By Staff | April 3, 2006 | Last updated on April 3, 2006
16 min read

The new federal minister of finance is asking Canadians what they want out of his first budget. In a press release, Jim Flaherty said the Conservative government will stick to its five key platform issues, but that keeping these promises would require cuts elsewhere in the budget. “Canada is enjoying one of the longest periods of uninterrupted economic growth in its history. In fact, we are in our 15th consecutive year of expansion,” he said in a press release. “But, while the economy continues positive — with unemployment at a 30-year low — we must not, and we will not, take such growth for granted.”

Flaherty says the budget will not be able to tackle all of the Conservative party’s promises at once, and that their “action plan must be focused and affordable.” There’s already been speculation that although the Tories’ promise to cut the GST by a single percentage point will be kept, other campaign pledges, such as a proposal to eliminate the capital gains tax will be put on the back burner.

Canadians are encouraged to submit there opinions on the budget via email, at The consultation process is open until April 19, suggesting that the Tories could wait until early May to table their first budget.

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Market regulator fines two CIBC World Markets traders

(April 7, 2006) Two Calgary traders have been fined $225,000 by Market Regulation Services (RS) for entering orders in the knowledge that their actions would create an artificial price for the stock.

Between June 24 and September 30, 2004, Margaret Coleman and Judy Koochin of CIBC World Markets purchased shares on the TSX Venture Exchange in Caribou Resources.

In a settlement agreement, the pair admitted their actions were contrary to RS Universal Market Integrity Rules, since they should have known that the order entries could “reasonably be expected to create an artificial price for Caribou shares.”

Coleman was fined $150,000 and ordered to pay $13,250 in costs. Koochin was fined $75,000 and $6,562.50 in costs. Both individuals will be subject to strict supervision for a period of six months for all trading on Canadian equity markets.

Saskatchewan cuts business taxes

(April 7, 2006) Saskatchewan has introduced corporate tax cuts estimated to be worth more than $95 million. In a provincial budget tabled on Thursday, Saskatchewan said it would lower the province’s corporate tax rate, currently at 17%, by three percentage points this year and a further two percentage points, to 12%, in 2008.

The province’s finance minister also promised to eliminate the general corporate capital tax by July 1, 2008 and eliminate the same tax on new capital investments this year.

The province is also increasing the small business threshold to $500,000 to $300,000 by 2008. “Business tax cuts will grow the economy by attracting and stimulating capital investments, and creating jobs and opportunities for youth, said Finance Minister Andrew Thomson. There were no personal income tax cuts in the province’s 13th consecutive balanced budget.

CLU Institute launches awareness campaign

(April 7, 2006) The CLU Institute has launched a new website to promote awareness of the Chartered Life Underwriter designation among the broader public. The website,, offers articles, links and a tool to find a local CLU.

“A CLU advisor and provide a road map to navigate through the maze of comprehensive, cradle-to-grave financial planning,” said CLU Institute chair Kris Birchard in a press release. “A CLU will put you on the road towards a secure retirement, advise on how to save for your children’s education, how to protect your assets, and — especially important as the filing deadline nears — structure your finances to minimize your taxes.”

The release calls the CLU designation “the gold standard of excellence in the financial services industry.”

Canada not keeping up on tax cuts: KPMG

(April 7, 2006) While there is a global trend toward lower corporate taxation rates, Canada is failing to keep up with other industrialized nations in cutting taxes, according to accounting firm KPMG.

In its annual survey of 86 countries, KPMG found European tax rates averaged 25.04% while the OECD average of 28.31%. Canada’s corporate tax rate was higher, at 36.1%, but still below that of the U.S., at 40%.

Of the 86 countries surveyed, the majority had either kept their tax rates unchanged since 2004 or had reduced them. Tax cuts in six EU nations — including traditionally high tax jurisdictions like France and the Netherlands — helped lower the average European tax rate.

While this may make Canada sound like a corporate tax haven compared to the U.S., KPMG points out that its survey does not factor in each country’s methodology of calculating corporate profits and therefore does not reflect the overall tax burden.

Trusts promote productivity: study

(April 7, 2006) Contrary to common belief, the income trust structure does not stifle productivity, but in fact enhances it, according to a study by HDR|HLB Decision Economics, commissioned by the Canadian Association of Income Funds.

