Mr. Chairperson (Ben Sveinson): Good afternoon. Will the Committee of Supply please come to order. This afternoon this section of the Committee of Supply meeting in Room 255 will resume consideration of the Estimates for the Department of Consumer and Corporate Affairs.

As had been previously agreed, questioning for this department will follow in a global manner with all line items to be passed once the questioning has been completed. The floor is now open for questions.

Mr. Jim Maloway (Elmwood): I think today we wanted to look at the Securities Commission and its operation in the province, so perhaps I could begin with some questions of the Securities Commission. Over the last while, there has been talk of a national–

Hon. Shirley Render (Minister of Consumer and Corporate Affairs): Mr. Chair, we have got a new face up here today, and I would just like to introduce Doug Brown, the deputy director of the Securities Commission.

Mr. Maloway: Mr. Chairman, I wanted to get into the issue of the whole business of a national securities commission for the country as a whole versus the current system that we have. I would like to know what are the developments that have occurred over the last year or two in this area.

Mrs. Render: There have been some discussions at a national level, but I think it would be fair to say that there has been very good co-operation between the various securities commissions across the country. The chairs have monthly conference calls. There is dialogue going back and forth all the time. There is discussion about the rules and regulations and harmonization of it. In effect, it is almost as if there is a national securities commission operating, even though it is not a separate entity. At this stage there is no intention to proceed to that kind of a national body.

Mr. Maloway: Well, how much duplication currently exists then between the provincial Securities Commission and the national?

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Mrs. Render: There is no duplication. Each commission has its own rules and regulations within its own particular jurisdiction. As I said just a second ago, there is no duplication. There is working toward harmonization, but that is not to imply that at the present there is duplication.

Mr. Maloway: Then what sort of problems does a company face when it operates interprovincially in a number of provinces when it has to file different requirements with different securities regulators and different rules for broker registration and the like?

Mrs. Render: I am advised that it is not an onerous process. It is co-ordinated through one jurisdiction. In other words, the business does not have to work with 10 or 13 jurisdictions. One jurisdiction takes the lead and facilitates what the company has to go through. That is on a prospectus level. That same concept is being expanded at the registration level.

Mr. Maloway: So is the minister saying, then, that the old concept floated a couple of years ago about a national securities commission is a dead issue at this point?

Mrs. Render: I am not too sure who the member was implying was pushing the national concept. It was not being pushed at the provincial level. It is felt that at the provincial level there are lots of efficiencies. As I said earlier, the chairs have monthly conference calls. There is dialogue back and forth on a very regular basis and co-operation is a key word. If there was any pushing, it may have been by the federal government.

Mr. Maloway: How will the Securities Commission be affected by the demutualization of the five life insurance companies right now? I know that some of the brokers are pretty happy about this development and are holding planning seminars, and so on, but, beyond that, how does it affect your role?

Mrs. Render: The Securities Commission does not regulate the companies themselves. They will regulate the process of the selling of the shares to the public. I will just leave it at that for the moment.

Mr. Maloway: With all the activity, though, of the brokerage houses in this field I was just asking the Securities Commission as to whether they saw a lot of potential problems with this whole process or whether there would be more activity on their part, more work for them. What sort of problems would they envision?

Mrs. Render: The Securities Commission really does not anticipate any problems with this process. It is like any other process along these lines. The Securities Commission will ensure that the prospectus is accurate, that it provides full disclosure, but the monitoring is the same as with any other similar kind of transaction.

Mr. Maloway: A lot has been made over the last few years regarding the regulation of financial planners. That issue has been all over the map. I just wondered just what has been happening in that field and how close we are to getting some sort of a proper regulation of the area.

Mrs. Render: The securities administrators are looking at the issue.

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Mr. Maloway: The securities people have been looking at this issue for a long time. While all this is going on, people are, in fact I think anybody in this province and this country can hold themselves out as a financial planner. In fact, many, I think, regular agents go under the handle of a financial planner because it gets them in the door a little quicker than if they went in as what they really are, life insurance agents or whatever handle they happen to be licensed under.

I think it is in the interests of the industry as well to have some sort of regulation, because it does not help their cause any if consumers feel aggrieved by this process when they feel they have been taken advantage of and they complain and it discredits the whole industry. So it is not only a question of consumer protection, it is also a question of the viability of the reputations of the people selling the products in this business. Clearly there is more going on than what I know about right now. I would like to know exactly what has been going on. What sort of meetings have been occurring? Where are we in the process of getting some regulations in this area?

Mrs. Render: As I have said, people are looking into the issue. That is about all I can say at the moment. We are not at a stage where regulations are coming in. I take the member's comments, and, in fact, there has been some media attention on this very issue. I think that I remember reading articles in perhaps The Globe and Mail, perhaps in the Free Press, talking about the term "financial planners" and that anybody can call themselves a financial planner. I think one of the thrusts of one of the articles that I read was that the investor should ask a few questions. When somebody calls themselves a financial planner, one should ask just exactly what qualifications that individual has. As I say, I will take the member's comments. He has some valid comments.

