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Regulators reach settlements in asset-backed commercial paper investigations


December 23, 2009   by Canadian Underwriter


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The Ontario Securities Commission, autorité des marchés financiers (AMF), and the Investment Industry Regulatory Association of Canada have reached settlements in connection with the investigations into the Canadian asset-backed commercial paper (ABCP) market.
In total, Cdn$138.8 million in administrative penalties and investigation costs will be paid.
The settlements are broken down as follows:
•    National Bank Financial, Cdn$75 million;
•    Scotia Capital Inc., Cdn$29.27 million;
•    Canadian Imperial Bank of Commerce and CIBC World Markets Inc., Cdn$22 million;
•    HSBC Bank Canada, Cdn$6 million;
•    Laurentian Bank Securities Inc., Cdn$3.2 million;
•    Canaccord Financial Ltd., Cdn$3.1 million; and
•    Credential Securities Inc., Cdn$0.2 million.
Five of the institutions involved are alleged to have failed to respond adequately to issues in the third party ABCP market, a joint release from the regulators says. The regulators accused these five companies of continuing to buy and/or sell without engaging compliance and other appropriate processes for assessing such issues.
“Particularly, they did not disclose to all their clients the July 24th e-mail from Coventree providing the subprime exposure of each Coventree ABCP conduit,” the release continues.
“In the case of Credential and Canaccord, these institutions are alleged to have failed to take adequate steps to ensure that its Approved Persons understood the complexities of the third party ABCP and, in not taking these adequate steps, did not ensure that the purchase of third party ABCP was appropriately understood by its clients.”