While regulators reach decisions and settlements on a case-to-case basis, they are expected to be objective and fair, meaning that cases that are similar should be judged similarly. However, an article on the Financial Post
has pointed out an inconsistency between the cases of three CIBC-associated entities and CI Investments
, both handled by the OSC.
“In both cases the companies self-reported, meaning that once they became aware of the situation they notified the OSC and then assisted with the investigation,” wrote contributor Barry Critchley.
In a case reported last week – which involved CIBC World Markets, CIBC Investor Services and CIBC Securities – $73 million worth of excess fees charged from as early as 2002 were discovered by CIBC, which it then reported to the OSC. The three CIBC entities paid a cash settlement equivalent to the overcharged fees, and CIBC paid $3 million as a penalty for inadequacies in control and supervision, though the bank “neither admitted nor denied the accuracy of the facts and conclusions.”
A February settlement with CI Investments
concerned a slightly different issue. The subsidiary to CI Financial miscalculated the net asset value of three close ended funds when it failed to account for accrued interest on forward contracts; CI Financial self-reported the error. The OSC said that the resulting settlement “involves approximately $156.1 million being returned to harmed investors” – a slightly incorrect wording, according to Critchley, as no CI-affiliated entity actually took any cash out of the funds.
Markets reacted differently to news of the two cases: CIBC shares were sent up by 0.17% following news of its settlement, while a selloff sent CI shares down by 6.46% on larger-than-usual volume, presumably because of confusion over the wording of the decision in that case.
The OSC’s penalties in the two cases also seemed inconsistent. “Market participants can go slowly mad if they try and figure out how the OSC determines the size of the penalty,” Critchley wrote. “In CIBC’s case, it paid $3 million to the OSC for a series of transgressions, amounting to $73 million, where some of its entities gained at the expense of its clients. In CI’s case, it paid $8 million to the OSC but paid nothing to its clients.”
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