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(July 7, 2008) In a test case for the Anti-Money Laundering and Terrorist Financing Regulations, four Canadians injured in a Hezbollah rocket attack on northern Israel have filed a civil suit against the Lebanese-Canadian Bank (LCB).

The suit alleges that the bank unlawfully provided financial services to the Yousser Company for Finance and Investment, and the Martyrs Foundation, both of which the U.S. Treasury Department has identified as terrorist organizations.

The statement of claim alleges that the bank allowed the two groups to funnel millions of dollars into Hezbollah coffers, which eventually funded the rocket attacks.

“LCB knew that both charities are part of Hezbollah’s financial arm and that by providing them banking services they were really assisting the Iranian-backed terrorists in Lebanon perpetuate their rocket attacks against civilians,” says Israeli attorney Nitsana Darshan-Leitner. “This lawsuit is only the beginning of the uncovering of Hezbollah’s extensive financial network in Canada.”

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GMP Securities names president

(July 7, 2008) GMP Capital Trust has named Harris A. Fricker as the next president of GMP Securities L.P., replacing Thomas A. Budd, who retired June 30.

Fricker is currently vice-chairman and head of investment banking for GMP Securities, and co-chairman of GMP Europe. He will retain both roles.

“Harris has the industry experience and an in-depth understanding of the GMP culture and we are confident he will provide the necessary leadership to GMP as we continue to execute our growth strategies,” said Kevin Sullivan, CEO of GMP Capital Trust.

GMP also announced that Dan Tsubouchi, vice-chairman, research, will assume responsibility for the Calgary office, while continuing to work with clients in the oil and gas sector.

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Raters need independence, CFAs say

(July 7, 2008) Credit rating agencies are susceptible to pressure from investors, issuers and underwriters, and will occasionally change their ratings based on this pressure, according to a global membership survey conducted by the CFA Institute.

The survey found 11% of CFAs said they had witnessed the change in ratings firsthand.

“In the wake of the subprime crisis, we have met with several representatives from ratings firms,” said Kurt Schacht, CFA and managing director of the CFA Institute Centre. “They were concerned about the hype and insinuation that CRAs easily inflate their ratings in response to pressure from issuers and underwriters, implicating the integrity of their process and ratings. In exploring that topic, we were very surprised by the results of our member poll, where some 211 of the 1,956 respondents said they have indeed witnessed a CRA change ratings in response to external pressures.”

Survey respondents pointed to the conflict of interest inherent in the ratings industry, with issuers usually paying the rating agency for its service. They suggested that the CRA’s interests need to be aligned with investors, and not with the issuer.

There was majority support (55%) for the idea of CRAs banding together to form an international standard-setting and monitoring self-regulatory body with enforcement powers.

There was also strong support (47%) for the creation of new ratings symbols for structured products, which may often behave differently from traditional debt instruments, and should therefore use something other than the traditional letter grade ratings.

“We feel that a different rating scale is an essential aid to trustees and fiduciaries, to help them evaluate and quantify the amount of structured product exposure they desire in their portfolios,” said James Allen, CFA and director of the CFA Institute Centre’s Capital Markets Policy Group. “We have expressed this thought and others in responses to the ratings agencies themselves and in response to both domestic and international consultations from [The Committee of European Securities Regulators] CESR and [International Organization of Securities Commissions] IOSCO on the topic.”

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IFIC hires IIAC’s Amsden

(July 7, 2008) Barbara Amsden has joined The Investment Funds Institute of Canada in the newly created position of director, research and strategy. She will take over responsibility for the statistics area and assist in strategic planning and key projects.

Most recently, Amsden held the position of director, capital markets, at the Investment Industry Association of Canada, and previously held senior positions with the Canadian Depository for Securities Limited (CDS), and the Canadian Bankers Association.

(07/07/08)