Magazine article Newsweek

Buy This Stock, Eh? Canada's Exchanges Are the Wild West Up North

Magazine article Newsweek

Buy This Stock, Eh? Canada's Exchanges Are the Wild West Up North

Article excerpt

Canada's exchanges are the Wild West up north

WHEN INVESTORS FIRST HEARD the story of Bre-X Minerals, most were aghast. For three years the Canadian mining company claimed to own the world's biggest gold deposit, and its soaring stock turned its executives into millionaires. The gold rush ended in March, when the stock cratered after early tests found little but dirt in Bre-X's Indonesian mining site. But where journalists see a scandal with mini-series potential, Adrian du Plessis sees a familiar tale. Du Plessis spent six years as a trader on the Vancouver Stock Exchange, a market that's nicknamed "The Seam Capital of the World." Now he runs a muckraking Web site that chronicles Canada's dubious deals. "Our reputation is better than it deserves to be," du Plessis says. "Anything you've heard, it's really much worse."

The mystery surrounding Bre-X may end this week, when new tests will show whether there's any gold in those hills. Even if the find is legit, as BreX execs insist, the stock's implosion has given investors a reminder that financial markets operate differently north of the U.S. border. Canada's markets are small, but they produce more than their share of shady investments. Even most market neophytes have heard of the treacherous Vancouver exchange, home of historically du- g bious investments like MTC Electronic Technologies, which promised profits by running a cell-phone network in China (which was illegal), and Cam-Net Communications, whose chairman landed in court on FBI charges that he offered bribes to boost its stock last fall. This time it's the blue--chip Toronto Stock Exchange that's been blemished. When Bre-X tanked in March, Toronto's computers overloaded, and trading was halted for four days straight. The computer glitch is embarrassing--especially in light of Toronto's move last week to dose its trading floor to become North America's largest computerized market. But worse handwringing will come if Bre-X's mines turn out to contain hot air instead of gold. Says financial columnist William Hartley of Canada's Financial Post: "This makes it look like there are a bunch of crooks running around up here."

On the books there's little reason scamsters should thrive up north: Canada's securities laws are very similar to U.S. rules.

Enforcing them is the problem. …

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