onrecognition, measurement and disclosures. In the periodleading up to the conversion, the AcSB will continue toissue accounting standards that are converged with IFRS.The Commission is currently evaluating the impact of theadoption of IFRS on its financial statements.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

The Commission’s objective when it manages capital is toensure it continues as a going concern in order to fulfill itsmandate.

The Commission has established a fee stabilization reserve of$1,500,000 to manage its capital risk. The Commissionensures that any payment of surplus funds will not impairthe Commission’s ability to pay its liabilities, to meet itsobligations as they become due or to fulfil its contractualcommitments.

Financial instruments and disclosuresEffective 1 April 2008 the Commission adopted new AcSBhandbook sections relating to financial instrument presentationand disclosure. These sections are intended to enhance theusers’ ability to evaluate the significance of financial instrumentsto an entity, related exposures and the management of theserisks.

The Commission’s objectives are to protect itself againstvarious financial risks. These include credit risk, liquidity risk,interest rate risk and foreign exchange risk.

Credit riskThis risk is minimal since the majority of the Commission’srevenue is received when due.

Liquidity riskThe Commission generates enough cash from operatingactivities to fund its operations and fulfill its obligations asthey become due. The Commission has a fee stabilizationreserve in place in the event that cash requirements exceedcash generated from operations.

Financial liabilities that are due within one year have beenclassified as current and presented as such on the balance sheet.

Interest rate riskThis risk is minimal since the Commission did not incur anyinterest bearing long term debt during the year. Cash depositsearn interest at a floating rate and this revenue is impactedby the current low short-term interest rates.


3. Cash and investments held for designated purposesThe Commission maintains two separate bank accounts.The first is comprised of the operating account and thosemonies attributable to the fee stabilization reserve and moniesreceived from disgorgement orders. The second account ismaintained for the market enhancement reserve. Under theterms of the Commission's banking agreement, both accountsearn interest at prime less 2% calculated daily.

4. ReservesFee Stabilization ReserveThe Commission has established a reserve consistent withsub-section 25(6) of the Securities Act to finance extraordinaryexpenses for isolated and unanticipated purposes that areregulatory in nature, and for changes in market activity thathave an effect on revenue. The reserve is funded throughcharges to retained earnings. The maximum value of thereserve has been set at $1,500,000.

Market Enhancement ReserveThe Commission collects administrative penalties undersection 186 of the Securities Act. Consistent with sub-section25(4) of the Securities Act, these amounts are not used forthe normal operating expenditures of the Commission.Instead, they are used for endeavours or activities that enhancethe capital markets in New Brunswick. Market enhancementreserve funds are maintained separate from the normaloperating funds of the Commission and generate their owninvestment revenue.

Disgorgement ReserveThe Commission has the authority to issue disgorgementorders under section 184 of the Securities Act. Disgorgementorders permit the Commission to order that a person bedivested from the benefits obtained as a result of failure tocomply with securities law. These amounts are not used forthe normal operating expenditures of the Commission andwill generally be used to return funds to negatively impactedinvestors.


6. Disposition of surplus operating fundsThe disposition of surplus operating funds consists ofpayments to the Consolidated Fund of the Province of NewBrunswick subject to the approval of the Board ofManagement and consistent with sub-section 25(5) of theSecurities Act.

7. Commitments and contingenciesDetails of commitments to organizations outside theCommission and contingencies from guarantees and legalactions are set out below. Any losses arising from the settlementof contingencies are treated as expenses in the year ofsettlement.

(a) CommitmentsCommitments arising from contractual obligations associatedprimarily with the lease of the premises and minor rentalof office equipment at 31 March 2009 amounted to$1,718,624. The Commission entered into a ten-year leasefor office space effective 15 February 2006. Under the termsof its lease agreements, the Commission will be required tomake the following annual lease payments:

2009-2010 $ 243,8282010-2011 246,0842011-2012 257,3662012-2013 253,9062013-2014 253,214Thereafter 464,226Total $ 1,718,624

N O T E S T O T H E F I N A N C I A L S T A T E M E N T SFor the year ended 31 March 2009

In addition, the Chief Executive Officer receives asupplemental pension benefit whereby supplementalpensionable service of one year (or part year) for each yearof service as Chief Executive Officer to a maximum of fiveyears is provided. This benefit is fully funded by theCommission.

9. Related party transactionsThe Department of Justice and Consumer Affairs, a relatedparty to the Commission, provides certain services in thenormal course of operations that are measured at theexchange amount, which is the amount of considerationestablished and agreed to by the related parties. Informationtechnology services were provided, such as data storage,data back-up, data protection and support for theCommission. The Commission has an agreement wherebythe Department of Justice and Consumer Affairs alsoprovides support for the policy and regulatory responsibilitiesof the Commission.

The Commission expended $122,736 ($115,316 in 2008)during the reporting period on these services. As of31 March 2009 an accounts payable of $24,547 ($22,911in 2008) was owed to the Department of Justice andConsumer Affairs and is subject to normal terms. Thisamount is included in accounts payable and accruedliabilities.

