NOTICE OF AMENDMENT APPROVAL DEFINITION OF REGULATED PERSON

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1 February 6, 2004 No Suggested Routing: Trading, Legal & Compliance NOTICE OF AMENDMENT APPROVAL DEFINITION OF REGULATED PERSON Summary Effective February 6, 2004, the Alberta Securities Commission, British Columbia Securities Commission, Manitoba Securities Commission, Ontario Securities Commission and the Commission des valeurs mobilières du Québec approved an amendment to the Universal Market Integrity Rules ( UMIR ) to expand the definition of a Regulated Person to include a person who is subject to the rules of a marketplace that has retained RS to be its regulation services provider. Background to the Amendment If a recognized exchange or a recognized quotation and trade reporting system retains RS to be its regulation services provider pursuant to an agreement contemplated by section 7.2 of National Instrument , RS is able to enforce through disciplinary proceedings the market quality rules of that marketplace ( Marketplace Rules ) as such rules are defined as a Requirement for the purposes of UMIR. Prior to the amendment, the enforcement provisions of UMIR were applicable to Participants, Access Persons and to various persons to whom restrictions or responsibilities have been extended in accordance with Rule 10.3 or 10.4 of UMIR. Under Rules 10.3 and 10.4, the application of UMIR is extended to: a related entity of a Participant or Access Person; a director, officer, partner or employee of the Participant or Access Person; and a director, officer, partner or employee of a related entity of a Participant or Access Person. There was a possibility that a Marketplace Rule may be applicable to a person not otherwise covered by UMIR. For example, under clause (1)(c) of The Toronto Stock Exchange Act (Ontario), the Toronto Stock Exchange ( TSX ) is given the power to regulate the conduct of members of the TSX and other persons or companies authorized to trade by the exchange and of their current and former directors, officers, employees and agents and other persons or companies currently or formerly associated with them in the conduct of business. As such, the TSX may have marketplace rules that apply to persons not presently covered by the definition of Regulated Person such as persons or companies currently or formerly associated with them in the conduct of business.

2 In order to ensure that RS may undertake a disciplinary action as against a person who has breached a Marketplace Rule in its capacity as the regulation services provider for the marketplace, the definition of Regulated Person was amended to specifically recognize that Marketplace Rules for which RS has enforcement responsibilities may apply to persons that are not described in Rule 10.3 or 10.4 of UMIR. Impact of the Amendment The extension of the definition of Regulated Person to include persons who are subject to the Marketplace Rules of any marketplace that has retained RS to be its regulation services providers, simply clarifies the jurisdiction of RS to use the powers and procedures under UMIR and its Policies with respect to investigation and enforcement in connection with violations of Marketplace Rules. In particular, each person who is subject to a Marketplace Rule also will be subject to: the requirement under Rule 10.2 of UMIR to assist in an investigation including the provision of information or documents requested by RS as part of the investigation; the powers and remedies available to RS under Rule 10.5 of UMIR; and the indemnification and limitation of liability of RS under Rule of UMIR for any act, deed, matter or thing made, done or permitted by a Regulated Person. Changes to the French-language version of the Definition During the rule approval process, a number of editorial changes were suggested to the Frenchlanguage version of the definition of a Regulated Person. The changes to the French version do not involve any additional changes to the English-language definition. The changes to the French version are being made simply to improve the quality of the translation. These editorial changes are included in Appendix B of the French language version of this Market Integrity Notice which is available on the RS website at Appendices The text of the amendment to UMIR to expand the definition of Regulated Person is set out in Appendix A. Appendix B is a marked version of the definition of Regulated Person to highlight the changes introduced by the amendment. Responses to the Request for Comments No comments were received by Market Regulation Services Inc. in response to the Request for Comments on the proposed amendments set out in Market Integrity Notice dated October 24,

3 Questions Questions concerning this notice may be directed to: James E. Twiss, Senior Counsel, Market Policy and General Counsel, Market Regulation Services Inc., Suite 900, P.O. Box 939, 145 King Street West, Toronto, Ontario. M5H 1J8 Telephone: Fax: ROSEMARY CHAN, VICE PRESIDENT, MARKET POLICY AND GENERAL COUNSEL 3

4 Appendix A Universal Market Integrity Rules Definition of Regulated Person The Universal Market Integrity Rules are amended as follows: 1. Rule 1.1 is amended by adding the following as clause (e) of the definition of Regulated Person : (e) any person subject to a Marketplace Rule of a marketplace for which the Market Regulator is the regulation services provider or was the regulation services provider at the time of the conduct. 4

5 Appendix B Universal Market Integrity Rules Definition of Regulated Person Marked to Reflect the Amendment Regulated Person means, in respect of the jurisdiction of a Market Regulator in connection with the conduct of a person: (a) (b) (c) (d) (e) any marketplace for which the Market Regulator is the regulation service provider or was the regulation service provider at the time of the conduct; any Participant or Access Person of a marketplace for which the Market Regulator is the regulation service provider or was the regulation service provider at the time of the conduct; any person to whom responsibility for compliance with the Rules by other persons are extended in accordance with Rule 10.3 or to whom responsibility had been extended at the time of the conduct; and any person to whom the application of the Rules are extended in accordance with Rule 10.4 or to whom the Rules had been extended at the time of the conduct. and any person subject to a Marketplace Rule of a marketplace for which the Market Regulator is the regulation services provider or was the regulation services provider at the time of the conduct. 5

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