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On November 25th Canadian regulators quietly approved a first-of-its-kind investment platform that employs distributed ledger technology, better known as blockchain. This application, called Finhaven Private Markets, operated by Finhaven Capital Inc., allows for investors to purchase securities from private issuers directly, without the need for a broker, deal representative or clearing house. And perhaps more importantly, allows for those securities to be privately traded on the platform directly between qualified individual investors.
The potential for this application to revolutionize the securities industry is significant. Traditional capital raise models such as IPOs, RTOs and brokered financings could become as outdated as video games disks and home phones.
But as with every new advance in the financial sector, the potential for bad actors and malfeasance has to be identified, addressed and guarded against. That task has fallen largely on the shoulders of Finhaven’s Chief Compliance Officer Sandra Jakab. Ms. Jakab has worked at the highest compliance levels of Canada’s financial and investment industry, heading up Capital Markets Regulation at the BC Securities Commission for nine years, and at one time being the only woman responsible for managing conduct risk for a major Canadian bank.
“It was a big decision to join the team at Finhaven and leave behind the familiar institutional world,” explained Ms. Jakab. “But how many times in a career do you get a chance to build something brand new, something that could fundamentally impact the Canadian investing landscape.”
Sandra and Finhaven Private Markets worked closely with regulators across the country, especially with the BC Securities Commission that served as Finhaven’s principal regulator, who in turn worked with the Securities Administrators Regulatory Sandbox Committee — a group set up specifically to encourage Canadian innovation and technology advances for the industry. Perhaps not surprisingly, something this new is being held to an incredibly high standard – one far beyond what current Exempt Market participants must employ. While the front end of the system offers simple, safe and secure paperless solutions – behind the scenes, the tracking will be cutting edge.
As Sandra outlined, “the platform initially will be restricted to “accredited” investors who must meet some long-standing criteria for income and/or assets. In addition, we apply proprietary tools that assess investors’ asset concentration, market knowledge and the risk of their current portfolio. This will ensure each investment opportunity offered is a good individual match for our clients. And at the same time, connecting our investment product issuers with a highly qualified group of accredited investors.”
Finhaven is banking that accredited investors will be open to the heightened requirements, as it makes them eligible to trade directly and privately with other equally-eligible investors on the platform.
Every Canadian securities dealer must address the inherent conflict-of-interest between the needs of companies seeking to raise capital, and the investor’s need for transparency and surety. Finhaven Private Markets has taken the addional step of establishing an Outside Advisory Board which will conduct an independent assessment of each investment offering from the perspective of the potential future shareholder. “We’re excited to not only bring new opportunities to Canadian investors, but to do it in a way that increases confidence in the process as well,” said Ms. Jakab.
And now that Finhaven Private Markets has been launched from the “sandbox” it will be fascinating to see if the team can deliver on the promise of blockchain technology in the securities industry.

With very little fanfare, a much anticipated announcement from Canadian securities regulators has launched a first-of-its-kind platform for Canadian investors to purchase and trade digital securities directly using distributed ledger technology or blockchain.
Finhaven Private Markets, operated by Vancouver-based Finhaven Capital Inc. (a registered Exempt Market Dealer), has received approval from regulators across the country to connect investors directly with private companies raising capital, to have the shares issued directly using the security of blockchain, and allowing those investors to engage in direct, privately negotiated transactions with other investors on the platform. The implications for traditional investment channels like IPOs and RTOs, brokered financings and non-brokered private placements could be huge.
The holy grail of blockchain has been the elimination of the transactional middleman, yet the securities industry – arguably the most heavily layered sector in the economy – has been woefully late to the possibilities. The elimination of 3rd party clearing houses and the need for paper documentation alone could be transformative. As Finhaven CEO DH Kim explained, “it is a significant milestone for our organization and the regulators to be able to bring a simple, safe and secure solution to all market participants in Canada”.
Not surprisingly, the platform will initially be restricted to individual investors who qualify as “accredited” by meeting long-standing criteria for income and/or assets. Finhaven Private Markets is also being held to a much higher standard of reporting and tracking than other Exempt Market Dealers employing the status quo financing model. However, it is clear that the ability to hold private securities in a digital “wallet”, and to trade those securities privately and directly to other qualifying investors, will be of significant interest to sophisticated Canadian investors.
Ultimately, the key to the success of this innovative approach will be the same as every other – the quality of the investments. Finhaven Private Markets will now need to bring compelling, unique and successful companies onto the platform. The attraction of being able to market to a fully pre-qualified and motivated group of accredited investors should be attractive to issuers. The challenge will be the chicken and egg nature of launching a brand new investing platform. To attract more investors you need good offerings, to attract new offerings you need a solid base of investors. This long overdue leap forward in securities technology should have a good chance to do both.

Many projects and ideas have been thrown off schedule with the Covid-19 pandemic, but progress is being made on implementing the latest cellular phone network – the fifth generation, euphemistically known as 5G. As well as the global pandemic, there are other concerns of a geo-political nature to be addressed, such as which countries will allow and trust Huawei equipment on the front end, or anywhere else in their 5G infrastructure. Everyone wants to have their data SECURE and kept out of foreign government hands, but allegations…Click for full article.

Not surprisingly, I received more than a few emails chastising me for “bailing on the bull market, which is going higher.”
Such is hardly the case. We reduced our weighting in some of the companies which have had substantial gains over the last year. We remain primarily long-biased in our portfolios, but given the extreme technical overbought and deviated conditions; it was prudent to raise some cash and protect our gains.
Interestingly, such was also a point made in this past weekend’s newsletter:
When people believe that they need to take ‘a little more risk’ to generate greater returns, they may be making a very BIG mistake if they underestimate what ‘risk’ really means to them.”
As we noted in “Moral Hazard,” the Federal Reserve believes that insuring people against investment losses is a dangerous one. While investors are encouraged to take more risk currently, as prices rise, they begin to disregard risk for what it is.
When people take “a little risk” and get rewarded for it, they are then encouraged to take “a little more risk.”
“People in the ‘crowd’ don’t appreciate the risks they are taking because they’re surrounded by people who believe the market will keep going up.

There have been few significant changes in the cleanliness of nuclear reactors since the first electricity generating reactor was brought onto the power grid in Obninsk, USSR, in 1954. The low carbon emissions from nuclear reactors make them one of the greener methods for generating electricity, and a good fit with the “green” initiatives envisioned for addressing climate change. Reducing carbon emissions and greenhouse gases are important parts of many comprehensive plans to mitigate human-caused climate change. Such plans include a broad range of “green” ways to generate electricity, such as solar panels, wind turbines, hydro electric dams, underwater tidal kites, ocean wave generators, and several other innovative…Click for full article.
