Briefly:

(October 7, 2005) Despite a three-day slide that knocked more than 500 points off the S&P/TSX Composite Index, the head of the exchange says U.S. investors should be trading in Canada, considering the relatively weak performance of the main American indexes this year.

“At TSX, we run the stock exchanges where some of you have been putting your client’s money, and where all of you should have been trading,” Richard Nesbitt said yesterday in a speech to the Security Traders Association in Florida.

Canada’s economy has outperformed this year, he noted, mostly due to oil and gas. “The energy group is up 66% this year and accounts for more than 60% of the increase in the TSX.”

Even with crude oil prices hitting a two-month low on Thursday, Nesbitt remains optimistic, pointing out that Alberta’s oil sands hold as much as 175 billion barrels of recoverable oil, and production is increasing.

He conceded that that separating the oil from the sands is a challenging process, along with creating new pipelines.

“It’s going to take billions — eventually hundreds of billion — in investment dollars to produce five million barrels a day by 2030. But this year, as oil and has prices have soared, the world has come knocking with cheque books at the ready,” pointing to seven major oil deals involving Kinder Morgan, Total, Exxon Mobil, Imperial Oil, PetroChina, Sinopec and Synenco.

Even without oil and gas, Nesbitt says the TSX would be 7% higher year-to-date, thanks to a “strong added kick” across all sectors from the strength of the Canadian dollar, reflecting broader strength throughout the Canadian economy.

“Every component of our Toronto composite, except for technology and health care, has outperformed the comparable component of the S&P 500.”

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Ottawa to study inflation measure

(October 7, 2005) The consumer price index, the main gauge for measuring inflation, could be in for some changes next year, according to a Bank of Canada official.

Tiff Macklem, deputy governor of the Bank of Canada, says the central bank’s agreement with the federal government is up for renewal next year.

He says the bank’s policy of keeping inflation at a 2% midpoint within a 1% to 3% target zone has served the country well. And while he doesn’t expect that to change, the central bank is pondering a few technical questions related to the CPI.

“One relates to the measures we use to gauge inflation,” he said in a speech yesterday in London. “The CPI is the most readily recognizable and understood measure of inflation. But, because of the volatility in certain CPI components, we also pay close attention to core inflation.”

Core is a useful indicator because it provides a measure of the underlying trend of inflation and, hence, of future CPI inflation, he added. “One of the issues to review is our measurement of core inflation and our experience with this measure.”

Other questions relate to whether 18 to 24 months is the most appropriate time horizon for monetary policy to bring inflation back to target after various types of shocks, Macklem said. “For example, do big swings in asset prices contain any information about future inflation beyond our typical policy horizon? If they do, it might be appropriate, in certain circumstances, to lengthen the time horizon for returning inflation to target.”

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TD changes portfolio manager on three funds

(October 7, 2005) TD Asset Management today announced portfolio advisor changes for its Canadian Small Cap Equity, Asian Growth and Pacific Rim funds.

Connor, Clark & Lunn Investment Management will take over the equity fund, while Martin Currie will handle the Asia and Pacific Rim funds. The Pacific Rim fund was formerly known as the AsiaGrowth RSP fund.

The changes are scheduled to take effect October 11.

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GMP board approves trust conversion

(October 6, 2005) The board of directors at GMP Capital has unanimously approved terms for the firm’s conversion to an income trust.

Under the proposed structure, GMP shareholders will be entitled to receive in exchange for each of their GMP shares, either two units of the new trust and a cash payment of $1 or two Class B limited partner units of Griffiths McBurney L.P. and a cash payment of $1.

It’s expected the new trust will make regular monthly distributions of approximately $0.1042 per Unit ($1.25 per annum). Holders of exchangeable limited partner units will be entitled to equivalent distributions.

Once final court and regulatory approvals are received, shareholders will vote on the trust conversion at a November 18 meeting. The conversion is expected to be complete by December 1.

