Regulators to consider ABCP settlements

Regulators have announced hearings to consider settlements with firms involved in the sale of non-bank asset backed commercial paper, the market for which collapsed in 2007.

The Investment Industry Regulatory Organization of Canada will convene a hearing panel on Monday to consider settlement agreements reached with Canaccord Financial, Credential Securities, and Scotia Capital.

According to the regulator, the firms did not adequately respond to “emerging issues” in the market for ABCP issued by Coventree, the firm at the heart of 2007’s market seize-up for non-bank ABCP.

Also on Monday, the Ontario Securities Commission will convene hearings on ABCP settlements reached with CIBC World Markets and HSBC Bank Canada.

According to the OSC, both CIBC and HSBC:

“engaged in conduct contrary to the public interest by failing to adequately respond to emerging issues in the third-party asset-backed commercial paper (“ABCP”) market insofar as they continued to sell third-party ABCP without engaging compliance and other appropriate processes for the assessment of such emerging issues.”

Agreed penalties are believed to range from about $1 million, to as high as $70 million.

In January 2009, the Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper announced a restructuring plan, thawing out roughly $32 billion in frozen third-party ABCP.

Read more from the Scrap Paper saga

(12/18/09)