Tuesday, March 11, 2008

“I am astounded” CRTC Chairman

Those were the words of Konrad Von Finckestein that began today’s CRTC Hearings, upon being notified that Teachers’ had received a letter from its regulator, the Financial Services Commission of Ontario, that stated that Teachers’ ownership of 50+% of BCE did not run afoul of the Pension Benefits Standards regulation that reads:

“the administration of a plan shall not, directly or indirectly, invest the moneys of the plan in the securities of a corporation to which are attached more than 30% of the votes that may be cast to elect the directors of the corporation”.

Teachers asked that the letter from FSCO be kept confidential on the basis that it contains “proprietary information”. The Chairman of the CRTC balked at this and ruled that the letter will be posted on the CRTC website, in its entirety, with the exception that the share price paid by Morcague will be abridged. It was clear that by the term “proprietary” that Jim Leech meant that Teachers had found a proprietary way around the pension rules that were satisfactory to its regulator.

The CRTC Chair made reference to the second last paragraph of the letter where it appears that the FSCO determines beneficial ownership of these shares by Morcague on the strength that he paid for them ,although we’ll never know how much.

Such a basis for the determination of beneficial ownership flies in the face of all legal precedent as described in our submission to the FSCO in a letter dated March 5, 2008. The Supreme Court of Canada has upheld the ruling that true beneficial ownership turns on the issue of which party has the right to direct transfer of ownership of the shares in question. In the case of the Morcague arrangement, Morcague does not have the right of transfer of ownership. Teachers’ does. The FSCO made the wrong ruling.

Meanwhile the CRTC is being deferential to the FSCO on a key aspect of ownership, even though in Jim Leech’s own words of today, the FSCO does not have the “authority” to make binding rulings. Meanwhile, left to his own devices, Konrad Von Finckenstein finds the FSCO letter and its conclusion to “be astounding”.

Who could argue with that? Apart from Teachers’ and its cozy regulator.


Robert Gibbs said...

Seems to me to be another case of two forms of "justice": one for the uber rich & powerful and another for the average Joe or Jill.

Just like Flaherty's Income Trust betrayal.

Dr Mike said...

As Robert has said , the little guy gets the shaft again.

Just another case when the best deal for Joe Public was left on the shelf to placate the more powerful in society.

This has been going on forever & is not going to change anytime soon -- how discouraging is that!!

We have layer upon layer of bureaucracy which supposedly is there to protect us from nasty outside influences--however , who protects us from the nasty protectors, such as Jim Flaherty.

Put these guys in positions of power & we don`t stand chance--we are stuck with whatever disaster they decide to impale us with.

They tell us that it is the right thing to do , or that it is done for the larger good or they were forced into it by changing conditions.

Well , give us a break.

If the guy formulating the policy is half-way stunned , then we are the recipients of nothing more than a bunch of hooey & we are left to pick up the pieces.

Can we say The Tax Fairness Plan.

Dr Mike.

Anonymous said...

CRTC boss sees red, as BCE plan moves ahead


March 12, 2008

GATINEAU, QUE and TORONTO -- The Ontario Teachers' Pension Plan is lucky Konrad von Finckenstein doesn't head the Ontario financial regulator.

The head of the federal communications watchdog said yesterday that Teachers addressed one of his key concerns about its takeover of BCE Inc. when it produced a letter approving the proposed shareholder structure.

But Mr. von Finckenstein indicated that he wouldn't have allowed it if he were writing the letter.

Two weeks ago, Mr. von Finckenstein postponed a hearing into the deal to give Teachers time to produce a letter from the Financial Services Commission of Ontario (FSCO) that said the structure would comply with Ontario pension laws.
Print Edition - Section Front

Section B Front Enlarge Image
The Globe and Mail

FSCO's approval appeared to surprise the chairman of the Canadian Radio-television and Telecommunications Commission.

"I'm astounded," Mr. von Finckenstein said at yesterday's hearing into the deal. "The interpretation that FSCO puts on these things is not one that I as a lawyer and a former judge would put on that legislation in the regulation."

Nevertheless, he acknowledged that "I'm not a pension expert - they are" and that his job is to determine whether Canadians will control BCE.

According to Ontario pension laws, Teachers cannot hold more than 30 per cent of a company's voting shares. To get around this restriction, a former Teachers executive, P. Morgan McCague, will hold two-thirds of BCE's class A voting shares and vote them according to Teachers' orders.

The proposed takeover and privatization must comply with foreign ownership rules for the broadcasting sector. Teachers is buying BCE with its U.S. partners, Providence Equity Partners LLC and Madison Dearborn Partners LLC.

In a note to clients yesterday, UBS analyst Jeffrey Fan called FSCO's approval letter a "key step" in the regulatory process. "In our view, BCE/Teachers have satisfied the CRTC and we continue to believe that the CRTC will approve the transaction," Mr. Fan wrote.

It aims to issue a decision by the end of the month. If it endorses the deal, Teachers will be on track to complete the buyout in the second quarter.

But the CRTC hasn't given any guarantees. At the end of the hearing, a CRTC commissioner asked Teachers' chief executive officer Jim Leech what would happen if it rejected the application. "One of the conditions of the consortium's agreement with BCE would not be met," he replied.

Along with the developments at yesterday's hearing, the Montreal-based company learned on Friday that it won a fight with its bondholders.

"We always said we agreed to live up to the agreement we had with Bell," Mr. Leech told reporters yesterday. "There were a number of conditions ... I'm sure as conditions are met, confidence will grow."

Nevertheless, concerns that the deal's financing could be pulled are keeping BCE stock below the $42.75-a-share bid.

According to the FSCO letter, which the CRTC made public yesterday over Teachers' objections, the pension fund is complying with regulations because it did not directly or indirectly invest its funds in BCE voting shares.

Teachers also addressed CRTC concerns about corporate governance. Mr. Leech explained that BCE's board of directors will be frozen at 13 members, seven of whom will be Canadian. The chairman will be a board member and a Canadian, and will not be designated by the U.S. investors.

BCE Inc.

Close: $38.65, up 93¢