Fund scandals will lead to regulatory changes, says CI president

(December 1, 2003) The head of one of the country’s largest mutual fund companies says there’s no need for the Canadian industry to defend itself in the wake of a series of fund scandals in the U.S. However, CI Funds president Bill Holland admits the scandals will likely lead to some regulatory changes.

“I think the smartest thing to do is to let this unfold a little bit,” Holland told reporters following a CI shareholders’ meeting in Toronto on Friday, November 28. “I think there are going to be some regulatory changes in our business and I think they will emanate from the United States. And I think some will be sensible and some will be reactionary.”

A number of major U.S. fund companies have been accused of late-trading and market-timing abuses. There have been no indications of similar problems in Canada, but the Ontario Securities Commission has written to more than 100 fund companies, asking if they have policies and procedures in place to detect and prevent trading abuses.

Holland called some of the practices uncovered in the U.S. — such as accepting orders at 6 p.m. — “horrible.” He added that although regulators might want to make some changes here in Canada, “I don’t think you’re going to see anything like these headline issues that you see in the U.S.”

CI recently acquired financial planning firm Assante and mutual fund rival Synergy Asset Management. Holland says he’s not ruling out further acquisitions, noting that size is clearly a competitive advantage in the fund business. “But we’ll be selective, it’s got to be financially right,” he said.

On other topics, Holland said CI is still exploring the idea of turning the company into an income trust. “It would help with growth because it reduces the cost of capital,” he said.

“We first looked at this a year ago,” Holland added. “The bigger our company gets and the less our cash requirements become, you start saying ‘This is something that could make sense.’ All we’re trying to do is increase the owners’ share of the profits.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com, with files from Darin Diehl.