Capital Power Corporation has announced:
that it has closed its previously announced offering of 6,000,000 Cumulative Rate Reset Preference Shares, Series 3 (the “Series 3 Shares”) at a price of $25 per Series 3 Share for aggregate gross proceeds of $150 million on a bought deal basis with a syndicate of underwriters, led by TD Securities Inc. and BMO Capital Markets.
CPX.PR.C is a FixedReset, 4.60%+323, announced December 6. It will be tracked by HIMIPref™ but assigned to the Scraps index on credit concerns. The issue size of $150-million means that the $50-million greenshoe was not exercised.
DBRS has announced that it:
has today assigned a rating of Pfd-3 (low) with a Stable trend to Capital Power Corporation’s (CPC or the Company) $150 million Cumulative Rate Reset Preference Shares, Series 3 (the Series 3 Preferred Shares).
The issue traded 252,702 in a range of 24.84-00 before closing at 24.88-90, 40×59. Vital statistics are:
| CPX.PR.C | FixedReset | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-12-18 Maturity Price : 23.07 Evaluated at bid price : 24.88 Bid-YTW : 4.50 % |
It’s hard to know where to start in responding. The issue to my mind is really quite simple: it is wrong for the regulated fund I own to to pay my regulated advisor an amount that is contingent on me remaining an owner of that fund, for all of the reasons enunciated in the CSA’s recent paper on the subject. Put more expansively, because it’s wrong for me, it’s wrong for all others in my situation, and therefore it is contrary to the public interest as it relates to securities markets.
As you might know, the securities commissions are required by law to regulate in a manner that protects the “public interest” (colloquially know as the “public interest mandate”). Thus, if the commissions judge as I have as it relates to trailer fees, they have a legal obligation in law to fix it.
Your examples of what is permissible at an electronics store are, you should know, because they are not subject to the special regulation of the securities industry. That is to say, they are not subject to the public interest mandate, though, to be sure, they are subject to various items of consumer protection legislation that are intended to operate to similar effect in their industry.
You say the following:
“A further problem with the regulatory proposals with respect to trailers has arisen in the comments to yesterday’s post with respect to fiduciary duty. If fees are charged directly by the advisor to the investor, then the advisor will have a fiduciary duty towards that client.”
You are very quick to chide the regulators for bad and offensive logic (even though logic is incapable of being offensive, only valid or not). Yet you commit the same error in the last sentence: how does it follow that if fees can only be charged by the advisor, the advisor must, seemingly as a causal matter, be a fiduciary? It doesn’t. The requirement could arise by virtue of the existence of a fiduciary duty, but equally it could arise by virtue of a statutory provision.
The issue at play is whether the regulators should impose such a requirement. You’ve said a lot, but nothing about the real issue: whether trailer fee arrangements are contrary to the public interest. To my mind, that they are contrary to the public interest is so obvious as to be in need of no explanation. Regulators in Canada, the US, the UK and Europe have all, essentially, finally come to this view. Maybe they are all the idiots you make them out to be, and once again they’ve got the issue wrong. But if you want to be persuasive you’d do better to address the issue directly.
This comment has been moved to what I believe is the intended location and a response made on that thread. JIH