Brenda Leong, CEO, B.C. Securities Commission

Brenda Leong, CEO, B.C. Securities Commission | BCBusiness
“This marketplace is a very important source of capital for startup companies and B.C. is often referred to as the startup capital of Canada.”

With B.C. home to more than half the young companies listed on the TSX Venture Exchange, Brenda Leong makes sure the (legit) financing keeps flowing.

Wearing an elegant, tailored pink leather jacket and understated black dress, Brenda Leong doesn’t look the type to thrive on fast-paced, high-stakes action. Nor does her resumé suggest an affinity for the fast and the furious: BComm, University of Alberta; LLB, University of Toronto; half a dozen years in corporate law before joining the provincial securities regulator in 1992. Yet every day when she reports to work, the soft-spoken 51-year-old chair and CEO of the B.C. Securities Commission immerses herself in the high-risk, high-reward world of venture financing in the province.

To be sure, B.C. has come a long way since its infamous designation as “scam capital of the world” by Forbes magazine in 1989. In fact, when Leong stepped into her current position in 2009, taking the baton from Doug Hyndman, chair of the commission since its founding in 1987, the commission’s top spot had matured from sheriff of the Wild West to regulator of an internationally recognized hub of venture finance. Nevertheless, in the world of Canadian finance, B.C. remains the polar opposite of staid and orderly Toronto, and Leong wouldn’t have it any other way.

With a staff of 230 and an annual budget of $35 million, Leong directs the agency responsible for overseeing the exchange of securities in this province. That might involve Canadian companies raising money from investors here and abroad, or B.C. investors dealing in Canadian and foreign securities. While the bulk of Canada’s senior corporations – those listed on the Toronto Stock Exchange – are headquartered in Ontario, B.C. is the centre of venture capital in Canada, hosting more than half of the 2,250 companies listed on the TSX Venture Exchange. That’s becaues the Venture exchange traces its roots to the old VSE; it still maintains a head office in Vancouver and is co-regulated by B.C. and Alberta.

When in May 2011 the Maple Group consortium announced its intention to buy the TMX Group, parent company of the TSX Venture Exchange as well as the Toronto and Montreal stock exchanges, Leong saw it as a threat to B.C.’s role as a vital hub of junior financing: “When you’ve got a conglomerate of bank-owned dealers and large pension funds, all of which reside in Eastern Canada, who may not understand the venture market and what makes it successful, it was imperative for us to look at the risks that transaction presented in making a decision.”

The acquisition, which closed in October 2012, required the approval of all provincial regulators. Ultimately Leong and her colleagues at the BCSC decided it would be counterproductive to stand in the way of the acquisition, so they gave the transaction their blessing, but not without first securing a number of assurances. Chief among them was a promise that the Venture Exchange’s Vancouver offices would continue to play a central role.

The TSX Venture Exchange, with its historical and administrative ties to Vancouver, may be the junior counterpart to Toronto’s senior board, but Leong sees B.C. playing an equally important role in the even less-structured world of private placements, or “exempt market” securities, which, at least until recently, weren’t always burdened by such inconveniences as scrutiny from regulators.

Leong reports that $9.3 billion was raised in the private placement market in B.C. in 2011. “This marketplace is a very important source of capital for startup companies and B.C. is often referred to as the startup capital of Canada,” she says with pride. “They’re high-risk, illiquid securities, so very risky for investors, but vitally important for capital raising in this province.”

The challenge for the securities commission, Leong notes, is finding a balance between facilitating the flow of capital to deserving startups, and weeding out fraudsters intent on exploiting investors seeking outsized returns.

When the commission turned its attention to the exempt market a few years ago, it found about 800 companies with ties to B.C. trading on the U.S. Over the Counter Bulletin Board, many of which existed for the sole purpose of prying money from the hands of gullible investors. As Leong puts it, “We saw a proliferation of shells used for pump and dumps” – worthless companies whose value would soar under a heavy promotion blitz, leaving promoters to cash in while gullible investors are left with nothing but the empty shell.

The commission’s response was to implement regulations in September 2008 requiring companies with a B.C. connection that trade on the OTC to become reporting issuers. Known as the OTC Rule, the regulation places these companies under the BCSC’s jurisdiction – even if their nominal headquarters are in the U.S. and their targeted investors are mainly American. The commission also imposed rules on B.C. brokers dealing in those stocks.

The results are easily quantified, Leong says: of the approximately 800 B.C.-linked OTC companies at the outset, only about 400 remained by the time the regulations were implemented. Of those 400 companies, about 200 began to comply with the OTC Rule, and those that did not comply remain cease-traded in B.C.

Back at the BCSC’s 12th-floor boardroom, Leong gazes down at the Eaton Centre, which will soon join the VSE as a departed Vancouver icon that was both loved and hated by many. And if recently revived rumours of a new national regulator actually come to fruition this time, the BCSC may also one day be nothing but a memory. But in the meantime, Leong is at the centre of B.C.’s colourful world of financiers, promoters and entrepreneurs.

“I know regulation doesn’t seem exciting to most people,” Leong admits with a laugh, “but it is!” And despite her calm demeanour, there’s no doubt that she’s absolutely right.