Four Fund Firms Warned In Canadian Market Timing Probe

by Mike Godfrey, for LawAndTax-News.com, Washington

24 September 2004

The Ontario Securities Commission (OSC) announced on Tuesday that as part of the regulators's investigation into market abuses in the Canadian market, four fund managers have been given the opportunity to respond to market timing allegations.

Although the OSC did not name the fund firms in question, according to reports in the Canadian media, AGF Funds Inc., AIC Ltd., CI Fund Management and Investors Group later came forward to confirm that they had received letters from the provincial securities regulator.

Market timing, which involves rapid in-and-out trading in mutual funds by favoured clients of the fund firms, is not illegal in Canada. However, the fact that the majority of fund investors are unable to benefit from the practice represents a problem, in the view of the OSC.

Speaking to CBC Business News, the Commission's enforcement director, Michael Watson explained that:

"It's only a handul of people who are allowed by fund managers to engage in this kind of activity. Fund managers aren't supposed to prefer one client over another, yet this is clearly preferential treatment when it happens."

He went on to add that fund firms which state that they do not allow market timing but are then found to have allowed the practice are also likely to find themselves under regulatory scrutiny.

Recommended