Briefly:

(October 21, 2005) A Quebec class action suit against Norbourg Financial has named the powerful Caisse de dépôt et placement du Québec, alleging the fund failed in its due diligence.

“The CDP, by omitting to proceed with due diligence before selling partnerships and funds to Norbourg Financial Group, breached its duty to act reasonably and diligently and let its commercial interests take priority over the interests of the investors whose portfolios it held.”

On December 21, 2003, the Caisse gave up its 21 Evolution mutual funds, assigning them to Norbourg Gestion d’actifs. The class action is claiming damages of $130 million, based on reports from Ernst & Young.

Vincent Lacroix, who heads the Norbourg group of companies, including the Evolution fund family, placed the firms’ assets under bankruptcy protection earlier this month, following allegations by Quebec regulators of discrepancies in the firms’ financial statements.

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Fidelity brings lifecycle funds north

(October 21, 2005) Fidelity Investments has announced its Fidelity ClearPath Retirement Portfolios are coming to Canada and will be available for purchase beginning November 3, 2005. These lifecycle funds have been available in the U.S. for nearly a decade.

“All investors need to do is choose an estimated retirement date and then, with their advisor, select the corresponding portfolio,” said Wilfred Vos, vice president of business development at Fidelity. “Behind this simple solution is a built-in intelligence based on years of Fidelity’s research and experience. Virtually anyone can get started on building the pay cheque they are going to need when they are no longer working.”

The target dates start from 2005, increasing at 5 year intervals to 2045, with an income portfolio for the clients’ retirement years. The minimum investment is $500.

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CSA streamlining short form prospectus

(October 21, 2005) The Canadian Securities Administrators is streamlining the short form prospectus system, aiming to integrate the primary and secondary markets’ disclosure systems. National Instrument 44-101 Short Form Prospectus Distributions allows issuers to access capital markets by depending increasingly on their existing continuous disclosure record.

“By harmonizing and integrating the short form prospectus regime with the new continuous disclosure regime, we are creating a universal, seamless, integrated and expedited offering system,” says Jean St-Gelais, chair of the CSA. “The new system can allow issuers to respond more quickly and efficiently to market opportunities without diminishing the information and protection available to investors.”

The new rule will come into effect on December 30, 2005, subject to ministerial approval. NI 44-101 and all related materials can be found on the websites of Canada’s securities regulators.

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Farm advisors get national sponsor

(October 22, 2005) The Canadian Association of Farm Advisors (CAFA) has announced Scotiabank as a new national sponsor.

“We see our involvement in CAFA as important in two ways — first, to further demonstrate to farm clients our commitment to providing sound financial solutions to their farm businesses, and second, to let other farm advisors know of our desire to work co-operatively with them in bringing value to mutual farm clients,” said Bob Funk, vice president of agriculture at Scotiabank.

Earlier this month, CAFA awarded the credentials of “Certified Agricultural Farm Advisor” to its members in good standing.

“The certification will become the mark of trust for farmers across the country looking for professional advisors,” says Liz Robertson, CAFA’s executive director.

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Central bank cuts growth projections

(October 20, 2005) Citing higher energy prices and the stronger Canadian dollar, the Bank of Canada today reduced its economic growth estimate for 2006 to 2.9%, down from earlier predictions of 3.3%.

“Past and recent movements in energy prices and in the exchange rate for the Canadian dollar, along with competitive pressures from China and other newly industrialized economies, are giving rise to significant ongoing adjustments in the Canadian economy,” bank governor David Dodge said in statement.

Given these adjustments and the slow growth of productivity in recent years, the bank has slightly reduced its estimate of potential output growth, although it does expect growth to pick up to 3% by 2007.

And though inflation has been volatile this year and could reach close to 3% by year’s end, the CPI is expected to return to the bank’s 2% target range in the second half of 2006.

