TORONTO, Feb. 10, 2016 /CNW/ - The Ontario Securities Commission (OSC) today approved a no-contest settlement agreement with CI Investments Inc. ("CII") in relation to a matter that CII self-reported to the OSC and that resulted in investors buying and selling units at an understated value. The settlement involves approximately $156.1 million being returned to harmed investors – the largest amount of investor compensation to date in an OSC no-contest settlement.
This settlement follows allegations by OSC Staff that CII's system of controls and supervision, and its monitoring and oversight of an outsourced service provider, were not sufficient to address the unique cash collateral feature of certain funds and to ensure that interest earned in related accounts was recorded and included in the net asset value ("NAV"). NAV is a critical metric for investors in evaluating a fund's performance, and it is imperative that an entity's systems of controls and supervision function appropriately so that the NAV is accurately calculated and reported. Staff allege that these inadequacies led to the NAV being understated and that this error was not promptly identified and corrected. Staff do not allege, and have found no evidence of, dishonest conduct by CII.
While having neither admitted nor denied the accuracy of the facts and conclusions of OSC Staff, CII has agreed to the settlement and intends to compensate harmed investors a total of approximately $156.1 million.
In addition, CII has made a payment of $8 million to advance the OSC's mandate of protecting investors, plus a further payment of $50,000 to be allocated toward the costs of the investigation.
After reporting this matter, CII provided prompt, detailed and candid co-operation to OSC Staff. CII has also taken action to address inadequacies in its systems of controls and supervision. Further, as part of this settlement agreement, CII will be required to report to the OSC on its ongoing progress in developing enhanced supervisory and monitoring systems.
"We expect that registrants will establish robust systems of controls and supervision around the proper calculation and reporting of NAVs," said Tom Atkinson, Director of Enforcement at the OSC. "Investors rely on investment fund managers to oversee the accurate calculation of NAV and fund performance to assist investors in making informed investment decisions, and in cases where this does not happen, we will take enforcement action."
The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in the capital markets. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.gov.on.ca
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SOURCE Ontario Securities Commission
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