Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC), is calling on the federal government to bring back income trusts.
In a speech to the Prospectors and Developers Association of Canada’s convention in Toronto on March 4, Russell expressed concern about the future of financial services in the Canadian mining business, saying that industry is under "considerable stress". On one hand, aging retail investors are making more conservative investments, while on the other, institutional investors are focusing on foreign equities in order to obtain higher risk-adjusted returns. "It is this eroding equity market liquidity that makes it difficult for investors to sell their securities," he says.
Russell is also concerned about the heavy overall regulatory burden and compliance costs that small investment dealers face, as well as the reporting obligations that force many mining firms to avoid exchange listing and remain private. "All this becomes a major problem for the mining industry, damaging trading and financing activity in the key small and mid-cap markets," he comments.
On a larger scale, Russell believes that provincial and federal governments can improve investor confidence by reducing their deficits and debt burdens, saying that the "sea of government red ink" will drive away capital. More specifically, he thinks the government should introduce tax incentives that would allow retail investors to defer their capital gains in a small Canadian company and reinvest the proceeds in another one. “We need to encourage investors to take advantage of growth opportunities among small companies,” he says. “And that includes taking another look at income trusts.”
Finally, Russell expressed his support for a national securities regulator that would eliminate inefficiencies and overlap, especially in obtaining prospectus exemptions which differ across the provinces. "These regulatory hurdles are costly," he says. "They interfere with financing. They hurt companies. They hurt investors. They hurt our economy."