The Translation Bureau for the Government of NewBrunswick also provides translation services to the Commissionthat are measured at the exchange amount, which is theamount of consideration established and agreed to by therelated parties. In addition to this amount, a total of $29,848of translation services was provided without charge to theCommission. Total expenditures during the period were$47,151 ($41,547 in 2008). As of 31 March 2009 anaccounts payable of $7,427 ($11,104 in 2008) was owed tothe Translation Bureau for the Government of New Brunswickand is subject to normal terms. This amount is included inaccounts payable and accrued liabilities.

(b) Legal actionsThe Commission is involved in various legal proceedingsarising from its regulatory activities. Management considersthe chance of liability under these legal proceedings not tobe determinable and, accordingly, an estimate of anycontingent loss cannot be made. The Commission is notaware of any legal proceedings against it at the date of thesefinancial statements.

8. Accrued benefit liabilitiesThe Commission has a retirement allowance program foremployees with five or more years of continuousemployment. This is available on retirement, death or lay-off. Each employee is entitled to receive five days of payfor each year of service up to a maximum of 125 days, plusan additional 20% of accumulated sick leave. In total, thisbenefit cannot exceed 166 days. This benefit cannot exceed250 days for the Chief Executive Officer. The employee’srate of pay is used to calculate the allowance.

This benefit is calculated on those employees with five ormore years of service and is represented at the aggregateamount with the application of a 3% discount factor foreach year that the eligible employee is below the earliestpossible retirement age of 55.

Office furniture and equipment $ 144,930 $ 99,906 $ 45,024 $ 24,175

Information technology infrastructure 96,951 82,681 14,270 25,184

Software 11,780 9,835 1,945 3,890

Automobile 34,086 17,042 17,044 25,565

Leasehold improvements 508,564 173,070 335,494 279,079

$ 796,311 $ 382,534 $ 413,777 $ 357,893

2009 2008

Cost Accumulated Net Book Net BookAmortization Value Value

5. Capital assets


SCHEDULES TO THE F INANCIAL S TATEMENTS

2009 2008SCHEDULE 1ADMINISTRATION

Fostering capital markets $ 180,725 $ 160,823 Investor protection and education 326,685 242,532 Members and staff development 146,692 113,148 Payment to Department of Justice andConsumer Affairs under Agreement 30,000 30,000 Information technology 118,508 118,822 Other administration 133,270 137,245

$ 935,880 $ 802,570

SCHEDULE 2MARKET ENHANCEMENT

Contribution for ABC's of Fraud® $ 57,030 $ 27,000

$ 57,030 $ 27,000



Accredited investorA person or organization, generally wealthy andexperienced, judged suitable to undertake an investmentwithout needing the protection of the registration andprospectus requirements of the Securities Act. For specificcriteria see National Instrument 45-106 Prospectus andRegistration Exemptions on our website at www.nbsc-cvmnb.ca under the Law and Policy section.

Administrative penaltyA financial penalty imposed by the Commission on anindividual or organization for breaches of the SecuritiesAct. The legislation provides the Commission with theability to levy an administrative penalty up to $750,000.

Angel investorAn individual that invests funds and personal expertisein a small and/or start-up business.

COSRA (Council of Securities Regulators of the Americas)COSRA provides a forum to coordinate securitiesregulation throughout North, South and Central Americaand the Caribean and cooperate with regulators in anincreasingly global environment.

CSA (Canadian Securities Administrators)CSA is a voluntary umbrella organization of Canada’sprovincial and territorial securities regulators whoseobjective is to improve, coordinate and harmonizeregulation of the Canadian capital markets.

Capital marketsThese markets bring together the providers and users ofcapital, the financial products, like stocks (equity capital)and bonds (debt capital) that make the transfer of capitalpossible, and the people and organizations that supportthe process.

G L O S S A R Y

DistributionA first time offering of shares by an issuer, from treasury.Treasury shares are shares from a company’s reserve (asopposed to shares bought on the market).

Equity capitalA method of financing in which a company issues sharesof its stock and receives money in return.

ExemptionAn exemption allows relief from certain requirements ofsecurities regulations.

FullsailThe Commission’s capital markets development initiative,the objective of which is to help bring economic wealthand independence to the province.

General Regulation (Regulation 2044-66 under theSecurities Act)The regulation that falls under the New BrunswickSecurities Act. It provides legal guidelines for CommissionMembers, management and staff.

IIROC (Investment Industry Regulatory Organizationof Canada)IIROC is the national self-regulatory organization whichoversees all investment dealers and trading activity ondebt and equity marketplaces in Canada. It was createdin 2008 through the consolidation of the InvestmentDealers Association of Canada and Market RegulationServices Inc.

Cease-trade orderAn order issued by the Commission to prohibit tradingby an individual or organization or to stop trading in aspecific security. Generally made on the basis that tocontinue to allow trading is contrary to the public interest.

Compensation orderCompensation order obligates a person who has violatedsecurities laws to return money to an investor. Once theorder is issued, it can be easily filed with the Court ofQueen’s Bench and then becomes a judgement of thatCourt. The investor avoids the costs and delay of havingto pursue a claim through the courts.

