Feature: Helping get small business around big rules

By Jamie Sturgeon | Financial Post | 10.27.2008

If necessity is the mother of invention, regulation must surely be its unwanted sibling.

It was mid-September in a small boardroom on Bay Street when the thought occurred. Oscar Jofre (pictured, above),the 43-year-old chief executive of BoardSuite, had just run down a laundry list of requirements that new legislation introduced last spring had imposed on business.

In June, Bill C-25, a federally-mandated expansion of The Proceeds of Crime, Money Laundering and Terrorist Act, came into force, requiring banks to collect information on virtually every stakeholder, financial interest and transaction for every incorporated account holder.

"That touches six and a half million commercial accounts currently open with all major banks in Canada," Mr. Jofre said. "It doesn't matter if it's private or not-for-profit; every single one of these entities will have to adhere to the new banking laws."

The expansion was built on rules erected in the wake of the Sept. 11, terrorist attacks in the United States, as well as the accounting scandals of Enron in the United States and Nortel Networks Corp., to keep tabs on illicit bookkeeping.

It has become the latest regulatory cross all businesses big and small must bear.

That was in mid-September, when the towers a few blocks south were just beginning to feel the bite from the biggest failure in regulation in living memory. What will the fallout be from the current financial crisis? Even more rules, said Mr. Jofre, whose firm, BoardSuite (www.boardsuite.ca) aims to make corporate record-keeping more transparent and cheaper than ever before.

Through an easily navigable Web site, the firm has streamlined that process from the smallest tasks like tracking events on a calendar and maintaining the minute book, to mandatory obligations such as insurance reapplications and annual return filings.

Some company data must still be manually inputted into the system; however, once it's there, it stays on the record.

Concerned about complying with Bill C-25 at the risk of having an account frozen? "[BoardSuite] has all the data organized and sent to the bank rep without encumbering your business operations," said Dean Peloso, a former Toronto Stock Exchange regulator. "It's the institutional repository for all this information.

"All the elements you normally rely on your professionals to tell you to do, it's now telling you," said the 50-year-old career regulator who helped design Sedar, the electronic filing system for Canadian public companies.

Mr. Peloso's involvement with BoardSuite, where he's a director, is a testament to the rigorous planning that went into the product early on, Mr. Jofre said.

It was in 2003 when Mr. Jofre, an entrepreneur from Edmonton, learned his lesson in the regulatory pitfalls small businesses can stumble into.

A routine offering memorandum transferring assets from his company to another filed with the Alberta Securities Commission failed to disclose a bankruptcy of one of its officers.

The commission returned the filing and fined each director and Mr. Jofre $3,500, he said.

"It was in the minute book, the shareholders knew ... that wasn't the issue. Guess what the issue was -- one little line in the first page ... indicated no director or officer had filed for bankruptcy in the last 10 years. "The lawyer's backing away saying, 'It's not my responsibility,' but yet he's got the book. At the end of the day, I have to know exactly what I'm signing," he said. "The only way you can do that is by having access to information. That's the reason Board-Suite got started."

Of course, having the information on an encrypted Web site is another caveat of the service.

It's accessible around the clock anywhere there's an Internet connection. But perhaps best of all, BoardSuite is absolutely free. At least, it is to the company using it.

Through partnering with major service providers such as Aon Corp., the largest insurance broker in the world, BoardSuite can offer itself for free to clients. It generates income through service fees from Aon and other partners every time a company uses a partner's service.

Not that clients are compelled to use BoardSuite's sponsors, Mr. Peloso said, but "we think they will. It's easier, it's going to save them [time] and money and it's going to be that much more convenient."

"By helping your organization, we help the partners and everybody wins," Mr. Jofre said. Since mid-September, the financial crisis has deepened with the possibility of a recession looming. The talk of increased regulation has begun in earnest.

While it may be good news for BoardSuite, it likely means more red tape for businesses of all sizes.

