Investors should not pay for Portus probe, says IFB

(April 18, 2005) The Independent Financial Brokers of Canada (IFB) is calling on the Ontario Securities Commission (OSC) to take full responsibility for the cost of the Portus investigation. The move comes after receiver KPMG asked for court permission to transfer an initial sum of $11 million from a Portus bank account to pay the expenses of the receiver and legal firm Fraser Milner Casgrain.

“This is investor money,” said IFB president David Barber in a letter to Ontario Board of Management chair Gerry Phillips. “IFB is concerned, as are its members, that a lengthy and exhaustive investigation will only serve to rapidly deplete investor funds. The investing public should not have to forfeit their savings in order to pay for this investigation.”

IFB fully supports regulators in their efforts to protect investors from fraudulent activity, Barber says, but adds that he believes it is appropriate for the OSC to take responsibility for the probe, including costs. “Moreover, we believe the receiver should make public the cost of the investigation thus far, along with ongoing weekly charges borne by the investors of Portus.”

“Past experience with large receiverships suggests there is a real danger that the expense of the process and the ongoing investigation can jeopardize investor recovery,” the letter continues. “YBM and Bre-X are two examples where investor money was drained by a lengthy receivership and investigation.”

The OSC froze the assets of Portus in February and appointed KPMG as receiver. Earlier this month, KPMG revealed that it had found $662 million in Portus assets, but more than $1 billion in liabilities, including $750 million invested by Canadians and $68.7 million US from international investors. In addition, there were $238 million and $30 million US in “unexplained offshore wire transfers.”

KPMG has also attempted to interview the chief executives at Portus, but has been unable to meet with co-founder Boaz Manor, who has moved to Israel. An Ontario court judge has asked Manor’s former lawyers to request that he return to Canada to answer questions about the hedge fund business.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com