Mr. Maloway: I would like to know how many complaints then have been lodged with the commission over the years relating to this issue.

Mrs. Render: We have been discussing this because in a sense the question does not quite fall within the jurisdiction of the Securities Commission. I guess what I am saying is, because there are no financial planners because the Securities Commission does not regulate this term, this person presumably called a financial planner, the complaints are not categorized as financial planner complaints. If complaints come in, they perhaps would come in as a salesman who is acting improperly or perhaps a registered person acting against the rules of the commission. We just do not have a figure we can pull out for the member in answer to his question.

Mr. Maloway: But if the area is so problem free, then why are there constant requests for regulating this particular industry if there is no apparent problem here?

Mrs. Render: I guess I would answer the question by saying that there is some confusion out there, as the member well knows, as to exactly what a financial planner is. In that sense there would be reason to regulate because you would define what a financial planner is and define the qualifications that that individual needs to have. Some people who call themselves a financial planner may offer only advice, and they do not buy or sell securities. So the push to regulate may be coming from various associations within the industry itself. I think that is certainly understandable. I will just leave it at that for the moment.

Mr. Maloway: The question, I guess, is: has there been agreed definition as to what a financial planner is?

Mrs. Render: I think the last part of the member's statement probably is the answer that I will give. No, there is no definition of a financial planner. At the present there is not agreement as to what designates a financial planner.

Mr. Maloway: Is any province in this country interested in rules and regulations concerning [inaudible] profession?

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Mrs. Render: I believe only Quebec.

Mr. Maloway: What year or how long has that been [inaudible]

Mrs. Render: I am afraid we cannot give the member an answer to that. We are not sure.

Mr. Maloway: Can they do some research and find out the details of the Quebec legislation, when it was set up and what sort of experience you had with it over the years it has been set up? Has it been effective in curbing problems? Are there still as many complaints as before? More complaints or fewer complaints than before? Let us check into the United States–there is probably a lot of financial planning type of legislation in some of the individual states themselves–and maybe come up with some sort of a chart as to who has got what. Then we could see where we could go with it. Does that not make sense?

Mrs. Render: These are some of the things that the Securities Commission is presently looking at.

Mr. Maloway: Well, I am looking for some information on this, so that I would like to see, you know, if you would get a report done or get some information done that you could get back to me with the answers to the question.

Mrs. Render: As I say, the Securities Commission is looking at some of these right now. We will see what information we can gather for the member on a fairly speedy basis.

Mr. Maloway: I would like to ask the minister: what sort or kind of e-trade activity do we have in Manitoba?

Mrs. Render: I have been advised that there is minimal, perhaps 3 to 4 percent.

Mr. Maloway: Mr. Chairman, who is operating in Manitoba with e-trade?

Mrs. Render: I have been advised that there is one registrant–oh, several; I am sorry, I will correct that–several major brokerage houses.

Mr. Maloway: Can the minister provide a list of those brokerage houses?

Mrs. Render: Yes, we can provide a list.

Mr. Maloway: I would like to ask the minister then: are those brokerage houses registered in Manitoba?

Mrs. Render: That is correct.

Mr. Maloway: Well, are there any foreign traders operating in Manitoba that the Securities Commission is unaware of?

Mrs. Render: I have been advised that we do not have a list. The Securities Commission would respond to a complaint, but if somebody is trading on the Internet and they are trading in Manitoba, then they would presumably be registered or should be registered.

Mr. Maloway: Then what is the Securities Commission's view of some of the U.S. trading houses? I believe schwab.com and others are operating right now. How does it view operations like that?

Mrs. Render: If they are not registered in Manitoba, then they should not be dealing with Manitobans, but the major American companies do abide by the rules.

Mr. Maloway: How would they know if people were doing their e-trading through Schwab, for example? How would you know?

Mrs. Render: As I mentioned earlier, probably the Securities Commission would not know unless there was a complaint but, as I said, the major companies do abide by the rules.

Mr. Maloway: I think you ultimately get into the whole area of how to regulate the World Wide Web. That is where it kind of ends up at the end of the day.

I remember talking to the Saskatchewan Finance minister, because I cannot talk to the one here.

An Honourable Member: Say what?

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Mr. Maloway: Because I cannot talk to the one here, I have to go to Saskatchewan to talk to a Finance minister. I asked him at the time to look into the whole area of taxation because you can imagine that if you are buying things through the Internet, how do you collect taxes? If you can buy a computer in the United States or if you can buy a computer in Ontario, then how do you collect the sales taxes when it crosses the border, and so on?

It is an increasingly difficult problem to do, and in the old system it was a much easier proposition, because you had to bring it in through roads and stuff like that. But now it is, with the Internet, you can buy stuff all over the world. So it is certainly going to be a problem for Finance, and it is going to be a problem for you as well.

Now, ultimately, if you project 10 years down the road, it is conceivable that maybe, you say 4 percent of the e-trades are occurring in Manitoba right now, 4 percent of the total trades are e-trades, but in short order that could be reversed. It could be 96 percent will be e-trades. They may be with schwab.com, and they may not be registered here. The point is, at a certain level, how are you going to regulate and enforce in an environment like that? How are you going to do that?