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Canadian families mismanaging debt

(October 20, 2005) A typical Canadian family with a residential mortgage loses an average of $1,000 each year by not effectively managing their debts and short term assets, according to a study released today by Manulife Bank.

The company says nearly two-thirds of homeowners surveyed last month say they have never consolidated what they owe. More than one-third said they only make minimum payments on their mortgages, credit cards and other loans. A separate study confirms they could save borrowing costs by combining their debts.

“This suggests to us that many Canadians are not actively seeking solutions to reduce their debts and likely paying too much in interest costs,” says Manulife Bank president and CEO, J. Roman Fechyshyn. “Building wealth goes beyond finding the best investment or lowest mortgage rates. It’s about managing your debts and short term cash in the most efficient way to lower your overall costs.”

Moshe Milevsky, associate professor of finance at York University and co-author of one report released today, says “Canadians need to take a careful look at the liabilities on their personal balance sheet. They need to make sure that all their eggs — debts and short term cash assets, are placed in one basket, otherwise what they owe and what they own aren’t working optimally to lower their costs,” he says. “While portfolio diversification is an excellent principle when it comes to your assets, it’s not a sound practice when applied to your debts.”

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Equities give pension plans a lift

(October 20, 2005) The health of Canadian pension plans improved slightly in the third quarter, thanks to the country’s booming Canadian stock market, according to Mercer’s quarterly pension update.

“The good news is the 12% return on Canadian stocks in the third quarter alone”, said Mercer’s Paul Purcell. “The bad news is that there remains a big hole for most plans to climb out of, and it will almost certainly take higher long-term interest rates for that to happen.”

Purcell says companies with pension plans should budget for higher costs in 2006, but adds that the increase are unlikely to as dramatic as they were a few years ago.

“Pension plans that have hedged their sensitivity to interest rates will have fared much better,” he notes. “On the other hand, those that have promised inflation-indexed pensions have likely fared worse, with the continued decline in real return bond yields.”

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S&P issues new bond index guidelines

(October 20, 2005) Standard & Poor’s has announced a set of new rules governing the use of credit ratings in the S&P/TSX Canadian Bond Index.

After the close of business on November 30, 2005, bonds in the index must have two investment grade ratings to qualify for inclusion. The index committee will use publicly available credit ratings from the Dominion Bond Rating Service, Fitch Ratings, Moody’s Investor Service and Standard & Poor’s.

For bonds that are rated by two agencies, the committee will use the lowest rating to assign the bond to a sector. The committee will use the middle or most common rating for bonds that are rated by more than two agencies. For those rated by four agencies, the committee will assign the bond based on the more conservative score, in the event the ratings are equally split between two sectors.

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Market regulator fines Dundee supervisors

(October 20, 2005) Trading supervisors at Dundee Securities have been fined after two trainees and a registered trader engaged in “potentially manipulative and deceptive trading.”

Mark Ellis and Keith Leslie Leonard were each fined $15,000 plus $6,000 in costs after a Market Regulation Services (RS) panel approved a settlement in which they agreed they failed to fully comply with their trading supervision obligations.

In September 2003, a person in training to become a trader at Dundee entered non-client market orders in pre-market trading that were designed to circumvent the TSX trading mechanism that allocates which orders will receive a complete fill at the opening.

When RS market surveillance officers told him to “cease and desist”, the trainee cancelled the orders and informed his supervisors. Ellis and Leonard warned him of the ramifications, told him not to repeat the mistake, but did not conduct any further investigation or contact the company’s compliance department as required by Dundee’s policies and procedures.

“Persons with supervisory responsibilities must fully and properly supervise all employees to ensure their compliance with the rules,” says RS vice president, Maureen Jensen. “Ellis and Leonard failed to fully comply with their obligations as trading supervisors and failed to escalate the matter in question as required.”

RS says another trainee, meanwhile, was able to engage in a similar but more blatant pattern of order entry for 52 days between July and December 2003. Ricardo Mashregi, a registered trader, engaged in similar trading conduct for 248 days between October 2003 and February 2005. RS fined Mashregi $60,000 for his conduct.

