Mining Markets


Letter to the editor: BCSC to blame for overregulation of juniors

I'm disappointed in Mining Markets' recent interview with Venture Capital Markets Association of Canada cofounder Don Mosher, in which he stated that the British Columbia Securities Commission (BCSC) is not the problem for junior mining...

I’m disappointed in Mining Markets’ recent interview with Venture Capital Markets Association of Canada cofounder Don Mosher, in which he stated that the British Columbia Securities Commission (BCSC) is not the problem for junior mining companies. That is so incorrect — so off-base — as to be ludicrous. How could you get it so wrong?

Haven’t you noticed a reluctance by TSX Venture Exchange companies to expand, knowing that if they try, the Commission will pull their chain, run them around in circles, and waste a hundred grand of their money?

I am determined to take my company off the Canadian market. The climate has become one of prevention, not regulation. Poison, not support. While I agree that regulation is good, it has to be regulation that management of companies can understand and agree and comply with. Enforcement by the BCSC’s compliance department is subjective — the same report could be submitted four times and there will be four different, unrelated responses. The lack of consistency, and seemingly making up of rules as they go along, makes it prohibitively costly to deal with the Commission staff.

When the BCSC took over the regulatory role, the Compliance Officer from the Exchange morphed across to the Commission where he ran a one-man desk. Just a desk — no support staff. Then along came Bre-X and the world fell right into his lap. The BCSC reached out for a set of rules and picked up the JORC (Joint Ore Reserves Committee) rules from Australia . While the result was unintended, the whole world suddenly was on the same page — Australians were governed by the same rules as Canadians and Europeans (who also match JORC, with a few minor differences) and the market took off. Investors across the world invested with confidence, and the industry prospered.

But that wasn’t enough for Commission compliance staff, and the department led a parade to change the rules on the pretense that they could enhance capital raising and make it easier for junior companies to raise money. It was a lie! Yet on July 1, 2011, the rules changed, and now the whole world has one set of rules, except Canada , which has another set of rules. In this change, almost every Professional Association in the United States was knocked off the “approved list” of associations to which National Instrument 43-101 authors could belong in order to be deemed a “Qualified Person.” In one swoop, almost every United States geologist and engineer was deemed to not be a QP and dismissed from authoring reports. Clearly, a “job for the boys in Canada ” rule. Almost immediately the quotes for a Canadian QP to perform an independent 43-101 report went from $5,000 to $45,000. Thanks BCSC!

In the meantime, the Compliance Department grew – from one person to many, due to the increased report reviewing workload. They have grown to a large office now, and salaries have grown commensurately.

I believe Compliance staff have taken the industry strongly backward. While they dream of a perfect world, they have suppressed the entrepreneurial spirit of the tough, nuggety types that run these companies, and have clearly denied the Canadian investor market many opportunities by denying companies approvals of 43-101 reports. Investment and employment has plummeted, yet the Commission staff are employed and get their paycheques, so they’ll keep going.

Commission management and staff want to be independent, and to govern themselves. That is more comfortable than having to answer publicly for the damage they have caused to the industry.  Other companies have complained about Compliance staff to the management of the Commission, to no avail. I hear that they are met with a brick wall, and fear reprisals from Compliance staff.  This is obstructionism.
When I approached the Compliance leadership with my concerns, they stated to me “We have a mandate from the province to do these things.” So I approached the Minister of Finance’s office with an appeal to get involved and force openness at the Commission. Rather than speak with me, I was pushed to a mid-level person who then unloaded me onto an intern. Yes, an intern! That displayed the lack of interest by the Minister, and at that point, I realized that the industry is destined to shrink, literally abandoned by the political mastery.
Clearly, the concern expressed at last year’s Town Hall meeting has faded away, without response. Commission Compliance staff are as reckless as ever, and I see a stream of corrective news releases by companies being forced to do corrective reports due to Commission insistence. Is the industry safeguarded by Commission enforcement? No! Could Bre-X happen again? Yes! Would Commission Compliance have prevented Bre-X? No! Because today the crook would be a QP and would still be a crook. All that the Commission Compliance staff is succeeding in doing is stamping down a once-vibrant industry through over-regulation and intimidation. Crooks will always find a way around the safeguards.
The solution is simple: return to the JORC rules, and retire Compliance leadership. The Canadian junior market is not likely to recover unless both of these occur. 
My cry is a last appeal for reasonableness and change. JORC standards work for the rest of the world — can we adopt those again and get back to sanity, reasonable Commission treatment, and rebuild our industry?
The industry has expressed its concern — yet only silence has emanated from the Commission, the Exchange, and the Minister of Finance’s office.  I expect that the London AIM Exchange might welcome our 30-year listed B.C. corporation.
— Signed, a 30-year Canadian public company veteran

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1 Comment » for Letter to the editor: BCSC to blame for overregulation of juniors
  1. John F. Gravel says:

    The QP cost, as stated by the author, has gone up not because the hourly rate has increased, but the number of hours applied for more stringent due diligence has:

    $200 x 25 hours = $5,000.00
    $200 x 225 hours = $45,000.00

    We should certainly argue if the QP designation goes far enough to protect investors (I don’t believe it does). If I were were an uneducated investor, I would be much more confident that a QP spent more than 2.5 days analyzing a project before investing my life savings.

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