Briefly:

(April 22, 2005) Canadians like to gripe that the country’s rich don’t pay their fair share in taxes. A new Statistics Canada study suggests that’s not the case. According to the government agency, 10% of Canadian taxpayers in the highest income bracket accounted for more than one-half of federal personal income tax revenue in 2002. And their share of the tax pie has been steadily rising since 1990.

The group comprising the 10% of taxfilers with the highest income (defined as more than $64,500) provided more than 50% of the federal personal income tax revenue in 2002. Between 1990 and 2002, the share of federal tax paid by this group went from 46% to 53%.

“This increase reflects faster income growth and a smaller reduction in effective tax rates for this group relative to others,” the agency said.

At the other end of the scale, the one-half of taxpayers with the lowest incomes saw their share of the tax pie decline during the same period. In 1990, this group accounted for 7% of total federal personal income tax paid; in 2002, this proportion declined to 4.4%. “In fact, this group paid less federal personal income tax in 2002 than in 1990, in spite of higher incomes.”

Intermediate-income earners were the biggest winners in terms of effective tax rates, StatsCan adds. For this group, the rate went from $11.75 in federal tax paid for each $100 of income to $10.14, a decline of $1.61.

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Union Securities fined $25,000 by IDA

(April 22, 2005) The IDA has fined Vancouver dealer Union Securities $25,000 for failing to establish controls enforcing the use of foreign exchange rates by employees.

The case dates back to 2000, and involves investment advisor Ramon Porcellato, who sustained large day-trading losses in his account. Concerned that he might lose his job, Porcellato used a client’s account to continue day trading, conducting more than 500 trades without the knowledge or consent of the client.

In order to hide the trading losses, Porcellato entered false exchange rates on various trade tickets. As a result of Porcellato’s conduct, Union suffered a loss of nearly $260,000. No clients were harmed by the rep’s conduct, the IDA notes.

At the time Porcellato entered false exchange rates, Union was not monitoring the foreign exchange rates used to settle trades.

In 2003, Porcellato was fined $45,000 and banned from the industry for three years.

The panel dismissed allegations that the firm failed to properly supervise trading in a client’s accounts and failed to disclose that a registered representative had manipulated exchange rates in order to disguise losses.

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CMHC lowers mortgage insurance premiums

(April 22, 2005) The Canada Mortgage and Housing Corporation is reducing mortgage insurance premiums for first-time homebuyers by 15% for the second time in as many years.

For a homebuyer with a $120,000 mortgage and 5% down, the benefit amounts to a saving of $600, says federal labour and housing minister Joe Fontana. “Combined with the premium reductions of two years ago, the homebuyer is saving $1,200 on the same transaction,” he adds.

CMHC will issue refunds to homebuyers during a six-month transition period to provide financial institutions the time needed to update systems to incorporate these costs savings directly, the federal government says.

This fall, CMHC will also be enhancing its mortgage insurance benefits to include homeowner protection against title-related risks.

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China eying Canadian oil, economist says

(April 22, 2005) Although the U.S. is by far Canada’s largest trading partner, China is catching up quickly, says BMO Nesbitt Burns chief economist Sherry Cooper.

Surprisingly, considering China’s appetite for commodities, oil is largely absent from the trading picture between the two countries. “Canada’s most important exports to China are pulp and paper, fertilizers and aircraft and parts, Cooper says in an online report. Coal becomes part of the equation when B.C. is factored in. “China is the world’s largest consumer of coal and B.C. is the largest producer in Canada, so this is perfect symbiosis.”

China now demands 12% of the world’s oil supply, the economist says, suggesting it’s only a matter of time before Canada jumps in to help fill that need. Recently, the China National Offshore Oil Corporation bought a $150 million stake in MEG Energy, an upstart oil-sands player.

Although the primary motivation behind that investment is technological, PetroChina has signed a preliminary deal with Enbridge to buy crude shipped from a proposed pipeline running from Fort McMurray to Edmonton and Canada’s west coast ports.

Developing countries are running on empty, Cooper says, and, as a result, they will continue to boost domestic output and stockpile oil. They are also widening their supply sources as they deepen relations with Russia, the Sudan, the Middle East, Venezuela, Canada and others.

“No doubt, Washington is taking note of the Chinese-Canadian courtship,” Cooper concludes. “Hopefully, this is not a zero-sum game; it could well be win-win for everyone if played judiciously.”

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Acuity proposes two fund mergers

(April 22, 2005) Acuity Funds is seeking unitholder approval for a pair of fund mergers.

