By Staff | May 24, 2005 | Last updated on May 24, 2005
9 min read

(May 27, 2005) The U.S. Federal Reserve will likely raise its key overnight lending rate by another 25 basis points next month to 3.25%, says Scotia Economics. But after that, interest rates will likely remain on hold amid slower economic growth and higher inflation.

“Core inflation should edge a bit higher from current levels,” says Scotia economist Steve Malyon. “However, we expect underlying inflation to moderate by the fourth quarter, falling back into line with the Fed’s projections early next year.”

If history is any guide, the Fed will defer its rate hike agenda once signs of slower growth become convincing, Scotia says.

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Scotia Securities swaps fund portfolio advisor

(May 27, 2005) Scotia Securities has appointed Alliance Capital Management Canada as portfolio advisor to the Scotia European Growth Fund. Alliance, whose parent company manages $600 billion in assets worldwide, takes over from Bank of Ireland Asset Management.

The change takes effect June 27.

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Saxon Financial to go public

(May 27, 2005) Saxon Financial has filed a preliminary prospectus for an initial public offering and secondary offering of common shares.

The offering will be sold through a syndicate of underwriters led by BMO Nesbitt Burns, the investment management firm said in a statement.

Saxon, which offers retail mutual funds, institutional asset management and private client asset management, has assets of $9.6 billion.

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Ontario to review commodity futures act

(May 27, 2005) The Ontario government has appointed an advisory committee to review the province’s commodity futures act.

Carol Pennycook, a partner at Davies, Ward, Phillips & Vineberg LLP and chair of the Ontario Securities Commission’s Commodity Futures Advisory Board, will chair the first ever statutory review of the act.

“I’m pleased to be part of the process designed to make sure that regulation keeps pace with market evolution and innovation and changes in other jurisdictions,” Pennycook said. “The government is taking an important first step in moving forward with updating and modernizing the commodity futures regulatory regime.”

The committee has been asked to develop an interim report by March 31, 2006, and to deliver its final report no later than September 30, 2006.

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Ottawa consulting on DB pension plans

(May 27, 2005) The federal government has launched an online consultation on rules governing defined benefit pension plans registered under the federal Pension Benefits Standards Act.

As part of the initiative, the department of finance has released a discussion paper on the topic. The object, the paper says, is to improve the security of pension plan benefits and ensure the viability of defined benefit pension plans.

“In recent years, there have been growing concerns that defined benefit pension plans have had to deal with adverse market conditions, funding deficits, legal rulings creating uncertainty, some lack of clarity regarding pension rights under insolvency and questions regarding the impact of pension accounting rules. Experts say this is creating incentives to shift from defined benefit to defined contribution pension plans, which in general, shifts much of the risk of financing retirement income from the plan sponsor to the plan member.”

Discussion topics include surplus distribution, solvency funding and disclosure of funding information to pension plan members. Submissions will be received up to September 15, 2005.

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Dimensional reduces management fees

(May 26, 2005) Dimensional Fund Advisors says it is reducing management fees on three of its funds, effective June 1.

Fees for the DFA Canadian Applied Core Equity Fund (to be renamed the DFA Canadian Core Equity Fund) will be reduced by 10 basis points to 1.25% for Class A units and 0.25% for Class F units.

Fees for the DFA U.S. Small Cap Fund will be reduced by 10 basis points to 1.35% for Class A units and 0.35% for Class F units and the fees for the DFA International Value Fund will be reduced by five basis points to 1.4% for Class A units and 0.4% for Class F units.

Dimensional also announced the launch of two new funds today: the DFA U.S. Core Equity Fund, which will primarily invest in common stocks of U.S. companies, mostly small and value stocks; and the DFA International Core Equity Fund, which will invest in common stocks of non-Canadian and non-U.S. companies in developed countries.

Class A and Class F units of these funds are expected to be available to investors in early June 2005.

