- Originally from our sister publication, Advisor.ca.
Canadian CFAs say the Maple Group bid for TMX Group will result in a monopoly, which could adversely affect Canadian investors.
“The TMX is the primary exchange for all Canadian securities,” says Keith Summers, CFA, chair of the Canadian Advocacy Council (CAC) for Chartered Financial Analysts. “It’s important to Canadian investors that regulators stay committed to a fair and competitive marketplace.”
Today, the CAC for Canadian CFA Institute Societies, a group of investment industry professionals representing 12,000 Canadian CFAs, will be meeting with the Autorité des Marchés Financiers to highlight their concerns regarding the proposed acquisition.
The concern stems from the Maple Group’s proposal to “create a private company with a near-monopoly on what is essentially a public utility,” says the CAC.
The Bank Act stipulates that no single shareholder can own more than 10% of a regulated body, including the TMX. Last week, the Maple Group consortium, which comprises 13 large insurers, banks and pension funds, released a letter saying its proposal would limit any one investor from owning more than 10% of the company.
The group has not committed to limiting ownership to 10% among its members. This means the group could theoretically own all TMX shares.
“It’s an awful lot of control in the hands of a small number of [organizations],” says Summers. “[We want] to have the TMX owned by a wide group and to have a board that is independent of these controlling interests.”
The Maple Group has stated the new board of directors will have an independent chair and half of the directors will also be independent. However, the CAC says, “As the largest shareholding bloc, the Maple Group will be able to choose those directors.”
Given the proposed concentration of ownership, Summers says dealer users who are not affiliated with Maple Group may sue the TMX for unfair access—with the costs of litigation passed down to investors, not shareholders.
The CAC has also stated that the proposed regulatory oversight committee of the board should be independent of the board and any SRO. It also wants to ensure Alternative Trading Systems have a chance to thrive in the Canadian marketplace, and says “any new alternative trading system could be starved of order flow if the Maple Group chooses not to use it.”
For its part, The Maple Group released a statement today saying its bid “offers significant efficiencies, creates the right conditions to drive increased economic activity and international investment in Canada and contributes to the ongoing stability of Canada’s financial system.”
The CAC has filed a letter outlining its concerns with the Ontario, Alberta, Quebec and B.C. securities commissions. So far, only AMF has responded.
The Maple Group investors include the Alberta Investment Management Corp., Caisse de dépôt et placement du Québec, CPPIB, CIBC World Markets, Desjardins Financial, Dundee Capital Markets, Fonds de solidarité des travailleurs du Québec, GMP Capital, National Bank Financial, Ontario Teachers’ Pension Plan, Scotia Capital, TD Securities and Manulife.