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The New CDNX: restoration of a traditional predator-prey system? by John Kaiser The Vancouver and Alberta Stock Exchanges have merged to form the Canadian Venture Exchange, or CDNX for short. There has been much media talk about how CDNX will be able to compete on the global stage by offering strong regulation and transparency. I have been among those quoted by the media as espousing this view. Unfortunately, I have an ominous feeling that I may be mistaken. While checking out the new CDNX web site (www.cdnx.ca), I discovered that CDNX has abandoned the long standing VSE policy of publishing details about corporate transactions that involve the creation of paper. This decision has apparently been made by Gerry Romanzin, the new head of CDNX corporate finance who was the former executive vice president of the Alberta Stock Exchange. As you know, the ASE steadfastly resisted suggestions to adopt a VSE style of disclosure, and in the process helped investors lose extraordinary amounts of money through disasters like Cartaway, Timbuktu and YBM Magnetics that would have been nipped in the bud by VSE style disclosure. The information which CDNX is now planning to keep internal to the exchange is important because it alerts investors to possible conflicts of interest within the brokerage industry, and it lets them see the degree of stock dilution in the form of options, warrants, convertible debt and asset related contingent stock issuances. This information was traditionally picked up and retransmitted by Market News and Canada Stockwatch, the only news vendors that do justice to the Canadian junior markets in terms of detail and universal coverage. Their news feeds are picked up by a number of financial web sites that specialize in Canadian listings. The loss of this information thus affects more than a few people like myself for whom it is critical research material. A key frustration that I have had with the ASE is that there was no way of knowing what financings or transactions had closed, who was involved, and what the true full dilution was for an ASE listing. CDNX has adopted the VSE daily bulletin notice system, but to stop publishing the corporate transaction details somebody had to go out of their way to make this happen. The discouraging implication is that the new CDNX is nothing but a clone of the ASE, and that the merger was contrived by the brokerage industry as a way of getting back the business that fled to the OTC Bulletin Board. If this attempt to shroud the corporate transactions of CDNX listings prevails, there will be little reason to prefer the Canadian junior market over American equity markets. Any regulator who claims to have the ability to protect investors is a fool or a liar. If investors in Canadian juniors are to avoid becoming prey for predatory brokers and promoters, they need to use their own brains to supplement regulatory efforts. And if the information investors need to assure themselves that they are dealing with a fair playing field is not available, the smart thing will be to steer clear of predator-prey systems where they are the prey. This "little thing" is symbolically a "big thing" that would be easy to fix if CDNX is truly interested in being the best regulated and most transparent venture capital exchange in the world. If you believe CDNX is making a big mistake in cutting back its disclosure policies, please contact any or all of the CDNX directors I have listed below and let them know what you think. William Hess (CDNX President): whess@cdnx.ca Dennis Burdett (CDNX Chair, Canaccord): dennis_burdett@canaccord.com Ian Brown (CDNX Co-Vice Chair, Goepel): ian.brown@goepelmcdermid.com Scott Paterson (CDNX Co-Chair, Yorkton): spaterson@yorkton.com Wiley Auch (First Energy): wdauch@firstenergy.com Chris Lay (CIBC): lay@cibc.ca John Hagg (Northstar Energy): johnh@northsnrg.com Norman Thompson (Union): nfthompson@union-securities.com Deborah Weinstein (LaBarge Weinstein): dw@lwlaw.com John Anderson (Anderson Expl): andersj@axl.ca Mary Macdonald (Macdonald & Assoc): mmacdonald@canadavc.com Alain Auclair (Scotia Capital): alain_auclair@scotiamarkets.com John McCoach (Yorkton): jmccoach@yorkton.ca Ian Beddis (RBC): ibeddis@rbcds.com John Brock: jsbrock@istar.ca Gordon Medland (Goepel): gordon.medland@goepelmcdermid.com Sesto DeLuca (Latimer): drdyp@wdlatimer.com James Sorenson (Merrill Lynch): jim_sorenson@ca.ml.com Harry Jaako (Discovery Capital): hjaako@discoverycapital.com John Wells (National Bank): jwells@isiedm.com Feel free to forward this part about CDNX to anybody or post it anywhere on the Internet. | ||||||||||||
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