“There is no evidence to suggest that the adoption of trust structures has had, or for that matter will have, any negative effect on capital investment or Canada’s economy,” said David Lewis, chief economist of HDR|HLB Decision Economics.

Some have theorized that the distribution of operating profits leaves trusts unable to invest in productivity-boosting capital equipment. The study says these claims are unsubstantiated, and that capital expenditures appear to be largely unaffected by conversion to an income trust from a corporate structure.

Income trusts dominate new IPOs

(April 6, 2006) Canada’s IPO market picked up steam in the first quarter as the total value of new offerings rose nearly 50% compared to last year, to $2 billion from $1.2 billion.

There were 34 IPOs in Q1, PricewaterhouseCoopers said in a report released Thursday, up from 23 in the first quarter of 2005.

Income trusts led the way, as 10 new trusts valued at $1.3 billion joined the TSX. In the same quarter last year, there were eight new trusts worth $800 million.

“It took a long time for the market to find its feet in the first quarter,” said Ross Sinclair, national leader for PwC’s IPO and income trust services. “Part of that is attributable to the long process involved in a new issue, particularly since so many companies had put their plans on hold because of the uncertainty last year.”

“We only saw the real strength in March when about 60% of the income trusts reached the market,” he said. “Based on March, the market for new issues — particularly income trusts — will carry real momentum into the second quarter.”

The largest new issue of corporate equity in Q1 was a $410 million offering by Addax Petroleum. Most other equity issues were much smaller: the total value of the top five corporate IPOs in the first quarter was $582 million.

The top five income trusts, led by Jazz Air Income Fund, represented $960 million of the total for the three month period.

New government not expected to affect Canada’s credit rating

(April 6, 2006) Standard & Poor’s says that the priorities of Canada’s newly-installed federal government as outlined in the speech from the throne will likely not negatively affect Canada’s current AAA credit rating.

“Although there are some indications that the new government will reduce the federal authority’s fiscal flexibility to deal with unforeseen events, Standard & Poor’s does not expect serious erosion of Canadian fiscal discipline under the Harper government,” said Standard & Poor’s credit analyst Nikola Swann.

“This reflects our analysis not only of the Conservative leadership, but also our expectation of continued parliamentary and broader public pressure to preserve the hard-won gains of the past 15 years, which have resulted in eight consecutive years of federal budget surpluses and a general government budgetary balance (all levels of government included) which has been the strongest of the G7 nations for the past four years,” he added.

Although the Tories may have to bend on some issues, given their minority position (such as reports that the new government is considering abandoning a campaign promise to reverse personal income tax cuts brought in by the Liberals ) and that could reduce their fiscal flexibility, Standard & Poor’s says it still expects Canada’s general government budgetary balance to remain the strongest of the G7 nations in 2006 and 2007.

Low income earners on the decline, says StatsCan

(April 6, 2006) Fewer Canadians slipped into low income in 2004, while more were able to climb out, according to a new Statistics Canada study.

Using income data for 2004, StatsCan found that only 3.3% of Canadians who were not already living below Statistics Canada’s low-income cutoff in 2003 fell into that bracket in 2004.

By comparison, about 5.5% of Canadians who were not in low income in 1993 fell into it by 1994. By 1998, the proportion of those entering low income dropped below 4%.

At the same time, one-third of individuals living below the low income threshold were no longer in that bracket by 2004. A decade earlier in 1994, the proportion of individuals who had exited low income was only about 28%.

“The study reinforced previous research showing that low income is not a permanent state of existence for most Canadians who face it,” StatsCan said.

In 2004, about 3.5 million people were living in low income, down from a peak of about 4.6 million in 1996, the agency noted.

In a separate study also released on Thursday, StatsCan found that about one in every five people in the work force who had a university education was overqualified for their job at some point in 2001. Most were in a job that required at most a high school education.

Younger workers were more likely to be overqualified, as were immigrants and people who had studied commerce as well as arts and humanities in school.

McKenna joins TD bank

(April 6, 2006) Former U.S. ambassador and New Brunswick Premier Frank McKenna has accepted the post of deputy chair of TD Bank.

