Briefly:

(March 11, 2005) A class action suit has begun against Nortel Networks, its accounting firm Deloitte & Touche, as well as several former officers and directors, including ex-CEO Frank Dunn. Investors who purchased shares of Nortel between April 24, 2003, and April 27, 2004, are seeking $3 billion.

The group alleges the named parties misrepresented the company’s financial situation by creating improper cash reserves and issuing false reports and financial statements.

“The Nortel case raises serious issues about the integrity of the capital markets in Canada and the disclosure obligations of a major Canadian issuer, and this must be resolved by the Superior Court of Justice in Ontario,” said Peter Jervis, a partner at Lerners LLP, which has been retained to assist the plaintiffs’ lead counsel, Rochon Genova LLP. “These issues affect thousands of Canadian investors across this country.”

• • •

CSA issues harmonized fund reporting rules

(March 11, 2005) The Canadian Securities Administrators (CSA) are releasing a set of continuous disclosure (CD) requirements for investment funds, aimed at harmonizing the process across the nation’s various regulatory bodies.

The new rules govern the obligations of investment funds regarding financial statements, management reports of fund performance, delivery, proxy voting disclosure, annual information forms for investment funds that do not have a current prospectus, material change reporting, information circulars, proxies and proxy solicitation.

The new measures are contained in National Instrument 81-106 Investment Fund Continuous Disclosure, Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance and Companion Policy 81-106CP Investment Fund Continuous Disclosure.

• • •

FTI launches income trust fund

(March 10, 2005) Franklin Templeton Investments today launched the Bissett Income Trust Fund, managed by Leslie Lundquist.

The fund focuses on the large-cap segment of the income trust market, investing in a portfolio of income trust securities including royalty trusts, real estate investment trusts (REITs), income trust units, income fund units and publicly-traded limited partnership units.

All income trusts in the fund, including utility and pipeline trusts, will have a market capitalization of at least $200 million. Gas royalty trusts and REITs must have a market cap of more than $500 million.

The fund is designed for investors with a moderate tolerance for risk who are planning to hold the fund for a medium term in exchange for a high level of income and some capital gains, Templeton says.

Available on a front end, deferred sales and low load basis, the fund charges a 2% management fee, or 1% for F-class shares. The minimum investment is $500.

• • •

Hedge fund index posts modest gains

(March 10, 2005) Hedge funds gained nearly 2% in February, according to The Barclay Group, thanks to a jump in emerging markets products.

The Barclays/GHS Hedge Fund Index was up 1.98% last month (with nearly 1,000 hedge funds around the world reporting), and year-to-date, is 2.1% higher.

The emerging markets category paced gainers in February, rising nearly 5%.

“Recent articles in the financial press proclaiming an era of diminished hedge fund returns obviously haven’t taken emerging market funds into consideration,” says Sol Waksman, president of The Barclay Group.

“Emerging markets are only now reaching their 1994 highs after having gone sideways for over a decade. Meanwhile, earnings have soared, so valuations are at near-record lows,” added Timothy Mistele of Everest Capital. “That’s why we think this sector will continue to do well in the future.”

• • •

Kamloops man fined $250,000 for fraud

(March 10, 2005) A Kamloops man has been hit with a $250,000 penalty by the British Columbia Securities Commission after he fraudulently raised more than $2 million from investors.

Ronald Stephen Barker was also permanently banned from trading and ordered to pay costs of $58,000. Working under the name Double Eagle Investments, Barker traded and distributed securities without registration or a prospectus and acted as an advisor without having registration, a BCSC panel ruled.

“Barker advised clients that an investment in Double Eagle was safe and suitable when he knew that this was not true,” the commission said. “In some instances, he misled investors into believing that their money would be invested in a company that was in the business of corporate leases and financing. Instead, the majority of the funds were used for other purposes, including: unsecured business and personal loans, venture capital and stock market investments, and advances to himself and his companies.”

Barker advanced $824,000 to himself from his company, the panel found and treated Double Eagle’s funds as though they were his own.

The firm raised more than $2.3 million from 58 investors between 1996 and 2002, mostly from the Kamloops area. Close to 75% of that money — about $1.7 million — has been lost.

• • •

Thirteen Canadians win CSB contest

(March 10, 2005) The federal government has awarded $1,000 each to 13 Canadians in the annual “Tell Us Your Canada Savings Bond Story.”

Winning stories were selected on personal significance, interest, relevance and creativity. For instance, Karen Whitehead from Prince Edward Island wrote that “CSBs have always been there to ensure that unexpected expenses like a major car repair bill didn’t put a damper on our family holidays!”

