Briefly:

(June 10, 2005) The British Columbia Securities Commission (BCSC) has meted out punishment to three men for breach of securities laws. Brent Gordon Edgson, Mark Stephen Heeres and Del Michel Delisle have been banned from holding office with any issuer or engaging in investor relations for terms ranging from six to 10 years. Edgson has also been fined $40,000, Heeres, $2,500.

The three men admitted to violating securities laws, in helping to sell investment in a numbered company without a prospectus or registration to trade securities. In all, nearly $27 million was raised from more than 1,400 investors in seven provinces and other international locations.

The owner of the company on whose behalf the funds were being raised and another man have settled with the BCSC.

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ASC puts house in order in bid to boost public image

(June 10, 2005) The Alberta Securities Commission (ASC) is overhauling its staff in an attempt to improve public confidence in the regulator. Newly-installed ASC Chair Peter Valentine announced the changes Thursday, along with his report to provincial Finance Minister Shirley McClellan regarding allegations about the commission’s management and operations.

The report indicated no evidence of wrongdoing, either ethically or legally, as had been claimed by some ASC employees and former employees through the media. The report suggested the allegations stemmed from internal issues and personal dynamics within the organization. Valentine noted some administrative matters had to be dealt with to enhance the effectiveness of the commission, however.

Valentine notes that while he has every confidence in what he calls a very talented staff, some staffing changes are being made that he believes are “vital to the health and future of the ASC.” Changes are also being made to the organizational structure of the commission, mostly related to work hours, vacation, salaries and promotions, and to increasing resources for the ASC’s information technology department.

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Database changes dawn at Morningstar

(June 10, 2005) Morningstar has made some changes to its fund database. One new asset category has been created while two others have been eliminated, following changes implemented by the Canadian Investment Funds Standards Committee (CIFSC) as of the end of the month.

As well, some funds have been moved to different categories, in part due to portfolio changes over the past three years, and some category changes have resulted in revised performance-quartile rankings and Morningstar ratings.

The most notable change involves the creation of the Canadian Income Balanced category. As of last month, there were more than 1,000 such funds spread across three categories in Morningstar’s retail fund database, including multiple versions of the same underlying funds. Meantime, the Canadian Mortgage and Latin American Equity categories have been done away with, their funds relocated to the Canadian Short Term Bond and Emerging Markets Equity categories, respectively.

However, one of the biggest sources of fund migration involved categories whose definitions had not changed. The Canadian Equity (Pure) category has tripled in size after approximately 140 funds were moved from the Canadian Equity category, which permits up to 30% foreign content. Funds in the Canadian Equity (Pure) category have at least 95% of their non-cash assets in Canadian equities.

In all, the shifts make for 34 different categories under the CIFSC categories, down one from before.

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Clarington fund family to shrink after proposed mergers

Clarington Funds plans to merge 13 of its mutual funds into other funds, in an effort to improve cost-efficiency for investors. The company expects the changes, to be approved at a unitholder meeting in August, to reduce ongoing expenses in the merged funds due to expected increases in economies of scale.

For example, pending investor and regulatory approval, Clarington’s Asia Pacific Fund will merge into the Global Equity Fund, the Canadian Growth Fund into the Canadian Equity Fund, its Global Communications, RSP Global Communications and International Equity Funds into the Global Equity Fund, and Global Core Portfolio and U.S. Core Portfolio Funds will merge into the Canadian Core Portfolio Fund.

Details of how these mergers will affect investors, including the tax consequences, will be set out in an information circular to be sent to mutual fund investors in July.

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MFDA switches light on fund switches

(June 9, 2005) The MFDA is sniffing out arrangements involving fund managers, dealer firms and sales reps in which client units of mutual funds with deferred sales charges (DSCs) are converted into units of the same fund carrying no front-end loads, without the knowledge of clients, and is urging that the situation be corrected.

The MFDA says these conversions are put into effect through a “bulk switch” of all eligible DSC units held by clients, or automatically converting units which have matured (and whose DSC has fallen to zero) into units of the same fund with no front-end load.