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Online investor education developed for Chinese immigrants

(May 26, 2005) The Calgary Chinese Cultural Society, along with the British Columbia Securities Commission, the Alberta Capital Market Foundation and the Investor Education Fund of Ontario have teamed up to provide multi media education resources to help Chinese immigrants gain a better understanding of Canadian capital markets.

The investor education program videos will be available online in English, Mandarin and Cantonese. The six video segments will focus on the basics of investing, how to choose a financial advisor and how to avoid scams and frauds. The videos, scheduled for completion by the end of the summer, will be available on all the participated organizations websites.

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CI launches Series 3 deposit notes

(May 26, 2005) CI Mutual Funds and Skylon Advisors today launched Series 3 of two different Bank of Montreal CI C.A.P.I.T.A.L. Deposit Notes. The income oriented Enhanced Yield class invests in units of the Signature Income & Growth Fund and Signature High Income Fund and employs a formula driven leveraging feature that provides up to 200% exposure to the portfolio.

Investors receive 75% of the underlying funds’ distributions, if any, while the remaining 25% is reinvested. The growth-oriented Callable Class, Series 3 notes invest in a portfolio linked to the CI Canadian Investment fund and Signature Income & Growth Fund. Both offer 100% principal protection if held until maturity. The notes are available until June 30, 2005 for issue on July 6, 2005. Commissions on the Callable Class notes are 4% up front with no trailing fees. The Enhanced Yield Class pays 5% up front with a 0.25% trailer. Minimum investment is $2,000.

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One Signature Financial shuffles execs

(May 26, 2005) One Signature Financial has appointed Marco Marrone as chair, replacing Shane Maine, who will remain on the board of directors. The company’s CFO, Tony Cutruzzola, will see his role expand to include day-to-day management of the firm.

“I look forward to the increased involvement of Marco and Tony in One Signature and working with both of them,” said Maine.

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Central bank stands pat on rates

(May 25, 2005) For the fifth straight time, the Bank of Canada has opted to leave its key overnight lending rate unchanged at 2.5%.

“Global and Canadian economic data received since the last interest rate announcement have been broadly in line with expectations,” the central bank said in a statement, adding that its outlook for the Canadian economy is unchanged through to the end of 2006.

However, once again the bank left the door open for a possible interest rate hike down the road. “With core inflation projected to return to 2% around the end of next year … a reduction of monetary stimulus will be required over time.”

“The real question is not whether rates are going to rise, but rather the timing of the rate increases,” says TD deputy chief economist Craig Alexander. “Once there is compelling evidence that the economy has picked up steam and that economic growth will be sustained at above a 3% pace, the bank will shift back into tightening mode.”

Alexander expects the central bank to boost rates by 50 basis points by the end of the year, starting in the fall, and believes the overnight rate will eventually rise as high as 4% in 2006.

The next interest rate announcement is scheduled for July 12.

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BMO, CIBC post healthy Q2 profits

(May 25, 2005) BMO today reported second quarter profits of $600 million, 2% higher than the same period last year. However, the bank also said its revenues were lower due to the weak U.S. dollar.

“Reported earnings were modestly higher than a year ago, but excluding significant items, earnings declined,” said BMO CEO Tony Comper.

Excluding those significant items — which included a change in accounting for mortgage loan pre-payment fees — net income was down $30 million, or 5.2%.

Meanwhile, CIBC’s Q2 profits declined 13% to $440 million from $507 million last year. The bank added a $75 million provision in the quarter “related to matters involving CIBC’s dealings with certain hedge funds in the U.S. that engaged in market timing of mutual funds.”

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MFDA warns again on exempt securities

(May 25, 2005) Hot on the heels of last week’s warning related to outside business activities, the MFDA today issued a caution related to a specific securities offering.

The MFDA says Calgary-based Exclusive Capital Corporation is offering to assist financial planners in distributing exempt, or off-book, securities.

“Members and approved persons are reminded that if approved persons wish to trade and advise in exempt securities promoted or offered by Exclusive Capital Corporation, they can only do so through their member firm in accordance with MFDA rules.” Those rules require that all “securities related business” must be conducted through the member firm.