“The money invested in CSBs not only helped put me through university, but also taught me a valuable lesson about the value of money and the importance of savings,” said B.C.’s Nathalie Wandler in her submission.

“The collection of stories about how Canada Savings Bonds have shaped the lives of so many Canadians are really insightful and motivational,” says Jacqueline Orange, President and Chief Executive Officer, Canada Investment and Savings. “Canadians have used savings bonds to help them live life to the fullest, reach their goals or even as gifts.”

The national online initiative was hosted by Rogers Consumer Publishing, Maclean’s and L’actualité.

• • •

OSC announces fee rebate

(March 9, 2005) The Ontario Securities Commission is giving back $15 million in fees to market participants as part of an ongoing effort to match fees with the cost of regulation. In its last fiscal year, the regulator posted a $21 million surplus.

The surplus issue has become a rallying cry for critics who believe that securities regulation should not be a profit-making activity.

“The rebate reflects stronger than expected revenues under the OSC’s new fee structure,” the OSC said in release.

“Our fee structure calls for us to adjust fees on a three-year cycle,” added OSC executive director Charlie Macfarlane. “We’re pleased that the commission has authorized a one-time rebate of fees to expedite the return of the surplus to the market participants who funded it.”

In 2003, the commission implemented a new fee model in an effort to reduce overall fees, streamline the fee structure and adopt fees that “fairly reflect the OSC’s cost of operations.”

• • •

Brown to report on fund probe next week

(March 9, 2005) Ontario Securities Commission chair David Brown will deliver the regulator’s final report on mutual fund trading practices next week. The report will be released at the same time Brown delivers a speech in Toronto on March 17.

The investigation came to an end last week after Franklin Templeton agreed to pay out $49 million to investors who suffered harm from market timing activities in funds managed by the company.

In total, five fund companies, including AIC, CI, AGF and IG have agreed to pay out $205.6 million to investors.

In December, Brown said letters had been sent to other fund companies confirming that the regulator was not contemplating proceedings against them. The year-long inquiry involved 105 Canadian mutual fund companies.

• • •

Manitoba makes minor tax cuts

(March 9, 2005) The Manitoba government has introduced small reductions to both personal and corporate tax rates. In its provincial budget released yesterday, Manitoba announced it was reducing taxes for middle-income earners ($30,544 to $65,000) to 13.5% in 2006, from the current rate of 14%.

In addition, Manitoba increased the basic personal exemption, but only by $100, to $7,734 for 2006.

Evelyn Jacks, president of the Winnipeg-based Knowledge Bureau, says the Manitoba government could have done more for taxpayers.

“Hidden taxation is still a reality in Manitoba as tax brackets have not been indexed to inflation once again,” she says. “This means Manitobans do not receive recognition for inflation erosion on their purchasing power.”

Corporate tax rates in Manitoba, currently at 15%, will be reduced to 14.5% on July 1, 2006 and to 14% on July 1, 2007.

• • •

HSBC cuts clone MERs

(March 9, 2005) HSBC Investment Funds has reduced management fees on two of its RSP clone funds, retroactive to February 28, 2005.

The MERs on the HSBC Global Equity RSP Fund and the HSBC US Equity RSP Fund have been cut to match the underlying funds they track. According to Morningstar Canada, the firm’s Global Equity Fund carries an MER of 2.53%, while the US Equity Fund’s MER is 2.25%. The RSP clones of these funds had MERs of 2.63% and 2.58%, respectively.

The day after the federal budget was tabled and Ottawa announced it was eliminating the 30% foreign content rule, Brandes Investment Partners announced it would absorb the added costs associated with clone funds.

• • •

Marlow Group permanently suspended by IDA

(March 9, 2005) The IDA has imposed an immediate and permanent suspension against Toronto-based Marlow Group Securities.

At a hearing Wednesday, an IDA panel found that Marlow had violated capital deficiency bylaws.

The firm was ordered last year to maintain a positive Risk Adjusted Capital (RAC) in the amount of $100,000 for a period of 12 months. In February, the chief financial officer at Marlow advised the brokerage industry association that the firm’s RAC estimate for January was $35,000 and that would not be possible to raise it to the required amount in the foreseeable future.

At the end of February, Marlow announced its intention to resign from the IDA. All client accounts are being transferred to other IDA member firms.

• • •

Home ownership hits record levels, Scotia estimates

(March 8, 2005) Canada’s home ownership rate is sitting at a record 67%, says Scotia Economics in its latest report on real estate trends. That’s up from 65.8% in 2001.

That might seem to be a fairly small increase, but it translates to nearly half-a-million new homeowners in the past four years, says Scotia chief economist Warren Jestin.

