Thursday, 23 June 2016

Divide and Conquor - How the BCSC pits investors against entrepreneurs while robbing them both blind!

Divide and Conquor – How the BCSC pits investors against entrepreneurs while robbing them both blind:


One of the common themes among Canadian regulators is a mass campaign to supposedly educate investors on the dangers of Fraud and how to be aware of those selling fraudulent stocks. In BC the BC Securities Commission 'educates' the public with its InvestRight (TM) and Be Fraud Aware programs designed in the words of the Commission to 'Fraud Proof' the BC public. The entire media campaign is simply lipstick on a pig, its designed to make the BCSC look tough on crime and put a mistrust in the public of entrepreneurs and the risk takers looking for capital.
Before we go any further I would like you to consider this analogy to understand how the Government plays the public while it robs them blind. The regulatory regime in Canada does not act in the public interest as it maintains. The gambling and casino industry is considered to be much akin to the investment industry by many and there are many comparisons to be made, both are highly regulated due to the money involved in addition both can offer potential for lucrative rewards.

The investment industry however has, or should have assets of some type behind it which should mean that although risky it would make more sense as far as a model of sound economic governance to let people take a 'chance' if you will on something with tangible value behind it then throw their money away on a game with no intrinsic value. Instead our current Regulatory Regime in Financial Securities, Real Estate, Mining/Energy stifles local small investors and makes it hard for them to invest in local small industries that could grow up to be national or global players while colluding with many large Multi-National firms to commit the very crimes they pretend they are preventing.
The Financial Regulatory Regime claims that these Regulations and its measure for 'Compliance' are there to protect the population from fraud and bad corporate actors. So in essence on one hand our Government allows anyone 19 and over to go to a Casino and blow $50,000 no questions asked yet if that person wants to invest $500 dollars in a friends company they cannot unless that company has spent an average of $50K on a prospectus which does nothing to actually prevent fraud. A 19 year old can get offered a $50,000 credit card with its high interest debt payments attached without anyone in the Financial Regulatory Regime blinking an eye however if that same person were to choose to invest $1000 in, lets say their Fathers best friends viable and credible business they would not be allowed unless that company had paid the 'cost of compliance' of course. To do so could allow the BCSC to Cease Trade and destroy that business regardless of whether it was a legitimate business with a clear viable plan.
The BCSC as with the rest of the Financial Regulators has the power to look at bank accounts and peoples financial lives without a warrant due to the nature of the industry, it also has the power to look at the corporate side and follow the money. Why does the BCSC spend all its time squeezing the citizens and entrepreneurs who are risking capital on ventures that actually have value to our population when it could simply follow the money and ensure bad actors pay the consequences?

I would also like to state that although I attack the Prospectus and the Offering Memorandum in this section as being useless ploys used by the Regulators to mislead the public into believing their investments are secure both the Offering Memorandum and the Prospectus have important uses and I do not completely discredit them. The purpose of this section is to show how they are misused by the regulators and how the completion of a Prospectus or Offering Memorandum does not do much to deter fraud, it simply gives the BCSC a reason to charge a company with an offence and go after their assets.

In the meantime the BCSC likes to paint individuals who are not 'compliant' as bad people who are simply after your money. Many who are not compliant on simple paper work (Not complicated cases of real fraud) problems are often mislead into regulatory offences by their lawyers, many of whom in BC are from what we experienced in collusion with the BCSC to wring their client for as much fees as possible and bury them in the end. Now maybe if the BCSC acted with integrity this system would work (although not optimal) however the BCSC like most of the nations regulators is self-funded and must create regulations that need to be broken in order for it to get paid. Compliance costs money.

This is a clear conflict of interest that is dangerous for the integrity and well-being of the Financial Marketplace.
This is a large reason why there are many individuals who have come to us in the past few weeks with the same problems, one individual who will at this time remain anonymous paid all the costs of 'compliance' including the costs of an Offering Memorandum that was properly completed.

The BCSC and its staff in lieu of having any real offence to charge this individual with since the OM was properly completed decided the best course of action in order to ensure market 'integrity' and weed out the bad guys would be to copy and paste new evidence over the original OM that would allow them to charge this individual with an offence against the Securities Act.
Simply put what most of the investing public does not know is that the BCSC is almost never telling the truth, when such orders and judgments are rendered by the Commissions Tribunals the public automaticly thinks ill of the reciepients of said judgments. Even close friends and family often doubt the individuals targeted by the Commission. Those who speak the truth to the press and the public in regards to the criminal actions of the Commission, whether shareholders or the entrepreneurs in question are threatened with law-suites or even physical violence in my case in order to intimidate them into silence.

Now consider this according the BCSC, if a member of the BC public would like to buy $500 dollars worth of shares in a private company in BC they would not be able to unless the private company selling its shares had completed a Prospectus which is supposed to answer key questions that would enable the purchaser to make the right decision in regards to the purchase of these private equities.

Certainly I am not against measures to ensure that the proper information is communicated with integrity to potential buyers regarding the private securities in question however the market regulators are simply operating a shell game that makes them look good and tough on crime as they go after companies who are not 'compliant' while real fraudsters pay the cost of compliance.

