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OSC rules Mackenzie can buy shares in parent firms

The Ontario Securities Commission has ruled that mutual funds operated by Mackenzie Financial Corp. can buy and sell shares in the fund manager's parent companies.

Mackenzie had been barred under Ontario securities regulations from holding shares in Power Financial Corp., which had acquired Mackenzie through its Investors Group Inc. unit in the spring of 2001.

In addition, Mackenzie was prevented from buying shares in Power Corp. of Canada which owns Power Financial, and to complicate matters even further, it also couldn't purchase shares in Great-West Life Assurance Co., which is part of Power Financial's list of companies.

The concern is that fund managers buying shares in parent companies could create potential conflicts of interest.

But given the sheer size of Power Financial's amalgamation of companies, Mackenzie had petitioned the OSC for an exemption, arguing that it should continue to be allowed to purchase shares in these companies.

Under a timetable imposed by the OSC, Mackenzie had been told to divest its shares by certain dates, although this has now been overruled by the exemption.

The OSC's decision in favour of Mackenzie, which includes various criteria such as the introduction by Mackenzie of an independent panel to review its trading in the parent companies, will be published in an OSC bulletin tomorrow.

The OSC expects other fund managers, particularly funds at banks barred from purchasing shares in their own parent companies, will seek similar exemptions.

"We expect there's probably going to be some market participants who are now going to want to apply on the same terms [as Mackenzie]. I think the commission was aware of that and is prepared to consider similar circumstances," said Paul Dempsey, manager of investment funds at the OSC.

© 2007 The Globe and Mail. All rights reserved.

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