Under the proposals, the assets of the Acuity Clean Environment Science and Technology Fund would be folded into the Acuity Clean Environment Global Equity Fund and the Acuity G7 RSP Equity Fund would be merged into the Acuity Global Equity Fund.

An information circular on the changes will be sent to unitholders in early June. If approved, the mergers will be effective at the end of June.

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Quebec introduces modest tax cuts

(April 22, 2005) Though well short of Premier Jean Charest’s promise to chop personal income taxes by $1 billion every year, the Quebec government tabled a budget on Thursday promising a $500 tax cut for each worker, starting in 2006.

Finance Minister Michel Audet says the new measures amount to a $300 million saving for Quebecers.

“This is in addition to the $1 billion gain for taxpayers announced last year, primarily in favour of families, and the indexation of personal income tax, which will give taxpayers an additional $250 million in 2005-06,” Audet added.

The move brings personal income tax in Quebec closer to the Canadian average. The fiscal gap between Quebec and the Canadian average has been cut almost in half, dropping from $2.2 billion to $1.2 billion in three years, Audet notes.

Quebec also plans to reduce capital tax on corporations more than 50% by 2009.

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Ottawa names new CDIC boss

(April 22, 2005) Federal Finance Minister Ralph Goodale has proposed the appointment of Guy Saint-Pierre as the new president and CEO of the Canada Deposit Insurance Corporation (CDIC). Saint-Pierre would replace J.P. Sabourin, if the appointment is approved by the House of Commons Standing Committee on Finance.

Saint-Pierre is currently CDIC’s executive vice-president and COO. He has been with the corporation for past 18 years and is widely recognized as an expert in deposit insurance, Goodale says.

“I am pleased to propose Mr. Saint-Pierre for this important position,” Goodale adds. “His experience includes a solid understanding and knowledge of the Canadian financial services sector and its regulatory environment, as well as a strong commitment to consumer protection.”

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Nasdaq to buy electronic trader Instinet

(April 22, 2005) Nasdaq has announced a $1.88 billion US deal to take over electronic trading platform Instinet. The move comes on the heels of Wednesday night’s announcement that the New York Stock Exchange was buying Chicago-based Archipelago and forming a new public company.

Instinet’s virtual trading floor, INET, will be folded into the Nasdaq system, while its institutional broker will be sold off to private equity firm Silver Lake.

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National Bank Financial tops brokerage statement study

(April 21, 2005) Montreal-based National Bank Financial provides clients with the most effective account statement among Canadian brokerage houses, according to a study conducted by Dalbar.

MD Management and National Bank Discount Brokerage also did well on the study, receiving Dalbar’s “very good” designation.

“These three companies provide their clients with statements that give a very solid base of information with which to interpret their accounts,” said Dalbar’s Randy Carriere. “They give clients a clear summary of what they hold, tell them how much income they’ll have to report, and just as importantly are very easy to read, with little to no abbreviations or jargon.”

However, Canadian brokerage statements are largely quite conservative, Dalbar notes, with little innovation across the sample. “They also lack several features present on statements produced by other industries (i.e. mutual fund statements) such as percentage rates of return and electronic delivery,” Dalbar says.

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Rockwater announces share offering

(April 21, 2005) Rockwater Capital has reached agreement with a syndicate of underwriters to issue 5.7 million common shares worth approximately $29 million. The share price is set at $5.10.

The syndicate is led by TD Securities and First Associates Investments and includes CIBC World Markets, GMP Securities, Scotia Capital, Genuity Capital Markets and Sprott Securities.

The syndicate has the option to purchase a further 852,941 shares after closing on April 28, which if exercised, would increase the offering to $33 million.

Rockwater plans to use the net proceeds to repay $25 million in debt in connection with the acquisition of KBSH Capital Management and for general corporate purposes.

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Deutsche Bank Securities appoints new chair

(April 21, 2005) Toronto-based Deutsche Bank Securities has named Thomas Barber as its new chair. He will also service as vice chair of Deutsche Bank’s global banking division.

Barber will provide strategic counsel and transaction execution to Deutsche Bank’s largest corporate clients, focusing especially on the metals and mining and industrial sectors, the firms said in a release.

He also will work closely with Deutsche Bank Securities CEO Paul Jurist to build on the firm’s investment banking presence in Canada.

Barber joins Deutsche Bank from Credit Suisse First Boston, where he was chair and CEO of CSFB Canada and headed CSFB’s global metals and mining group.

