ABCP settlement: still a rigged table

News item: Canadian regulators settle ABCP fiasco

For many it will be a bittersweet end, but I see in the DTM that settlements have come to pass with some Canadian institutions — about two and a half years after the wheels came off the asset-backed commercial paper market.

When I say “see”, don’t take that literally. For reasons that can only add to the nation’s displeasure about the entire ABCP meltdown, the OSC and IIROC met in secret to approve “seven settlements over improper handling of the investments at some of Canada’s biggest financial institutions.”

In secret? That’s right.

Although most regulatory panels take place under the watchful eye of the public (OSC Rules of Practice: 1. General – (1) Commission hearings are generally open to the public including all branches of the media.), these particular settlement panels were held “in camera”. I guess the administration of justice would have been brought into disrepute if anyone was to actually hear OSC prosecutors flail some of our largest financial institutions in person.

When New York Attorney General Mario Cuomo took large banks to task over Auction Rate Securities (see prior post “Cuomo takes action against Citigroup, while ABCP buyers wait in vain” Aug 2-08), which were the U.S. twist on ABCP, the court process wasn’t shut to the media. And it certainly didn’t take more than two years to bring it about.

Strangely, when the OSC holds a hearing in early January to discuss the conduct of tiny Coventree and two of its principals, there’s no mention of that session being held “in camera”. Moreover, none of the bank settlement deals involved any individuals…just the institutions themselves. It’s as if the banks and brokerage firms sold the tainted ABCP all on their own, without any human intervention whatsoever.

Likewise, when investors complain about bond trading practices where large “brokerages may be inflating prices and hiding big commissions” (see prior post “IIROC needs to channel their inner Andrew Cuomo” April 16-09), what comes of it? Zip.

Breaches of Regulation FD? No one pays any attention (see prior post “Remember Regulation FD? No one else seems to.” March 31-09).

Late trading mutual funds? Mega fines against large institutions, but not one individual was named.

Rest assured, when a three person Limited Market Dealer plays in the Life Settlement space, the regulators swing into action with a pre-emptive emergency temporary order (see prior post “Citigroup fined $100MM for ARS, while ABCP fiasco remains untouched” Aug 7-08) with blinding speed.

But, when the big guys are involved, the regulatory kid gloves stay affixed. I guess that’s why it has to be done in camera. Our regulators don’t want you to see this double standard at work.

MRM