Five Canadian fund companies are still trying to track down investors to return monies owed from a market trading scandal that was settled with regulators in 2004-2005.
AGF Funds Inc., I.G. Investment Management Ltd., CI Investments Inc., Franklin Templeton Investments Corp., and AIC Ltd. have been granted a two-year extension from the Ontario Securities Commission to allow investors harmed by the market-timing activities to make claims until June 1, 2011.
Fund companies were ordered to set aside millions of dollars to be paid back to investors because the companies gave preferential treatment to some market pros who were allowed to zip in and out of their funds without paying the maximum fees to do so, and pocketed hundreds of millions of dollars in quick profits.
Under a settlement approved by the OSC in June, 2005, the fund companies were required to place uncashed cheques into a trust account, and use "reasonable efforts" over the next three years to find the affected investors who were entitled to a payment of $200 or more.
AIC Ltd., which agreed to set aside $58.8-million - the largest amount toward restitution among the five companies - has about $2.4-million remaining in uncashed cheques.
"The fund companies went to get an extension to continue to honour these cheques," said Marcia Stewart, general counsel for AIC Global Holdings Inc., which owns Burlington, Ont.-based AIC Ltd.
"It's still a lot of money," she said yesterday in an interview. "Some of the cheques are in the hundreds of dollars, and a few of the cheques are in the thousands of dollars. The majority are smaller... .
"It leads us to believe that people have either moved or died, or we are not contacting the right individual," she said. "Often, the funds are held in the dealers' name... . Over the past year, we have put out another 1,000 cheques. We have either located people or issued new cheques because someone has contacted us."
The OSC said it was "in the public interest" to grant a second extension, following a one-year prolongation of the deadline to this June 1. The fund companies will be required to distribute any unclaimed monies to the relevant mutual fund or successor funds - if there have been mergers - after July 1, 2011.
If there are any monies left in the future to go back into the mutual funds that were harmed, that amount would increase their net asset value, Ms. Stewart said.
CI Investments said in an e-mail that it has paid out 95 per cent of its settlement funds; Franklin Templeton, 94 per cent; and AGF, 95 per cent. I.G. Investment Management did not reply by deadline.
"We have made every effort to locate investors" both inside and outside Canada, AGF spokeswoman Lucy Becker said in an e-mail. "Any remaining money [in 2011] will be paid to the relevant funds - approximately 20."
Meanwhile, some shareholders who were enraged by the settlement reached by the fund companies and the Ontario securities watchdog have launched class-action suits related to this controversy.
An Ontario court will decide at a hearing this fall on whether to grant certification to a class-action suit launched by Toronto-based Rochon Genova LLP against the five fund companies.
If the court does allow the case to go to trial, the defendants could still elect to settle out of court.
The five fund companies were initially named along with other parties in a class action launched by Regina-based lawyer Tony Merchant of Merchant Law Group in 2005.
However, the firms are working together and his suit now only names BMO Nesbitt Burns, RBC Dominion Securities Inc. and TD Waterhouse Canada Inc. as defendants.
Among the allegations, the class-action suit alleges that the firms breached their fiduciary duty to unitholders by causing, directing and approving or allowing market-timing transactions, and they are seeking other damages that may be proved at a trial.
By the numbers
|Company||Restitution under OSC settlement||What remains in trust account|
|CI Investments Inc.||$49.3-million||$2.5-million|
|AGF Funds Inc.||$29.2-million||$1.5-million|
|IG Investment Management Ltd.||$19.2-million||N/A|
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