I mentioned the report from Deloitte UK yesterday, titled Bridging the Advice Gap: Delivering Investment Products in a Post-RDR World. Under the new UK regime of prohibiting payments by fund sponsors to salesmen, Deloitte suggests that bank advisors will be hardest hit, since they have greatest exposure to “mass market” clientele (up to £10,000 in portfolio value) and are perceived as being too sales-oriented and not as skilled as other advisors.
In preparation for the change:
- Lloyds will offer face-to-face advice only to those with £100,000+ to invest
- HSBC will offer face-to-face advice only to those with £100,000 income or £50,000 savings; peasants will get a DIY website
- Barclays Financial Planning will shut down and the bank will focus on high net worth individuals
- On the other hand, Santander is hiring frantically to add to its 1,000+ existing staff
What might happen in Canada if similar regulations are enacted? I suggest:
- No change in MF fees (why bother? Those few people who care moved to other products long ago)
- Much more tied selling (don’t expect to see a Bank “A” advisor recommending a Bank “B” product)
- Even stranger PPN products from the banks (Nobody pays anyone! It’s EXACTLY like a GIC, except you can MAKE UP TO 10%!!!!)
Credit Suisse is advocating increased regulation for exchanges:
The botched initial offering of Facebook Inc. (FB) is the catalyst that should lead to U.S. exchanges being stripped of self-regulatory powers and their related benefits, a Credit Suisse Group AG (CS) executive said.
Nasdaq Stock Market’s claim of immunity from liability for $500 million in brokerage losses stemming from technology problems on May 18 exposes a conflict between the historical, quasi-governmental role of exchanges and their status as profit- seeking public companies, Dan Mathisson, head of U.S. equity trading at Credit Suisse, told U.S. senators in Washington last week. Those tensions can’t be managed fairly and should spur a regulatory overhaul of the securities market, he said.
…
Like the Commonwealth of Virginia and Indian tribes, exchanges have absolute immunity for actions taken as part of their regulatory duties. The doctrine arose when exchanges were not-for-profit organizations owned by their member firms. The shield protects them from lawsuits related to the exercise of powers delegated by the SEC and prevents financial losses that could jeopardize institutions seen as vital to the U.S. economy.
The Globe has an opinion piece titled CMHC must stay in government hands, which argues that … well, you figure it out! The concluding paragraph is:
Governments must be wary of intervention for its own sake, but governments should step in where the market fails to achieve an economically efficient outcome. J.P. Morgan may have been the “lender of last resort” in 1907 , but no one would suggest privatizing the Bank of Canada today. We need a government-owned (if reformed) CHMC to curb excesses in housing. Too often in the financial system, the invisible hand likes to roll the dice, fuelling speculative bubbles and the risk of financial collapse. Like musical chairs, everyone has fun until the music stops.
The problem with this argument is that it makes the implicit assumption of a wise, benevolent government carefully tempering the enthusiasm and despair of childish bankers – a view that has gained many adherents in the past years. Trouble is … in just as many cases, and in the case of Canadian housing in particular, it is the government that is the villain. CMHC has been pumping up Canadian housing prices like no man’s business for the past six years (as alluded to yesterday); in the US, it was Fannie and Freddie that ran amok. In the current instance, CMHC is aided by the Bank of Canada, which has kept the price of money down … for very good reasons, but with the unavoidable side-effect of pumped-up prices for houses.
The author also makes the claim that:
Organizations from the Financial Stability Board to the International Monetary Fund praise CMHC as a lynchpin of Canada’s financial stability (albeit calling for improved governance and risk management by CMHC).
I am unable to detect much “praise”, although the word “lynchpin” is justified by paragraph 40 of the IMF report.
I am advised by Financial Webring Forum that the comments to the CSA fiduciary duty proposals are being published. Those who are fascinated with the issue and have a LOT of time to spare may be interested in the SEC Study on Investment Advisers and Broker-Dealers and the Comments on Study Regarding Obligations of Brokers, Dealers, and Investment Advisers.
It was a day of modest movement for the Canadian preferred share market, with PerpetualPremiums up 6bp and both FixedResets and DeemedRetractibles gaining 1bp. Volatility was low. Volume was extremely low, with a notable presence in the highlights of BNS issues, which went ex-Dividend.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0267 % | 2,482.5 |
| FixedFloater | 4.36 % | 3.72 % | 31,614 | 17.83 | 1 | 1.3011 % | 3,692.4 |
| Floater | 2.80 % | 3.00 % | 54,137 | 19.73 | 4 | 0.0267 % | 2,680.4 |
| OpRet | 4.63 % | 2.45 % | 30,726 | 0.47 | 4 | -0.3425 % | 2,595.8 |
| SplitShare | 4.63 % | 4.67 % | 54,645 | 4.37 | 2 | 0.1816 % | 2,875.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3425 % | 2,373.6 |
| Perpetual-Premium | 5.26 % | 1.17 % | 69,953 | 0.16 | 30 | 0.0647 % | 2,331.3 |
| Perpetual-Discount | 4.86 % | 4.87 % | 129,641 | 15.73 | 4 | 0.0374 % | 2,640.7 |
| FixedReset | 4.93 % | 2.97 % | 216,459 | 4.26 | 77 | 0.0116 % | 2,461.9 |
| Deemed-Retractible | 4.88 % | -0.34 % | 113,513 | 0.33 | 46 | 0.0100 % | 2,429.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.C | FixedReset | -1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-12-28 Maturity Price : 23.55 Evaluated at bid price : 25.55 Bid-YTW : 2.86 % |
| BAM.PR.G | FixedFloater | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-12-28 Maturity Price : 22.41 Evaluated at bid price : 21.80 Bid-YTW : 3.72 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.X | FixedReset | 22,780 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.45 Bid-YTW : 1.37 % |
| ENB.PR.T | FixedReset | 16,125 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-12-28 Maturity Price : 23.17 Evaluated at bid price : 25.23 Bid-YTW : 3.74 % |
| FTS.PR.G | FixedReset | 14,760 | Desjardins crossed 12,000 at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-12-28 Maturity Price : 23.55 Evaluated at bid price : 24.20 Bid-YTW : 3.63 % |
| ENB.PR.N | FixedReset | 14,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-12-01 Maturity Price : 25.00 Evaluated at bid price : 25.46 Bid-YTW : 3.73 % |
| BNS.PR.Q | FixedReset | 13,580 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.32 % |
| BNS.PR.P | FixedReset | 11,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 3.28 % |
| There were 1 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TCA.PR.X | Perpetual-Premium | Quote: 51.50 – 52.42 Spot Rate : 0.9200 Average : 0.5812 YTW SCENARIO |
| TRP.PR.C | FixedReset | Quote: 25.55 – 25.96 Spot Rate : 0.4100 Average : 0.2490 YTW SCENARIO |
| MFC.PR.E | FixedReset | Quote: 26.20 – 26.47 Spot Rate : 0.2700 Average : 0.1519 YTW SCENARIO |
| IGM.PR.B | Perpetual-Premium | Quote: 26.38 – 26.70 Spot Rate : 0.3200 Average : 0.2303 YTW SCENARIO |
| MFC.PR.A | OpRet | Quote: 25.65 – 25.94 Spot Rate : 0.2900 Average : 0.2038 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 25.55 – 25.77 Spot Rate : 0.2200 Average : 0.1434 YTW SCENARIO |