In the largest no-contest settlement to have ever taken place in Ontario, CI Investments (CII) is paying $156.1 million to investors who regulators say bought and sold funds at an understated value.
On Feb. 10, the Ontario Securities Commission (OSC) approved a no-contest settlement agreement with CII, in which the latter will pay approximately $156.1 million to investors. This is the largest amount of investor compensation ever paid in an OSC no-contest settlement.
The settlement follows allegations by OSC Staff that CII’s system of controls and supervision, as well as its monitoring and oversight of an outsourced service provider, were lacking and did not properly record and include interest earned in the net asset value (NAV) of certain funds.
"NAV is a critical metric for investors in evaluating a fund’s performance, and it is imperative that an entity's systems of controls and supervision function appropriately so that the NAV is accurately calculated and reported,” reads the statement published by the OSC. “Staff allege that these inadequacies led to the NAV being understated and that this error was not promptly identified and corrected. Staff do not allege, and have found no evidence of, dishonest conduct by CII."
While CI neither admitted nor denied the accuracy of the facts and conclusions of OSC staff, it did agree to pay $156.1 million, and it is also paying another $8 million to advance the OSC’s investor protection mandate, as well as another payment of $50,000 to be put towards the costs of the investigation.
"We expect that registrants will establish robust systems of controls and supervision around the proper calculation and reporting of NAVs," comments the OSC’s director of enforcement Tom Atkinson. "Investors rely on investment fund managers to oversee the accurate calculation of NAV and fund performance to assist investors in making informed investment decisions, and in cases where this does not happen, we will take enforcement action."