Industry calls to block crowdfunds to save TSX-V
• The Investment Industry Association of Canada is calling on provincial securities regulators to scrap equity crowdfunding to help turn around the fortunes of the TSX Venture Exchange.
“The TSXV is a far more effective vehicle for raising capital than crowd-funding, and provides far better protection for investors,” Ian Russell, chief executive of the IIAC, said in an industry newsletter published Thursday.
Russell has other ideas besides shelving long- awaited crowdfunding — due to arrive in Ontario this month — to improve the fortunes of the moribund venture exchange.
The j unior l i sting and trading venue has foundered amid weak commodity markets along with many of the small resource companies that populate it.
Russell said regulators should work with the TSXV to reduce administrative and regulatory costs for small listed companies, and harmonize prospectus exemptions across the country.
Neil Gross, executive director the Foundation for the Advancement of Investor Rights, isn’ t a big fan of crowdfunding. However, he says getting rid of the new method of pooling of investors’ money for “pet projects” would not be enough to buoy the TSX’s venture exchange.
“To avoid adding to the TSXV’s woes, you’d have to scrap more than just crowdfunding — you’d need to rethink the wisdom of many other recent decisions that have opened up pathways to the exempt market,” Gross said.
A series of new exempt i ons i ntroduced across the country this week have made it easier for companies to raise money from retail investors without issuing expensive and detailed prospectus documents required for publicly listed and traded companies.
One regulatory official who spoke on condition that he not be quoted said crowd funding in some provinces won’t interfere with listing and trading venues because it targets the fund raising efforts of very small startup companies.
Regulators weren’t the only source the IIAC’s Russell sought to persuade to make changes to help the TSX-V.
In his letter, he also urged the federal government to step up and join the effort to bolster the junior exchange by i ntroducing carefully targeted tax incentives to stimulate private and public markets for small business.
Ott a wa could adopt something similar to an incentive introduced in the U.K. that offers a 30 per cent personal income tax credit for purchases of the shares of new and emerging businesses.
“It would provide an incentive to invest in these risky startup enterprises,” Russell wrote.
“The scheme would also facilitate capital raising as the economy expands, and eventually lead to companies getting listed on the Venture Exchange.”
Russell said the government could also introduce a capital- gains tax deferral if proceeds from startup investments were re- invested in l i sted shares of small businesses.
In his letter, Russell acknowledged that the TSX-V recently launched its own strategic plan to revitalize its marketplace.
The junior listing venue plans to reduce administrative and compliance costs, expand the base of investors to draw capital to the TSX-V, and diversify listings away from natural resource stocks.
“The plan is an effective one, but should have been l aunched much sooner,” Russell wrote.
INCENTIVE TO INVEST IN RISKY START-UP ENTERPRISES.