EDITORIAL & OPINION — VSE policy not in public interest — Dissemination deal a dud

The Vancouver Stock Exchange is getting battered by more than low gold prices and investor indifference toward the junior mining companies that make up the majority of its listings. The venture capital exchange is also under fire for a controversial news dissemination policy that was to have kicked in this month.

Earlier this summer, the VSE told its listed companies that they would be required to e-mail their news releases to the exchange’s web site. The information would then be publicly disseminated by Canada News Wire — and only Canada NewsWire — at a cost of 58 cents a word. But before any of this could happen, all hell broke loose.

The idea of giving one news service a monopoly was too much for competing services, which saw their livelihoods threatened by a public institution that is supposed to epitomize the free-enterprise system, not interventionism to the degree where competition is stifled and normal business practices go out the window.

If adopted, the VSE policy would be a cash-cow bonanza for Canada News Wire (CNW) and an outright bust for its two main competitors, Canadian Corporate News and Information Service Dissemination Network (ISDN). Our newsroom is supplied by all three companies and we fail to see why one should be so enormously favored over another.

We do, however, agree that all news services should be capable of disseminating news electronically to as wide a network as possible. And we also agree that all news releases should be available to the public on the exchange’s own web site.

Listed companies are not happy about the VSE’s heavy-handed policy either, particularly as it goes to the extreme of allowing the exchange to halt trading of companies that fail to pay their CNW bills on time. This is unheard of. Trading halts are serious business; they are intended to allow time for dissemination of news, or to prevent trading while unusual market activity or corporate developments are investigated.

Other exchanges jumped into the fray, with Alberta inviting disgruntled juniors to hop over the mountains to list there. Even Toronto got in on the act by inviting the more mature listings — those capable of meeting its new listing standards — to consider moving to Canada’s senior exchange.

It is hard for us to imagine what the VSE was thinking when it cooked up the scheme, which, so far, has been nothing but a public-relations disaster. Fortunately, the new dissemination policy was put on hold by the British Columbia Securities Commission (BCSC) for at least six months until a full hearing is held into the matter.

The BCSC did so largely because of concerns about the way the policy was adopted. The regulator noted that the VSE developed the policy rapidly, without consulting affected parties or the public, and unveiled it less than two months before it was to be implemented.

The BCSC took the position that there should have been at least some consultation with listed companies and market professionals. And it noted that Canada News Wire and the VSE had provided “little, if any, evidence” to support the claim that the existing policy was insufficient. “There is clearly no critical threat to public interest that requires an immediate change in the dissemination policy before a thorough review takes place.”

We agree with the view that there is no critical threat to the public interest that might have motivated the VSE to adopt the policy so quickly in the first place. And we also share the view that a hearing into the matter is warranted, and that policy changes should not be introduced before allowing for a period of public comment.

Information is the lifeblood of capital markets. We fail to see how diverting the life-giving substance to one news service while denying it to others serves the public interest. The VSE’s dissemination deal is a dud. Surely, this important venture capital market can do better.