Strangulation by Regulation – the death knell for BC jobs

POSTED ON August 10, 2015 BY Joe Martin
CATEGORY Stories,

An Open Letter to All Elected Members of the Legislative Assembly of British Columbia

Venture Capital is all about speculative investing
Innovation and determination for discovery leading to jobs

BC has a well earned reputation for raising venture capital, particularly with companies involved in mineral exploration, where BC companies have accounted for about 60% of worldwide activity. Many of the major mines in the world were discovered by Vancouver-based junior exploration companies raising risk capital from speculators. All significant mines in BC were initially financed by equity raises subscribed by speculators.

This industry is now in a death spiral because regulators are effectively killing the BC-based support industries that have been responsible for creating thousands of jobs in BC and around the world. The exploration financing mechanism based in Vancouver, at one time generating over $300 million annually, is in full retreat.

This Strangulation by Regulation is led by:

BCSC - the BC Securities Commission
IIROC - the Investment Industry Regulation Organization of Canada
CMRA - the Capital Markets Regulatory Authority
the banks that control the major stock exchanges (TSX, TSX-V) and have shifted the business focus from risk capital equity raises to wealth preservation.

The BCSC, in its current form, is a well-meaning but destructive force:

a Crown Corporation supposedly reporting to the Minister of Finance
receives no financial support from the provincial treasury
generates income from fees and fines set by its regulations
returns no funds to the provincial treasury
80% of its funds go to salaries and premises
“growth” is achieved by creating new regulations and new fee structures
contracts out its obligations of oversight of brokerage firms to Ontario's IIROC
rules set by IIROC are killing Canada’s independent brokerage industry, with no regard for investors who may choose some 'high risk-high reward' speculation.

Who is Mis-Calling the Shots?

The BCSC leaders comprise lawyers, a retired economics professor, and an accountant - a major absence of expertise in the industries that built British Columbia. There is nobody representing venture capital or mining exploration, when in fact those industries should be controlling their futures!

The Irrelevant National Regulator

Efforts to create a national regulator have too many obstacles to be of help in this struggle for venture capital to survive the current regulator-generated problems.

Stock Exchanges:
The TSX and TSX-V are Toronto based and bank controlled. The TSX-V has evolved into a bureaucratic dysfunctional organization, operating as an unelected board of directors, inflicting its own set of moving target rules on its listed issuers.

Brutalization and Extinction of the Retail Investor:

Piling on of regulatory and pseudo-regulatory bureaucracies forces issuers to raise millions of dollars for payment of regulation costs in addition to the constructive capital they require. The BCSC and the Alberta Securities Commission are empowered to regulate the TSX-V, but choose not to do so. Ontario rules.
Further compounding the problem, the TSX-V continues to list hundreds of non-compliant companies with negative working capital, damaging efforts by others to go forward.

THE VISION

BC is capable of reestablishing itself as a major venture capital centre, and must do so or BC will lose its position as the world centre of mineral exploration:

A restructured leaner BCSC should report to a new independent board controlled by members that reflect the industry
The BCSC should take responsibility for and control of its obligations
- IIROC should be replaced with a BCSC-empowered industry board

The BCSC should become pro-active

Become responsive to the brokerage industry
Actively seek a public exchange to locate in the province
Budget for marketing BC as a world centre for venture capital
Market listing in BC to international venture capital centres
Focus educational programs on how venture capital works
Push to expand the passport system with other jurisdictions

VCMA Advisory Board:
Don Mosher: BD Capital Inc.; don@venturefunding.biz
Joe Martin: Cambridge House Int’l. Inc.; jmartin @cambridgehouse.com
Brian Ashton: Eagle Advisory Group; brianashton16@gmail.com
Tony Simon, CPA, CA: Seguro Consulting Inc; tony.whistler@gmail.com
Lawrence Page, Q.C.: Manex Resource Group Inc.; lpage@mnxltd.com
John Kaiser: Kaiser Research Online: jkaiser@kaisesrresearch.com

Joe Martin

jmartin@cambridgehouse.com

Joe Martin

jmartin@cambridgehouse.com

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