Lowering Limits on investment could do more harm than good
TORONTO, Nov. 17, 2014 /CNW/ - We all know about the stock market. Trillions of dollars in a highly regulated, transparent trading environment that fuels corporate growth. But there is another, larger source of corporate funding. The "exempt market". You may know it from the money you invested in your brother's new business, with only a small application form to fill out. You may not know that the exempt market is BIGGER than the traditional stock market. More money is being invested in the largely unregulated market, than in the traditional one.
Governments have noticed. And regulators are promising to crack down on this unregulated market with stricter controls, and smaller investing limits. With the amount of money at stake, investors are right to ask, "Do the regulators know what they are getting into?"
Prof. Jack Mintz, Director of The School of Public Policy, released a new report today that helps answer that question with a three-pronged rebuff to proposed regulation. "Much more data and study of the exempt market is needed before we rush into the kinds of regulations that Quebec, Ontario, Alberta and Saskatchewan are considering - like a lower investment limit, that could harm a capital market is a major driver of new business and innovation. We need to tread lightly. There are three reasons why proposed regulation needs to be reconsidered. First is the lack of knowledge about this market. Regulators have a responsibility to fully understand the size, scope and operations of this market before attempting to further regulating it. Second, no substantive need has been demonstrated to cap contributions made by eligible investors to $30,000. This is a solution to a problem that has not been clearly articulated. Finally, proposed regulations aimed at limiting the number of investors in the exempt market could actually discourage solid firms from entering the market, and leave only less stable companies behind," said Mintz today.
The paper can be found at http://policyschool.ucalgary.ca, then click on "publications".
SOURCE: The School of Public Policy - University of Calgary
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