“Tom has earned a reputation as a leading advisor to the top metals and mining and industrial companies in the Americas, and he will be a major asset to the bank as we continue to expand our presence in those sectors,” said Tom Gahan, Deutsche Bank’s head of corporate and investment banking in the Americas. “Tom’s extensive relationships with Canada’s top business leaders and in-depth knowledge of the corporate landscape will also help us build upon the tremendous momentum we have achieved in Canadian investment banking.”

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Warning issued over phony e-mails

(April 21, 2005) The RCMP and the Canadian Bankers Association have issued a joint warning concerning unsolicited e-mails that ask for personal or financial information.

Fraudulent e-mails have been circulating that appear to be from legitimate organizations, police say, such as banks and credit card companies, asking consumers to update or verify personal information, including credit card numbers, social insurance numbers and online banking passwords.

The e-mails usually warn recipients that access to their accounts will be limited or even closed if they do not respond. In other cases, the e-mails will promise financial benefit for the recipient if they reply, or ask for a verification of information to help protect the recipient from identity theft. The e-mails usually link to a fraudulent website that appears legitimate.

“We have seen an increase in these fraudulent spam e-mails, so we wanted to remind people that a bank would never send an e-mail to customers asking them to verify their personal information,” said Caroline Hubberstey of the Canadian Bankers Association.

“We recommend that consumers use a healthy dose of skepticism when they receive any unsolicited e-mail, particularly if they are asked to reveal personal or financial information,” adds RCMP sergeant Michel Haché. “If you do receive one of these e-mails, report it to the organization being spoofed and to law enforcement through PhoneBusters and Reporting Economic Crime On-Line (RECOL).”

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NYSE to go public

(April 21, 2005) Three years after the TSX became a publicly-traded company, the New York Stock Exchange is following suit. On Wednesday, the NYSE and the Archipelago Exchange announced they were joining forces to form a new public company, called NYSE Group.

The deal would combine the world’s leading equities market with the most successful totally open, fully electronic exchange, creating long-term shareholder value, NYSE and Archipelago said in a joint statement.

“Today, publicly-held exchanges such as those in London, Frankfurt, Toronto and Sydney are aggressively competing to expand their reach and share of market in the new global arena,” says NYSE CEO John Thain. “We look forward to working with the Archipelago team to strengthen our position as a world-class competitor and to provide the highest levels of market quality and service to our customers.”

The merger — the largest-ever among securities exchanges — is expected to close late this year or early in 2006, pending approval by Archipelago shareholders, NYSE members and regulators.

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B2B Trust to offer investment loans through Acuity

(April 20, 2005) B2B Trust, a subsidiary of Laurentian Bank, has signed an agreement with Acuity Funds to distribute investment loans. Under the terms of the deal, B2B Trust will make available investment loans to financial advisors for clients who purchase Acuity products.

B2B Trust will be responsible for the underlying credit services, and Acuity will make the program available to investors through their advisors.

“Using the loan program, advisors will have additional ways to incorporate Acuity products into their client portfolios,” said B2B president Al Spadaro. “This program demonstrates B2B Trust’s position as a major provider of investment loan programs to the financial advisor community.”

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Citizens Bank launches high-interest savings account

(April 20, 2005) Citizen’s Bank of Canada is upping the ante in the increasingly competitive field of high interest savings accounts, promising to beat all other banks. Citizens’ new Ultimate Savings Account offers a rate of 2.45%, slightly above ING and Altamira’s current rates (2.4%).

“With the introduction of the Ultimate Savings Account, Citizens Bank continues to be the premier full-service online bank in Canada, offering the best rate compared to any major bank in Canada,” said bank president Ian Warner.

The Ultimate Savings Account is available immediately. Each new member will receive a $25 signing bonus with a minimum deposit of $500 before June 7, 2005.

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Grey Horse appoints senior advisor

(April 20, 2005) Grey Horse Capital has appointed Russ Waterhouse as senior advisor, responsible for various strategic initiatives.

“Russ brings solid financial service industry experience to our organization and management team,” said Grey Horse president Kevin Reed. “Our goal is to scale the organization in a measured but rapid pace. Russ will assist us in achieving our organic growth initiatives along with seeking acquisition opportunities throughout North America.”

Waterhouse previously served as president of Computershare North America, vice president of ChaseMellon shareholder services, chief operating officer of R-M Trust and chief financial officer at Mellon Investor Services.

Grey Horse and its subsidiary, Equity Transfer Service, provide transfer agent services to small and mid-market issuers in the North American capital markers.