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UBS Bank opens Calgary office

(October 6, 2005) UBS Bank has opened a branch in Calgary in an effort to expand the firm’s wealth management presence for clients in western Canada.

“Calgary is home to the second largest number of company headquarters in Canada, and as more companies thrive in Western Canada’s oilpatch, they will need global financial solutions, such as multi-currency investments, something a global financial services firm such as UBS can provide,” says Grant Rasmussen head of UBS Wealth Management in Canada.

UBS Bank offers services to private clients in the areas of portfolio management, investment advisory and investment lending, as well as financial planning and integrated wealth management services.

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Consumer confidence sagging

(October 6, 2005) For the second time this week, a survey shows that Canadian consumer confidence is at its lowest level since September 2001.

The Conference Board of Canada’s Index of Consumer Confidence declined by 10 points last month, the steepest drop since the board began surveying Canadians monthly in December 2001.

“The spike in gasoline prices following Hurricane Katrina left less money in consumers’ pockets and clearly affected confidence in September,” said Paul Darby, the board’s deputy chief economist. “This is a major decline in consumer confidence and will likely affect spending and Canada’s overall economic performance for the next six months.”

The sharpest drop was in big ticket spending, such as purchases of homes and cars.

Earlier this week, Decima Research and Investors Group released a consumer confidence survey with similar results, also noting that Canadians appear to believe the trend will be short-lived.

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OSC extends Norshield suspension

(October 6, 2005) The Ontario Securities Commission has extended a temporary order suspending the registration of Norshield Asset Management. A new hearing has been scheduled for December 12.

The order also applies to Norshield’s retail division, Olympus United Group. Norshield is the manager and advisor of a variety of hedge funds and alternative investment products offered across Canada by Olympus. These products are sold as shares in the Olympus United Funds Corporation. Olympus Funds has approximately 2,000 shareholders, mostly in Ontario.

At the beginning of May, Olympus announced the deferral of redemptions in a number of its funds. On May 13, the registration of Olympus was suspended because Olympus was operating without a registered trading and compliance officer.

RSM Richter remains in place as receiver over the assets, undertakings and property of Norshield, Olympus and other related entities. Richter’s mandate is to locate and secure assets in the best interests of investors and other creditors.

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CI profit rises on strong sales

(October 5, 2005) CI Financial today reported quarterly sales of $879 million, up a whopping 732% from the same time last year when sales were just $105 million.

Favourable market conditions in fiscal 2005 and 2006 combined with positive net sales of contributed significantly to CI’s growth, the firm said in a statement.

Revenue in the quarter was up 14% to $332 million while profits rose to $91 million, compared to $81 million last year.

CI’s healthy sales benefited from its industry-leading line-up of 30 five-star Morningstar rated funds, the company said in a statement. CI has now maintained the position of either first or second most funds with Morningstar Canada’s five-star rating for 43 consecutive months.

Fee-earning assets as of August 31 stood at $71.1 billion, up 11% from $63.9 billion last August. Those assets include $52.1 billion of retail managed assets (including $9 billion of managed assets at Assante Corporation and $1.4 billion of structured products and other funds), and $19 billion of administered assets net of the managed assets at Assante and IQON Financial Management.

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Market regulator dismisses frontrunning charge

(October 5, 2005) An RS hearing panel in Vancouver has dismissed a frontrunning charge against Jason Fediuk, an institutional equity trader with Salman Parntners. RS accused Fediuk of committing a frontrunning violation when he traded TVX Gold shares ahead of his client on April 26, 2002.

However, the panel today decided that it did not have “clear and convincing” proof the Fediuk knew of the client order to buy 3.5 million share of TVX when he placed his own order.

“Frontrunning is ranked by the securities industry as one of the top risks to market integrity,” said Gerry Halischuk, RS’s Vice President, Market Regulation, Western Region. “RS will always vigorously prosecute anyone we suspect of frontrunning. While this was not the decision we were hoping for, I am satisfied that the panel demonstrated a clear understanding of the allegations and weighed the evidence fairly.”

