David Baines: Investors urge regulators to force public disclosure of private stock sales
Not surprisingly, the majority of those supporting greater disclosure are public citizens and generally smaller investors
By David Baines, Vancouver Sun January 20, 2011 5:51 AM
http://www.vancouversun.com/Investors+urge+regulators+force+public+disclosure+private+stock+sales/4136971/story.html
Last September, the B.C. Securities Commission proposed new rules to provide the public with more information about securities that companies sell privately to B.C. investors.
If approved, the rules would force issuing companies to publicly disclose the names of all individuals and companies that buy shares under exemptions from prospectus and registration requirements.
It has always been mandatory for reporting issuers to make this sort of disclosure, but the commission stopped releasing this information to the public in 2003, ostensibly due to privacy concerns.
I was not happy.
This sort of disclosure shines much light on junior stock deals. For me, it was an immense aid in exposing unethical promotions and outright frauds.
Here's why.
Penny stock promoters routinely sell large blocks of cheap shares privately, at a discount to the prevailing market price, to close friends and associates and to people who can help them promote the stock, such as newsletter writers and investor relations consultants.
In some cases, the promoters sell the stock to parties who act as their nominees.
Often these nominees are located in offshore tax and secrecy havens. This enables the promoter to deal stock anonymously, without reporting or tax consequences.
Requiring disclosure of who is buying the cheap stock, how much they are buying and at what price gives investors, analysts and reporters a good idea whether it is a real business effort, or simply another stock promotion.
The commission invited comments on the proposed rules, and received 39 responses.
I have reviewed those responses and they basically divide into two subsets: The first consists mainly of public citizens, who are very much in favour. Twenty-six people (including me) filed submissions supporting the initiative.
This is a real departure from the commission's previous call for comments, when they were dismantling this disclosure practice.
That time, there were no comments in favour. Clearly, this issue has struck a chord with consumers. Here are some excerpts:
As a long time investor in Vancouver stocks, I would like to encourage the BCSC to release the names of all participants in private placements . . . . Knowing who is the money behind a company is information that should be available to all investors, as the placees often have access to information, at least on an informal basis, that is not available to the general public.
David Griffiths
A lot of scam [sic] is going on amongst Canadian explorers with cheap financings for promoters et al, and these scam patterns can be identified much more easily when the names are known. I am sure this would clean the explorer community
and save especially retail investors from being ripped by acting-in-concert scamsters and front-runners. Olaf Kroppach
Retail investor, Germany.
If the commission is genuinely interested in placing the small private investor at the same footing as corporate players and mining promoters, this would be a first step in the right direction.
Karl Philip, Toronto. This is a great proposal that provides the transparency a venture market, particularly our marketplace, requires. Please accept this as my personal opinion and not necessarily that of IIROC.
Chris Perkins, Vancouver (Perkins is the manager of investigations in the Vancouver office of the Investment Industry Regulatory Organization of Canada, the disciplinary body for Canadian stockbrokers).
As regulators with obviously limited budgets and staffing, I can see no better way for your department to get ahead of the game without the requirements of increased resources.
Ray West, Hamilton
I support the idea of publishing names of all individuals involved in private placements simply in the
spirit of full disclosure. I've been an investor for over 50 years and have always found this information useful in decisions regarding purchasing or selling stocks on the venture exchange.
Mel Rossmo I am an accredited American investor that has participated in number Canadian private placements over the last five years. Transparency is good and I would welcome changing the rules to require the publication of each entity's name participating in future private placements.
Carter Robbins Lake Charles, Louisiana
I promote Canadian mining shares in the UK. . . . Personally the majority of my investments are in the mining, oil and gas sector and many of those are TSXV listings. One of the biggest investing issues I face is filtering out the less reputable listed companies some of which can only be classified as outright scams. I encourage you to pursue this issue and use your influence to overcome any resistance you encounter in our drive to establish the TSXV as the premier exchange for junior resource listings in the global market.
Giuseppe Trucco
Italian investor and financial adviser
A big part of my investment strategy is to differentiate the quality deals from the scams, and the scammers these days employ many tactics to disguise the fact that they are behind certain promotions. This proposed change would definitely make it more difficult for these "scammers" to hide.
Dave O'Brien, Surrey
I sincerely hope the BCSC will see the opposition to the proposed revision of the rules regarding disclosure of private placees for what it is -- an attempt by certain promoters and their mouthpieces to hide their market activities.
Irene Wilson
I expect there will be some private placement investors who have now grown accustomed to having their names in the shadows and hope to keep it that way. They will do their best -or their lawyers will -to make compelling presentations to the commission about the merits of continued secrecy.
Johns Woods Editor, Canada Stockwatch
NEXT: We review the opposing responses. Not surprisingly, most are from law firms.
dbaines@vancouversun.com
© Copyright (c) The Vancouver Sun
Read more: http://www.vancouversun.com/Investors+urge+regulators+force+public+disclosure+private+stock+sales/4136971/story.html#ixzz1BacJvh86
News 
Market Data 
Discover 
AI
