Briefly:

(August 26, 2005) Morningstar Canada decided today to stop reporting on the Norbourg and Evolution mutual funds, and has since removed them from the company’s web-based products and services. Information on the funds will remain accessible through the PALTrak and BellCharts desktop products until the next update is released in the second week of September.

The data reporting company made the decision after Quebec’s regulator, the Autorité des marchés financiers (AMF) said nearly $70 million in assets belonging to investors in the Evolution and Norbourg funds were embezzled through various schemes, and a discrepancy of $71 million exists between the company’s latest financial statements and Norbourg’s assets under management.

“The serious allegations cast doubts on the accuracy of the data reported by the Norbourg and Evolution funds,” says Morningstar Canada, president and CEO, Scott Mackenzie. “Under the circumstances, we believe that the prudent course at this time is to cease reporting on the funds.”

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Regulators issue guidance on income trust disclosure

(August 26, 2005) The Canadian Securities Administrators (CSA) is calling for more transparency from income trusts and issued guidance today on the information that trusts are expected to disclose when they present information about estimated distributable cash in a prospectus.

Estimating future cash distributions often incorporates significant estimate and assumptions, but many income trusts have provided only limited information about these assumptions.

The CSA is calling for detailed disclosure of underlying assumptions which may also involve providing financial statements and forecasts prepared in accordance with the CICA Handbook.

“We have heard repeated concerns about eh transparency of this information,” says Susan Wolburg Jenah, acting chair of the Ontario Securities Commission. “We expect issuers to carefully consider whether their disclosure represents a balanced and complete assessment of all the factors likely to affect distributable cash.” The CSA also says issuers need to consider whether their disclosure provides adequate transparency about the sustainability of estimated distributable cash.

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BC firm settles with regulators, surrenders registration

(August 26, 2005) A Richmond, B.C. firm has surrendered its registration as an exchange contracts dealer and the British Columbia Securities Commission has reprimanded both the firm and its owner.

Clive Chow Kai Tsang, the sole proprietor of J.D. Stanley Futures Inc., has been banned from trading for five years as part of a settlement with regulators. J.D. Stanley had capital deficiencies, failed to prepare accurate capital records and did not immediately report its capital shortcomings as required by securities rules.

Tsang had not been registered under the Securities Act in any capacity since February 2001 and violated the Securities Act by periodically providing backup for JDS representatives and trading exchange contracts on behalf of clients.

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Pro-Hedge launches energy fund

(August 26, 2005) Pro-Hedge Funds has launched a new fund of funds that will focus on the energy sector, claiming their diversified Pro-Hedge Multi-Manager Energy Fund to be the first of its kind in Canada.

“We are now at a point where volatility will likely rise regardless of the future direction of prices,” says Les Grober, vice-president and portfolio manager of Pro-Hedge. “This creates a more advantageous environment for hedge funds relative to long-only managers. We have structured the portfolio with this view in mind and as a result, investors will now be able to participate in a far more diversified portfolio of underlying managers and strategies in both the energy and utility sectors.”

The fund will hold a selection of energy funds, offering diversity of strategies, sectors and security types.

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Royal Bank announces earnings

(August 26, 2005) RBC Financial has released its third quarter results, posting net income of $979 million, up $236 million or 32% from a year ago. RBC is still locked in a legal battle over its role in the collapse of Enron and no settlement has been reached or accounted for.

“I am pleased with the performance of all of our business segments and with our continued strong credit quality this quarter,” said Gordon Nixon, bank president and CEO. “Our Canadian Personal and Business and Global Capital Markets segments generated very strong earnings growth of 31% and 33%, respectively.”

The bank also boosted its quarterly dividend by 3 cents a share to 64 cents. Return on common equity was 20.0%, up 390 basis points.

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TD takes a hit from Enron

(August 25, 2005) TD Bank Financial Group has issued its latest quarterly earnings report, posting a profit of $411 million or 58 cents a share. Profits were down 27% compared to last year after the bank added $238 million to its Enron related litigation reserve fund. TD raised its common share dividend by 2 cents to 42 cents.