"This will only impose more regulations," Mr. Peloso said. "Just like last time, the really big mistakes are made by the really big corporations, but the rules are made for all. The small guys end up having to live with the new rules. So you have to organize yourself better."

jasturgeon@nationalpost.com

That's what's up

The transition begins ... Click here

TSX erases almost four years' worth of gains

The carnage across global stock markets continued into the second week of October. A bottom is at hand, some say, but then again, we've been saying this for awhile

By Jamie Sturgeon, Financial Post | 10. 10. 2008

Toronto stocks slipped below 9,000 Friday afternoon as North American markets continued their week-long freefall despite a pledge from the Department of Finance in Canada of more capital injections and an address from U.S. President George W. Bush intended to calm markets.

At 2 p.m. EST, Toronto's S&P/TSX composite index was down 743.1 points at 8,863.1, virtually erasing the gains of the previous four years. Canadian stocks were last closed below 9,000 in December, 2004.

U.S. stocks also declined steeply on Friday. The Dow Jones industrial average had lost more than 7% by early afternoon after having sunk as low as 8% earlier. The benchmark Standard & Poor's 500 Index had fallen by 7.4%.

"Fear is essentially gripping the market today," said Benjamin Reitzes, economist at BMO Nesbitt Burns in an interview. "That has not gone away."

Stocks in Toronto were down despite the Ministry of Finance's pledge to buy up to $25-billion worth of assets from banks in an effort to increase liquidity in the Canadian financial system.

Jim Flaherty, the Finance Minister, said the government would begin buying assets as early as next week to keep the flow of credit to consumers from tightening further.

The declines follow a deep sell-off across world markets on Friday.

In London, the FTSE 100 index of top European shares shed nearly 9% earlier to hit its lowest level since June, 2003. The Dow Jones Stoxx 600 index tumbled to its worst week on record at the end European trading on Friday.

Japan's Nikkei plunged 9.6% as Japanese stocks ended the week 24% lower -- the steepest decline since records began in 1949.

"I would say that this is the day that's the transcending moment, where there's been no negative news -- you could even make a case that there's positive news," said Paul Gardner, portfolio manager at Toronto-based Avenue Investment Management. "This is what you call despondency and capitulation."

Investors are looking to the weekend's meeting of leaders from the Group of Seven major industrial nations in Washington for the latest attempt to salvage confidence in global markets.

Coordinated interest rate cuts by the Federal Reserve and other major central banks this week failed to relieve investor fears that the freeze in credit markets will damage banks further and provoke a deep recession around the world.

"It's a proper strategy," said Mr. Gardner in Toronto. "But no one's listening."

"Essentially we're flying blind. No one has a clue what's going on," DZ Bank currency strategist Sonja Marten said. "The uncertainty is too great and volatility is incredible. It's a question of market confidence and somehow we're going to have to get it back."

U.S. President George W. Bush said on Friday the government would move aggressively to address the financial markets crisis, but he acknowledged that anxiety was feeding on itself which was sending stocks plummeting.

"The United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets," Mr. Bush said in the White House Rose Garden. "We can solve this crisis and we will."

He also said the Treasury Department would work quickly to implement the US$700-billion financial sector rescue plan approved a week ago and that the Securities and Exchange Commission was stepping up its efforts to fight manipulation in the stock market.

The U.S. Treasury plans to start injecting capital into U.S. banks as soon as this month, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.

"You have to say we're at capitulation and despondency ... which technically, you're supposed to buy [into] aggressively," said Mr. Gardner in Toronto. "We're at the conditions for a bottom."

With files from Reuters

News: IPOs grind to halt in North America

"Everybody say IPO ..." Source: WJS

By Jamie Sturgeon, Financial Post | 10.03.2008

Unprecedented uncertainty in capital markets has wilted all demand for initial public offerings in North America.

In Canada, not a single IPO was launched on the Toronto Stock Exchange in the third quarter, marking the first quarter in at least a decade that Canada's largest equities market failed to attract a new listing, according to a report from PricewaterhouseCoopers.

"Over the years we've been doing this, I don't think there's ever been a quarter or six-month period with zero," Ross Sinclair, partner and national leader for PwC's IPO and income trust services, said yesterday.

