Canadian mutual funds may not be out of the woods just yet.

Earlier this month, Ontario Securities Commission Chairman David Brown said in a speech that the agency had concluded its probe of the Canadian mutual fund industry (see MME 3/21/05). Brown described the process and results of the probe, explaining that settlements had been reached with five of the country's biggest fund companies.

But industry watchers say that several issues pertaining to illegal trading practices at mutual fund companies are far from being addressed. The OSC has drawn criticism from people like investor advocate Robert Kyle, who is skeptical about the OSC's request to firms to voluntarily provide information for the investigation.

Questions also loom over how the OSC determined the settlement amounts it asked of AGF Funds, AIC, C.I. Mutual Funds, Franklin Templeton Investments and I.G. Investment Management. Brown said last week that the OSC had hired consultants to figure out how much fund shareholders should be compensated.

"It's like the OSC must have looked at their resources and said, We don't have the manpower to do it. Let's look at how we can estimate it.,'" said mutual fund analyst Dan Hallett. "The way they did it might be fine. But we just don't know."

Unlike the U.S. investigation, the Canadian probe did not disclose the names of the market timers. Hallett also points out that money market funds were left out of the probe. The OSC said the reason for the omission was that money market funds "present no opportunity for capital gains."

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