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OSC-AIC to settle over market-timing moves

The Ontario Securities Commission has reached a tentative settlement with a fourth mutual fund company over questionable market-timing practices.

The OSC said last night that AIC Ltd. has struck a settlement agreement with commission staff over allegations that it failed to protect investors from the "significant harm" that frequent "market-timing" trading can inflict on a fund.

The agreement will be presented to an OSC panel for approval at a hearing tomorrow, along with accords reached with three other companies caught up in the probe.

The agreement with Burlington, Ont.-based AIC comes a day after commission staff reached tentative settlements with I.G. Investment Management Ltd., CI Mutual Funds Inc. and AGF Funds Inc. over the same allegations.

In separate statements of allegations, OSC staff allege that the conduct of the four companies in failing to fully protect the funds they manage from the impact of market timing was contrary to the public interest.

Market timing involves rapid, in-and-out trading by hedge funds and other sophisticated market professionals to take advantage of time-zone differences in international funds, where events after overseas markets close often make stock prices in a fund out of date.

A Report on Business investigation published in June found that rapid, in-and-out trading in mutual funds totalled more than $220-billion between 2000 and 2003.

The Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada will also hold hearings tomorrow related to market timing.

RBC Dominion Securities Inc., TD Waterhouse (Canada) Inc. and BMO Nesbitt Burns Inc. have reached tentative settlements with the IDA for allegedly failing to detect and prevent "potentially harmful" market timing activities in mutual funds. Investors Group Financial Services Inc., a sister company to I.G. Investment, has reached a separate tentative settlement with the MFDA.

© 2007 The Globe and Mail. All rights reserved.

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