Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House




Angry investors risk losing their savings

FROZEN FUNDS: Victims’ money ‘commercial paper’


John Bermingham
Staff Reporter


Thursday, April 3, 2008

After selling her home, Victoria paralegal Jill O’Hara put $250,000 in a 90-day investment vehicle that would return 4.25 per cent per year and was guaranteed.

It was called a ‘structured-investment vehicle.’ But what O’Hara didn’t realize was that her money had gone into commercial paper.

“A lot of us were not told what it was,” said O’Hara, who was among 200 small investors from around B.C., many of them seniors, who packed into a Vancouver hotel yesterday — demanding their money back.

Some 2,000 investors across the country — more than 1,000 from B.C. — who invested $270 million in asset-backed commercial paper (ABCP), have had their funds frozen since last August when the U.S. subprime crisis collapsed the $32-billion market.

They must vote later this month whether to accept a rescue plan, and risk their investments falling 40 or 50 per cent in value when trading resumes in May.

Investors also give up the right to sue the banks, brokers and rating agencies if they vote yes.

By voting no, investors will have to sue to get their money back, and their investments may end up becoming worthless.

“Nobody told me it was a risky investment,” said Angela Speller, 61, a retired homemaker from Victoria, who invested more than $1 million with her husband. “I was told it was AAA rating.” “All our savings are gone,” Speller told the angry meeting. “I want my money, plus interest.”


Victoria paralegal Jill O'Hara fears she may lose the $250,000 she invested in asset-backed commercial paper.

“Here I’ve been investing for the old age. Here it is, and I can’t get my money,” said 80-year-old Geoff Hopkins from West Vancouver, leaning on his cane, and looking for his $139,000 back.

Bay Street lawyer Purdy Crawford, who chairs the rescue-plan committee of big institutional investors, said he’s heard the same story across the country.

“We have sympathy and empathy and wanted to do everything we can to help all investors,” said Crawford.

Small investors, Crawford said, “have a lot of clout” because the plan can only be approved by a majority of individual investors and they account for 99 per cent of those.

“I think there’s sunshine over the hill for you,” he told them.

But Crawford admitted he doesn’t know how much the ABCP will be worth on the day that trading resumes, or how much they will ever get back.

Many small investors are clients of Vancouver-based brokerage Canaccord Capital Corp., or Credential Securities Inc., the credit unions’ investment dealer.

Canaccord and Credential were not available for comment.

Click for more on ABCP