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Third Avenue to manage new AIC fund

(April 19, 2005) Respected American firm Third Avenue will manage the latest addition to the AIC fund family: AIC Global Focused. The value fund, officially launched on Monday, will have a concentrated portfolio of 10 to 20 holdings, AIC says, with the flexibility to invest in companies in any country or industry.

“The firm’s portfolio turnover tends to be very low, further helping to make it an excellent fit for AIC’s buy-and-hold investment philosophy,” says Morningstar Canada investment funds editor Rudy Luukko.

Third Avenue — founded nearly 20 years ago by Martin Whitman — manages four funds in the U.S. and sub-advises on a number of European and American institutional portfolios. In total, the New York-based firm controls assets worth $13 billion US.

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CNQ expands to Vancouver

(April 19, 2005) Alternative stock exchange CNQ has opened its first branch office in Vancouver. CNQ has appointed Don Gordon as senior advisor and Natasha Blackburn as manager of market development for the new office.

“CNQ has always recognized the dynamic Vancouver community of small-cap companies,” says CNQ CEO Robert Cook. “We have seen a steady stream of B.C.-based companies listing on CNQ and they currently represent approximately one-third of the listed companies who have recognized the benefits of CNQ’s unique market.”

The exchange is also considering opening additional branch offices across Canada, Cook added. CNQ launched in 2003 and was recognized by regulators as a full-fledged stock exchange in May, 2004.

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Real estate still favoured investment, survey says

(April 19, 2005) Investors remain confident, but are showing more interest in cash and fixed income securities, according to the quarterly Manulife Investor Sentiment Index. While these safer products still rank near the bottom of the survey’s list of investments, they showed the greatest increase in investor confidence.

“Overall, investor sentiment among Canadians remains relatively strong, despite some slight changes in where and how they invest,” said Bruce Gordon, Manulife Financial’s senior executive vice president and general manager. “We saw the index reflect sensitivity to predictions of possibly higher interest rates in late 2004, but investors generally remain focused on their long-term savings.”

Real estate remains the most popular option, with Canadians overwhelmingly agreeing that it was a good time to either pay down their mortgage or renovate their homes. Investment property was the second most popular response.

Balanced mutual funds were the top financial instrument, followed by fixed income and cash. Equity investments, either direct or through equity funds, remain the most controversial option, with survey respondents pretty much evenly split on whether now was a good time to invest or not.

“Given changes in the economy and markets, investors need to keep working closely with their advisors on how to best balance their guaranteed versus variable investments to reach their long and short-term goals,” Gordon said.

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CompCorp releases annual report

(April 19, 2005) The agency that protects consumers from insurance company insolvencies has released its annual report for 2004, revealing assets totaling $119 million.

With no major bankruptcies in the industry since the collapse of Confederation Life in 1994, CompCorp has seen its liquidity fund grow by $1.9 million from last year to $117 million. The agency also holds $2 million in its administrative fund. Total revenues for 2004 were $5.7 million, down $430,000 from 2003 partly due to an $8.2 million refund to members in 2003. Meanwhile, operating expenses reached $4.2 million, an increase of 11%.

Among the achievements heralded in the report, CompCorp members agreed to adopt proportional coverage, which protects at least 85% of customers’ monthly income, health expense and death benefits. Cash values and accumulated values are still covered for up to $60,000.

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Sun Life offers guaranteed lifecycle fund

(April 19, 2005) Sun Life Financial has introduced a new lifecycle series of segregated funds for employer-sponsored group retirement and savings plans.

The Milestone series offers the usual features of lifecycle products, such as a set maturity date, but also includes a guarantee at maturity of the highest month-end unit value achieved over the life of a fund, provided by ABN AMRO Bank.

“With the Milestone Funds, investors are guaranteed to receive at maturity an amount determined using at least the funds’ inception unit price, or, if the fund reaches a higher month-end unit price over its lifetime, that higher unit price,” said Rick Headrick, Assistant Vice-President, Investment Services.

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Police make arrest in Nigerian letter scam

(April 19, 2005) The Ontario Provincial Police have charged a 32-year-old Brampton man with numerous fraud offences following a 14-month probe into a Nigerian letter scam.

Police identified more than 40 victims across North America and more than $800,000 in stolen cheques.

The scam came to light after members of the public in eastern Ontario who were asked to cash cheques for individuals complained that the cheques were fraudulent.

Olusoji Ayodele is charged with two counts of fraud over $5,000, two counts of attempted fraud over $5,000, one count of conspiracy to commit fraud, six counts of uttering forged documents, 12 counts of possession of property over $5,000, and two counts of possession of property under $5,000.