If the firm is not prepared to put those securities on its approved product list and allow them to be sold through the dealer, then fund salespersons cannot advise on, trade in or be compensated for the sale of those securities, the SRO adds.

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Seamark re-appoints Marshall as CEO

(May 25, 2005) Halifax-based Seamark Asset Management has appointed Peter Marshall as its chief executive officer. Marshall was CEO from 1996 to 2003. He replaces Robert McKim, who has resigned in the wake of “significant differences of opinion” with the board regarding how the company should be managed, Marshall said in a statement.

Marshall has also served as Seamark’s chair since 1996. He will continue in that role and will also resume his former responsibilities as chief investment officer, a position he held from 1982 to 2003.

“On behalf of Seamark and all its clients and shareholders, I would like to thank Bob [McKim] for his tremendous contribution to the growth and success of the company,” said Marshall. “During Bob’s time at the helm, Seamark has stayed true to its roots as an investment management company dedicated to offering clients disciplined asset management based on consistent and proven investment principles, a heritage I will continue to foster.”

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AIM Trimark launches new fund-of-funds product

(May 25, 2005) AIM Trimark Investments today introduced Dialogue Portfolios, a fund-of-funds option, and part of the firm’s Dialogue Wealth Management program.

Based on clients’ individual risk tolerance and investment objectives, the new portfolios allow advisors to provide their clients with one of five fund-of-funds portfolios which invest directly in underlying AIM and Trimark mutual funds, the company says.

“Dialogue Portfolios give investors another great way to get the investment expertise of the AIM and Trimark fund families working for them,” says Bill Henderson, executive vice-president of marketing at AIM Trimark.

The portfolios were created with the assistance of Mercer Investment Consulting, which provided advice asset allocation and manager selection.

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FPSC offers engagement letter help

(May 24, 2005) The Financial Planners Standards Council (FPSC) is offering an online resource to help advisors holding the CFP designation in drawing up an engagement letter that complies with the FPSC’s practice standards.

Using boilerplate language, the resource allows planners to customize their client communications and lay out the responsibilities of both the planner and the client at the outset of their relationship.

“Providing written disclosure is fundamental to ensuring both the professional and client have a mutual understanding of the scope and respective responsibilities of the engagement,” says Carolyn Fallis, FPSC’s director of professional and student affairs.

To access the engagement letter resource, visit the FPSC website at For a comprehensive look at the engagement and disclosure process and another template you can use with your clients, please click here.

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RBC launches U.S. income fund

(May 24, 2005) RBC has launched a new U.S. Income Fund, a diversified fund that invests about 70% in U.S. fixed income securities. The remaining 30% is allocated to “high-quality equities” with above average dividends.

“Up until now, Canadian investors who want to maintain U.S. assets in U.S. dollars and benefit from regular U.S. dollar income have had limited options,” said Brenda Vince, president of RBC Asset Management. “We’re pleased to now offer investors a balanced solution offering regular income combined with the potential for higher returns over traditional short-term U.S. dollar securities.”

The fund is managed by Frank Gambino, Ray Mawhinney, Doug Raymond and Stuart Kedwell. The monthly distribution for the fund is currently set at 2.25 cents U.S. per unit.

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Skylon introduces new series of notes

(May 24, 2005) Skylon Advisors has announced the launch of Bank of Montreal Skylon Y.I.E.L.D. Notes, Series 2, a six-and-a-half year note offering exposure to an equally-weighted basket of 10 “leading Canadian issuers.”

If an underlying security posts a positive return in a given year, the return is deemed to be 11%. Negative or flat returns on an underlying security will be considered the actual return. The returns for the 10 underlying securities are then averaged, with the annual distribution equalling that average. The coupon payment can therefore range from zero to 11%.

“We are pleased to provide investors with another opportunity to benefit from this unique structure, which combines principal protection at maturity with exposure to a strong portfolio of top Canadian firms and the potential for a very attractive yield,” said David McBain, president and CEO of Skylon Advisors.

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