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FPSC builds youth educational resources

(October 20, 2005) The Financial Planners Standards Council (FPSC) is working to enhance its online education for young people, by adding an “ask the expert” feature. The FPSC plans to invite young people to e-mail financial planning questions to a rotating panel of CFPs for a response.

The FPSC has also updated its Focus On Your Finances feature, adding a financial planning tool kit for Canadians between the age of 15 and 25.

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Shocks will slow, not derail growth: Scotia

(October 19, 2005) The global economy will continue to expand, despite higher energy prices, according to a report released today by Scotiabank. However, rising interest rates could slow the pace of international growth, as central banks take action to keep inflation in check.

“High and volatile energy markets should not derail the expansion underway throughout most of the world,” says Pablo Bréard, vice-president, international research, Scotiabank Group.

Here at home, the increased world appetite for energy and other natural resources is a boon for Canada, Bréard notes. “We are in a good position to benefit from increasing global demand.”

In the U.S., the economy will likely moderate closer to its potential, with government spending on post-hurricane reconstruction partially offsetting an expected slowing in consumer purchases, Scotia believes.

Meanwhile, China, India and Russia are expected to be the most dynamic engines of growth are in the developing world.

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Canadians continue borrowing despite rate hike

(October 19, 2005) If you thought Tuesday’s interest rate hike would dissuade Canadians from borrowing, think again. The Canadian Institute of Mortgage Brokers and Lenders expects the residential mortgage market to expand 10% by the end of this year and another 10% by the end of 2006.

This growth will come from new mortgages and transfers between lenders as well as refinances of existing mortgages, the institute says. Low interest rates will continue to drive growth in the residential market.

“The residential mortgage market could expand by 10% or 11% by the end of the year, to $660 billion, and by the end of 2006 we expect another 10% growth for a year end figure of $725 billion,” said CIMBL president Rod Swift.

In the second quarter of this year there was $617 billion in outstanding residential mortgage credit in Canada. Residential mortgages have grown at a rate of 6.4%, surpassing total household and business credit and expanding faster than the Canadian economy.

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OpenSky Capital launches new note

(October 19, 2005) OpenSky has launched a new 100% principal protected note, promoted as an attractive alternative in today’s low interest environment.

The notes, called the 100% Principal Protected Progressive Income Notes, Series 1, are guaranteed by Société Genérale. They offer two years of guaranteed coupons yielding 5% and 6% in years the first and second years respectively. After the first two years, investors will have the potential for progressively higher coupons.

The value of the coupon will be equal to the average of the cumulative returns of a basket of shares of 15 major global companies, capped at the maximum return for that year.

The notes also offer the potential of a reset of the initial value of each share, if after two years the basket value is down by more than 20%.

The notes are available until December 9, 2005 with an upfront selling commission of 4%.

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CIBC replaces sub-advisors

(October 19, 2005) Front Street Investment Management and Fidelity Investments Canada have been appointed by CIBC to take over as sub-advisors to some of its resource and global funds.

Three funds in all are impacted by the change, which will take effect November 21. Under the move, Front Street will add Talvest Global Resource Fund and the CIBC Canadian Resources Fund to the two CIBC funds it already sub-advises, replacing KBSH Capital Management.

The investment strategies spelled out in the CIBC and Talvest prospectuses have been modified to reflect Front Street’s investment process. The main change will be that under Front Street these funds may invest in income trusts.

Fidelity, along with Pictet International Management, will take over the duties as sub-advisor for a third fund: the Imperial Overseas Equity Pool, replacing GE Asset Management. Fidelity will handle everything except the international small-cap equity portion of the pool, which will be managed by PIM.

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Bank of Canada raises rates

(October 18, 2005) The Bank of Canada has raised its trend-setting overnight rate by 25 basis points to 3%. The major banks promptly followed suit, increasing their prime lending and variable mortgage rates.

