Support sought for securities reform

A summer meeting with Douglas Hyndman of the British Columbia Securities Commission has the Prospectors and Developers Association of Canada (PDAC) launching a lobbying campaign in western Canada designed to reform securities regulations.

PDAC directors questioned Hyndman about B.C.’s Continuous Market Access (CAM) system and expressed their frustration with the seemingly endless discussion about regulatory reform that has been happening since the 1930s.

While sympathizing with PDAC concerns, Hyndman said it was important to build greater momentum at the national level for streamlining and simplifying regulatory requirements.

In a follow-up letter to the PDAC, Hyndman wrote: “With PDAC’s support for regulatory changes that will improve opportunities for junior mining companies to raise capital, we might find that consensus on how to reform both content and structure is closer than it appears.”

In response, the PDAC is rallying its members and sister organizations in western Canada to support its drive for a single national securities regulator that consistently applies one set of rules. While Ontario supports that position, Alberta and British Columbia do not as yet, and it is in those provinces that the PDAC is focusing its efforts.

“If Canadian Mining Association-like regulation for junior companies is ever to be adopted,” says John Steele, co-chair of the PDAC’s securities committee, “now is the time for B.C. to join with Ontario and make it happen.”

Once it has the support of western members and mining associations, the PDAC hopes to present its collective views to B.C. Premier Gordon Campbell and Alberta Premier Ralph Klein, urging them to join with Ontario.

The PDAC’s position was approved by the PDAC board in May.

A single regulator, the PDAC argues, would reduce redundancies in the current system, lower the cost of financings and compliance, and ensure all potential Canadian investors have an equal opportunity to participate.

As well as structural reform, the PDAC is also calling for development of securities laws whose content meets certain criteria. For example, they must provide junior issuers with access to capital on a timely, efficient and cost-effective basis, and restore and maintain public confidence in the capital markets. They must also include disclosure and reporting obligations that strike a balance between protection of the investing public and ensuring that the maximum amount of a company’s financial and managerial resources are available for mineral exploration and development work.

The PDAC has outlined specifics regarding a national regulator and possible new securities laws. The single regulator need not be a federal agency or one based in Ottawa, but could be established in any of the provinces. The only requirements are that the regulator be close to financial centres, removed from political influence, innovative and responsive to market needs and aware of sectoral and regional interests.

Once a single regulator has been established, the next step should be the development of rules and regulations that facilitate access to capital while ensuring investor protection. The association wants the rules to accommodate small issuers that lack capital and management resources, in meeting overly stringent corporate governance and disclosure obligations.

Enforcement will be a vital part of maintaining investor confidence in the reformed regulations. The PDAC believes that offences should be vigorously enforced by a single regulator and that Ottawa must supply appropriate policing with criminal law investigative and prosecutorial powers.

The reform of securities regulations is of vital importance to the mineral exploration and mining industries. Says Steele: “With legal requirements varying from one jurisdiction to the next, ensuring compliance across the board is a lengthy and expensive process that requires companies to retain professional advisors in each jurisdiction of filing.”

In order to reduce their costs, most PDAC member companies raise money in only two or three provinces and this means residents in other provinces and territories in Canada cannot participate in financing these companies.

— The preceding is an excerpt from In Brief, a quarterly publication of the Prospectors and Developers Association of Canada.