“TDBFG delivered strong operating results in the third quarter,” said W. Edmund Clark, TD Bank Financial Group president and CEO. “The board’s decision to raise the quarterly dividend is a reflection of their confidence in our ongoing earnings strength.”

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National Bank posts higher profits

(August 25, 2005) National Bank has released its latest financials, showing a profit increase of 26% on a per share basis to $1.20, for the quarter. Net income totaled $207 million for the third quarter ended July 31, 2005, compared to $167 million for the same period a year earlier.

“Our third-quarter results confirm that the bank is capable of delivering consistently solid growth,” said Real Raymond, president and CEO. “Once again, we capitalized on our strategy to enhance our core business through various initiatives aimed at improving customer satisfaction while continuing to invest in the bank’s internal growth and keeping a tight rein on operating expenses.”

Return on common shareholders’ equity was 19.6% for the quarter versus 17.2% for the same period a year earlier.

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Corporate profits climb

(August 25, 2005) Corporate profits rose nearly 3% to $51.9 billion in the second quarter, boosted by rising oil prices, Statistics Canada says.

Profits have risen in 12 of the past 14 quarters, although the growth rates have moderated in the last three quarters, the agency noted.

Non-financial industries posted a 4.2% profit increase while the financial sector’s earnings dropped 1% due to weaker bank profits.

Deposit-takers, dominated by the banks, earned $5.5 billion in second quarter operating profits, down 5.6% from the record high profits earned in the first quarter. Insurance company operating profits rose a moderate 1.1% to $2.9 billion, as gains by life insurers were largely offset by lower profits in the property and casualty sector.

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CIBC suffers record loss

(August 24, 2005) CIBC today announced a $1.9 billion dollar loss in its third-quarter as the bank dealt with massive charges related to the Enron debacle. Earlier this month, CIBC agreed to a $2.5 billion charge to settle claims related to the Enron case.

In the same three-month period last year, earned $596 million, or $1.60. Without Enron and other charges, CIBC said it would have earned $1.62 a share in the latest quarter.

“These settlements will have a significant impact on our financial performance for 2005,”‘ said CEO Gerry McCaughey in a statement. But he also expressed confidence that the bank would recover. “Our goal is to position CIBC for the consistent long-term performance that I know we can deliver, and that our shareholders expect.”

On the plus side, stable credit markets and increased mergers and acquisition activity led to improvements in CIBC’s wholesale businesses, the bank said.

Net income at CIBC’s retail division rose up 16% to $39 million and the bank’s wealth management unit earned $14 million in the quarter, 13% higher than last year.

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IDA reduces fine against Quebec firm

(August 24, 2005) In an unusual move, an IDA appeal panel has cut in half a fine against a Montreal-based investment dealer. LVM Canada was initially fined $40,000 by the brokerage industry association, which announced today that the penalty had been reduced to $20,000.

The firm and its senior vice president, Jean-Claude Paradis, were acquitted of a number of alleged violations, save one related to the improper handling of a client complaint, the IDA said.

The appeal panel also cancelled costs imposed on the firm and the registrant, but upheld the original $10,000 fine against Paradis and the requirement that he rewrite the partners, directors and officers exam.

LVM Canada is currently under suspension by the IDA and Paradis is not registered.

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Mutual fund rep hit with lifetime ban

(August 24, 2005) The MFDA has permanently banned a former mutual fund sales representative from the industry for misappropriating cash from clients.

The MFDA found that Raymond Brown-John misappropriated $83,000 from two of his clients between December 1999 and February 2003. He also recommended that one of his clients redeem $67,000 in mutual fund investments and lend the money to him. The loan was never re-paid.

Brown-John was also fined $185,000, although as an SRO, the MFDA does not have the legal authority to collect fines from those not working in the industry.

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IDA offers account opening brochure

(August 24, 2005) The IDA has published a new information brochure for investors on how to open a retail account with an investment advisor.