Often these switches take place without the knowledge or consent of the client, the regulator says, sometimes resulting in a higher trailer commission, also not disclosed. There could also tax implications if such conversions are considered dispositions, something often not taken into account.

MFDA staff is stressing adequate disclosure when automatic conversions take place, with an appropriate form containing a signature line to indicate client consent, disclosure of increased remuneration, tax implication and reference to the applicable fund prospectus.

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Former broker fined, banned for discretionary trading

(June 9, 2005) An Alberta Securities Commission panel has come down hard on a former securities broker who conducted unauthorized discretionary trading. Christopher Wesley Stewart has been prohibited from trading for 10 years, and ordered to pay a total of $15,000 in administrative costs.

Last February, Stewart was found to have been dealing in shares of Edmonton-based Wenzel Downhole Tools from 1998 through 2000 through the accounts of two of his clients, who settled with the regulator earlier this year. A statement released by the panel today said it did not believe Stewart could “reasonably be relied upon” to act in the best interest of his clients or the market in general.

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Greenspan stays on message

(June 9, 2005) U.S. Federal Reserve Chair Alan Greenspan says he’s not worried that a recent soft spell in the U.S. economy will lead to a long-term slowdown.

He repeated the Fed’s statement from last month that the U.S. central bank could continue to raise interest rates at a “measured pace.”

“The most recent data support the view that the soft readings on the economy observed in the early spring were not presaging a more-serious slowdown in the pace of activity,” Greenspan said in testimony before a U.S. government economic committee.

“The U.S. economy seems to be on a reasonably firm footing and underlying inflation remains contained,” he added.

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Firms want closer watch on pension plans: survey

(June 9, 2005) More employers are keeping a closer watch on the governance of their pension plans, according to a survey released today by Towers Perrin. The management consulting firm also says this increased awareness of governance has sparked improvements in governance practices, but concludes there’s a lot of work left to be done, particularly in managing pension risk.

Towers Perrin spokeswoman Florence Holden says “organizations are recognizing the importance of taking a more active approach to managing their pension plans and are increasingly devoting more resources to doing so.” Recently, plan sponsors have focused on managing the financial risk of pension plans in areas such as plan design, funding, investment and accounting. But Holden maintains that even strong financial management processes don’t suffice to manage all inherent risks.

“Among the best ways to manage pension risk properly is through designing and implementing a good governance process which addresses issues such as accountability, transparency, stakeholder risk management and ongoing monitoring and performance measurement”.

The survey of by 127 organizations across industry sectors in Canada found that sponsors of defined benefit plans are more likely to have governance documentation than sponsors of defined contribution plans; that 33% of respondents found more rigorous performance standards are needed for all parties involved with pension plans and that more regular reporting is needed from company boards.

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Former fund salesperson banned for 30 years

(June 8, 2005) The British Columbia Securities Commission has banned a former fund salesperson from the markets for 30 years and fined him $200,000 for fraud and failing to deal “fairly, honestly, and in good faith with clients.”

Carey Brian Dennis lived in Salmon Arm, B.C. and worked in the industry from September 1993 to July 1997 for Mutual Investco, a subsidiary of Mutual Life. The BCSC says he intentionally misled seven clients, investing their capital in his own name. Clients lost close to $250,000. In October 2003, he was convicted of fraud and theft and sentenced to two years in prison.

“Dennis’ conduct was very serious and highly prejudicial to the public interest. He badly hurt seven vulnerable clients and their families and he enriched himself through fraud,” said the BCSC panel that issued the sanctions. “The amounts of money he took from his clients were very significant to them. He took advantage of his trusted position as financial advisor and his good reputation in the community over a period of three and half years.”

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RBC Capital Markets makes executive appointment in New York

(June 8, 2005) RBC Capital Markets has named Marc Daniels as senior managing director of its New York-based mergers and acquisitions group. He will be responsible for generating and supporting the overall M&A effort with a special focus on working with private equity firms, RBC said in a release.

Daniels comes to RBC from Bear Stearns, where he was also senior managing director.

“In a relatively short time frame, Marc established one of the leading exclusive sales units on Wall Street, and he has a proven success rate in closing deals,” said Allen Morton, head of U.S. M&A at RBC. “His hiring will solidify an already impressive roster of talent in our M&A group and puts us in an even more enviable position in the marketplace.”