Mrs. Render: I am advised that the Manitoba Securities Commission is a member of the North American Securities Administration Association. That membership puts them into contact with various securities commissions across the United States. If there are problems occurring elsewhere, that information is relayed to the Securities Commission here in Manitoba.

Mr. Maloway: Well, not having ever set up an e-trade account, I am wondering how it is determined just what the actual address is of the person that is doing the trading because the computer could be anywhere. It could be in a beach in Mexico, and the person may live here, and they may be trading on schwab.com, so how can you determine then just where this is happening?

Mrs. Render: The member is asking some pertinent questions, and I think the answer to a lot of this in fact is fairly similar to some of the answers I have been giving over the past number of days in Estimates. It is the educated consumer, whether it is the buyer beware, and I think more of us now, whether it is roof scams or whatever, are realizing that there is an onus on them to ask questions, and in this instance the Securities Commission will be offering information to potential investors. They quite recognize the fact that an educated investor is a protected investor. Even for something like this, the informed consumer will be advised that he or she should be dealing only with a company that is properly registered, that there is a risk to do business with a company that is not registered.

So the Securities Commission, one of the things that it is going to be doing is, as I say, providing more education informing investors about the workings and pitfalls of accessing capital markets in whatever way, whether it is through the Internet or what have you.

Mr. Maloway: I would like to ask the minister: what sort of scams the Securities Commission has encountered as related to e-commerce and e-trading over the last couple of years?

Mrs. Render: I have been advised that there has not been any mail scam.

Mr. Maloway: I would like to ask the minister if she has any information for me on the role of day traders in Manitoba.

Mrs. Render: Actually, here in Canada, speaking right across the country, not just with our Manitoba Securities Commission, there is an additional protection. Each order has to be reviewed by the broker, so it would make it more difficult for someone in Canada to fall prey to something that maybe was not being traded properly.

Mr. Maloway: I am not clear on what the minister said there. Could you repeat that?

Mrs. Render: I have been advised that each order has to be reviewed by the broker. As the member knows, each broker knows or should know his client's financial status and should be advising the client as to whether or not this is an undue risk. So, because this provision is in place, as I say, it just gives an additional protection to the Canadian or, in this instance, the Manitoban, investor.

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Mr. Maloway: What if the broker is schwab.com and they are not registered in Manitoba? Then what happens?

Mrs. Render: The company then would be subject to prosecution if they are not registered.

Mr. Maloway: Does the minister know how many day traders there are operating in Manitoba?

Mrs. Render: No.

Mr. Maloway: Can the minister tell us: is there any way to find out?

Mrs. Render: I do not think there is any way to find out. The brokers do not keep those kinds of records.

Mr. Maloway: Is there any thought given to registering the day traders or trying to get a handle on how big an issue it is here in Manitoba?

Mrs. Render: There is no proposal to register the individual who buys and sells his own stock.

Mr. Maloway: Well, what is the minister and the government's position on day traders? Do they approve of day trading or not?

Mrs. Render: I think the answer to that question is that there are rules in place as to the licensing of the broker for the protection of the investor.

Mr. Maloway: Does the minister accept the contention that day traders and day trading can create volatility in the stock market, unnecessary volatility, and that in fact these people create no wealth at all really in the process?

Mrs. Render: It is not really a question of creating wealth. It is a question of the movement of assets, the transfer of assets.

Mr. Maloway: I guess I was asking the minister's opinion as to whether or not day trading should be encouraged or whether it should be discouraged.

Mrs. Render: It is not a matter of approving or not approving. It is more a matter of making sure that the investor makes an informed decision and that is up to that investor as to how he wants to do this.

Mr. Maloway: Mr. Chairman, I had thought that perhaps regulation would be difficult to do, but just an opinion as to whether or not it was to be encouraged or not would go some way to educating the public on the government's views on day trading. It seems to me it is a very risky proposition that some people are making money at it, but some people are losing money at it as well. It is basically just using computers for immediate trades, and there is no wealth created. If too many people get into day trading, there could be, I have been told, a volatility on the market.

I do not think it is in anybody's interest to take down the market. You know, we had programmed trading collapse back, I believe, in '87, and there was an involvement in programmed trading that helped to take the market down at least once or twice in the past. So I think any activity that does not create any wealth, that leads to unnecessary volatility, unnecessary risk in the market, should not be encouraged. So I am not thinking the minister is going to solve this problem overnight, but certainly having a view on it and propagating that view would probably be a plus. Personally, I cannot see the minister being highly in favour of promoting Manitoba as a haven for day traders. I guess that is what I am asking.

Mrs. Render: The honourable minister promotes an educated investor. Any kind of investing involves a risk, so if you are going to put money into a stock market, you have to be prepared to take some risk. I would just repeat once more that you have to be an informed investor and decide what is the best route to go for you.