Ayodele is scheduled to appear court on June 6.

African letter scams have been prevalent in North America for years. It’s usually done via e-mail, where recipients are told that a high-ranking government official has millions of dollars stuck in a bank account. The e-mail asks for help in accessing the funds, in return for a percentage.

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CoVirt adds brokerages to client list

(April 19, 2005) Four new insurance brokerage firms have signed on to CoVirt’s VirtGate, an online advisor and policy management system. The firms are CF Canada Financial Group, Edge Benefits, Financial Horizons and Fulcrum Financial Group.

The VirtGate system aggregates data, reporting and account access and incorporates data from up to 15 different insurance carriers. “The core expertise of these firms is to sell insurance and investments through advisor acquisition, advisor retention and the efficient processing of new business,” says CoVirt president Tim Fitzpatrick. “They just want their administration system to work flawlessly behind the scenes, not to hassle them of give them surprise costs.”

The software allows clients to tie as many offices, trading partners and users together as needed with no additional user fees, CoVirt says. Brokerages do not need to maintain a server or install software. The product also allows advisors to attach documents to client records, policy records or to an online public library as needed using a web browser.

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CIBC fax mistakes a wake-up call, says privacy commissioner

(April 18, 2005) The Privacy Commissioner of Canada today released findings from an investigation of errant faxes sent by CIBC.

The faxes — sent to companies in the U.S. and and Canada — contained personal information belonging to CIBC customers including social insurance numbers, bank account numbers and balances, home addresses, telephone numbers and customer signatures. The commissioner says the most glaring problem was that CIBC employees involved in responding to the incidents never fully recognized that the faxes were a privacy issue.

In one case, CIBC faxed personal client information to Allstar Sports Line. The company tried to alert the bank, but says its concerns were not addressed until it contacted a customer whose name and number appeared on one of the faxes.

“That the bank’s privacy policies and practices were not functioning on a practical level should serve as a wake-up call to all organizations in Canada,” says Jennifer Stoddart, privacy commissioner of Canada. “Simply publishing a privacy policy does not make a business privacy compliant. Organizations must ensure that all employees are aware of and adhere to policies. When there are breaches, these must be brought to the immediate attention of the organization’s privacy officials.”

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RBC makes financial reporting changes

(April 18, 2005) Royal Bank of Canada is switching to reporting primary financial statements using Canadian generally accepted accounting principles (GAAP). The company says it will reconcile the material differences between U.S. GAAP and Canadian GAAP in its annual financial statements and in its interim consolidated statements, beginning next year.

Although the company published both U.S. and Canadian GAAP statements, RBC chose to use the U.S. GAAP financial statements in its primary reporting in order to help in comparing financial information to its North American peers. Canadian GAAP is the primary reporting basis for other Canadian banks. The company says U.S. and Canadian GAAP have been converging in recent years and there are now significantly fewer differences between the two.

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Foreign investors slow purchases of Canadian securities

(April 18, 2005) Foreign investors cut their purchases of Canadian securities in February. Foreign investors bought $1.8 billion in Canadian securities during the month following purchases of $2.4 billion in January and $3.7 billion in December, Statistics Canada says.

Canadian investors meanwhile increased their holdings of foreign securities to $5.3 billion, the largest investment in more than two years. The jump is mostly due to the merger of Molson and Coors which resulted in Canadian shareholders exchanging their shares for those of the newly-formed U.S. company.

Transactions in Canadian bonds were relatively flat in February. Foreign investors sold off $89 million in the month, after buying $600 million in January.

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Standard Life launches new CI product

(April 18, 2005) Standard Life has added a new product, Protecta 65, to its family of critical illness offerings.

Protecta 65 offers joint protection, an option not offered by other insurance companies, the Montreal-based insurer says, making it ideal for mortgage protection. Protecta 65 is a level premium policy that provides clients with coverage up to age 65 and includes a return of premium on death benefit.

“Standard Life’s limited period critical illness policies enable families to be protected at a reasonable cost,” said Standard Life’s Michel Fortin. “All of our products have been enhanced and now offer features that are even more competitive, such as our return of premium on surrender benefit as well as a greater number of covered illnesses.”

Standard Life also announced that it was adding managed accounts to the investment options available under Perspecta universal life insurance. “This new range of investment options meets the needs of clients who are comfortable building their own portfolios as well as those who prefer to leave portfolio selection and monitoring to the investment professionals,” the firm said.

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