Over ten years ago over %90 of the province was eligible to invest in your average private equity investment, today that number is down to less then %5 due to new regulations which stipulate that only accredited investors may now invest in private equity unless the investors are exempt under the friends and families act. See the following exert from the (now defunct?) Venture Capital Markets Association VCMA on the state of regulation in BC,

"Our sector has created tens of thousands of well paying Canadian jobs and hundreds of millions in economic benefits in resource communities across Canada over the years," said Joe Martin, Chairman of Cambridge House International Inc., and founding Chairman of the Association. Martin added, "Governments and regulators need to understand that the avalanche of new and costly regulations is having a very damaging impact to the venture capital sector at the very time that Canada desperately needs to recover from the current recession."

"The venture market used to be called a public market but it has now become elitist with only 2.1% of the Canadian public deemed to be 'qualified investors', by the many regulatory bodies," said Don Mosher, President of B&D Capital Inc., and founding President of the VCMA.

These regulations are supposed to protect the public from fraud but they simply limit opportunity and strangle the flow of venture capital to British Columbians that need it to build a prosperous economy that is not dependant on foreign corporations for jobs.

To go back to Gambling industry I will outline why the mantra from the Government regarding protecting the public from fraud is a joke, if the BC Govt was so worried about stopping its citizens from losing money then certainly we would see similar measures in place in our casinos to ensure citizens were not losing large amounts of money. Does the BCLC care if an elderly man walks into a pub and drops $50K as I have seen happen many times? The answer is it only cares on commercials to protect its public image, but it makes a fortune in profits so why would they ever prevent this man from gambling his fortune. Think about it, the Govt is okay with a 19 year old kid getting a credit card and maxing it out on worthless things, seniors are allowed to gamble their fortunes away with little concern from Regulatory authorities.

However your investment of $500 in a legitimately run profitable private company that did not do its prospectus is now considered an offence so flagerant if you are not a “qualified investor” (read rich), that it is worthy of shutting down entire small companies which can employ up to 100 people for 'non-compliance' and Cease Trading the company out of existence. This also usually incurs the loss money for many British Columbians and Canadians who may have owned shares in said company.

Meanwhile foreign corporate giants can act with near impunity for real fraudulent practices and get a slap in the wrist fine at the most from our regulators while they continue their unethical practices.
I am not advocating that a business plan that cannot be independantly verified by qualified individuals should not presented to potential investors in the private equity market but the current set-up does nothing for either the investor or the entrepreneur it is supposedly serving.

Before I explain how all of this equates to a 'divide and conquer strategy let me propose something bold in our Western Financial world today.

Currently our regulators put the onus on the public to be “Fraud Aware” while they stiffle worthy investment capital and build mounds of costly and useless paper work for the businesses fill out that do nothing to prevent fraud and other real misconduct. They call it 'Compliance'. While I do believe an educated public is a good thing maybe its time we actually put the onus on the corporate actors to act with integrity as was the original intent of a market regulator.

Maybe we should look at actually holding the Corporations accountable for where the money goes after all the paperwork is done. Certainly you cannot legislate corporate success however since the regulators have the ability to follow the money after its invested does it not make sense that they could simply verify whether a business is being run legitimately by doing so. I understand it is not nessacarily quite that simple however the answer is certianly not the current regime or anything resembling it.
All the above regulatory red-tape does is create an atmosphere where shareholders no longer trust the corporations they invested in. In my case one we have been fined for Distributing Securities Without a Prospectus, the fine is a total of $3 Million dollars. We know they are very unlikely to go after us for the money due to the phony nature of our case however some of the public simply read the paper and see that we have been fined $3 Million with significant market bans and assume we are guilty of Fraud and therefore bad people. The regulators will publicly announce that individuals have been found guilty by a Commission Tribunal of Offences against the Securities Act thus certain fines have been levied and market bans enacted for the public good, problem is half the time they are flat out lying in regards to whomever they have prosecuted simply in the hopes of intimidating these individuals into giving up assets to pay the fines.

They divide the investor against the entrepreneur, they make the investor ashamed to speak out for fear of looking foolish like they fell to a scam artist. The reality is in our case and at least several others I know of that many of these entrepreneurs have fought hard for their money. Money that belonged to their friends and family and was lost not due to the standard risks of operating in the world of start-ups such as competition or real Fraud, but due to the criminal nature of the very regulatory regime which is supposed to maintain market integrity.
While I certainly understand that there are real fraudsters operating out there and that the history of the Vancouver Financial markets is riddled fraud one has to fully understand the scope of the issue before in order to properly address it. What the BCSC does is simply turn off the flow of capital to most entrepreneurs who are attempting to raise private capital for a start-up project by imposing a regulatory structure whereby 'Regulatory Compliance' costs money. Often the cost to produce an Offering Memorandum and/or Prospectus is the same as it would be for a fledgling company to produce a whole run of a product, legal fees can be up to half the cost of a start-up. This might be acceptable of these legal fees were paid for products that properly did the job of ensuring market integrity and regulation as was the original purpose of such financial instruments, however they have simply become nothing more then highway robbers who no longer operate according to their fiduciary duties.
As always more to come..

No comments:

Post a Comment