Mr. Maloway: Well, perhaps day trading might be viewed as simply an offshoot of this government's policy on lotteries. Anything and everything goes in this jurisdiction and we are sliding, I believe, on a year-by-year basis, not in the right direction either, I might add.

I would like to ask the minister now, I have a couple of questions in an area that may, in fact, be closer to the Consumers' Bureau. I am certain that the minister did not want me to call the Consumers' Bureau back, if possible. So perhaps we can get into a couple of these areas just with the Securities Commission, and actually there are some implications for them as well in these areas, but one of them concerns rules on basically dealing with e-commerce and on-line merchants.

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I have a couple of examples for you, but just in the recent months, I ordered a UPS and the credit card was hit immediately. When it came time to pay the credit card bill a month later, there was still no UPS, no UPS had showed up. So upon phoning, believe it or not, the UPS did show up, but had there been no phone calls made, calls, not one, several calls made, I might still be waiting for the UPS at this point. So, clearly, there is a problem there, and there is need for some regulations in that area.

In fact, I was just looking at an article last night from a person who wrote to one of the computer magazines. This fellow claims he ordered a sound card from a reputable company on the Internet, and he said he received prompt confirmation via e-mail. His Visa card was charged. That seems to be automatic in this business. Time went by. He sent e-mails. Nothing happened. Then he noticed the company had no phone number listed on the site, and he called the Better Business Bureau. They told him that they had received other complaints. At the end of the day, he got his money back, but he went through a lot of inconvenience.

The question is whether just this province should have some sort of rules. In some states in the United States, there are some rules that stipulate when the credit card should be charged. They are not national rules but state laws. There should be a policy on payments and charges. These policies are in effect in some states.

So some have them; some do not. The feds do not. I would like to know what this minister and this government and this department are doing in this area.

Mrs. Render: I do not know that this is really a problem. I can think of major stores across the country that have catalogues, and if you buy something out of the catalogue on your credit card, it immediately goes on your credit card charge. These are very reputable stores, and the item shows up perhaps at your door or perhaps at a pickup that you have to go to. I do not know what the difference is.

The member is shaking his head, so perhaps he would explain.

Mr. Maloway: If you were to order a computer from Dell or Gateway on-line or over the phone, they do not hit the credit card. They do not charge the credit card until that equipment is actually sent to the buyer.

What we are talking about here, if Dell and Gateway were to do that, they would charge you immediately upon placing the order. Then where would the incentive be to get the computer made and sent? So their policy is to charge the credit card when the computer is sent. Now, these companies are very efficiently run, and they can predictably send their product out in 10 or 12 days, so they do not have a problem. The moment the computer clears the shipping dock, I guess that is when the card is charged.

Now, this is definitely a problem. You cannot say it is not. Some states have laws on this. So the question is whether the minister will do some research in this area, find out which states do have these laws and simply implement similar laws here, so that consumers do not continue to have this problem.

I think I have only ordered one item on the Internet, that one UPS, and UPS is a very reputable company, and that happened just with one trade. This problem with the sound card prompted this person to write a letter to a national computer magazine.

So the question is: why are some jurisdictions ahead of the game, out in front, progressive, looking after consumers, have legislation as to say when the credit card can be charged and have rules that say that the merchant site has to have a policy on payments and charges, and this province has nothing? Why is that?

Mrs. Render: Mr. Chair, as I started to say earlier, I do not see a difference in this kind of a transaction from the transaction of an individual going to a catalogue and purchasing a coat with a credit card. That credit card number is given when you make the phone call and place the order. It goes immediately on the credit card. Your merchandise may not arrive for two weeks. I do not see any difference in what the member is talking about.

I also go back to my other statement that people have to use common sense. There is an onus on people to check out who they are giving their credit card number to. I believe that there is a very strong onus on a person to do a little bit of sleuthing to see whether the company that they are giving out a credit card number to is a viable company that has a good reputation. A few phone calls can sometimes give you this information, and if you cannot find the proper kind of information, then, again, consumers should use common sense.

Just to change the subject now, I would ask the honourable member, he did request certain staff be here today, and I am just wondering whether he is through with the Securities staff. We do have other staff sitting at the back of the room.

Mr. Maloway: Well, as I had indicated to the minister yesterday, when we start a line of questioning, we do not know whether we are going to be finished in 15 minutes or 15 hours. I mean, unfortunately, that is just the way things work out. It is the responsibility of MLAs in this Legislature, opposition MLAs, to question the government and their department officials as to what they are doing, in this case, to protect consumers, but depending on the minister it will have a different function.

So I cannot guarantee how long I will be on any individual topic. I will try to move along as fast as I can, but if I am not getting the answers to the questions, then I have to ask more questions. It is a two-way street here, so I cannot tell the minister how long it will take.

Mrs. Render: Mr. Chair, I am just asking because your question was a consumer question, and we did have the director of the Consumers' Bureau here a number of times. We have sitting here at the table right now the Manitoba Securities Commission representative, so I just wanted some advice as to whether or not he could go back to his job or whether your questions were going to come back again to Securities or whether perhaps one of the other individuals at the back of the room–whether we should tackle a different subject.