“Homeownership rates have been increasing steadily over the past three decades as Canada’s large baby boom generation made the transition from renters to owners,” the report says. “These boomers, today in their 40s and 50s, are now in their prime home-owning years.”

Several other factors have contributed to the increase in home ownership, Jestin notes, including rising disposable incomes, strong job growth and low mortgage rates.

Going forward, the economic factors that are currently boosting home ownership could turn around, Scotia predicts, as home prices rise, increasing the attractiveness of renting over buying.

• • •

Faircourt launches new series of income trust notes

(March 8, 2005) Faircourt Asset Management has introduced a new series of principal-protected income trust notes. The firm says the notes offer investors the unique combination of leveraged exposure to a portfolio of income trusts with monthly distributions, and 100% principal protection at maturity, provided by the Bank of Montreal.

The notes employ a strategy of “dynamic leverage to provide up to 200% exposure to an underlying portfolio of income trusts,” Faircourt says.

The portfolio of income trusts was created by Faircourt, with trusts that are expected to be included in the revised S&P/TSX index being introduced later this year.

As of February 21, based on the distribution policy and the market price of the trusts expected to be included in the portfolio, the investment would generate distributions of approximately 9% per year, the firm says in its information statement.

Faircourt Principal Protected Income Trust Deposit Notes, Series I are available through advisors until April 29. The issue price is $100 per note, with a minimum investment of $2,000.

• • •

Haywood beefs up institutional sales team

(March 8, 2005) Haywood Securities has hired Alan Lane as an institutional salesperson. The Vancouver-based investment dealer says Lane will work out of the firm’s expanding Toronto office.

Prior to joining Haywood, Lane was head of institutional equity sales at Dlouhy Merchant Group and spent 11 years at CIBC World Markets.

“Alan brings a wealth of experience in both leadership and sales expertise to his role,” says Haywood president Rob Blanchard. “He is an excellent addition to the institutional sales team, and his keen understanding of the markets will add insight and value for our clients.”

• • •

Tremont sells research database business to Lipper

(March 8, 2005) Hedge fund giant Tremont Capital Management is selling its TASS research database business to mutual fund researcher Lipper.

Financial details were not revealed, but Tremont says the agreement will allow the firm to retain the right to use the database for its asset management and investment product business.

“This transaction will band together the strength of both companies,” says Tremont co-CEO Robert Schulman. “Tremont’s TASS research database is recognized as the industry leader in accurate hedge fund information and Lipper’s capabilities in the delivery and integration of data are known worldwide.”

The database has information on more than 6,600 alternative investment funds and managers.

• • •

Cestnick leaves AIC to set up new firm

(March 7, 2005) Tax expert Tim Cestnick has left mutual fund company AIC to set up his own advisory firm.

Cestnick, who was managing director of AIC’s tax and estate planning group, left the Burlington, Ont.-based company at the end of February. He says he’s setting up a “new and different type” of wealth advisory firm and will be working from his home office until the business is up and running.

Cestnick spent five years with AIC. He’s a popular public speaker on tax-related issues (Cestnick spoke at least year’s Advisor Forum conference series) and is frequently quoted in the media.

• • •

TD brings commercial mortgage business in-house

(March 7, 2005) TD Bank Financial Group is taking over its commercial mortgage loan business subsidiary and moving the operation in-house.

Commercial Mortgage Operations of Canada (CMO) is wholly-owned by TD. As of March 1, TD acquired all CMO’s assets and assumed its obligations and liabilities. TD says it will continue the business under the brand TD Securities, Commercial Mortgage Origination.

Andrew Phillips, Managing Director, Investment Banking, TD Securities, will lead the business. “We will reposition the branding of our commercial mortgage origination for securitization business directly under the TD umbrella as TD will now be the direct originator of the loans,” he said. “We expect this will be viewed positively by investors.”

• • •

Halifax investment firm to use FMC software

(March 7, 2005) Investment software provider Financial Models Company (FMC) has signed up a new client: Rudderham Norwood Ellison, an investment counsel firm based in Halifax.

The firm will use two FMC products — FMCSuite and FMCOutsourcing — for back-office administration of its client portfolios.

Founded last year, Rudderham Norwood Ellison has $30 million in assets under administration. “Using the Cadillac of portfolio systems and a top-end, back-office solution from FMC will enable us to approach pension plans as potential clients which is an important objective of our firm,” says founding partner Scott Ellison. “Having access to FMCSuite within the context of an outsourcing framework gives us the ability to focus on client relationships and rapidly grow our business.”

“As a start-up looking to move quickly, Rudderham Norwood Ellison was attracted to the idea of deriving immediate benefits from FMCSuite’s new technology, as well as the scalability afforded through outsourcing,” added FMC’s David Burnham.

• • •