Four Canadian Mutual Fund Companies Settle Market Timing Charges

A total of C$156.5 million will be paid under the settlement, with penalties being extracted from CI Fund Management Inc. (C$49.3 million), AGF Fund Management Ltd. (C$29.2 million), I.G. Investments (C$19.2 million), and AIC Ltd. (C$58 million). The money will go towards restitution payments to investors who were heart by the market timing practices between 1998 and 2003, according to Reuters.

In its decision, the OSC said that although no specific rules were broken, there was a clear violation of the principle of fairness, Reuters reports. Its initial investigation of the C$480 billion Canadian mutual fund industry started with 105 fund companies until OSC narrowed the field. The regulator is still looking at actions of other companies however, Reuters reported.

OSC said that three institutional investors were allowed to rapidly trade in and out of AIC funds and made C$127 million in profits, while six investors did the same thing in AGF funds, with a resulting C$47.9 million profit, according to Reuters. Five investors made C$90.2 million market timing CI funds, and one institutional investor made C$36 million using the I.G. funds.

Shares of the companies were not hit hard following the decision due to the expectation of such a settlement.

This hit to Canada’s mutual fund companies follows similar action in American markets, where the mutual fund industry has been rocked by charges of market timing and late trading since September 2003. Unlike with their American counterparts, Canadian companies have only been accused of market timing, and not the more serious – and explicitly illegal – late trading that some funds allowed selective investors to practice.