Mr. Maloway: Fair question, and we certainly have a lot more questions on the Securities Commission. I had thought that rather than bringing back the Consumers' Bureau for another day, that we could perhaps deal with this issue right now. The other question that I had in the computer area was the question of on-line privacy. That may have some interest as far as the Securities Commission is concerned. [interjection] The Securities Commission is saying they have no interest in on-line privacy?

Mrs. Render: The Securities Commission is not saying that they have no interest. The shake of the head was to indicate that it has not been a problem.

Mr. Maloway: Then perhaps we can deal with the Consumers' Bureau and on-line privacy tomorrow or another day. We can revert back.

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Mrs. Render: Just to advise the member, to our knowledge, just your last statement, there has not been a problem. These are not complaints that are flowing in at a fast rate. As I stated earlier, the director of the Consumers' Bureau does check for trends, and this is certainly not a trend.

Mr. Maloway: Mr. Chairman, it is a different question as far as on-line privacy is concerned. The question is: has the minister had any complaints, has any area of her department had complaints about on-line privacy? I guess that is the question. If you have not, you have not.

Mrs. Render: Mr. Chair, in answer to the member's question, speaking on behalf of the deputy and speaking on behalf of the Securities Commission, off the top of our heads, we know of no problems.

Mr. Maloway: I would like to move on and ask about the question of Y2K. Now Securities Commissions across the country have taken a bit of a leadership role in the whole area of Y2K. I would like to know what the Securities Commissions reports would indicate as to the progress of the Y2K issue, the initiatives that they took a couple of years ago, how have those initiatives panned out, and what is the prognosis for a successful transition into the new century.

Mrs. Render: Yes, the Securities Commission computer system is year 2000 compliant, and those who are registered with the Securities Commission have been filing reports with the Securities Commission, so that the Securities Commission is aware of just whether or not somebody is compliant. Obviously someone's licence could be affected if they are not compliant.

Mr. Maloway: How many companies does he have reporting to him, and how does he judge their state of compliance?

Mrs. Render: There are 414 brokers who are registered with the Securities Commission.

Mr. Maloway: So the minister is saying that the Securities Commission itself is Y2K compliant. It is saying that the 414 brokers are compliant. The question is: what about the companies? The companies I know were filing certainly with Toronto anyway. The question is: how many companies actually file with you here?

Mrs. Render: The member is correct. The companies that issue shares do issue statements as to how they are doing for the Y2K. That is more a disclosure rather than necessarily being compliant. As I stated earlier, the companies that are registered with the Securities Commission have been filing reports with the Securities Commission. They are not 100 percent compliant but the Securities Commission is monitoring.

Mr. Maloway: Are these monthly reports or quarterly reports? I assume they are quarterly reports. This 414 number, does this include brokerages and companies that are filing, or is this just brokers? I would like a little better explanation as to how this all got started, when it all got started, how many people you are dealing with, split them down as to whether they are companies, brokers, whatever it is, whether there were bumps along the road, and where you feel you are right now. Are you comfortable with where you are or are you not?

Mrs. Render: The brokers, the 414 brokers who are registered, file quarterly reports. Because they are registered with the Securities Commission, the Securities Commission, as we approach the end of the year, is in a position to take action if they feel that there is a problem, if they are not going to be compliant. As for the publicly traded companies that sell shares, they have an obligation to inform their shareholders, but, as I said earlier, it is a disclosure. The Securities Commission cannot take action against them. I guess the shareholders could make a lot of noise and be asking questions as to whether the companies are going to be compliant.

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Mr. Maloway: So how many companies are registered then with the Securities Commission? I have the brokers, 414. How many companies?

Mrs. Render: I am advised that the Securities Commission does not have any statistics. I do not have a number to give out. Likely the number is in the tens of thousands of companies. The companies have filing requirements.

Mr. Maloway: With six months, just barely over six months to go then, how many of the 414 brokers are compliant as of this point?

Mrs. Render: We do not have a number. The latest report has literally just come in and we do not have that number.

Mr. Maloway: Well, assuming that they are filing quarterly, which I assume is correct–it is not monthly, it is quarterly–so then what are the statistics from the previous quarter?

Mrs. Render: I can get that information for the member. We just do not have it here right now.

Mr. Maloway: Well, based on the last quarter, would the minister and her department say that there are many that are compliant or few that are compliant?

Mrs. Render: Many are compliant.

Mr. Maloway: I would like to ask how does she and her department know that they are?

Mrs. Render: I am not too sure of the member's question. I am wondering whether he is saying how do we know for sure that the filing is correct. Is that what the member is asking?

Mr. Maloway: Well, the government itself is spending millions of dollars on not only correcting the Y2K problem. Some of the problems are being solved by brand new systems being brought in. That is why we have this big computer change to the whole provincial government. That is why it has been brought in, $50 million, $80 million, whatever it is going to amount to. On top of that, some systems are being made Y2K compliant through hiring computer people to do the work, and that is costing millions of dollars. So we have these two things.

