The four Canadian mutual fund companies that recently settled with the
Investors Group, CI Fund Management, AGF Management and AIC, which settled with the OSC last month, admitted they permitted 15 unidentified market professionals to earn $300 million in the trades over a five-year period. Market timing, while not illegal, hurts long-term investors as fund managers try to take advantage of price differences in international funds after overseas markets close.
The Canadian investment community is upset that the OSC has not fished out more perpetrators, given that the activity is widespread. As part of the settlement, the four companies will pay $156.5 million in restitution to investors hurt by the practice. At the same time, the companies are busy charting out strategies to calculate losses incurred by their investors.
With 1.4 million clients in 24 separate funds hurt by the practice, CI investors were affected the most. The firm estimates its average payout from its $49.3 million in restitution will be about $33 per investor. AIC, on the other hand, has agreed to pay $58.8 million in restitution, the highest of any of the companies. Because the market timing occurred in only four of its funds, AIC estimates it will pay $392 to each of its investors.
All four companies say they have put measures in place to detect and prevent market timing, and the Ontario Securities Commission is requiring them to present a plan for distribution by September.