Compliance reviewA review of a market participant’s records to ensure thatthe firm or individual is in compliance with all obligationsunder the Securities Act.

Continuous disclosureThe legally-required information filed by reporting issuersabout their company and its business.

CostsThe obligation to pay costs associated with a proceedingunder the Securities Act. The Commission may imposethese on an individual or organization after a hearing orinvestigation.

Debt capitalLoans derived from traditional institutions such as banksand, in some cases, investment firms.

Disgorgement orderA disgorgement order forces a person or firm to surrendermoney obtained as a result of breaking securities law.

IOSCO (International Organization of SecuritiesCommissions)IOSCO is an international association of securitiesregulators that was created in 1983. Its General Secretariatis based in Madrid, Spain. Its focus is on establishingstandards, exchanging information and cooperation toenhance capital markets throughout the world.

MFDA (Mutual Fund Dealers Association of Canada)MFDA is the national self-regulatory organization forthe distribution side of the Canadian mutual fundindustry.

Market Enhancement ReserveMarket Enhancement Reserve is a separately-maintainedreserve whereby receipts from administrative penaltiesand settlements are held. As required by the SecuritiesAct, these funds are spent only on endeavours or activitiesthat enhance the capital markets in New Brunswick.

NASAA (North American Securities AdministratorsAssociation)NASAA is the oldest umbrella organization of securitiesregulators and provides a forum to coordinate securitiesregulation among North American regulators andcooperate in a number of areas including enforcementand education.

NRD (National Registration Database)A national web-based system that permits individuals tofile applications for registration electronically.

Passport SystemA national securities system that has created a similar setof rules across the country, giving market participants asingle point of entry into the Canadian capital markets.


Private equityTakes the form of privately-held shares. Unlike publicly-traded shares, they are usually held for long periods oftime and the price of purchase or sale is determinedthrough personal negotiation.

ProspectusA document that describes, in detail, material informationabout an issuer when it is offering securities to the public.Similarly, an offering memorandum is a prospectus-likedocument, but with less detail and used in privateplacements.

Public equityEquity capital invested in public issuers traded on a stockexchange such as the Toronto Stock Exchange.

SBITC (Small Business Investor Tax Credit)The SBITC is an investor tax credit of 30% provided bythe government of New Brunswick.

SEDAR (System for Electronic Document Analysisand Retrieval)The electronic system for the filing and publicdissemination of documents of reporting issuers inCanada.

SEDI (System for Electronic Disclosure by Insiders)The electronic system that facilitates the filing and publicdissemination of “insider reports”.

SME (Small and Medium Enterprise)SMEs are usually characterised as companies with lessthan 100 employees. In New Brunswick, such firmsemploy up to 95% of the province’s work force.

G L O S S A R Y

Securities ActNew Brunswick legislation that provides for the regulationof the securities industry in this province.

Sidecar financingProvides capital that “rides” or invests alongside an angelgroup. Traditionally, sidecar funds co-invest with angelsafter the angel have conducted the due diligence. Onceangels have agreed to invest, the sidecar, matching or co-investment fund then follows and accepts the same termsand conditions. Sidecars may provide matching or providea fraction of the funds invested by the angel.

Venture capitalFunds made available for early-stage firms and smallbusinesses with exceptional growth potential. Managerialand technical expertise is often also provided. Also calledrisk capital.

P U B L I C A T I O N S

These publications are available on the Commission’s website www.nbsc-cvmnb.ca.

Capital MarketsCo-investment Funds – The Capital Markets Potential (October 2008)Response to the Select Committee on Tax Review (August 2008)Angel Report (July 2007)Guide to Capital Raising ExemptionsTSX Venture Capital Pool Company Program (CPC Program)So you want to be an Angel? A guide to Angel Investing in Atlantic Canada

Fullsail ReportsFullsail Status Update (April 2009)Fullsail Summit Six Month Report (October 2008)Fullsail Summit - Event Summary (May 2008)Fullsail Status Report (January 2008)Fullsail Commitment Status Report (July 2007)Recommendation Performance Statistics (July 2007)Fullsail / Self-Sufficiency Task Force: Areas of commonality (March 2007)Making the Commitment (March 2007)Funding our Future (January 2007)Roundtable on Fostering Capital Markets (2006)


Investor Education The Basics of InvestingWorking With a Financial AdviserQuestions to Ask When Choosing a Financial AdviserUnderstanding Mutual FundsProtecting Your MoneyInvestments at a GlanceInvestment Fraud on the InternetInvestments 101 (Youth)Scams Target Adults Over 50"Boiler Rooms" Scams - Could You Be Vulnerable?Investment Planning WorksheetWhen Your Broker Calls; Take Notes!Investment Fraud ChecklistThe Alert Investor Series (Podcasts)Knowledge is Power (2007-2010 Education Strategy)Getting Help with Your Complaint

Enforcement CSA Enforcement Report 2008CSA Enforcement Report 2007

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