But that does not solve the problem completely, just making the system compliant. The next step is the testing process. The testing system, if you have read the papers recently, you know that the gas company is now in the testing phase. We have no idea what stage they are at right now, and I am sure they do not have the money that the government does. The government can afford to hire the best people. Do not forget there is a shortage of people out there to do this kind of work, too, because a lot of people have been waiting until the last minute, and they are now rushing around, trying to get these changes effected.

Now, the Manitoba government started a little earlier than most, and it decided to scrap most of its old systems and come in with new ones, and that is to its credit that it did that. But it is a very expensive process, a very involved process, and it is very time consuming. So, presumably, these brokerages, either they have replaced systems completely or they have hired Y2K experts to come in and make the system Y2K compliant, and if they have done that, then they have to go through a testing stage.

What I want to know is: what stage are these people at right now? Can the minister tell me that 90 percent of the 414 are to the point where they are into their testing phase already, or are they finished their testing phase already? I mean, where are they? Maybe they are just starting to look at the problem. And if you do not know, who is supposed to know?

Mrs. Render: That is part of what makes up the report. Perhaps the first report that a broker might file might say I am 10 percent compliant, and the next report would ideally show an increase in just how far along they are. So there is a monitoring.

Mr. Maloway: But we still get back to the fact that your reports were due on the 15th. Presumably not everybody has filed on time. I do not know whether that is true or not. It is going to take awhile to assess those reports, but, surely, you have assessed the ones from three months ago. So let us take a snapshot from three months ago and tell us where everything was three months ago. Then we can look at where we are right now and where we have to go.

Mrs. Render: As I said, a couple of minutes ago, we can get that information for the member. We do not have it here in front of us.

Mr. Maloway: Can we have this information by tomorrow?

Mrs. Render: We will certainly try.

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Mr. Maloway: I am talking about the information that is already three months old that has already been analyzed. The 15th's report is ready. The next question then is, when can we expect the analysis of the reports that were due on the 15? How long will it take you to tell us what those are?

Mrs. Render: The analysis of the reports is not done solely by the Securities Commission. Some of it is done by IDA. Some of it is done by staff in Manitoba, and some of it is done by people in Ontario. So it would be a number of weeks before everything sort of comes back together into a final report.

Mr. Maloway: Would the minister and her department say that this effort is ahead of schedule? Is it on schedule or is it behind schedule, in general?

Mrs. Render: All indications are that it was on schedule.

Mr. Maloway: Has there been any reluctance on the part of any of the members to comply with the requirements?

Mrs. Render: The answer is no.

Mr. Maloway: Does the minister have any way of guaranteeing that these systems are going to be up and running then by the year 2000?

Mrs. Render: I think that is like asking the minister if she can guarantee happiness for anyone. The answer is no.

Mr. Maloway: I guess at the end of the day there is a bit of risk and it is fairly high risk here, certainly for the shareholders of the company for sure, but also for the economy, so I think every effort has to be made to push the process along. I know that there are companies out there who will drag their feet to the end, and they will be wondering why they did not solve the problem earlier and why it is costing so much now as opposed to getting it done cheaper earlier. I think that there is a certain number that you could probably isolate out of that group of 414, but out of any group that are going to give you some grief, that is what I was really trying to concentrate on, as to whether you were finding some evidence of that.

Mrs. Render: Actually I am not too sure that there was a question there but, yes, our Securities Commission is doing all it can possibly do to ensure that the 414 brokers that are registered with it are compliant. It is in the interest of the Securities Commission, it is in the interest of the economics for the province of Manitoba to make sure that everyone is Y2K compliant, but I do not think that anybody can guarantee anything other than guaranteeing best effort.

Mr. Maloway: I guess the government of China had the most interesting solution to the Y2K problem. I see the Chairman smiling, so maybe he has heard the solution. It was reported in the press a few months ago. That is, to deal with the national airlines, the government of China has ordered that all the presidents of the airlines and all the executive officers of the airlines must be in the air flying on January 1. I thought that was a wonderful solution, because I asked one company president at a legislative committee a few months ago as to whether, you know, as a guarantee and a warranty that he would resign if this system collapsed next January 1.

I can see a reluctance for him to do that because, you know, when you phone Dell Computer or you phone Gateway Computers and ask them to certify Y2K compliance, they will tell you it is Y2K compliant, but when you ask them to certify it and put it on the invoice and sign it, they will not do it. So no one really knows whether this is all going to work properly until we actually get there.

Ultimately you can test your systems, and the gas company says it is all going to work just well and good. I know the PUB are represented here and we will be asking them questions about it too. They will say, well, based on the available information we have got, it should all work, but nobody knows exactly 100 percent that it is going to be.

With the lack of concern of some companies and some industries and some countries, for example, there has been a huge financial crisis in Asia recently, and we dealt with this before. If you have production models in Canada and North America which are sort of first in time, I guess it is called, or just in time, if you have a hundred products or a hundred parts to a car or a product, you can have 99 parts show up on time, but if one does not, the whole assembly line will have to close down. If that one part comes from Southeast Asia or from a plant out there that because of financial problems, financial meltdowns in the last couple of years has not been able to put the resources into Y2K or has not taken it that seriously, then you are going to shut down and put thousands of people out of work for a period of time until you can solve that problem. That is why potentially it could be fairly serious. We do not know how seriously some of the companies are taking it.