In his new role effective May 1, McKenna will be responsible for helping to build long-term business relationships that support the bank’s growth strategy both in Canada and the United States, TD said in a statement.

In addition, he will be responsible for representing TD as it works to expand its North American presence.

“We are thrilled that Frank will be adding his knowledge and expertise to our already strong senior executive team,” said TD president Ed Clark. “Frank’s experience here in Canada and in the United States will be an asset to TD as we work to reinforce our market presence and grow our businesses in both countries,” added Clark.

“I’ve reached a point in my life where I want to be associated with projects and organizations that are important to me personally and that I think are important to Canada,” said McKenna, who at one point was touted as a potential successor to Paul Martin as leader of the federal Liberal party. “Joining TD fulfilled both of those aspirations.”

B.C. regulator warns on income trusts(April 5, 2006) The British Columbia Securities Commission says investors should do their homework before investing in income trusts and has issued an investor alert on the topic.

“Income trusts have become a more common investment vehicle for Canadians,” says BCSC Executive Director Brenda Leong. “But, there are still some basic things that investors should know when they are considering investing in income trusts.”

The investor alert includes questions investors should be asking about the popular product.

“At the very least, people should know that income trusts are not fixed-income investments and that they should ask questions about high yields — can the trust afford to distribute the cash that they do and can they sustain that distribution?” Leong asks.

Investors should also review their current holdings since they may already have some exposure to income trusts through mutual funds, the regulator adds.

CFA exams attract record number of candidates

(April 5, 2006) More than 116,000 people in 163 countries enrolled in the December 2005 and June 2006 sittings of the CFA exam, the CFA Institute announced on Wednesday. CFA membership is also at a record high, with 81,454 members in 126 countries.

Level I of the exam is held twice a year, wile levels II and III are administered just once a year, in June. Only one in five candidates completes the entire process.

“The employers I have met worldwide tell me that they are encouraging their employees to obtain the CFA designation. They look for this distinction in determining who they will hire and promote for a broad range of responsibilities in the financial services industry,” said Jeff Diermeier, president and CEO of the CFA Institute. “Asset managers also find that their clients increasingly value charterholders in managing portfolios.”

There are currently 10,500 CFA Institute members in Canada, a 5% rise from last year. About 85% of CFA Institute members worldwide hold the CFA designation.

Sarbit offers DSC option on flagship fund

(April 5, 2006) Sarbit Asset Management is introducing a deferred sales charge option for the Sarbit US Equity Trust Fund.

The move gives investors the alternative to purchase units of the fund without paying a front end sales charge, the Winnipeg-based company said in a release.

Sarbit’s DSC will feature a six-year redemption schedule (as opposed to the more commonly-used seven-year schedule), a faster than normal declining redemption fee schedule, and a redemption fee waiver provision upon death.

The DSC purchase option includes a 5% up front commission and a 0.5% annual trailing fee. The declining fee schedule starts at 6%, dropping to 1% over six years. The firm will also waive redemption fees upon death after the first two years in the redemption schedule and up to 10% of the units can be redeemed free of charge each calendar year.

Dundee launches new series of notes

(April 5, 2006) Dundee Securities Corporation has introduced the first series of the Dundee Diversified Global Advantage Index Notes (G.A.I.N.), aimed at Canadian investors wanting to take advantage of global market opportunities.

The notes will be issued and guaranteed Société Générale and will mature in June, 2013.

In addition to providing investors with 100% principal protection at maturity, the notes offers exposure to a diversified mix of asset classes and geographic regions in order to maximize growth potential, Dundee says.

Each note’s returns are linked to a portfolio of seven indices and/or exchange traded funds from around the world. They also allow investors to lock in the best returning index in each year, up to a maximum of 12.5%. That index is then excluded from future performance evaluations.

“With the lifting of foreign content limits for registered plans and the rise of many capital markets around the world, investors are now recognizing the opportunities that exist outside of Canada,” said Dundee Securities president Kym Anthony. “We believe that these new notes, if held to maturity, can provide our more conservative clients with a safe way to participate in global markets.”

The notes are available through Dundee’s financial advisors until May 31, with a minimum investment of $5,000.

