RCMP probe into trusts widens

Details are emerging surrounding the RCMP probe into allegations that some market insiders had advance knowledge of Finance Minister Ralph Goodale’s November announcement on income trusts — including an apparent leak on a popular online message board.

Stockgroup Information Systems, which operates the StockHouse website, has revealed that a posting on its BullBoards message board, dated November 23, stated “…he (Goodale) will soon announce a reduction on dividend taxation to ‘even the playing field’…”

While the phrase “even the playing field” is fairly common, Goodale, announcing later that same day that he would not tax trusts, raised some eyebrows when he used exactly the same wording. Stockgroup’s vice president of marketing says the company has not yet been contacted by the RCMP, and today expressed reluctance to co-operate with the investigation.

“Both professional traders and non-professional investors frequent our BullBoards to candidly share their insights and opinions,” said Bruce Nunn. “They expect privacy and anonymity. Stockgroup will not release the identities of the persons that posted the BullBoards messages.”

The RCMP has already interviewed an executive member of Canada’s Association for the Fifty-Plus (CARP), which was earlier implicated in a posting on the website of former Liberal strategist Warren Kinsella. The posting has since been removed.

“We were told that Mr. Goodale wanted to resolve the uncertainty and that there would be an announcement soon and that was it,” associate executive director Bill Gleberzon told Advisor.ca in December. “We knew what everybody else knew, when they knew it.”

Prices for many income trusts and higher-yielding dividend stocks spiked late on November 23, just hours before Goodale’s announcement, which came after the closing bell. But not everyone agrees that this points to a leak.

“I think there is enough reason to suspect that the run-up in trading (and prices) was nothing more than educated guessing,” says Dan Hallett, president of Dan Hallett & Associates. “I have heard mixed things from fund managers regarding whether a leak actually took place. Some say that info was definitely leaked. Others suggest that the information was nothing more than rumour and that Goodale didn’t make his final decision until the 11th hour.”

Hallett points to Goodale’s abortive attempt to crack down on trusts themselves, before backing down in the face of a strong pro-trust lobbying effort. He says the finance minister has already demonstrated an aversion to controversy.

“With an election on the horizon, I just don’t think it was a risky gamble to take positions in dividend paying stocks — because they would win no matter the outcome — or income trusts — which would benefit if Goodale backed down…which he did again,” Hallett says. “Not to mention that tax experts have long argued that the dividend tax regime needed fixing to eliminate the effective double taxation.

“So, I’m not sure what actually happened, but I do think there is reason to believe the pre-announcement trading was educated guessing.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com