The brochure explains why investment dealers ask clients for personal information, such as net worth, marital status and occupation.

“Some clients may be concerned about divulging such information, but it is required by IDA regulations and other laws, and firms may not be able to open accounts without it,” the brokerage industry association says, adding that firms must safeguard personal information and comply with privacy laws.

“In order to determine if an investment is suitable for a client, a firm needs to have certain information about that client’s situation, objectives, and goals,” adds Morag MacGougan, the IDA’s vice-president, industry relations and representation. “This concept of Know Your Client is at the heart of sound investment practice.”

The brochure also explains the various accounts available to clients and outlines the types of disclosure documents advisors must provide.

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Desjardins unit posts record profit

(August 23, 2005) Desjardins Financial Security has recorded its most profitable quarter ever, posting earnings of $42.4 million, an increase of 24.4% over the same period last year. The firm also recorded first-half profits of $83 million, up 37.8% from the same period in 2004.

“Desjardins Financial Security is establishing itself as a major player in the Canadian life and health insurance industry,” says Francois Joly, Chief Operating Officer at Desjardins Financial Security. “These results lay solid foundations for our development across Canada. We have every reason to be confident in our future. We continue to take advantage of favourable economic conditions and to anticipate the market’s future needs, especially in the area of health coverage.”

Total income from insurance, annuities and investments, as well as other income, rang in at $1.51 billion, compared to $1.37 billion for the first six months of 2004. Individual insurance profits rose 65.1% over the first six months to $17.5 million, while group insurance profits totaled 49.1 million, up 21.2%. Savings and segregated funds accounted for net earnings of $7.5 million.

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Desjardins unit posts record profit

(August 23, 2005) Desjardins Financial Security has recorded its most profitable quarter ever, posting earnings of $42.4 million, an increase of 24.4% over the same period last year. The firm also recorded first-half profits of $83 million, up 37.8% from the same period in 2004.

“Desjardins Financial Security is establishing itself as a major player in the Canadian life and health insurance industry,” says Francois Joly, Chief Operating Officer at Desjardins Financial Security. “These results lay solid foundations for our development across Canada. We have every reason to be confident in our future. We continue to take advantage of favourable economic conditions and to anticipate the market’s future needs, especially in the area of health coverage.”

Total income from insurance, annuities and investments, as well as other income, rang in at $1.51 billion, compared to $1.37 billion for the first six months of 2004. Individual insurance profits rose 65.1% over the first six months to $17.5 million, while group insurance profits totaled 49.1 million, up 21.2%. Savings and segregated funds accounted for net earnings of $7.5 million.

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BMO sees profits slide

(August 23, 2005) BMO Financial Group has posted a quarterly profit of $541 million, a drop of 16%, or $102 million, from the same quarter in 2004. The bank promptly raised its common stock dividend by three cents a share.

Revenues grew by 2%, but expenses were 2.6% higher. Profits from the personal and commercial client group rose or 15% to $307 million. The private client group earned 8% more to $63 million, while the investment banking group saw profits drop 20% to $184 million. Return on equity dropped to 18.4% from 20% in 2004.

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Retailer offers RESP incentive

(August 23, 2005) Hudson’s Bay Company has teamed up with Heritage Education Funds and Canadian Scholarship Trust Plan to encourage Canadian parents to start an RESP for their children. Hbc is offering $100 toward a new RESP, as a part of its Hbc Rewards customer loyalty program.

Hbc Rewards members can redeem 100,000 points to get the contribution, and there is a limit of one contribution per beneficiary. The contribution qualifies for the federal government’s 20% RESP matching grant.

“Offering consumers the option of transferring Hbc Rewards points into an RESP is a revolutionary new program in Canada,” said Scott McIndless, president and CEO of Heritage Education Funds. “This offer allows Canadian families the opportunity to start planning for their child’s future and receive an invaluable return on their investment.”