OpenSky brings four new notes to market

(April 5, 2006) OpenSky Capital has launched four new series of principal protected notes, including series 14, Index Optimizer Notes, series 3, Blue Chip Optimizer Notes, series 7, Asset Allocation Notes, and series 2, US dollar Asset Allocation Notes.

All the notes are for an eight year term, provide 100% principal protection at maturity, and no foreign currency exposure on the calculation of the performance of the assets or indexes.

The notes also allow investors to lock in the best performing underlying asset or index each year, which is then discarded for future performance evaluations.

The notes offer an up front selling commission of 4%.

CIBC World Markets bullish on equities

(April 4, 2006) CIBC World Markets is boosting its recommended equity portfolio weighting to 58%, noting that the TSX is on track to hit 13,200 points by the end of 2006.

“While the TSX is already up 7% since the beginning of the year, valuations remain reasonable, supported by an expected 20% rise in operating earnings,” says chief strategist Jeff Rubin, adding that price multiples are not far off from historic norms, and “certainly not suggestive of any speculative bubble.”

In his monthly portfolio strategy report, Rubin also raised his weightings for energy stocks to 34%. “We expect our huge overweight position in energy to generate exceptional returns over the next nine months with the resumption of the hurricane season in the Gulf of Mexico.”

Rubin also recommends an overweight position in income trusts compared to the benchmark (10%) an underweight position in bonds (32%), and no cash.

Manulife updates life insurance tax guide

(April 4, 2006) Manulife Financial’s tax and estate planning group has released an updated edition of its reference guide, Canadian Taxation of Life Insurance, to help professionals understand the implications of integrating life insurance and annuity contracts into client tax, estate and business planning.

The soft cover book, first published in 2002, discusses how taxation of life insurance can affect personal and business financial planning, including an analysis of all relevant CRA technical interpretations, comments on product features and proposed reasonable expectation of profit rules, particularly in the context of leveraged life insurance strategies, as well as analysis related to foreign life insurance policies.

“We know the technical rules about life insurance can be confusing, even for professionals,” says Florence Marino, assistant vice president of the tax and estate planning group at Manulife. “Our goal with this book is to provide analysis and commentary on the Canadian tax rules for life insurance products and life insurance-based planning strategies.”

Housing markets booming in the West, cooling in the East

(April 4, 2006) TD Bank economists says housing prices in Canada rose nearly 10% in the first quarter of 2006, but national statistics mask a clear regional divide.

The latest issue of TD’s Housing Bubble Watch says Central and Atlantic housing prices appear to be cooling. Although sales in Ontario, Quebec and the Atlantic remain high, the pace of price growth has slowed. In the West, housing market strength has been supported by strong fundamentals for the most part, but the risk of speculative pressure is present in Vancouver.

“The Vancouver real estate market is clearly vulnerable to any deterioration in buyer sentiment, but the good news is that the economic fundamentals for Vancouver are likely to remain solid over the coming years, limiting any softening in the price environment,” say the report’s authors. Data from Victoria, Edmonton, Calgary, Saskatoon and Winnipeg on the other hand, suggest that home prices are being fundamentally supported by stronger income growth.

Craig Alexander, vice president and deputy chief economist, says “there are clear signs that speculation has picked up in Western Canada while housing markets in Central Canada appear to be coming in for a soft-landing. Based on long term factors, including demographics and income growth, the average annual increase in national home prices is likely to be around 4% in the coming decade, so the recent high single digit and double digit gains cannot persist indefinitely. The best outcome would be if housing markets in Western Canada in the future can mimic the current soft-landing unfolding in Central and Atlantic Canada.”

Altamira raises U.S. CashPerformer rate

(April 4, 2006) Altamira Investment Services is increasing rates on the $U.S. High-Interest CashPerformer to 4% for all existing and new accounts. The interest rate on the Canadian dollar version will remain at 3.25%.

Both products have no minimum balance requirements and no account fees. The Canadian dollar version is eligible for registered plans.

Altamira also announced on Tuesday that though its mutual fund sales were in net redemption last month to the tune of $29 million, the company generated $361 in non-mutual fund sales, for total March net sales of $332 million.