Indeed, the previous low for new TSX offerings was in the third quarter of 2007, when four issues raised $254-million.

For the year, there has been a total of 53 offerings launched across all Canadian exchanges, raising $680-million, marking the slowest pace of new offerings since PwC began tracking Canadian IPOs in 1998.

In contrast, 63 offerings were made through the first three-quarters of 2007, totalling $1.2-billion. Two years ago, 95 new issues valued at $4.7-billion were brought to market through the first three quarters.

"You're looking at a market that used to generate five or six billion dollars to now hundreds of millions -- it's down to a trickle," Mr. Sinclair said. "There's nothing happening."

Activity for the three months ending Sept. 30 would be at a virtual standstill if not for the 14 new issues on Toronto's Venture Exchange, which raised $66-million.

The downtrend partly follows a long-term slowing in IPOs dating back to late 2006. It was then that new federal taxation curtailed the explosion of income trusts -- a significant driver of new issues at the time.

Yet the "worsening environment" in capital markets through the year culminating in September has dried up demand wholesale, Mr. Sinclair said.

"A market is a meeting point for a willing buyer and a willing seller, and until some degree of stability returns, and we regain some certainty and predictability, we won't have a market," he said.

Moreover, given unfolding events, "there's not much hope for much IPO activity throughout the rest of 2008."

The bleak assessment extends south of the border.

Not a single American company attempted a public offering in September, according to an IPO tracking service, Hoover's Inc.

It's indicative of the constricted position the remaining underwriters on Wall Street are in as investment banks typically contribute their own capital to a client's public offering, said Tim Walker, IPO research manager at Austin, Tex.-based Hoover's.

"There's no stability in the market," he said.

According to Hoover's data, a mere five IPOs were launched across all American exchanges in the third quarter, raising US$917-million. A year earlier, there were 38 offerings valued at more than 10 times that.

The results bring the amount of new issues in the U. S. for the year to 30 companies, compared with 134 through the first three quarters last year, and 133 in 2006.

Total proceeds from this year's U. S. IPOs are US$24-billion. A "low" figure, Mr. Walker said, but even more disconcerting when one considers that US$18-billion or 75% of that stems from the IPO of Visa in March.

"That's what tells you how abysmal this IPO market is."

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Blog bite: U.S. fund boss offers to value toxic assets — for free

A news bite from the FP Posted, the running blog on the Financial Post Web site. I found the item particularly interesting because up until then, no one had really address how all those bad assets would be valued (Left, Bill Gross, fund manager of massive Calif.-based Pimco):

By J. Sturgeon, FP, 09.25.2008

One of the more contentious issues delaying the passage of the U.S. Treasury Department's colossal US$700-billion bailout package is that no one in Washington is quite sure how much a distressed asset is worth, nor how to go about ascribing a value either.

Given the 'depths of the crisis,' stamping a value on the sour debt-backed securities and other distressed investments held by financial institutions across the United States is paramount in moving the assets onto the government's balance sheet.

But at what cost, and to whom? Paying the same firms that helped create the crisis to now measure their own carnage is not an option.

Enter William Gross, the manager of the largest bond mutual fund in the U.S., who has offered to sort through the toxic assets — for free.

“We have a large and brilliant staff that can analyze and has analyzed subprime mortgages that can help the Treasury out,” Mr. Gross, the co-chief investment officer for the Pacific Investment Management Company, said in an interview with the New York Times on Wednesday.

He added: “And I’d even be willing to say that if the Treasury wanted to use our help, it would come, you know, free and clear.”

There is a sense that a private-sector appointment for the job will create an inescapable conflict of interest, particularly in the case of Mr. Gross, who has considerable influence in the bond market.

Yet with the current liquidity crisis touching virtually every sector, any firm in a position to advise the Treasury on its rescue plan would have potential conflicts of interest, Mr. Gross, who's funds began moving heavily into government bonds at the onset of the crisis last summer, told the Times.

“There’s fewer of them here than anywhere else,” he said. “Simply because we saw the crisis coming and we don’t have much of this paper.”

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