What is the Vancouver Stock Exchange (VSE)?
The Vancouver Stock Exchange (VSE) started operations out of Vancouver, British Columbia in 1907. The VSE continued to function as a standalone exchange until November 1999, when it was merged with other stock exchanges to create the Toronto Ventures Exchange (TSX-V).
The VSE was home to mainly small-cap mining, oil and gas stocks, and exploration companies. The companies usually held very few assets, mostly the mines they owned the rights to. Sometimes, they just aimed to raise capital to carry out exploration with little guarantee of success.
The exchange also comprised high-tech companies that intend to raised venture capital directly from public investors. It is the exact opposite of the current practice, where early-stage companies raise capital in private markets first.
Merger into the Venture Exchange
In 1999, the Vancouver Stock Exchange, along with the Alberta Stock Exchange, the Toronto Stock Exchange, and the Montreal Exchange, decided to merge and create the Canadian Venture Exchange (CDNX), now known as the Toronto Venture Exchange (TSX-V).
Later, the Winnipeg Exchange joined the TSX-V. Today, the TSX-V serves as a better venue for smaller companies, which are not eligible for listing on the Toronto Stock Exchange (TSX). The move also improved the quality of regulation, as, in Canada, there are provincial bodies for securities regulation instead of a federal body like the Securities and Exchange Commission (SEC) in the United States.
Scandals at the Vancouver Stock Exchange
Given the abundance of such speculative business, the VSE came to be known for equity market fraud. Many investors were misled into investing in highly risky ventures, and the promoters would end up misusing the money. To make matters worse, the requirements to list a company on the VSE were not as strict as other exchanges in North America, hence attracting dubious business.
The William Bennett Scandal
One such high-profile case was that of insider trading by the former premier of British Columbia, William Richards Bennett (Bill Bennett). He, along with his brother, sold shares of a company just before its acquisition was called off. Hence, they avoided losses from the subsequent fall in share prices.
The case lasted for a period of about 11 years. In the end, Bennett, along with two others, was convicted by the British Columbia Securities Commission (BCSC) and ordered to pay a fine of $1 million in addition to the sanctions imposed on them.
Columbia Homogenous Parallel Processor (CHoPP)
In 1986, CHoPP Computer Corp. claimed to had built a supercomputer that was 100 times faster than that of the erstwhile market leader, Cray Computers. CHoPP’s stock surged from 17 cents per share to $125 per share, following the company’s pronouncement. However, as it turned out, there was no real product, and consequently, the stock collapsed.
Axagon Resources Ltd
Axagon Resources sold selling another non-existent, but more believable product – non-corrosive and non-toxic salt to melt snow. The company’s stock price rose more than tenfold. Regulators ultimately shut down Axagon when the company’s claim of more than $8 million in sales turned out to be less than $8,000.
There were many other examples involving different types of fraud, such as money laundering, tax evasion, market manipulation, etc. Scams such as the above were one of the main reasons that prompted the VSE to merge with other exchanges.
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