There was an article in the paper not long ago. I think it was a little grocer from Elie, but he was representative, I think, of a lot of people out there who think this is just a big hoax, just a big conspiracy on the part of Bill Gates to get even richer. You know, this was not an issue until a couple of years ago. The computer company executives were not exactly trumpeting this whole issue more than two or three years ago, when they probably should, and they know that they can sit back and they are going to make big money out of this whole thing. So people like the grocer in Elie can understand that. You know, new computers are being required and he is being pushed towards this.

A lot of these people do not like computers in the first place. So first of all, they are antitechnology, they are resisting the change. Then they are being told they have to do this or the system will not work. They are skeptical. The other factor here is the money. A lot of people just do not have the money or do not want to put the money up for these kinds of changes. So I can understand that if you would tell me that you are having resistance on the part of some of your companies, that some of these companies are telling you that they are compliant when they are not.

You know, everyone has different testing mechanisms to test whether it is Y2K compliant. If you check, different companies have different testing mechanisms. There does not seem to be a standard. One company will say, well, turn on the computer this way and do this and do that and it should be okay. Another company will say, do it a different way. There is just no consistency out there. This is very hit and miss.

I do not know about you, but I think I would like to stay on the ground next January 1, because I do not know that we can really be sure. On the other hand–

Mrs. Render: You can fly with me.

Mr. Maloway: The minister said I can fly with her. I think I might trust her flying a little more than some, because you can land little planes, I think, right? That is the idea, that little planes, if they run into trouble can land.

Mrs. Render: You are safe with me.

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Mr. Maloway: Yes, but these big ones, when they get up there, there is no way they are coming down if the system does not work properly.

So this is a very expensive problem to fix. When all the bills are in from the government, if we ever get to the Finance department, if we ever get any answers out of them, that is the other problem is they never want to give any answers. This is an atrocious amount of money that has been spent on this whole effort. You can argue that it is absolutely necessary. We have had value over the years in using computer programs if they have then changed years ago would have very expensive. So all in all it is probably the amortized expense over a number of years. It is not that onerous. But to be hit with the expenses all of a sudden in a short period of time could be very difficult on different companies. I am not convinced you are getting all the facts here, that you are getting all the truth from these companies. They are telling you how Y2K ready they are, whether they are or not unless you have the ability to get in there and take a look at them. Ultimately the shareholders are going to be the ones that I guess are going to be chasing around. I can tell you that lawyers are waiting for a big windfall out of this whole Y2K business because the lawsuits, while they are starting to occur now, probably there will be a huge number of them starting in January and thereafter.

Mrs. Render: I would say that none of the companies, none of the brokers are dragging their feet. It is in their best interests to make sure that they are Y2K compliant. If they are not, they can lose their registration, go out of business. So we must make sure that we do not put words in the mouth of people who are not here to perhaps speak for themselves. As I say, it is in their best interests to make sure that they do their level best to be Y2K compliant.

Mr. Maloway: I think that is a true assessment and that in fact there will be companies that go out of business. That is just the nature of business. There will be the odd failure because of the lack of foresight of some of the companies. I want to ask the minister, page 46 of the report indicates that her department is reviewing and developing legislation, regulations and local and national policies. Now, what sort of activity has this department been involved in over the last year in this area?

Mrs. Render: The Securities Commission has been very busy, again, as I mentioned earlier, working to harmonize rules; also makes local Manitoba rules, one called the Keystone Company public offering just to facilitate the raising of smaller amounts of capital. Of course, this will be good for the Manitoba economy. Any companies then which are created will be listed on the Winnipeg Stock Exchange.

I wish I could explain it better. Essentially what it is is investing in the managers and then using all the shareholders, whether or not they take that opportunity to then create a company, and, as I said, that company would be listed on the Winnipeg Stock Exchange. As you know, we need to have more companies listed on the Stock Exchange. It is a way of raising smaller amounts of capital because the big houses here will not look at underwriting under $20 million or $30 million, so we needed a way to encourage the raising of capital for smaller ventures. One example that I can think of–it is not an example of this particular Keystone rule, but just to give the member an idea of the problems, the Fort Garry Brewing Company had a problem initially trying to find somebody to underwrite it. So here in Manitoba, as I say, your big houses are not interested in looking. You mentioned yesterday that you tested the waters there with your potential gas truck to see whether you could set up a viable business. Unless it looks as if you are going to be putting together a business that is going to be big bucks, the small entrepreneur here in Manitoba just had no way to raise money easily.

Before I forget, I should just mention that the Securities Commission has been working on the rules and regulations for the proclamation of the new Commodities Act.

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Mr. Maloway: Mr. Chairman, the ENSIS Growth Fund and the Crocus Fund are two venture capital funds that operate in this province, so how does the Keystone capital relate as far as they are concerned?