“The global and Canadian economies have continued to grow at a solid pace,” the central bank said in a press release. “At the same time, there have been significant movements in energy prices and the Canadian dollar has traded in a higher range against the U.S. dollar and other major currencies. Overall, the Canadian economy now appears to be operating at its full production capacity.”

“This is the main reason the bank is hiking — rates are well below neutral, but the economy is working flat-out,” said BMO chief economist Sherry Cooper in an online report, adding that the market is “heavily leaning” toward another increase in December.

Bank projections see the Canadian economy continuing to operate at production potential through 2007. CPI and core inflation are expected to come in at 2% in the second half of 2006, although CPI inflation is expected to average near 3% until then, due to high energy prices. .

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One Financial offers family of market-linked notes

(October 18, 2005) One Financial has launched a new family of 10 guaranteed market-linked notes, which differ from traditional offerings in that they allow investors to switch between notes within the family.

“Our new family of notes offer investors a greater level of choice, flexibility and security than has ever been available in the world of stock-market investing,” said Jeffrey O’Brien, president and CEO of One Financial.

Three of the 10 new notes offer a cash-flow component that provides tax-efficient quarterly income for the investor. All of the notes offer a guarantee level that rises along with each note’s net asset value, automatically locking in any investment growth on a daily basis.

The various notes offer exposure to the G7 countries, Canada, the U.S., and Asia, oil, the price of gold, baskets of income trusts, as well as a “Global Balanced” basket. The firm expects a new series of each note to be issued once per calendar quarter.

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Skylon selling off labour funds

(October 18, 2005) Skylon Advisors has reached an agreement to sell its VentureLink Group of labour sponsored funds to the funds’ current management team, consisting of Geoff Horton, John Varghese and Jim Whitaker.

“We are pleased to proceed with the sale of the VentureLink Funds to their proven management team, which ensures continuity for the investors in the funds,” said David R. McBain, Skylon president and CEO. “The fact that the full Ontario tax credit will be in place for another four years provides additional stability for the funds and the industry.”

On September 30, the government of Ontario outlined a plan that would phase out the provincial tax credits associated with LSIFs by 2010. CI Financial, Skylon’s parent company, will continue to provide administrative and other services to the funds, but will no longer manage labour funds.

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National Bank Securities and Altamira combine distribution units

(October 18, 2005) The mutual fund arm of National Bank and Altimara’s dealer distribution unit are joining up to create a new team, to be known as National Bank/Altamira Dealer Distribution.

For the past three years, the National Bank Securities team has provided advisors with a wide variety of investment products including money market funds, principal-protected notes and core equity funds.

Altamira’s Dealer Distribution team also offers numerous investment products to the advisor community including specialty bond and equity funds and its popular savings product, the High Interest CashPerformer, which has grown to $1.6 billion in assets since it was launched earlier this year.

National Bank/Altamira Dealer Distribution will offer advisors two complementary fund families with a majority of below-average MERs on most funds, the two companies said in a release.

“The combined National Bank/Altamira Dealer Distribution Team will offer advisors the benefit of dealing with two great fund families through one business relationship,” said Charles Guay, President and CEO of National Bank Securities and Altamira Investment Services.

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Institutional investors urged to think globally

(October 18, 2005) The environment for global investing is becoming more and more favourable. That was the message coming from GE Asset Management executive vice-president Ralph Layman. At a seminar held in Toronto on Monday, Layman pointed out that although the U.S. dollar is still sliding, it is doing so at a more “pedestrian rate” than in the past.

As a result, investors who are interested in global companies with U.S. exposure are better off to invest in them now, as the dollar slows its pace of descent.

In a talk directed at institutional investors who are interested in global equities, Layman also noted that Japan is seeing a dramatic turn of events as the banks move from “relationship-based lending” to a more “risk-based lending” approach.

