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(May 17, 2007) The British Columbia Securities Commission upheld an Investment Dealers Association of Canada panel decision that the self-regulatory organization can investigate and discipline its former members.

Charles K. Dass, a former stockbroker, had appealed to the BCSC that the IDA could not hold disciplinary hearings into his conduct because he was no longer a member when the IDA issued a notice of hearing. Dass argued that section 26 of the B.C. Securities Act limited the IDA’s ability to regulate former members.

The commission panel disagreed with Dass, stating that Section 26 imposes only a duty on the IDA to regulate and does not limit their its authority.

“Accordingly, although section 26(1) does not impose a duty to regulate former members, it does not limit the IDA’s authority to do so,” the panel wrote.

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BMO ups gas trade losses to $680 million

(May 17, 2007) BMO’s losses from natural gas trading are much more severe than initially reported. When the bank first made the losses public at the end of April, it estimated losses at between $350 million and $450 million. That figure has now been revised to $680 million.

BMO says that after the losses came to light, they it moved quickly to conduct an internal review. New information was obtained, and BMO determined that a more appropriate market-based methodology should be used for this portfolio. This change, together with “increased concerns” with the quotes given by its principal broker” led the bankm to conclude that losses should be recognized in both the first and second fiscal quarters.

BMO asserts it is continuing to investigate trading losses, including a review, to determine whether any potential irregularities in trading and valuation took place. The company has already purged two of their its brokers involved in the trades.

“Since our initial announcement on April 27, BMO and our external advisors have continued to investigate this matter. This has provided additional insight into the current circumstances, helped guide the actions we have taken and those we will take going forward. BMO has reduced the risk in this portfolio by approximately a third from its peak,” says Bill Downe, BMO Financial’s CEO.

Standard and Poor’s has placed BMO and all of its subsidiaries on watch “with negative implications.”

“The CreditWatch placement reflects our heightened concerns over the risk associated with the underlying strength of its enterprise risk management framework, management oversight, and the bank’s trading operations following today’s announcement that the total marked-to-market commodities trading losses as at April 30, 2007, would be C$680 million CDN before tax,” said Standard & Poor’s credit analyst Donald Chu. “This almost doubles the original estimated pre-tax trading loss of C$350 million–-C$450 million CDN that was announced on April 27, 2007.”

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2007 the year of M&A?

(May 17, 2007) Mergers and acquisitions are nearly double what it was at this point last year and has accounted for 44% of the increase in the TSX Composite over the plast year, CIBC World Markets reports.

CIBC says Canadian M&A deals have topped $175 billion so far in 2007, including $82 billion in announced transactions for May alone. With $2 trillion in global transactions thus far, M&A activity is up 60% from 2006.

“Investors are witnessing the greatest merger wave in history,” says Jeff Rubin, chief economist at CIBC World Markets. “The result is the emergence of global behemoths with GDP-like capitalization. And their creation has typically involved the payment of generous premiums, fuelling stock market rallies around the globe.”

For the TSX, the report finds that these premiums have played a critical role. M&A-related valuation changes have accounted for 44% of the index’s 2,000- point increase in the plast 12 months. CIBC estimates that M&A valuation pressures have accounted for all of the increase in the mining sector and a good deal of the gains for telecoms.

Rubin says that this unprecedented M&A wave will remain in place and should lift the TSX to the 15,000 level by year end.

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(05/17/07)