Some Portus investors could soon be repaid

The Ontario Superior Court has approved a motion which could result in a cash settlement for a limited group of Portus investors.

Justice Colin Campbell ordered that Market Neutral Preservation Fund (MNPF) trust be wound up, with the proceeds to be paid out to investors in that fund. The procedure will involve the unwinding of a forward contract between the fund and RBC, as well as a call option with French bank, Société Générale.

Justice Campbell ordered Computershare, the trustee over the fund’s assets, to retain counsel and proceed to “take such steps as are necessary and desirable to wind-up the MNPF subject to the prior approval of this Court.”

In the June 7 filing, KPMG lawyers stated: “Based on existing case law, it is not clear that a trust is a ‘person’ within the meaning of the Bankruptcy and Insolvency Act such that it can be put into bankruptcy; consequently, a bankruptcy of the MNPF and/or the MNB Trust may not be possible.”

Due to this uncertainty, they motioned that the trust be wound-up, rather than entered into bankruptcy.

Justice Campbell also ordered that KPMG continue to develop a claims process for investors in MNPF. The MNPF raised about $19.2 million from accredited investors across Canada before Portus was shut down by the OSC.

Most of the assets that flowed into Portus products were commingled into pooled accounts, making it difficult to trace ownership. Assets in the MNPF remained segregated however, leading to the motion by investors that the assets be paid out, rather than simply dumped into a communal pool to be split by all Portus investors.

Most of the $19.2 million that flowed into the fund remain intact. KPMG has already recovered $14.9 million by cashing an Ontario bond and the SGP call option was valued at about US$1.4 million in August 2005.

In its receiver’s report, KPMG has identified $4.4 million in redemptions, reducing net liabilities of the fund to about $14.8 million.

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