Briefly:

(January 28, 2005) The Joint Forum of Financial Market Regulators released practice standards today for the sale of products and services by all financial services intermediaries.

The Joint Forum was founded in 1999 by the Canadian Council of Insurance Regulators, the Canadian Association of Pension Supervisory Authorities and the Canadian Securities Administrators to coordinate the development of harmonized solutions to regulatory issues across the whole Canadian industry.

The Principles and Practices for the Sale of Products and Services in the Financial Sectors is intended to articulate the standards of professionalism and fair conduct Canadian consumers should expect from members of the industry. “The Joint Forum set out to develop a common language to express minimum standards that should apply to the conduct of all financial services intermediaries in their dealings with consumers,” says David Wild, chair of the Joint Forum and chair of the Saskatchewan Financial Services Commission. The committee is urging voluntary adoption by industry associations and by those not attached to any association.

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Canadian equities attractive to global investors

(January 28, 2005) Canada is the place to be if you are a global investor looking for exposure to China. In fact, at a conference in Zurich today delegates were told Canada could be the single most interesting place in the world in which to invest.

In a speech to the Canadian-Swiss Association, William Downe, deputy chair of BMO Financial Group and chief executive officer of BMO Nesbitt Burns, said the continuing strength of NAFTA trade, the rising value of the Canadian dollar and the recent boom of trade opportunities with China makes Canada a unique opportunity for global investors. Ever since the free trade agreement was implemented in 1988, he says, many European investors have used Canada as a way to hedge risk and obtain access to the U.S. market in their North American portfolios.

“Because the Canadian and U.S. economies have become so integrated under NAFTA, Canadian equities give the global investor an opportunity to play the U.S. market with a hedge against the greenback,” Downe says.

More recently, with the increase of exports to China, Canada’s exports grew from $2.7 billion to $4.8 billion between 1999 and 2003 and jumped again to $6.5 billion in the first 11 months of 2004. “Canada represents a low-risk, high-return opportunity for global investors to share in the booming Chinese economy.”

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Active managers working in favourable conditions

(January 28, 2005) Russell Investment Group released analysis today of manager performance in the last quarter of 2004. Active managers took advantage of the favourable investing environment and outperformed the S&P/TSX Composite Index. Overall, small-cap managers and value managers fared better than their growth and large-cap colleagues.

According to the Russell Investment Group Canadian Equity Manager Universe, more than half of the large-cap managers beat the composite return in the quarter. Small-cap managers were significantly better off, with over 90% of the managers in the Russell universe beating the S&P/TSX Small Cap Index return of 6.9%. Value managers, meanwhile, performed slightly better than growth managers for the third quarter in a row, with 60% of value managers beating the index, compared to 53% of growth managers.

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Accounting standards updated

(January 27, 2005) Canada’s Accounting Standards Board (AcSB) has released a new set of standards regarding the treatment of financial instruments in financial statements. The move is aimed at bringing Generally Accepted Accounting Practices (GAAP) in line with international best practices.

“One of the key impacts of the new standards is that all derivatives and most equity investments, such as common shares, will need to be recognized and measured at fair value,” said Cherry. “When financial instruments are not measured at fair value, they don’t show the gains and losses — sometimes there are disproportionate gains and losses due to changes in market conditions. Currently, a user can’t see the potential exposures these instruments create until it’s too late.”

Along with fair-value pricing of instruments, the new standard includes the extension of existing requirements for hedge accounting and the introduction of a new category for one-time gains or losses to be accounted for in a temporary manner, outside the income statement.

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Bank of Canada revises outlook

(January 27, 2005) Interest rate watchers already suspected it, but today the Bank of Canada confirmed it will slow down the pace of interest rate adjustments envisioned in the October Monetary Policy Report.

As an update to the report outlining economic growth and inflation expectations through 2006, the Bank discusses current economic and financial trends and Canada’s inflation control strategy going forward.

The Bank expects the Canadian economy will operate below full production capacity in 2005. Growth overall is weaker than anticipated in October, partly because of the stronger dollar, but that growth is on a more stable footing as a result of lower oil prices and prevailing confidence in the U.S. economy.

Although near-term global economic risks have decreased, the report cites significant medium-term risks to keep an eye on, including the evolution of oil prices, the pace of expansion in China, current account balances between the U.S. and East Asia, and other geopolitical developments.

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AGF launches two income funds

(January 27, 2005) AGF Funds today added two new income funds to its lineup, including the AGF Monthly High Income Fund and the AGF Diversified Dividend Income Fund. Both are managed by high-yield portfolio advisor Cypress Capital Management.

The dividend income fund invests in dividend stocks, income trusts and fixed income securities, while the high income fund holds income trusts, royalty trusts, real estate investment trusts, fixed-income securities and common shares. Both are designed for income or distribution-oriented clients with a moderate tolerance for risk.

Management fees are 2%. Minimum investment is $1,000.

