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(February 1, 2007) The Office of the Superintendent of Financial Institutions Canada has found that Canada’s major banks’ exposure to hedge funds is very small, and when they do deal with hedge funds, they take a sufficiently cautious approach.

In her remarks to the Senate Standing Committee on Banking, Trade and Commerce, Julie Dickson, acting superintendent of the OSFI, said her office, which assesses the risk strategies of Canadian financial institutions, felt it was prudent to review how the banks deal with hedge funds.

“OSFI is paid to be vigilant and to do something if we think that the entities we regulate and supervise are engaged in unsafe or unsound activity, or not fully understanding the potential risks in their businesses, or, in the case of the issue at hand, not adequately assessing the risk in their hedge fund exposure,” Dickson said.

The review found that Canadian banks do not deal with that many hedge funds and when they do, they are aware of the sometimes high risk associated with them and have put proper safeguards in place.

Nevertheless, she added that the OSFI will continue to monitor the presence of hedge funds in Canada and follow the lead of other nations in regulating them.

“While OSFI does not currently have any concerns with the participation of Canadian financial institutions in hedge funds, activity in this area will continue to be evaluated as part of OSFI’s ongoing supervisory process,” she said. “Further, we meet with our international counterparts on a regular basis to discuss issues, including hedge funds. With respect to hedge funds, we pay particular attention to the work and views of regulators in the United States and United Kingdom, as those countries are where the bulk of hedge fund activity occurs.”

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Desjardins launches 12 new portfolios

(February 1, 2007) The Desjardins Group has announced that it is launching the Chorus Portfolios, 12 structured portfolios composed of Desjardins funds.

Desjardins said the funds in the portfolios will provide caisse members with the expertise of internationally renowned managers as well as a diversification by asset class, management style and geographic segment.

Portfolios will include six accrual portfolios and six retirement portfolios, but Desjardins said all 12 have a distinct mix of funds selected for their specialization and steady returns.

Some of the Desjardins funds included in the portfolios are co-branded with Fidelity Investment, CI Investments and Northwest Mutual Funds.

To meet the goals and risk tolerance of its investors, Desjardins said the portfolios are monitored on a quarterly basis to keep them in line with initial targets. Should a component stray from its pre-established target, a rebalancing process is immediately activated to restore each fund to its initial weighting and thus ensure that the choice of the investor is maintained.

“In the equation that opposes variability and potential returns, the Chorus Portfolios offer a specific solution to every type of investor, whether the investor profile is prudent, balanced or energetic. No matter what the investors’ choices may be, the Chorus Portfolios will accompany them at every stage of their lives and adapt to their new realities and aspirations,” said Marc Dubuc, Desjardins Fund’s vice-president of marketing.

The Chorus Portfolios are open to investors with a minimum initial investment of $100,000 and are now available throughout the Desjardins network.

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CIBC will issue 10 million preferred shares

(February 1, 2007) CIBC announced Thursday that it will issue 10 million non-cumulative Class A preferred shares Series 32, priced at $25 per share, to raise gross proceeds of $250 million.

CIBC has granted the underwriters, led by CIBC Capital Markets, an option to purchase an additional 2 million Series 32 shares at the same offering price. If the underwriters’ option is fully exercised, the total gross proceeds of the financing will be $300 million.

The Series 32 shares will yield 4.5% annually and are redeemable for cash from CIBC, subject to regulatory approval, at a declining premium after approximately five years.

The expected closing date of the issuing is February 14, 2007. CIBC will use net proceeds from the shares for general purposes.

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MFDA bans Donald Kenneth Coatsworth for life

An MFDA central regional council hearing Wednesday resulted in the issuing of a number of penalties against Donald Kenneth Coatsworth

The MFDA has not released the findings of the hearings but has said that Coatsworth is permanently banned from conducting any securities-related business with any of its member firms. In addition, the MFDA has fined him $60,000.

In a November release, the MFDA stated that Coatsworth had been accused of unauthorized employment outside of the member firm he worked with and had failed to cooperate with the MFDA’s investigations into his conduct.

The MFDA said it will issue written reasons for its decision in due course.

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(02/01/07)