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  • Ned Goodman & Canada's Other Stock Exchange: The CNSX 0 comments
    Oct 5, 2013 2:53 PM | about stocks: DDEJF

    The amount and terms are confidential but Canada's other stock exchange got a boost in stature September 30 as Dundee Corp. (OTCPK:DDEJF) closed a strategic investment in the CNSX. Dundee president/CEO Ned Goodman, a strong critic of the TSX Venture regulatory regimen, becomes CNSX deputy chairperson.

    Addressing a September 12 panel discussion hosted by the Venture Capital Markets Association, Goodman called the Venture "a feeding source for the legal community." He added, "You need two hands to lift [the TSXV's] book of regulations and policies. It's absolutely mind-boggling all the things you're required to do to raise a half-million dollars-which means that half of that half-million will go to lawyers."

    The CNSX model, on the other hand, "reduces the time and expense companies face in going public, and in maintaining a listing, along with a high level of continuous disclosure," Goodman said in a statement accompanying the September 30 announcement.

    Speaking to ResourceClips.com on October 1, Goodman says, "I've been around the CNSX for quite a while, I even have a company listed there [Eurogas International CNSX:EI]."

    Stating his opinion of the Venture indirectly, he adds, "I think the country needs an entrepreneur's stock exchange. So I decided to help out."

    Although he describes issuers' regulatory responsibilities as "a fact of life" largely originating with the securities commissions, he says the TSXV compounds those obligations. "I would say there's tremendous difficulties, there's things thrown in there that mean your legal fees to get listed or stay listed are punishing, and it's almost like it was built for lawyers. You can't do it on your own and entrepreneurs like to do things on their own."

    CNSX Markets CEO Richard Carleton sees two-fold significance in Dundee's investment. "We look at it as a powerful endorsement of our services and our proposition from one of the major figures in junior capital finance in Canada," Carleton tells ResourceClips.com. "Secondly, it provides us with more resources to continue our program of supporting the work of junior capital issuers in Canada with better quality secondary markets through some work we're doing with the dealers, and to build a market-making program that will ideally provide continuous two-sided quotes for all the issuers on CNSX. We're also looking to build more bridges to the independent dealer community, and of course Ned is a very important figure there too. We want to help them reduce their cost of trading and do their corporate finance activities more effectively in a lower-cost environment."

    But rather than build up the alternative, a new advocacy group called the Venture Capital Markets Association wants to fix the Venture. Just prior to the official launch in early September, founder and Cambridge House International chairperson Joe Martin told ResourceClips.com that over-regulation imposes unnecessary burdens on already struggling companies. After the Vancouver, Calgary and Montreal exchanges merged with Toronto, he explained, juniors lost "infrastructure" that promoted venture capital.

    "Since the exchanges were merged and bought out by the banks, there's been a noticeable change," he said. "The banks couldn't care less about junior capital. It doesn't make them any money and they control the stock markets. It's costing the average junior company $200,000 a year just to keep in compliance."

    By comparison, the CNSX charges what it calls "simple, fixed listing fees: $12,500 for application and $500 per month."

    Martin also said the Venture imposes unnecessary duplication. "For example, by law you've got to do your SEDAR filings and if you're falsifying those things it's criminal. You should be charged. So why the heck do we have to have the exchange put another level of inquisition in there?"

    Martin said he knows one executive who's "so frustrated with what they're doing, he's thinking of moving everything over to CNSX. The CNSX just says, 'You've got your SEDAR filings, you've done your work.'"

    Junior explorers currently make up over 50% of CNSX-listed companies. But with only 180 issuers, the exchange has less than a tenth of the Venture's size. Does Martin see the CNSX gaining more prominence? "Well that's up to them," he replied. "I can't speak for them." His advocacy group, meanwhile, has begun a campaign of lobbying, fundraising and public awareness.

    Obviously Carleton would like to see juniors move from the Venture to the CNSX. "We certainly want to make a compelling case for them to do so. One of the things we want to do is ensure that companies spend less of their money meeting exchange requirements and more of their money growing their business. We do want to offer solutions to the small issuers and independent dealers to help them through these difficult times."

    Of course efforts to recruit listings face challenges, Goodman emphasizes. "We're competing against the banking community that owns all the stock exchanges other than the one I just bought, and the banks control the retail products so it's going to have problems. We've even heard stories that banks won't accept margin on shares listed on the CNSX."

    Attracting new companies is "not going to be easy. But I've created a career by doing things that aren't easy."

    He points to NASDAQ for inspiration. "When it went into the business, no one wanted to know anything about it," Goodman says. "Now the New York Stock Exchange has a complete floor of people that do nothing but try to convince NASDAQ players to come back to the New York Stock Exchange when they were refused in the first place because they were start-ups."

    Taking part in the Dundee announcement was the CNSX's largest shareholder, Urbana Corp TSX:URB.A, which holds interests "across the financial services sector from exchanges to banks to broker dealers and investment managers." Urbana president/CEO Thomas Caldwell chairs the CNSX board.

    As the new deputy chairperson, Goodman says, "I'm partners with him in the sense that we've agreed on how the place is going to be run."

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: CNSX, mining Stocks: DDEJF
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