BC Mining Minister Open to Discussing Securities Reform

British Columbia’s mines and energy minister is willing to discuss reforms to securities regulations that would make it easier to attract venture capital to industries that rely on it such as junior mining. 

In a recent interview with Resource Investing News, Bill Bennett, the MLA for Kootenay East in the province’s southeast corner, said he’d be open to talking with the federal government and other Canadian provinces about securities regulations, which have come under scrutiny of late, particularly by small-cap explorers who are finding it increasingly difficult to raise capital to pay for exploration expenditures, listing fees and other necessary annual expenses.

Industry heavyweights like John Kaiser have predicted the death of hundreds of junior mining companies, many of which have already delisted from the TSX Venture, the main trading board for junior miners, due to high listing fees and excessive regulations. Compounding the problem is a weak environment for metals prices currently, which has pushed retail and institutional investors to the sidelines.

A crackdown last year by securities regulators that targeted junior mining companies over disclosure rules was described as “a wake-up call to capital market participants,” The Financial Post reported.

One suggestion at a recent meeting of the Venture Capital Markets Association (VCMA), a group formed this year to attract more venture capital into mining, was to lobby federal and provincial governments to make changes to regulations that would make it easier to invest in junior mining companies.

“It’s something that governments can change. It’s probably the Canadian government but there’s hopefully things that we can do provincially,” the Minister said, adding: “I can certainly work with my provincial counterparts and try to convince them that changes should be made.”

One potential change voiced by the VCMA is to amend the accredited investor rule, whereby an investor wanting to participate in a private placement — the most common tool for a junior mining company to raise money — is required to earn $200,000 per year and have $1 million in assets. The rule is estimated to exclude over 90 percent of Canadians from participating in a private placement.

Another is the convention that investors aged 65 and older are deemed by regulators to be too old to understand the high risks involved in capital ventures like junior mining.

Rick Peterson, president of Waterfront Capital Corporation, venture capitalist, and a contender for the leadership of the BC Conservative Party, pointed to the age restriction as one impediment to venture capital attraction that needs to be addressed.

“Why are they being precluded? I’d think there’s a Charter [of Rights] challenge right there. I’m 66 and I can’t invest in the securities business?” Peterson asked rhetorically.

Peterson was outspoken at a recent VCMA meeting about the need to lobby provincial governments about changing the regulations. Since securities regulation is a provincial responsibility, and because much of Canada’s venture capital is domiciled in BC, he suggested the BC government should be targetted.

However, Peterson wasn’t hopeful about getting the provincial government onside with venture capitalists like those in the junior mining industry.

“The problem here is the provincial government has no interest in siding with those of us in the venture capital business,” said Peterson, who downplayed recent overtures by the Canadian government to create a national securities regulator, a move away from the current system where securities trading is overseen by 13 regulators across the country.

Such an overarching regulator, however, is by not means assured. While Ontario, BC, and the Venture Capital Markets Association, have all expressed support for a national regulator, Quebec and Alberta have said they would not participate.

“Those people who are creating wealth through the venture capital market here are handcuffed and handicapped. They are outnumbered, outspent,” Peterson said. “And they are starting to get a voice through this very worthwhile association but they really need a lot of help. That voice is not being heard.”

Instead, said Peterson, the message that is being promoted through the BC Securities Commission is “don’t touch this business”. He called out the BCSC for its current advertising campaign warning investors against fraud, which appears to target just the sort of companies like mineral exploration firms that could use an influx of venture capital.

“We have protection for fraud, it’s called the Criminal Code. There has to be a balance and the BCSC is off balance,” Peterson argued. He said the risk of putting money into venture capital markets should be highlighted but so should the benefits, such as the hundreds of jobs that are created “through the drill bit” at junior mining companies.

“The whole shift towards regulatory protection has gone way too far,” he said. “Ninety percent of companies out there are doing their very best to comply from an avalanche of papers, regulations and filings. So that’s where we need to start.”

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