Industry Committee on Nov. 16th, 2010

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Our goal as legislators is to make sure that as you start to climb those steps you don't fall on an unstable step and crack your head on the floor or something like that instead. We want to make sure that as we move forward we have a system that makes sense, that we avoid unintended consequences. There's been a lot of talk of unintended consequences. It seems to be a theme in this committee, even going back to the last legislation that we discussed.

Mr. Sproule, you said you're looking forward for other people, I think the quote was. One of the things I've noticed in my conversations with Nortel pensioners is a lot of that sentiment, that you recognize there's not an opportunity through this process maybe to fix things for yourselves, but you want to make sure we make the system better for others. I appreciate that, personally.

There's a lot of talk of bond holders here. I think, Judy, you made the comment, and I wrote it down, “bond holders have lots of options”. I just want to get clear, and maybe Mr. Cole can help me with this. You talked about bond holders in a lot cases being other defined benefit plans, for example.

[Jim Cole]

That's right.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Maybe you can give a little bit of a description around the bond holders that you're talking about when you say that.

[Jim Cole]

I can certainly speak to the nature of our client base. We invest in total maybe in the order of $50 billion to $60 billion of fixed income assets in Canada. Of those assets, the vast majority of them are defined benefit pension plans, whether we're hired by a trustee board or the pension committee of a plan sponsor. The others are obviously individual workers saving for retirement through RRSPs, whether it's on a group basis with their employer or on their own, and lastly it would be obviously individuals who are already in retirement and drawing an income from those bonds.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay.

I don't know if you can do this or not. Some of the defined benefit plans that you may represent, are they publicly known? Is there a way you could actually attach names to them for us, or is that asking too much?

[Jim Cole]

Unfortunately, I'm not able to divulge the names of my clients specifically. However, they would be a range. If you look through the list of the top 60 investment-grade issuers that is very readily available, those would be the typical types of clients. The other important piece of our client base is actually what's referred to as a jointly trusteed pension plan. It's an amalgamation of employers and employees, typically in the union sector, that would be receiving contributions from their members and the employers they work for and then managing that pension plan. The trustee board manages that pension plan.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I don't know if it was Mr. Rutherford, but one of the witnesses here talked about a lot of hurt for those pensioners who are impacted by bankruptcy. It seems to me that our goal here, in terms of what we do on the whole, is to minimize hurt for anybody who is impacted by bankruptcy or anything else. Obviously bankruptcy by its definition hurts many people. It hurts pensioners, it hurts the workers who lose their jobs, it hurts suppliers, and it obviously hurts shareholders. I think there are many Canadians out there, for example in the Nortel situation, who had large portions of their RRSPs invested in Nortel and are impacted from their own pension standpoint.

As we work through what opportunities or options there are for us as we move forward, what unintended consequences do we need to be most acutely aware of as we move forward? What are the biggest pitfalls, in your mind?

[Brian Rutherford]

Are you talking to me?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I was looking at Mr. Cole, but—

[Brian Rutherford]

Because it's definitely his question.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm looking at Mr. Cole. I was referring to your quote, but I'm looking to Mr. Cole for the answer if I can.

[Jim Cole]

So the question is what sorts of pitfalls might you want to....

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Might we, as legislators from all parties as we consider how to react here, be aware of.

[Jim Cole]

I think the big thing, speaking to Bill C-501 as an investor in bonds, is that as bond holders what we really took to and what we don't like is uncertainty. If changes are made in legislation that change the pecking order of who receives assets and liquidation and what not, we can respond by pricing that into.... If we're behind other secured creditors, we will price the demand that we require in the way of an investment accordingly. The challenges are things like this that come in on existing bond holdings. We can't respond to that because we've already made investments on behalf of clients.

The second one is that I know there have been some comments made about the clarity in the minds of others about what this bill represents, but we have seen a lot of market commentary with this impression or understanding that it applies to the entirety of the unfunded pension liability. As a bond holder, while certain legal opinions are expressed that, no, no, it just applies to past service payments, we on the other hand have to rely on how the courts will interpret it. That lack of clarity creates uncertainty in our minds. That's a challenge.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Cole.

Thank you, Mr. Lake.

Thank you to all the witnesses, both this panel and the last. I see some of them are still here. I appreciate that. And I apologize that we had such tight timelines, but it was necessitated because of the number of witnesses.

Have a great day.

The meeting is adjourned.