Editorial Resource financing needs a new policy

We’ve learned over the years that the wheels of justice turn slowly, and that includes Canada’s quasi-judicial securities commissions. On balance, it is probably best that they err on the side of deliberating too long before making a decision rather than acting too hastily.

We know the wheels turn slowly, but that hasn’t stopped us on occasion from trying to speed them up a bit. In the case of the Thompson committee’s report on resource financing, it may be time to gear up the Ontario Securities Commission’s driving wheel.

The Thompson committee was set up almost two years ago, in January, 1986, at the request of the Ontario government. The committee presented its report just five months later. It then took the osc a year to conduct public hearings and prepare a policy. That policy — essentially what was contained in the Thompson committee report with some slight modifications and one significant change — was published for comment last June.

And there the matter sits. The osc has made no indication when, if ever, it might actually implement the policy.

The policy is not perfect. The one significant change the osc made to the Thompson committee report was to limit dealers’ compensation to 45% of the total funds raised after payment of all expenses of the issue. That seems like a generous share, but it could virtually eliminate any incentive for dealers to do small financings of under $1.5 million — the very deals prospectors and small entrepreneurs rely on.

Not only that, but because the costs of a thorough due diligence study will come off the top from proceeds of an issue, dealers might be reluctant to spend any more than is absolutely necessary. That would only further reduce their own compensation.

Still, no policy is perfect. This policy, incorporating the deliberations of the committee, the lengthy public hearings and the osc’s own scrutiny, is probably the best compromise. It should be implemented now to end the uncertainty surrounding the current procedure for junior resource financings.

That does not preclude attempts to come up with a common policy for junior resource financings among securities commissions in other provinces. Even if that idea goes ahead, it will be years before any result is put into effect. Ontario cannot continue as it does now, following rules which the osc itself revoked in 1983.

There has been ample time to study this policy. If it has been found wanting, the osc should be prepared by now to say in what manner. If it is satisfactory, it is time it was put into effect.