All charges against Fediuk have been dismissed and RS says it will not appeal the panel’s decision.

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BMO commits $150 million to private equity fund

(October 5, 2005) BMO Financial says it will commit as much as $150 million US to the Halyard Capital Fund 2, a private equity fund that invests in media, communications and business services.

Halyard Capital is a wholly-owned independent affiliate of BMO Financial, formed in May 2000. The $350 million US Halyard Capital Fund 1 has a variety of investments in media and communications, including newspapers, radio, television, wireless towers, marketing services, directories and B2B publishing.

“As the principal investor in Halyard II, we will continue to leverage both our capital and our longstanding experience in the media industry and its related sectors,” said Yvan Bourdeau, President and Chief Operating Officer, BMO Nesbitt Burns.

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Funding improving for DB plans, says study

(October 5, 2005) The bulk of Canada’s defined benefit pension plans are more than 80% funded, according to Dominion Bond Rating Service (DBRS).

In a report released Wednesday, the ratings agency said that the situation with pension funding continues to improve across most industries, with just a handful of industries remaining in a large underfunded position. “The sectors most seriously affected are auto parts and a wide range of manufacturing companies which tend to be more labour-intensive,” DBRS said.

DBRS stuidies 324 plans across 16 industries noted that 63% were funded 80% or better at the end of 2004.

“This compares to 58% at the end of 2003 and 51% at the end of 2002,” says DBRS vice president and study author, Francesco Sorbara.

DBRS says that the worst appears to be over for most companies, relating to pensions, and only a handful of companies have serious issues with pensions remaining.

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RBC launches third series of commodity-linked note

(October 5, 2005) RBC Financial Group has introduced the RBC Principal Protected Commodity-Linked Note, Series 3 in response to substantial investor demand for short-dated commodity structures that offer principal protection.

The notes mature in three-and-a-half-years, offering investors access to a select group of commodities that includes aluminum, crude oil, copper, natural gas, and nickel.

The RRSP eligible notes are available through advisors and self-directed investors until November 10.

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Ontario regulator to create new investor committee

(October 4, 2005) The Ontario Securities Commission announced today that it will establish a new Investor Advisory Committee (IAP) to help identify and address issues affecting investors.

The committee will also ensure that the views of consumers of financial services are heard by the OSC, said acting chair Susan Wolburgh Jenah in a statement.

“The commission recognizes the critical importance of consulting directly with investors in carrying out its mandate,” she added. “The IAC will provide advice and guidance on any aspect of the OSC that has an impact on investors, including complaints handling and compliance practices.”

At a Town Hall meeting in Toronto earlier this year, former OSC chair David Brown promised that the OSC would look at ways to better communicate with investors.

Investors, representatives of consumer organizations and other interested persons are invited to apply in writing for membership on the IAC, indicating their qualifications and areas of relevant experience, by October 18.

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MFDA warns on personal financial arrangements with clients

(October 4, 2005) The MFDA has released a four-page bulletin on personal financial dealings with clients, warning of the possibility of conflicts of interest.

The SRO says it has become aware of situations where mutual fund salespersons have become directly involved in private investment schemes with clients, such as investment clubs, “that would raise significant and direct conflicts of interests.”

Lending to clients is specifically prohibited under MFDA rules, but borrowing from clients is not. Still, the regulator says that borrowing from a client raises a direct conflict of interest “that in almost all cases will be impossible to resolve in favour of the client.”

In addition to conflict of interest issues, these types of arrangements also raise concerns with respect to compliance with another MFDA rule, which requires that all securities-related business be conducted through the member firm.

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Consumer confidence falls to lowest level since 9/11

(October 4, 2005) Canadian consumer confidence has declined to its lowest point since September 2001, according to a survey released today Decima Research and Investors Group.