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RBC launches principal-protected note

(January 27, 2005) RBC Financial Group has joined the recent trend toward principal-protected products, today launching a note based on selected U.S. blue-chip stocks.

The banks said that he RBC Principal Protected Dow 10 LEOS (Liquid Equity Option-linked Notes) is aimed at risk-adverse retail investors looking to expand their portfolio with U.S. blue chip equity return.

The notes will be available through advisors or to individual investors until March 25, 2005. They are RRSP-eligible and will not affect the 30% foreign content limit in an investment portfolio.

“Investors today are looking for financial products that give them access to the upside return potential of U.S. blue-chip equities,” said Andre Colenbrander, managing director, RBC Capital Markets.

The notes have a maturity date of April 1, 2013, but could be called by RBC at the four-year anniversary date for a price of $13.80 per $10 note. Should the RBC Dow 10 LEOS be called at this price, an investor would realize an 8.39% annualized return.

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New financial planning toolkit targets Canada’s youth

(January 27, 2005) The Financial Planners Standards Council has come out with a new 32-page financial booklet aimed at Canadians aged 15 to 25.

“Focus on Your Finances” includes basic information on money, financial planning and setting goals for the future, with an emphasis on budgeting and saving for post-secondary education.

It also covers credit ratings, income tax and debt, and provides a primer on investing in such financial vehicles as stocks, bonds, mutual funds and RRSPs.

The FPSC says it consulted with educators, school counsellors, youth and parents, in order to determine how best to inform young people about financial planning. Surveys suggest Canadian adults believe they would have benefitted from learning about finance management when they were younger.

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MFDA announces disciplinary first

(January 26, 2005) The Mutual Fund Dealers Association has announced its first disciplinary action against an individual salesperson.

Robert Roy Parkinson is accused of soliciting and accepting about $314,000 from clients, but failing to account for the money. The MFDA says he then provided false account statements and order forms.

Parkinson is also alleged to have abandoned his business as a mutual fund salesperson “without notice to his clients or to his mutual fund dealer, thereby frustrating the ability of the dealer and the MFDA to investigate his conduct.”

A meeting will be held to set a date for a hearing at the MFDA’s office in Toronto next month.

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CSA calls for more trust disclosure

(January 26, 2005) The Canadian Securities Administrators (CSA) have issued additional guidance for information on income trusts for investors.

As well as including basic definitions of income trusts and how they work, the CSA provides information on risk and return, explaining that trusts are not fixed-income investments, but are more like equities, in that they carry varying degrees of risk.

“Income trust distributions are not assured, and depend almost entirely on the financial performance of the underlying business,” the CSA says. “Just like any security, the quality of income trust investments can vary.”

The CSA policy also suggests ways in which issuers could improve their disclosure about what cash will be paid out to unitholders and about the risk factors associated with investing in an income trust.

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National Bank introduces managed GIC

(January 26, 2005) National Bank of Canada has introduced a new multi-managed GIC for conservative investors. Similar to some structured notes, the GIC invests in bonds, equities and alternative management strategies and guarantees a 5% return if the product is held until maturity.

The GICs, on sale until March 8, are only available if purchased as part of a registered retirement savings plan. Minimum investment is $500.

The product is not transferable or redeemable before maturity. If annualized returns do not exceed 3%, the amount needed to guarantee a 5% return, the bank will pay a bonus to meet their return commitment.

“An investor who chooses the multi-managed GIC is guaranteed a total minimum yield of 5%, even when the market is on the downside,” says National Bank vice-president Jean Blouin. “If the managers succeed in achieving a higher return, the yield for the investor will also increase.”

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Mawer caps New Canada Fund

(January 26, 2005) Mawer Investment Management has capped the New Canada Fund to all new and existing mutual fund investors, including institutional accounts.

The no-load, small cap Canadian equity fund, launched in January 1988, was designed for long term investors with a higher tolerance for risk and volatility. The fund currently has the lowest MER among top performers in the small cap fund category.

With more than $182 million in assets, managers say they decided to limit new money coming into the fund to avoid swamping available investment opportunities.

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Interest rates unchanged: Bank of Canada

(January 25, 2005) In a move widely anticipated by market analysts, the Bank of Canada today announced interest rates will remain untouched for the coming month.

The strong appreciation of the Canadian dollar in 2004 led to weaker economic growth in the last part of the year, forcing the bank to maintain its target overnight rate at 2.5%. The operating band for the overnight rate is also unchanged and the bank rate remains at 2.75%.

The currency continues to trade in a range higher than was anticipated in October’s Monetary Policy Report, and bank officials now expect the Canadian economy to operate below its full production capacity in 2005.

The Monetary Policy Report Update outlining the Bank’s outlook for economic growth and in inflation through 2006 is due out on Thursday.

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CPPIB expands infrastructure investments

(January 25, 2005) The CPP Investment Board (CPPIB), manager of Canada’s surplus pension assets, announced two new infrastructure commitments today.

