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MP agrees to delay hearings into ABCP crisis

Duncan Mavin
Monday, March 31, 2008


House of Commons hearings into the asset-backed commercial paper crisis will be deferred until retail investors have had a chance to consider details of a plan to restructure the troubled investments.


Liberal finance critic John McCallum tabled a motion for hearings in early March and a vote was anticipated for Monday afternoon.



Jim Young/Reuters Canada


But the member of Parliament for Markham-Unionville will now ask for the hearings to be deferred until Bay Street lawyer Purdy Crawford has completed his multi-city roadshow during which he hopes to persuade investors to sign up to the planned restructuring.

The delay on parliamentary hearings comes after last-minute negotiations between Mr. McCallum and Mr. Crawford, who chairs a team of lawyers and bankers that has been working to resolve the crisis since it broke last summer.


Mr. McCallum has also been in discussions with a number of the 1,700 or so retail investors in ABCP, many of whom say they are angry that they were mis-sold investments they thought were risk free.

Most of large institutions that hold the majority of the $32-billion in affected ABCP investments by dollar value have largely agreed to the restructuring plan that will see them exchange tainted short-term paper for longer term notes. But many retail investors continue to question a plan that will likely see them take significant losses on investments they thought were safe.

"The retail customers group should not be forced to suffer damages on the restructured long term notes received in exchange for their expired 30- to 90-day ABCP and have their right to sue the brokerages who sold them this flawed savings product squashed," said Diane Urquhart, an independent analyst who has been working with a number of the smaller investors.

Mr. Crawford's committee did not consult with hundreds of retail investors during a lengthy process to come up with the plan, and the veteran Bay Street lawyer acknowledged last week that he has only recently become aware of how many small investors were involved.

Mr. McCallum is expected to insist that Parliament is not turning its back on the retail investors and he will ask that a hearing is held even if the situation is resolved to the satisfaction of smaller retail investors.

The hearings will be focused on why regulators were not able to prevent the crisis and what can be done to prevent a similar situation in the future. Federal and provincial regulators including the Superintendent of Financial Institutions, the Investment Dealers' Association, and the banking ombudsman will all be called to account for themselves.

Mr. McCallum will also tell the finance committee that Mr. Crawford has also agreed to attend the hearings. One question that is likely to come up at hearings is whether Canada should have a national securities regulator that might have been better equipped to deal with the crisis than the current system of provincial regulators.

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