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Russell appoints pair of new fund managers

(June 8, 2005) Russell Investment has appointed Wellington Management and Arrowstreet Capital as managers of Russell’s sovereign overseas equity pool and overseas equity fund.

Capital Guardian Trust and Marvin and Palmer Associates had managed the equity fund, while Capital and Baillie Gifford handled the equity pool.

“In light of our high expectations for Wellington and Arrowstreet, we believe that the Russell fund and sovereign pool will be better served by this new combined manager line-up,” the firm said in a statement.

The changes were effective May 31, 2005.

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Regulators launch registration reform website

(June 8, 2005) The Canadian Securities Administrators is launching a website for its Registration Reform Project (RRP), an ongoing initiative intended to harmonize and streamline the registration regime for firms and individuals across Canada.

The website (www.rrp-info.ca) will provide market participants with updated content about the RRP, including news and events, forms, and frequently asked questions about various elements of the project, including the National Registration System, the CSA said in a release.

An extension of Ontario’s Fair Dealing Model, the RRP project has a steering committee, chaired by OSC executive director Charlie Macfarlane, and comprised of three industry members, representatives of the IDA and MFDA, as well as securities regulators in British Columbia, Alberta, Quebec and Ontario.

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OSC terminates Buckingham’s registration

(June 7, 2005) Nearly four years after suspending Buckingham Securities, the Ontario Securities Commission has issued an order terminating the firm’s registration.

OSC staff today announced a settlement agreement with Buckingham, concerning allegations that from March 1997 to July 2001, the firm failed to segregate fully paid or excess margin securities owned by its clients, failed to maintain adequate capital at all times, and failed to keep such books and records in violation of requirements of Ontario securities law.

“Buckingham made admissions in relation to the violations of the requirements of Ontario securities law … and agreed to an order terminating the registration of Buckingham,” the regulator said today.

Buckingham has been in receivership since shortly after the OSC suspension, in July 2001. Buckingham had about 2,400 client accounts at the time of its collapse, many of whom suffered financial losses. The firm was not a member of the IDA, so clients were not protected by the Canadian Investor Protection Fund.

In 2004, the OSC issued a lifetime trading ban against former Buckingham director David Bromberg. Another Buckingham executive, Lloyd Bruce, agreed never to apply for registration in Ontario and was also ordered to cease trading in securities, with the exception of his personal accounts.

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Canadian Western Trust teams up with Qtrade

(June 7, 2005) Canadian Western Trust and Qtrade Fund Management are joining forces to offer investors a no-fee, self-directed RSP account.

“Providing financial advisors with enhanced products and services is a priority for CWT,” said Canadian Western Trust vice-president Adrian Baker. “We believe the family of QFM investment programs and funds will provide outstanding choice to meet the goals and strategies of Canadian investors.”

“We created the QFM portfolio program and the QFM asset management program to deliver the best of strategic asset allocation combined with client and advisor input to produce an optimal investment portfolio, customized to the client’s specific risk tolerance and return objectives,” adds Calvin MacInnis, QFM’s managing partner.

The no-fee RSP account is available through CWT with a minimum investment of $50,000.

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Firms concerned about growing number of retirees, survey says

(June 7, 2005) Executives at Canada’s largest companies are worried about losing key staff who are close to retirement, a new survey suggests.

More than 60% of the 100 executives questioned by Robert Half International said they were either very concerned or somewhat concerned about staff turnover in the next five to 10 years. And 89% said they were taking steps to address the loss of baby-boomer employees.

Those steps include training and professional development, succession planning programs and recruitment efforts.

“As members of the baby-boom generation retire, shortages of skilled workers will likely start emerging,” said Max Messmer, chairman and CEO of Robert Half. “Tenured employees take with them valuable experience, industry contacts and knowledge of best practices that are difficult to replace.”

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CRA announces interest rates

(June 7, 2005) The CRA has confirmed the annual interest rates that will apply to any amounts owed to the revenue agency and to any amounts the CRA owes to individuals and corporations.