Pending regulatory approval, the CPP board members plan to commit $320 million to the Macquarie European Infrastructure Fund, investing in electricity and gas transmission, distribution networks, water and sewage companies, rail, airports, communications infrastructure and toll roads. The CPPIB also plans to co-invest another $150 million alongside the fund in the Wales & West gas distribution network, a regulated natural gas distribution business service in Wales and parts of England.

David Denison, president and CEO of the CPP Investment Board, says he expects infrastructure will generate better returns than bonds while providing a good hedge against inflation.

“This is the type of regulated asset we are ideally looking for.” Unfortunately, he says there are very few domestic opportunities that meet the board’s investment criteria. In total, the investments, the equivalent of $470 million, bring the CPPIB’s total infrastructure commitments to approximately $670 million.

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AGF appoints new manager

(January 25, 2005) Investment manager AGF announced its decision to appoint Eng Hock Ong as managing director of AGF Asset Management Asia Ltd. and lead portfolio manager of the AGF Asian Growth Class fund.

The growth at a reasonable price (GARP) style manager will continue working on his existing investment mandates in the AGF-branded emerging markets value fund, global financial services class, global health sciences class, global real estate equity class, global resources and global technology class funds.

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SEC approves payment plan for MFS penalties

(January 25, 2005) The Securities and Exchange Commission (SEC) approved a plan to distribute more than $50 million in penalties owed by Massachusetts Financial Services Co., a subsidiary of Sun Life Financial.

The SEC agreed to the proposed plan to put the assets into a “fair fund” for proportionate distribution to the MFS Funds affected by the company’s failure to disclose conflicts of interest created by its use of its fund assets, namely mutual fund brokerage commissions, to pay for “shelf space” arrangements.

MFS and the SEC settled in March 2004. The distribution plan provides that each MFS Fund shall receive a share of the disgorgement and penalty relative to brokerage commissions coded to pay for the arrangements.

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IDA launches online CE reporting system

(January 24, 2005) The IDA announced its new online reporting system for tracking members’ CE requirements and credits. Passwords and launch dates are available from designated contacts at each firm.

The online system allows members to review requirements for each IDA-approved person and report any completed compliance and CE credits. Individuals are responsible for completing the listed CE requirements.

Starting in January 2006, the IDA plans to implement non-completion penalty provisions. In the meantime, members are asked to report any discrepancies listed in the online records.

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Horizon Planning Group launches CI product

(January 24, 2005) The newest critical illness product on the market comes from AXA Assurances and B.C.-based Horizon Planning Group. LifeBeat provides a lump-sum, tax-free benefit 30 days after initial diagnosis for most covered conditions regardless of severity, degree of disability or the patient’s ability to work. After age 70, the product converts to long-term care coverage, including guaranteed monthly income.

The company claims the product is the only one in Canada with dual coverage for both acute and chronic conditions and the only product on the market that converts automatically to long-term care coverage.

“Today’s baby boomers are among the most influential and knowledgeable consumers, yet incredibly they are not prepared to deal with the devastating effects of an acute or chronic illness,” says Kyle Dunn, CEO of Horizon Planning Group. Horizon Planning is the Managing General Agent (MGA) for LifeBeat and all other AXA insurance products. Horizon does not operate in the province of Quebec.

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D’Alessandro named most respected CEO by peers

(January 24, 2005) Manulife’s CEO, Dominic D’Alessandro, is the most respected CEO in Canada, according to a survey of 263 leading Canadian CEOs.

The Tenth Annual Canada’s Most Respected Corporations Survey found that vision, financial performance, track record and the ability to add shareholder or investment value to a company were the top defining characteristics of the most respected CEOs in the country.

D’Alessandro’s ascension to the top of the list follows his oversight of the Manulife Financial and John Hancock Financial Services merger in 2004. The deal, the largest cross-boarder transaction in Canadian history, puts him in charge of the largest life insurance company in Canada and the fourth largest in the world.

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CI announces manager changes

(January 24, 2005) CI Fund Management is continuing with its effort to streamline and strengthen its fund lineup by merging BPI Global Asset Management with employee-owned firm Trilogy Advisors. BPI is 66% owned by CI. Until the transactions are completed in May, the firms will continue to operate as separate entities.

Anticipating the changeover, however, CI appointed Trilogy to manage six different funds and their RSP counterparts, replacing BPI. Trilogy will also manage portions of the CI Global Managers Sector Fund and the CI American Managers Sector Fund that were previously managed by BPI.

Similarly, CI is changing managers on a number of other mutual funds and hedge funds to reflect Nandu Narayanan’s decision to focus his firm, Trident Investment Management, on hedge fund investing.

Bill Priest and Daniel Geber of Epoch Investment Partners replace Narayanan on four of CI’s Asia Pacific funds while Trilogy takes over the mandates on two of the company’s emerging markets funds. Narayanan meanwhile will take over as lead portfolio manager of CI’s global and American hedge funds that were previously managed by BPI.

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