Investors Scrutinizing the Regulators

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Canadian legislators to hear ABCP complaints


Tue Apr 8, 2008 1:13pm EDT

OTTAWA, April 8 (Reuters) - Disgruntled retail investors in Canada's frozen asset-backed commercial paper market will have a chance to air their concerns to politicians at special hearings set to begin this week, legislators said on Tuesday.

The finance committee of Parliament has invited at least six individual investors to give testimony at a three-hour session on Thursday morning.

"If there is anybody that we want to hear from, most importantly it's the investors," said Ted Menzies, a Conservative committee member and parliamentary secretary to the finance minister.

But Menzies was quick to caution that the committee did not want to meddle in the thorny ABCP restructuring process being crafted by a committee led by lawyer Purdy Crawford.

"We don't want to be offering advice, we just want to provide a venue for these people to be able to raise their concerns and find out if they understood what they were buying," Menzies told Reuters.

"This committee can't interfere with a private sector-led process that is ongoing."

About C$32 billion ($31.6 billion) worth of ABCP issued by groups other than Canada's big banks has been choked up since August, when investors lost confidence in the instruments on concerns about ties to the U.S. subprime mortgage market.

Investors are due to vote on Crawford's restructuring plan on April 25, amid signs that individual investors could derail the accord because they are unhappy that they might not get all their money back and may also have to wait for their funds for up to nine years.

Individual investors represent only about 1 percent of the total ABCP value falling under the plan, but they get one vote each and far outnumber big corporate investors.

The names of those who will appear at the parliamentary committee have yet to be confirmed, but Victoria, British Columbia-based retail investor Wynne Miles said she had been asked to come and tell her story.

A "substantial portion" of Miles and her husband's retirement savings have been frozen in ABCP notes since last August after they were sold the money market investments by a broker at Canaccord Capital Inc.

"We were sold the product without our knowledge and consent... Most of that money was in Treasury bills on July 26. The next day it was in ABCP," she told Reuters.

Many retail investors have said they will vote against the restructuring plan unless they get all their money back.

"I think it's in Canada's national interest that this deal passes but we as parliamentarians are providing a forum for the retail investors to let their voices be heard," said Liberal legislator John McCallum, who first proposed the special ABCP hearings.

McCallum said it was not clear if there would be another committee session prior to the April 25 vote, but added that subsequent sessions, possibly after that date, would explore deeper issues of regulatory reforms and how to avoid market breakdown in the future.

Potential witnesses at those hearings include Crawford, federal banking regulator the Office of the Superintendent of Financial Institutions, big banks, Bank of Canada officials and the Investment Dealers' Association, McCallum said.

By then, Canada will have had time to digest some international proposals for combating the credit crisis, including regulatory reform recommendations.

"It's not only what Canada should do, but Canada in an international context," said McCallum.

"We have the U.S. proposals, we have the G7, we have Gordon Brown wanting a more international regulatory system, so those subsequent hearings will be in that context."

The Financial Stability Forum -- which brings together financial authorities, institutions and regulatory bodies from several countries -- will present possible action points for discussion by Group of Seven finance ministers and central bankers at a meeting in Washington this weekend. (Reporting by Louise Egan and Nicole Mordant; Editing by Bernadette Baum)


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