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(September 26, 2008) While Canada’s financial institutions are relatively safe compared to what’s happening in the U.S. right now, that doesn’t mean some of this country’s banks and insurance companies haven’t been affected by the meltdown, including Sun Life Financial.

The Toronto-based insurance giant revealed Friday that it has exposure to embattled American bank Washington Mutual.

The company reported that it’s exposed to bond securities worth $270 million, with the majority of Sun Life’s exposure in segments backing liabilities.

In a press release, Sun Life says that it expects “to record a charge to earnings in the third quarter of 2008.”

In related news, Great-West Lifeco holds $2.1 million par value of fixed income securities of Washington Mutual, which was seized by regulators in the United States on Thursday.

The Canadian insurer also clarified that its holdings of securities issued by WaMu as reported by Lifeco in its United States regulatory filings include mortgage-backed securities that had been packaged and serviced by a subsidiary of Washington Mutual.

“These securities do not expose Lifeco to the credit of Washington Mutual,” according to a company statement.

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American advisors still investing in equity funds

Despite the economic crisis in the U.S., advisors aren’t turning away from equity funds just yet. A new survey by Kasina, a New York-based financial consultancy firm, says 47% of advisors are staying put in equity funds, even while the market remains volatile.

“It’s a positive sign that advisors are not panicking,” says Steven Miyao, Kasina’s CEO.

The report also reveals that 29% of those surveyed are actually increasing their investments in bonds, equity and money market funds, while 24% are investing less.

Miyao says the U.S. bank bailout is a positive thing, and should help markets eventually get back on track. But if it doesn’t go, “we’ll be in trouble,” he says.

“If the bailout doesn’t happen, then the sentiment would be quite different,” Miyao explains. “We might see people become very nervous and maybe start to panic.”

The survey was conducted on September 24 and 25 with 174 financial intermediaries. Miyao says if the bailout doesn’t happen, it’s likely they’ll do another survey next week in order to gauge how advisors are feeling.

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CSA and IIROC take steps to protect Canadian markets

While the financial crisis is happening largely in America, Canadian financial institutions are still taking action to prevent a meltdown here.

In a press release issued Friday, the CSA outlined what it’s done to keep the crisis from moving north of the 49th parallel, including temporarily banning short selling of common shares of some financial institutions and initiating a fact-finding review of money market funds to see if there is any exposure to impaired or illiquid assets.

The CSA, along with the Investment Industry Regulatory Organization of Canada, is also watching markets to make sure trades continue to be fair and orderly.

“The CSA is actively engaged in an examination of the issues related to the current market events and will continue to take regulatory action, where appropriate, to protect investors and market integrity in these extraordinary times,” says CSA chair, Jean St-Gelais.

IIROC has also taken measures itself, including increasing surveillance of short-selling activity on Canadian marketplaces, and closely monitoring the regulatory capital position of all dealer member firms.

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IAFP takes issue with IIROC’s financial planning rule

On Friday, the Institute of Advanced Financial Planners said that it would participate in a detailed review of the Investment Industry Regulatory Organization of Canada’s proposed financial planning rule.

The IAFP finds that IIROC’s definition of the personal financial planning process is too narrow, and that it’s wrong to exempt planning “directed at making investment recommendations from the definition, practitioner qualifications, as well as the associated oversights and controls of financial planning,” writes the organization in a release.

The group says that it’s “dangerous” to characterize financial planning services as something that’s provided only though a dealer member.

The IAFP will submit its comments and findings directly to IIROC.

(09/26/08)