Friday 9th December 2016

Resource Clips


‘Crisis’ at the TSX Venture

The Venture Capital Markets Association argues the juniors’ case for regulatory reform

by Ted Niles

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The Venture Capital Markets Association argues the juniors’ case for regulatory reform

Panellists Ron MacDonald, Don Mosher, Frank Holmes and Joe Martin discuss the juniors’ plight
at the Toronto Resource Investment Conference 2013.

 

These are indeed bad times for the junior resource sector. But can anything be done? The newly formed Venture Capital Markets Association believes part of the problem can be solved and it’s embarking on a plan of action.

There’s little doubt that some combination of macroeconomic forces and regulatory inefficiency has caused one of the worst downturns in memory. Few question the view that bear markets have the nasty habit of following bull markets. To the extent that the bears inevitably give way to the bulls again—leaner and meaner bulls, moreover, culled of those who preferred romancing cows to pulling ploughs—this is generally considered good.

There’s some dispute, however, regarding regulatory inefficiencies. One side believes that while the burden of regulation on venture capital companies can be onerous, it is necessary and manageable. But, the other side argues, what was manageable (if only just) at the height of the market is not so much slowing down a cyclical upturn as preventing one.

Speaking September 12 at Cambridge House International’s Toronto Resource Investment Conference 2013, the event’s founder and chairperson Joe Martin says: “For over 100 years Canada has been a world leader in providing venture capital for speculative investing and mineral exploration, mining, technology, life sciences and energy. Today, zealous over-regulation by a multitude of governing organizations is rapidly bringing venture funding to a halt. We’re not talking here about the regulation of trade, we’re talking about the regulation of money. Hundreds of thousands of jobs across Canada and around the world are going to be lost.”

You need two hands to lift [the TSXV’s] book of regulations and policies. It’s absolutely mind-boggling all the things you’re required to do to raise a half-million dollars—which means that half of that half-million will go to lawyers.—Ned Goodman

Two panels at the conference discussed problems specifically facing TSX Venture resource companies. While high-frequency algorithmic trading was touched upon—a particular concern of Kaiser Research Online editor John Kaiser—the priority issues were access to capital and regulatory overkill.

Ned Goodman, president/CEO of Dundee Corp TSX:DC.A, explains, “In raising money you’re always frustrated, but if you’re talking about the Venture exchange it’s more than frustration. I think the Venture exchange has forgotten why stock exchanges were put into existence. They were put into existence to allow people to invest money in ventures that can be built and grown and more money has to be raised. Instead it’s been nothing more than a feeding source for the legal community—and you end up spending legal fees in excess of the amount of money you can raise before you have to start all over again.”

Goodman continues, “You need two hands to lift [the TSXV’s] book of regulations and policies. It’s absolutely mind-boggling all the things you’re required to do to raise a half-million dollars—which means that half of that half-million will go to lawyers. The Vancouver exchange was one where you could raise money and it created an awful lot of nice companies. But the rules and regs [for the TSXV] are unbelievable and they’re not designed for junior companies. In most instances you’re so blocked you can’t even do your financing. Then, once you are on the exchange, the costs of staying there and doing business—you can’t buy something or sell something without having to deal with a bureaucrat [who has] no knowledge of the industry at all.”

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