Mrs. Render: Mr. Chair, I have been advised that the Keystone method would be looking at one specific company, whereas Crocus or ENSIS would be looking at a number of them. Their managers would be choosing a series of investments rather than just focusing on one.

Mr. Maloway: Well, as the minister knows, the ENSIS Growth Fund and the Crocus Fund contributions to the fund are tax deductible under the RRSP provisions of the law and thereby the taxpayers are, in fact, helping to subsidize the investor. How does Keystone raise its capital, then? It is presumably a different structure.

Mrs. Render: Mr. Chair, Keystone raises its money through a public offer through a prospectus.

Mr. Maloway: Well, how old is it, and what competitors does it have in the market?

Mrs. Render: In answer to your question how old, the rules have just been published for comment, and that was probably less than three weeks ago.

Let me see if I can go back and explain this a little bit better. There is a problem with small business financing in Manitoba. There has been a problem. It is called the Keystone Company Program, I guess, really is the official name. I guess you could call it a venture capital pool program proposed by the Winnipeg Stock Exchange. I am advised that this is what the rule will authorize as to how this is going to be done.

So the proposed commission rule based on the policies of the Stock Exchange, this has been reviewed by the commission and the securities advisory committee. So after publication there is a comment period of 60 days prior to the rule achieving legal status, and then it is published in the Gazette.

Mr. Maloway: I would like to ask the minister then: has its IPO been concluded?

Mrs. Render: Keystone is essentially a rule as to how to raise the money. So any company could use the rule to do their own offering.

Under this kind of a program, investors invest in a company that has no real assets, and investments are made primarily on the strength of the management team of the company. The management then looks for an opportunity and then goes to the shareholders for a vote to see whether or not they go that particular route.

Mr. Maloway: Well, I asked also who its competitors were in the market. Who would it be competing with for investment?

Mrs. Render: The Alberta Stock Exchange and the Vancouver Stock Exchange would be the two main competitors.

Mr. Maloway: Mr. Chairman, does it have a prospectus that could be brought at our next meeting, and I could take a look at it? I would like to ask whether the prospectus is available that could be brought to the next meeting.

Mrs. Render: Yes, we can bring something.

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Mr. Maloway: Mr. Chairman, I would like to ask who is the management of the Keystone capital? Do you have a list of the management or the board of directors?

Mrs. Render: Mr. Chair, it is a wee bit confusing. It is not a company in itself, so it does not have its own management. It is a rule that that can be utilized by companies to raise money.

Mr. Maloway: I wanted to get an idea of –

Mrs. Render: If I could just interrupt the member for Elmwood. I think it would be useful if I perhaps brought a briefing paragraph and shared it with the member.

Mr. Maloway: Mr. Chairman, I think that would be a very timely idea, and I thank the minister for that. I would like to–we are quickly running out of time here–get an idea of some of the activities of the commission over the last year. You do not hear too much about the commission. Occasionally, it has a cease and desist order that it issues. But I would like some idea of the activities that it has been involved in over the last year or two and some of the concerns that it has. Perhaps, the minister could give us some ideas of some of the great things that it has done to protect consumers in Manitoba over the last few years.

Mrs. Render: The commission really just has been active doing its job, registering securities, dealers, brokers, advisers, portfolio managers, sales personnel, reviews, prospectuses and other disclosure documents to ensure true, plain disclosure with regard to new issues, to securities. It monitors financial statements, insider trading reports and other continuous disclosure material by issuers of securities. It licenses and regulates–well, that is another subject so I will leave that one.

Obviously, it also investigates suspected violations under legislation, has held hearings, has handled prosecutions.

Mr. Maloway: The number of exemption orders increased in the last couple of years. I would like to know what number they were in 1999. You had 194 in '97-98. How many did you have in 1999, or '98-99, I guess.

Mrs. Render: In 1998-99, the number was 177.

Mr. Maloway: Mr. Chairman, could the minister explain the use of the exemption orders?

Mrs. Render: Usually the exemption is because of a technical problem, that the company cannot comply with a particular rule or regulation.

Mr. Maloway: I would like to ask about the whole area of insider trading and ask whether that is a problem that is increasing with the commission or whether it is a problem that just remains constant year after year.

Mrs. Render: I guess human nature being what it is, it is a problem that is always there. Market activity has increased. There has been an increase in insider trading but not a huge increase.

Mr. Maloway: There is certainly an ongoing problem with mutual fund operations. The minister will recall last year, I believe it was, that a big mutual fund company in Toronto, in that case the manager was insider trading, and that is definite conflict because the manager has the control over the investment decisions of the fund. I am wondering if anything has happened over the last couple of years to make certain that that kind of activity does not occur. In addition, mutual funds–well, anyway, let us deal with that issue first.

Mrs. Render: Insiders must report their holdings to the Securities Commission. The Securities Commission obviously acts on complaints. But, as I say, there is a monitoring in place by the Securities Commission.

Mr. Chairperson: The time being six o'clock, committee rise.