|Loose end in Manulife's Berkshire buy|
|Unanswered Questions About Thow Affair|
Wednesday, September 05, 2007
On cue, Manulife Financial announced last Friday it had "received regulatory approvals" and had closed its purchase of Berkshire-TWC Financial Group -- a transacation that added more than 700 advisors and 237 branches to Manulife's operations.
Normally such an announcement wouldn't attract much interest, but this deal is a little special.
The reason: an ongoing investigation by the Mutual Fund Dealers Association, a self-regulatory body formed to deal with the distribution side of the mutual fund industry, into the affairs of Berkshire. (The RCMP is also investigating.) The investigation has taken more than two years and is not complete. The body -- it has a budget of $20-million -- has a number of powers including the ability to fine, suspend or limit Berkshire's activities. But the MFDA doesn't have subpoena powers, which makes it less than fully effective.
Berkshire employed as a senior vice-president in its Victoria office Ian Thow, who is alleged to have snared more than $30-million of clients' money. The BC Securities Commission has heard a series of hearings into Thow's activities. The hearings started last year, wrapped up in July and a decision is expected in October. The BCSC made it pretty clear what it thought of Thow: It said he "was, or at least became, a predator." In addition, the BCSC alleged that Thow, who now lives in the United States, "intentionally and systematically stole millions of dollars from his clients."
With that background, we decided to
explore what regulatory bodies, and
under what circumstances, gave the
green light for Manulife to purchase
We called the OSFI. A spokesperson said he couldn't comment on this specific transaction. He said OSFI has an "approval process based on prudential grounds. In this case, we were satisfied with what we saw and gave our recommendation for approval."
We then call the IDA, specifically
Suzanne Wolburgh Jenah, who became
chief executive effective July 1.
We then called the MFDA, an
organization of 164 members, which
oversee $303-billion of mutual fund
assets and employ about 71,000
salespersons. Its vision is to raise
"the standard of firm, fair and
transparent regulation in Canada for
the protection of investors through
commitment to collaboration, staff
excellence and regulatory best
We then called the provincial securities commissions.
Naturally enough, we started with
the BCSC, given that the alleged
transgressions occurred in that
province, even though Berkshire's
head office is in Burlington, Ont.
BCSC was the natural for another
reason: A senior executive told one
of Thow's former clients that it
would have to okay the transaction.
Let's give the final word to
Manulife. Naturally we were
interested to know whether it had
given any indication to the
regulators what it might do
regarding Thow's former clients.