Here are some highlights from a recent Financial Post editorial.
The role of the OSC in Portus
Terence Corcoran
Financial Post
Friday, May 13, 2005
"A lot of stray dogs probably need to be shot over Portus, a few of which might even be hanging out at the OSC. Where were the regulators when the creators of these products brought them to market? What role did existing regulation play in making Portus's products, based on hedge funds, so alluring to small investors?"
"what could have accounted for [Portus's] tremendous sales record?" asked Mr. Brown. "Perhaps there is only one particular feature to speak of -- high up-front fees and trailer fees for referrals."
"That's it? More than 26,000 investors turned over $750-million to Portus solely because advisors were paid fees? This is convenient for the OSC, which has been riding the fund fee issue for more than a decade, with absolutely no benefit to investors. Rather than take a hard look at the regulated investment environment that created Portus, Mr. Brown has decided to take a quick, cheap shot at a dead hobbyhorse."
"Far more interesting and sophisticated would be an examination of the role of regulation in creating demand for Portus and the other hybrid hedge products."
"Regulations have a high price in the market. A big part of that price is to lull investors into believing that the market is safer and less risky than it actually is. Many small investors, ignorant of risk, should not be in these markets, but the air of confidence created by regulations draws them in. Failures then land on investors as stunning surprises. At that point, the regulators walk away from the victims and turn to imposing new regulations and lay the foundation for more stunning disasters in the future."
