Briefly: “Thow gets penalty reduced” and more of Friday’s news

Ian Thow, the ex-Berkshire rep accused of stealing $6 million from 26 clients, has won an appeal to have a BCSC administrative penalty dramatically reduced, from $6 million, to $250,000.

The Court of Appeal for British Columbia has ruled that the securities commission overstepped its regulatory bounds by imposing such a large penalty, which far exceeded the maximum penalty spelled out in the B.C. Securities Act (1996).

In essence, the Honourable Mr. Justice Groberman said the BCSC could not scale its penalty based on the magnitude of the alleged wrongdoing.

“It has not been suggested that an administrative penalty less than the maximum should have been imposed on Mr. Thow,” Groberman said in his reasons for the decision. “In light of the commission’s finding that Mr. Thow engaged in ‘one of the most callous and audacious frauds this province has seen,’ the imposition of the maximum administrative penalty is appropriate.”

Whether Thow will pay even the reduced penalty remains in question; he was last reported living in Washington state, just beyond the reach of the BCSC.

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Webb closes sales for two of three funds

Webb Asset Management has announced that the simplified prospectus and annual information form for each of the Webb Enhanced Growth Fund and the Webb Enhanced Income Fund will not be renewed.

The two funds are no longer available for purchase and will only accept redemption orders. Webb is not wrapping the funds up yet, however, and will continue to manage their remaining assets. The company says it may renew the two funds’ prospectuses in the future, reopening them to new sales.

The company’s only other fund, the Webb Canadian Performance Fund, is distributed via offering memorandum rather than prospectus, and remains in distribution. It is not affected by any of these decisions.

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CPP Fund posts 6.7% loss in Q3

The CPP Fund has ended its fiscal Q3 of 2009 with assets of $108.9 billion, down $8.5 billion from the previous quarter. The fund posted an investment loss of $7.9 billion, or 6.7%.

The fund’s assets declined by $13.8 billion over the nine-month period ended December 31, 2008. That decline includes operating expenses, with an investment loss of $17.4 billion (13.7%), partially offset by $3.7 billion in CPP contributions.

“Sharp declines in global equity markets, especially in October and November, negatively impacted our results for the quarter,” said David Denison, president and CEO, CPP Investment Board. “However, looking beyond these short-term results, we continue to believe that our long investment horizon, steady cash inflows and broadly diversified portfolio will generate the longer-term results necessary to deliver on our multi-generational mandate.”

The fund reported a four-year annualized investment return of 3.5%, with investment income of $10.2 billion. Including CPP contributions, the fund has grown by $31.7 billion over that period.

“The funding structure of the CPP means that it is able to weather an extended market downturn, and the assets we are managing today are not required to help pay pensions for another 11 years,” said Denison.

At December 31, 2008, the portfolio held a 57.5% weighting in equities, with 42.2% of assets in publicly traded stock, and 15.3% in private equity investments.

Fixed income, including bonds, money market securities, and other debt, represented 27.8%, while real estate accounted for 7.1% of assets. Inflation-linked bonds and infrastructure accounted for 4.2% and 3.4%, respectively.

In terms of geographic weighting, 48.7% of the portfolio was invested in Canada, while 51.3% was invested globally.

The Chief Actuary’s 2007 report projects that the CPP, as constituted, is sustainable throughout the 75-year period of the report.

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British prosecutors investigate AIG unit

American International Groups (AIG) financial products unit, widely blamed for the companys brush with bankruptcy through bad bets on credit default swaps, is being probed by British prosecutors for possible criminal conduct.

The U.K.s Serious Fraud Office (SFO) is looking into the British arm of AIG Financials sale and valuation of financial instruments linked to toxic U.S. subprime mortgages and other potentially fraudulent activities at the division. SFO investigators are working with U.S. authorities who are conducting a similar probe.

“It is right for us to look into the U.K. operations of AIG Financial Products to determine if there has been criminal conduct,” said Richard Alderman, director of the SFO, in a statement. “We will use our full range of powers to seek information and to speak to those with an inside knowledge of the companys operations.”

AIG has pledged to co-operate with the investigation.

(02/13/09)