“These results likely reflect a combination of rising concerns about energy prices, coupled with concerns about the economic impacts caused by Hurricane Katrina” said Decima CEO Bruce Anderson, noting that the Canadian results follow a similar drop in the U.S.

Still, Anderson said the pattern of the survey results indicates Canadians believe the economic impact will be short term. “People appear to think that they will be able to get through the rough patch.”

Charles Feaver, vice-president of research at Investors Group, points out that most consumers are worse off now than they were a year ago, mostly due to higher gas prices. “Even though Canada is an energy producer, and in a position to benefit from higher prices, the expectation of increased economic activity in the energy sector is clearly not being felt across the country. While Alberta and B.C. residents are more positive about prospects for the Canadian economy, consumers in other regions have more negative expectations.”

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Savoy launches new equity fund

(October 4, 2005) Savoy Capital Management says its new Gladiator Absolute Return Canadian Equity Fund is now available to investors.

The new offering applies the same investment strategy as the Gladiator L.P. Absolute Return Fund, investing in the 500 largest stocks on the TSX in an effort to provide consistent absolute returns regardless of the market environment.

The Gladiator fund, which is 100% RSP eligible with a minimum $5,000 initial investment, will be managed by Gene Vollendorf, founder of Calgary-based Savoy Capital Management. “It’s exciting to be able to offer the innovative actively managed investment style of our Gladiator L.P to mainstream Canadian investors through this new fund,” he said.

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RBC offers new principal protected notes

(October 4, 2005) RBC Financial has launched two new principal protected notes aimed at risk-averse retail investors seeking an alternative to GICs.

The RBC Leon Frazer TargetYield(TM) Principal Protected Notes Series 1 and Series 2 are linked to a portfolio comprised of bonds as well as Canadian equities and Canadian income trusts. Both notes are managed by Leon Frazer & Associates.

The first series offers quarterly coupons equivalent to 100% of the ordinary cash distributions received on the equity investments. Series 2 provides quarterly partial principal repayments equivalent to 100% of the ordinary cash distributions received on the equity investments.

Both notes are available to self-directed investors, as well as through investment advisors, until November 10 and mature in 2013.

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Trade papers sweep IFIC journalism awards

(October 3, 2005) Financial writers at three of the country’s top trade publications were winners at this year’s IFIC journalism awards, handed out last week at the fund industry association’s annual conference in Toronto.

A special lunch-hour ceremony last Thursday celebrated IFIC’s Fifth Annual Journalism Awards Program, where three Canadian reporters were lauded for their financial news articles, aimed at assisting investors in reaching their financial goals through the use of investment funds. Advisor’s Edge Report editor Scot Blythe received third-place for his article, “Falling Knives,” which touted the benefits of value investing and different investment strategies. Blythe’s article appeared in AER’s March 2005 edition.

“It’s great to be acknowledged and it confirms that we’re fulfilling our role, which is to provide advisors with news that they can use,” Blythe says. “We do try, in all our writing, to aid the advisor in understanding the investment universe as well as in building a sustainable practice.”

Grant McIntryre received first place recognition for his May 2005Investment Executive piece, “Women, Money and Advisors,” outlining the challenges facing advisors in helping women plan for retirement. Second prize was awarded to Stéphane Desjardins for his February 2005 article entitled, “One Out of Four Mutual Funds Will Vanish Within Five Years,” which appeared in The Insurance Journal.

“IFIC has always believed in the importance of encouraging journalists’ efforts to educate the investing public and advisors,” said outgoing IFIC president Tom Hockin. “Members of the public rely on the knowledge and understanding of media to make their investment decisions.”

The program’s French-language award will be handed out at the Quebec Investment Funds Council’s annual conference next April.

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B.C. regulator slaps lifetime ban against convicted fraudster

(October 3, 2005) The British Columbia Securities Commission has permanently banned a man with a lengthy record of securities fraud and criminal convictions. Michael Mitton was also fined $250,000, the maximum penalty the regulator can administer.