The political status quo has been changing, noted Layman, as Prime Minister Junichiro Koizumi seeks to alter and privatize the Postal Savings Network which acts as a large public bank and insurance system. Although the sale of the network and privatization will be a slow process, the opening of the Japanese banking and lending system will be a good start for opportunity and creative stock picking, noted Layman. “The cost cutting that we thought was possible, is starting to come out.”

Layman says China and India will continue to work through their banking restructuring and the two markets will increasingly have a major impact on the rest of the world. Opportunities for investors may very well be in the areas of power and infrastructure as China and India ramp up their manufacturing and services industries. (Filed by Joel Kranc, news editor, Benefits Canada)

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Altamira launches first blue chip note

(October 17, 2005) Altamira Investment Services today introduced a Canadian blue chip note, the first in a series the fund company plans to roll out in the coming months.

The Altamira Canadian Blue Chip Note offers investors unlimited potential return with the security of having their initial investment fully protected at maturity, Altamira says. “Investors will benefit from the gains in a benchmark portfolio of 20 leading Canadian companies including financial institutions, telecom service and energy providers.”

“The Altamira Canadian Blue Chip Note is an excellent way for investors to capitalize on potential gains in the Canadian market with the security of knowing their initial investment is protected,” said Ian Dillon, Altamira’s chief investment strategist.

The notes are backed by National Bank of Canada and cost $100 each, with a minimum investment of $500. There are no management fees and the notes are available for sale from October 17 to November 25 from Altamira advisors.

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MasterCard offers budgeting guide

(October 17, 2005) MasterCard Canada is launching a campaign to help Canadians manage their household finances, teaming up with Credit Counselling Canada to offer an assessment quiz on finances, along with a guide on basic money management rules.

“While people think they’re managing their money well, they clearly aren’t,” says Laurie Campbell, spokesperson for Credit Counselling Canada. “Canadians need to start the process of becoming solid financial managers by being honest with themselves and their families.”

StatsCan recently reported that Canadians had slipped into a negative savings rate (at -0.6% in 2005) for the first time since 1961. Despite this, a poll by MasterCard found almost 90% of Canadians believed they were comfortable managing their household finances.

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Union Securities faces $80,000 IDA charge

(October 17, 2005) The IDA has fined Union Securities $50,000 for failing to provide business records during an investigation. Union must pay an additional $30,000 in costs.

“Failure to cooperate, even if based upon a matter of principle, strikes at the very integrity of the association’s duty and ability to police itself,” said the IDA hearing panel in its decision. “For that reason, the seriousness of the offence calls for a significant penalty.”

Union Securities had argued that enforcement staff should not have access to e-mail correspondence during an investigation into the firm and one of its employees, as the servers involved also stored personal and private e-mail.

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Laurentian offers investors access to institutional managers

(October 17, 2005) Laurentian Bank Securities has introduced a “multifaceted” portfolio management service, called M3, available to retail investors with $150,000 in assets.

“The M3 service takes the burden of ongoing investment portfolio management decisions off the client’s shoulders while offering access to the expertise of the best investment managers in each financial market,” says Michel Trudeau, President and CEO, Laurentian Bank Securities.

M3 is managed by First Asset Advisory Services and gives investors access to 15 investment management teams that provide service to large institutional investors.

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RBC opens second insurance branch

(October 17, 2005) RBC Insurance has opened its second retail boutique in Ontario, this time in Hamilton’s Centre Mall, next door to its banking operation. The branch office approach was implemented in early summer to skirt federal regulations forbidding banks from selling insurance in their branches.

“The response of both existing RBC clients and potential new customers to this new channel gives us confidence that we are providing a viable and welcome alternative in the insurance marketplace,” said Neil Skelding, president and CEO, RBC Insurance. “Consumer interest has exceeded our expectations since we opened our first branch in Toronto in late June.”

Clients have access to RBC Insurance’s property and casualty products, health insurance and term life. More complex products, such as universal life insurance, are referred to specialized sales representatives.

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