Evidence of meeting #18 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investors.
A recording is available from Parliament.
10:05 a.m.
Chief Executive and National President, Financial Executives International Canada
If I could just add one brief point—
10:05 a.m.
Chief Executive and National President, Financial Executives International Canada
—there is only so much money to go around.
This particular committee is concerned with credit availability. The plan sponsor is a corporation that has certain moneys to allocate. So what we are recommending is that the funding period for that liability be more equitable and be aligned with the long-term nature of the pensions. That will provide additional moneys, which those corporations can put into the economy and create jobs and grow their companies.
10:05 a.m.
Conservative
10:05 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chair.
My question is for Ms. Walmsley. I agree with you. You state in your presentation that you want Canadians to have their faith in the financial system restored. That is an important point. Indeed, many people are disillusioned over the entire management of the financial system. Mr. Buell talked about this. I will have a question for him later on.
There are many stakeholders that make up our financial system. We are meeting many of them here. Your organization, in particular, represents people who work on the ground and who reassure others, who provide a certain degree of confidence. Personally, I have dealt with investment advisors, and the experience was totally disastrous. You represent the Investment Counsel Association of Canada. Earlier, in response to a question asked by my colleague, you clarified that you represent investment firms mainly. At what point do you consider a firm to be an investment firm? You say that you do not represent advisors per se, but the firms that they work in. What is the size of a firm, how many employees must it have in order for you to represent it?
Do you understand my question?
10:10 a.m.
President, Investment Counsel Association of Canada
Yes, I do.
The company is the member of our association, not individuals. We're not a professional association like the CSA. We represent the companies. The companies join, and we support them by providing education to their members.
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I understand, but at what point will you consider the entity to be a firm or a company? Personally, I have done business with an agency that employed perhaps four or five investments advisors. Would you consider that agency to be a full-fledged firm or a group of advisors?
10:10 a.m.
President, Investment Counsel Association of Canada
The firm is our member.
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
You state that you represent investment firms throughout Canada. What is the percentage of firms that you represent? Is it 50%, or only 25%?
10:10 a.m.
President, Investment Counsel Association of Canada
We estimate, in terms of the firms that are registered with the securities commissions as investment counsel portfolio managers. We represent roughly 50% of them.
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Therefore, belonging to your association is not compulsory. Firms are not obliged to become members of your association. Is that correct?
10:10 a.m.
President, Investment Counsel Association of Canada
No, they are not. They are volunteers, and we are not a regulatory body.
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
In response to a question asked by my colleague earlier, you confirmed that you did not issue any notices with respect to asset-backed commercial paper, an issue that has been problematical for several years. Many investors did not want to venture into that. You said that you did not issue any notices or warnings to your members on this matter, to suggest that they be cautious vis-à-vis these assets. Is this accurate?
10:10 a.m.
Treasurer, Board of Directors, Investment Counsel Association of Canada
It's an excellent question. Again, how transparent some of the issues were with the non-big-bank-sponsored ABCPs can be debated for a long time.
Our association is really about ensuring the best practices of our members, ensuring that there are ethics and good compliance processes and that we're following rules and regulations. Just to really get the sense, we're geared as an association toward the practices of members and not at looking at investment processes, which at the end of the day is intrinsic to each member.
Your point is a good one, though. There were a lot of people--
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Nonetheless, you are in a situation where you are aware of notices issued by other banks that publish opinions on investments, as well as the Bank of Canada. You were informed of all this, and yet you kept all of this information to yourselves. You allow each firm to behave as it wishes. Is this correct?
10:10 a.m.
Treasurer, Board of Directors, Investment Counsel Association of Canada
Absolutely.
10:10 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
To my mind, you do not offer, unfortunately, any major guarantee. If you do not issue warnings to ensure that investors do not become victims of fraud or do not become unwittingly involved in fraudulent financial activity, you are not giving me any guarantee that you could issue warnings to all investment advisors. What you are saying does not reassure me.
Seeing as I do not have a lot of time remaining, I would like to put a brief question to Mr. Buell. Among your recommendations, Mr. Buell, you ask that the government bring forward improvements. Earlier, you answered a question put by Mr. Menzies on this topic. Now, as regards the credit-rating agencies that are at the heart of these bad investments, can you tell us if, in light of all of the information you have, we could adopt a specific rule or otherwise improve the situation?
March 31st, 2009 / 10:10 a.m.
Founder and President, Small Investor Protection Association
One of the problems we see is that we continue to refer to rules and regulations and mandates, but these are limited. That's why we say we need an authority that would be independent from industry to be responsible for investment protection. We think that's the solution.
10:15 a.m.
Conservative
10:15 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Thank you, Mr. Chair.
Good morning, ladies and gentlemen. Thank you for your information and advice.
I'd like to pose a question for Mr. Boychuk.
Earlier you mentioned the BDC in response to a question from Mr. McCallum. It's not my intention to defend the BDC, but I think we need to keep in mind that they have a mandate from Parliament to lend to creditworthy enterprises that may reasonably be expected to succeed, and they're required to be self-sustaining. They don't get a subsidy from the government.
I understand that they have a legislated loan loss reserve requirement that in these economic times may be limiting their ability to lend to the kinds of businesses that we would like them to lend to. Could you comment from your perspective on the loan loss reserve requirements in the BDC? Would you agree that this is something the government should contemplate doing?
10:15 a.m.
Chief Executive and National President, Financial Executives International Canada
May I describe what we did in preparation for this committee? When we were invited to appear, we went out to all our membership and got a very significant response. The summary of that response is under the survey results tab. The summary is supported by a very large document, which is available if you would care to have it. Clearly the message we got actually just confirmed what we were expecting: that access to credit has significantly tightened, the cost has gone up, and the process is a lot more difficult.
We didn't specifically ask in our questions, which are shown in the appendix, about the members' happiness with BDC, but generally across the board there is a credit tightness, so we were really focused upon trying to put forward recommendations to the committee that would help open up credit availability. We saw the measure in the budget that increased the funding to BDC and EDC as a positive one.
We've long been in favour of government efficiency. Someone mentioned earlier that it takes a long time to set up new programs, which is why we were recommending under several of our recommendations to use some of the existing mechanisms.
10:15 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Sure, and let me add that given the current economic situation, obviously any business that the BDC may be asked to lend to may not have the same business prospects it had, say, a year ago.
Given that they have a risk tolerance that is in a sense set by government, should we loosen the requirements on BDC so that they can increase their risk tolerance and go a bit further to assist these businesses?
10:15 a.m.
Chief Executive and National President, Financial Executives International Canada
It's a difficult question. Overall, we frankly prefer less government intervention in normal times. Unfortunately, these aren't normal times.
