Debating society or real progress? Frustrated prospectors listen to securities regulators

(March 12, 2003) Major players in the move to reform Canada’s fragmented securities regulatory system came face to face with the disgruntled mining industry yesterday at the annual convention of the Prospectors & Developers Association of Canada (PDAC) in Toronto.

Speaking on a panel organized by PDAC’s securities committee were David Brown, chair of the Ontario Securities Commission (OSC); Robert Fabes, vice president of advisory affairs for the Toronto Stock Exchange (TSX); Doug Hyndman, chair of the British Columbia Securities Commission (BCSC); and securities lawyer Harold MacKay, vice-chair of the newly formed “wise persons” committee, dedicated to finding and recommending solutions to Canada’s outmoded securities regulatory structure.

Publicly traded mining companies in Canada have long been frustrated by the fragmented and cumbersome regulatory system and they want to see reform happen — and soon. As MacKay told the audience, the challenge for regulators is to come up with a viable plan for change: “How can we be sure we don’t just have a debating society over the next several months… when people are asking that we make real progress?”

And the mining industry is getting impatient. Says John Steele, co-chair of PDAC’s securities committee, “[Mining companies] are 28% of the public companies in this country and we raise all our money through the stock market.” The duplication of rules and fees brought about by multiple provincial securities laws has a particularly negative impact on them, especially exploration companies who absorb the costs and undergo delays when trying to raise money. And that’s a barrier for global competition.

So did the panelists give the industry hope that things will change for the better? Steele isn’t entirely optimistic. “Changes are going to happen,” he says. “What we’re not sure of is whether they’ll meet our objectives.” Those objectives, says Steele, are a faster system and improved enforcement. And while panel members seem to understand the issues involved, he’s not convinced that they have answers. “They didn’t really come up with clear solutions.”

Brown, long a proponent of a single, national securities regulator, reiterated the key issues involved — “To be viable you must have capital at a reasonable cost.” However, as Bre-X has taught the mining industry, market reputation “can have a devastating impact on capital and its availability.” Brown outlined some of the initiatives underway at the OSC, including efforts to reduce costs.

On the other side of the coin, Hyndman said no to a new national regulatory system. Reiterating his argument for a simplified, streamlined, principles-based approach, Hyndman says it’s necessary to foster a culture of compliance by educating investors and industries. The mining industry should have room to focus on finding new mines, not searching for “new loopholes.”

Much anticipation surrounded MacKay’s remarks. As the last speaker on the panel, his main message was to urge the mining industry to get involved. He said that the industry should be active now — securities regulators cannot “work in a vacuum” and mining industry members can provide the “missing pieces.” MacKay says he expects to submit his recommendations in the fall of 2003 — at that point, he says, it will be up to lawmakers and governments to implement change. For that to happen, industry will have to “keep the heat on” to make sure that change happens sooner rather than later.

A lot of possibilities are on the table, but what concerns Steele is timing. “I am not optimistic that they will do this in any reasonable time period,” he said. “We need it now — we can’t wait three years.”

Caroline Cakebread is a Toronto-based investment writer.

(03/12/03)