TD Asset Management to merge portfolio funds

(April 3, 2006) TD Asset Management is streamlining its mutual fund line-up, merging ten of its portfolio funds with their RSP counterparts.”This re-organization follows the elimination of the foreign content limit on registered plans and benefits investors through a more streamlined fund line-up,” TD said in a release.

For instance, the TD Managed Income Portfolio will be merged with the TD Managed Income RSP Portfolio and the TD Managed Income & Moderate Growth Portfolio will be folded into the TD Managed Income & Moderate Growth RSP Portfolio.

When the mergers are complete, expected in August, the continuing portfolios will change their names by removing the term “RSP.” This will not impact their eligibility for registered plans, TD notes.

With the elimination of the foreign content rules, the objectives and strategies of the discontinuing and continuing portfolios are the same, TD notes, adding that investors will not be required to take any action as a result of the changes.

TD also announced changes to its early redemption fee schedule and minimum purchase requirements for some funds.

Early redemption fees may be charged if clients redeem or switch units up to a certain period of time following purchase. Effective July 4, this time period will be reduced to 30 days from 90 days for Investor, Advisor, F, H, S, T, Institutional, Premium and O-Series units and lowered to 90 days from 180 days for e-Series units.

Initial investment and account balance minimums will be reduced for non-registered plan accounts to $100 from $1,000 for Investor and e- Series units of all TD Mutual Funds except TD Premium Money Market Fund, TD Income Advantage Portfolio and TD U.S. Equity Advantage Portfolio.

Initial investment and account balance minimums will be reduced for non-registered plan accounts to $2,000 from $5,000 for Investor, Advisor and e-Series units of TD Managed and TD Managed Index Portfolios, TD Income Advantage Portfolio and TD U.S. Equity Advantage Portfolio.

Scotia launches new fixed income index

(April 3, 2006) In the wake of the elimination of the foreign content rule, Scotia Capital has introduced a new index for the Canadian fixed income marketplace: the Scotia Capital Maple Bond Index.

The end of the FPR has resulted in an increase in foreign issuers of Canadian currency denominated government and corporate bonds, Scotia says, and the index will be the first to track the performance of this growing sector of the Canadian bond market.

The index tracks investment grade bonds with a minimum of 10 institutional buyers with a $100 million minimum amount outstanding for each issue. As of March 31, 2006, the index contained 55 government and corporate issues, with a total market value of approximately $20 billion.

TradeFreedom to provide FX trading for retail investors

(April 3, 2006) Online broker TradeFreedom Securities has announced the launch of TradeFreedomF/X, a new service that provides foreign exchange trading for retail investors.

“We have seen increasing demand from our active investors that are looking for access to the foreign exchange market as an alternative asset class, or as part of a hedging or speculative strategy,” says Bruce Seago, president of TradeFreedom Securities. “They are attracted by the market’s superior liquidity, commission-free transactions and 24-hour access. To meet this demand, we are providing a powerful trading platform and access to competitive inter-bank prices.”

TradeFreedom notes that the foreign exchange market is the largest and most liquid in the world, with daily volumes exceeding $2 trillion.

Loring Ward appoints new CEO

(April 3, 2006) Loring Ward International has named Gerard Melia as chief financial officer of Loring Ward Group in New York. Melia, formerly with Credit Suisse, replaces Denis Taillieu as the company moves its executive operations from Canada to the U.S. Taillieu will continue to work with the firm as a consultant.

Melia will also serve as treasurer and chief financial officer of SA Funds, a Loring Ward affiliate.

Loring Ward — which was spunoff from Assante when the Winnipeg-based firm was purchased by CI — is targeting the American high-net-worth market.

Robson takes the helm at C.D. Howe

(April 3, 2006) William Robson has been appointed president and CEO of the C.D. Howe Institute, effective July 1.

Robson, a senior vice-president who has been with the think tank since 1988, replaces Jack Mintz, who is stepping down after a seven-year term as president.

“Bill Robson is an outstanding leader and accomplished policy thinker with numerous research awards to his credit,” said board chair Tim Hearn. “There were many outstanding candidates, however, the board unanimously felt Bill was ideally positioned to continue and enhance the independence and quality of the institute’s work.”

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The staff of have been covering news for financial advisors since 1998.