“Mitton has a long and egregious history of fraudulent and abusive trading,” said the regulatory panel in issuing its decision. “He has 103 criminal convictions in Canada and an outstanding indictment for securities fraud in the U.S.”

The panel found that Mitton provided advice and traded securities without registration, sold shares he did not own, defrauded investment dealers through various schemes, illegally distributed securities and manipulated the market.

In one case, he raised $6 million from investors after setting up a shell company on a U.S. over-the-counter bulletin board, issuing press releases about the business ventures the non-existent firm was involved in.

In December 2000, the B.C. Supreme Court sentenced Mitton to a four-year jail term after he entered guilty pleas to six counts of securities fraud.

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New federal bond series commemorates Victory bonds

(October 3, 2005) The federal government today announced its new 10-year series of bonds, coinciding with a campaign to commemorate the 60th anniversary of Ottawa’s Victory bond program.

“In this year of the veteran we are recognizing the contributions made by the women and men who have served Canada in uniform,” said Finance Minister Ralph Goodale. “It is also fitting that we recognize the contributions made on the Canadian home front, one of which was the Victory Loan Program and the purchase of Victory Bonds.”

“Victory Bonds once financed the fight for freedom and fueled the achievements of our veterans,” said Veteran Affairs Minister Albina Guarnieri. “As Canadians save for a better future, they might remember the veterans who saved a better future for all of us.”</>

A Victory Bond certificate was presented by Goodale and Guarnieri to Canadian War Museum Director Joe Geurts in a ceremony in Ottawa.

Ottawa’s new series of Canada Savings Bond, which can be cashed at any time, mature in 2015, and offer a 2% annual interest rate. Canada Premium Bonds have a slightly higher interest rate, starting at 2.25% and rising to 2.75% by 2007, but can only be cashed once a year.

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AGF closes Unisen deal

(October 3, 2005) AGF Management has closed the sale of back-office service provider Unisen Holdings to Citifinancial Canada, a subsidiary of U.S. banking giant Citigroup, in a deal valued at $97.5 million US. The sale was first announced in July.

Unisen provides third-party administrative services to the financial industry. Under a 10-year agreement, Unisen will continue to service AGF and AGF mutual funds.

“This sale generates significant value for AGF shareholders and mutual fund investors, while allowing us to focus on our core investment management business,” said Blake Goldring, AGF’s president and chief executive officer. “With a large partner like Citigroup, we can have access to the best in professional client services and administrative processing as well as benefit from economies of scale.”

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PH&N introduces new income fund

(October 3, 2005) Phillips, Hager & North has launched the PH&N Canadian Income Fund, offering investors a mix of Canadian equities and income trusts, with a small allocation to fixed income securities.

The fund is designed for those looking for a balance between capital preservation, growth and steady income, the Vancouver-based fund company said in a release.

“PH&N has a strong reputation for Canadian equity research and yield-enhancement strategies,” says company president John Montalbano. “The Canadian Income Fund brings these strengths together in a low-fee package to benefit investors.”

After the fund’s asserts reach a “reasonable” size, PH&N expects to keep its MER to around 1.25%. Minimum investment is $1,000 and investors’ accounts must be at least $25,000.

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U.S. regulator fines market timers in brokerage industry

(October 3, 2005) The National Association of Securities Dealers (NASD) has fined ING Funds Distributor $1.5 million US for permitting market timing, the largest penalty ever issued in such a case. NASD also ordered ING to pay more than $1.4 US million in restitution to the affected mutual funds.

The securities regulator also fined two other firms for market timing. Philadelphia’s Janney Montgomery was penalized $1.2 US million and order to pay nearly $1 million US in restitution. San Diego’s First Allied Securities was fined $408,000 US for facilitating the deceptive efforts of three hedge fund customers to engage in market timing transactions and was ordered to pay approximately $326,500 US to reimburse the affected funds.

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