The interest rate charged on overdue taxes, CPP contributions, and EI premiums will be 7%. The interest rate paid on overpayments will be 5%. The rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 3%.

The CRA calculates interest rates quarterly. They will be in effect from July 1 to September 30.

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Canadian advisor scouting for Buffett

(June 7, 2005) Warren Buffett has engaged a Canadian financial advisor to track down potential acquisitions for his conglomerate, Berkshire Hathaway, north of the border. Jeff Hull met Buffett while filming a documentary on the legendary investor.

“I’m presently scouring the Canadian landscape for ideal businesses,” says Hull. “As Warren teaches, it’s all about minimizing risks and patiently waiting for the right opportunity. I look forward to discussing my recommendations with Warren once my analysis of the Canadian market is complete.”

Hull says Buffett’s investment criteria have him hunting for privately held businesses, with a passionate and successful management team. A strong competitive advantage and a steady track record of success are also key. Hull has been placing his own money, as well as his clients’, with Berkshire for the past 12 years.

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Faircourt offers principal protected notes

(June 6, 2005) Faircourt Asset Management has launched two new series of principal protected notes, both focused on the income trust sector.

The ROC Deposit Note (for which BMO Nesbitt Burns has submitted a patent application) provides investors with potential tax deferred monthly distributions, in addition to the opportunity to maintain exposure and potential upside to the income trust sector, while protecting an investor’s capital if held to maturity, Faircourt says.

The Income Trust Deposit Note provides exposure to a basket of income trusts providing a potential high monthly interest payment, the firm says.

Both notes are being issued by BMO, employing a strategy of dynamic leverage to provide up to 200% exposure to an underlying portfolio of income trusts, modeled by Faircourt.

The notes are available until July 29 at an issue price of $100 per note, with a minimum investment of $2,000.

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HSBC acquires mortgage broker

(June 6, 2004) HSBC Financial is acquiring Invis, one of the country’s largest mortgage brokers. Financial terms were not released and the deal remains subject to regulatory approval.

Invis has a network of more than 500 mortgage brokers across the country and last year negotiated more than $4.5 billion of mortgages on behalf of homeowners and homebuyers.

“We are impressed with the dramatic growth that Invis has experienced since being founded in 2000,” says HSBC president Pat Burke. “Invis mortgage brokers have a reputation for providing great customer service and our goal will be to nurture the entrepreneurial energy of Invis and provide additional support where we can to enhance the value to the customer.”

“I am looking forward to bringing the resources of HSBC Financial together with our own expertise to enhance customer experience,” added Invis CEO Andrew Moor.

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Shorcan Index bought up by British firm

(June 6, 2005) Toronto-based Shorcan Index has been taken over by London’s CMC Group.

The new company, renamed CMC Markets Canada, will focus on offering spot foreign exchange products and online contracts for difference (CFDs) to institutions such as hedge funds and accredited individual investors. Shorcan was Canada’s only CFD provider.

“This acquisition will enable us to win market share throughout North America,” said Peter Cruddas, chair and CEO of CMC Group. “As CMC has done in other regions, we expect CFDs to become the trading product of choice for active investors and institutions in Canada.”

“Pricing, trading and software efficiency have all helped to establish CMC Group as a world leader in real-time internet trading, and now we’ll be able to build on that tradition as CMC Markets Canada,” says CMC Canada president Simon Grayson. “The resources of CMC Group will help us to dramatically change trading as we know it here in Canada.”

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TD, Brandes join Aegon’s portfolio lineup

(June 6, 2005) Aegon Asset Management has added TD Mutual Funds and Brandes Investment Partners to its imaxx TOP portfolios, effective May 30.

Aegon’s other imaxx TOP Portfolios partners are AGF, AIM Trimark, CI Funds, Fidelity Investments, and Mackenzie.

“These world-class money managers will provide an even greater depth of investment expertise within our imaxx TOP portfolios,” says Aegon vice-president Geraldo Ferreira. “We are very excited about the inclusion of their funds within our portfolio offering.”

The six imaxx TOP portfolios are comprised solely of third-party mutual funds.

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