Investors Scrutinizing the Regulators

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Fox Guarding the Hen House





Brokers backed ABCP

Re: Were ABCPs Insured? Terence Corcoran, March 27


Terence Corcoran’s comments about “small investors who made bad market choices” sticks in my throat. My 89-yearold mother, who suffers from Alzheimer’s, sold her modest home two years ago and moved into a long-term care facility at considerable monthly expense. I invested the proceeds with Canaccord Capital. I specified 100% risk-free investments — nothing locked in — for obvious reasons.

A year ago, I was sold an investment for 89% of my mother’s account. I was told it was AAA rated, as safe as GICs, would pay slightly better interest and could be invested for 1 month at a time. It turned out to be ABCP!

Surely, it is the banks (with their millions in profits) that sold these investments and the brokerage firms that recommended them to unwitting seniors, that should be taking the losses — not the innocent victims.

Maybe it ’s time the government stepped into this mess to protect seniors.


Janet Carey, Kitchener




Re: Retail Investors’ Day will Come, Sean Silcoff, and ‘Little Guys’ Speak Out, John Greenwood and Grant Surridge, March 31


Seems to me you had a bunch of guys who didn’t understand what they were buying from supposed professionals who obviously didn’t understand what they were selling.

Since the $400-million “little guy” exposure is only 1.2% of the Canadian ABCP exposure being restructured, and incidentally less than the annual MERs of a lot of the mutual funds peddled by these “professional” advisors, the ethical thing to do would be to eat the loss and give them their money back. Risking a significant portion of $31.6-billion over this seems imprudent, to say the least.

Of course, selling it to these people in the first place was imprudent, so who should expect them to change. The “nolawsuit” clause just adds insult to injury. I think I’ ll stick to losing money on an amateur basis, rather than hiring “professionals” to do it for me.


Peter Tindall, Calgary




Re: Little Guy Left Holding the Bag, Diane Francis, March 29


Diane Francis’s column includes an incorrect reference to the role of the Office of the Superintendent of Financial Institutions (OSFI) in the Asset-Backed Commercial Paper (ABCP) issue.

The column stated that OSFI waived prospectus requirements on the ABCP because they were rated as “top quality”.

As a prudential regulator, OSFI has no role in either approving or waiving prospectus requirements for ABCP.


Rod Giles, manager, communications and public affairs, Office of the Superintendent of Financial Institutions, Ottawa




There are issues related to the ABCP restructuring that I haven’t seen reported on. They are:

●   Under the securities laws/regulations of most provinces. the ABCP paper could only be sold to sophisticated or accredited investors, as defined within the various security acts. It appears from your latest coverage that many of the smaller ABCP holders do not meet the requirements or definition of accredited investors, and it seems as though they shouldn’t have been sold this investment in the first place.

●   The ABCP is supposedly backed by assets, yet parties intimate that unless the smaller holders vote their approval, they could lose everything. Why couldn’t an ABCP holder initiate ordinary course foreclosure proceedings against the underlying assets, upon the expiry of the term of the note and non-payment by the issuer?

●   If the banks or securities firms sold these investments to non-accredited investors, they have major problems from a regulatory view.

●   If the ABCP paper doesn’t actually have underlying assets backing it of equivalent value, there are greater issues to be explored.

Finally, the National Post has noted correctly, that the ABCP market isn’t a corporation or entity as contemplated under the provisions of the Companies’ Creditors Arrangement Act. Will a restructuring under CCAA even survive if challenged to a higher court?

I feel for the smaller investors in this case and do not believe they deserve what it appears that they are getting set up for.


Edward L. Ellwood, MBA, London, Ont.

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