“We are delighted to increase access to education through this generous loyalty program,” added John Kearns, President and Chief Executive Officer of C.S.T. Consultants, distributor of the Canadian Scholarship Trust Plan. “Families can now maximize the value in their Hbc Rewards points by putting them toward an RESP contribution.

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Insurance regulator appoints new CEO

(August 23, 2005) The Financial Services Commission of Ontario has named Dr. Bob Christie to the role of CEO and Superintendent of Financial Services, effective September 6, 2005.

Christie holds a PhD in economics and served as Ontario’s Deputy Minister of Finance between August 2000 and February 2004. He has also served as Deputy Minister of Training, Colleges and Universities, and of Intergovernmental Affairs

Cheryl Cottle will remain as the acting CEO and Superintendent until Christie assumes his position.

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Governance has evolved: Wilson

(August 23, 2005) Corporate governance has come a long way since it began hitting the headlines a few years back, but there are still measures needed to be taken, according to Michael Wilson, chair of the Canadian Coalition for Good Governance.

In a breakfast speech today at RBC Global Services, the former federal finance minister said that since 2003, the majority of companies have taken steps towards corporate governance. He noted the creation of more independent boards, the fact that directors are sitting on fewer boards and the push for executive compensation to be more open.

However, Wilson pointed out the need to do even more. “The low hanging fruit has been captured, but there is a lot of work to do,” he said. And what he called “the tone at the top” is essential to create a governance structure that is effective and lasting.

He also said that regulators need to be more focused on dealing with dishonest behaviour as it occurs and implement more severe penalties.

(Joel Kranc, Benefits Canada)

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RBC offers global financials note

(August 22, 2005) RBC Financial Group has launched RBC Principal Protected Global Financials Enhanced Yield Notes, Series 1, which is aimed at risk-averse investors seeking exposure to global financial services firms.

On top of principal protection, the note offers exposure to a basket of financials, made up of the U.S. listed securities of AFLAC, Bank of Nova Scotia, Barclays, Janus Capital Group, Lloyds TSB Group, Nomura Holdings, Royal & Sun Alliance Insurance Group, Royal Bank of Canada, Charles Schwab and Washington Mutual.

RBC guarantees a 5% return for the first year, with subsequent years returns capped at 10%. The notes mature September 13, 2012 and are available through advisors until September 2.

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Manulife launches new Canadian equity fund

(August 22, 2005) Manulife Mutual Funds is introducing a new Canadian equity fund and changing sub-advisors on another fund.

The Elliott & Page Core Canadian Equity Fund will be managed by Pat McHugh, vice-president and senior portfolio manager for MFC Global Investment Management. McHugh has more than 20 years experience and is responsible for managing MFC Global’s Canadian large cap core mandates.

“We are pleased to make this new fund available as it enhances our comprehensive line-up of Canadian equity funds, said Manulife Mutual Funds vice-president Rick Annaert.

Manulife also announced the appointment of Mawer Investment Management as sub-advisor to the E&P Manulife Tax-Managed Growth Fund (formerly E&P Manulife Tax-Managed Growth Portfolio). The selection of Mawer comes following an extensive manager search for an asset management firm with a proven track record in managing tax efficient assets for Canadian investors, Manulife says.

“This change reflects our continuing efforts to enhance our product line-up and provide investment solutions for both registered and non-registered investors,” added Annaert. “We believe Mawer’s expertise in tax efficient asset management will enhance our investment line-up and benefit unitholders in the fund over the long term.”

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Former bank CEO receives Ivey Business School award

(August 22, 2005) Peter Godsoe, former chair of Scotiabank, is this year’s winner of the Ivey Business Leader Award.

Godsoe joined the bank in 1966 as a teller trainee and moved up through the ranks with various positions in international, corporate and investment banking.

He was named president and chief operating officer in 1992, chief executive officer in 1993 and chair in 1995. Godsoe retired in 2003.

“We are proud to honour Peter with this award in recognition of his track record of success. His commitment to business in Canada and to his community is inspiring,” said Carol Stephenson, Dean of the Ivey Business School.

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