Wednesday, February 25, 2009

C D Howdy Doody think tank

C D Howe argues that Pension Funds be formally allowed to skirt rules, because they have been so successful in skirting rules?

The CD Howe Institute really has a knack for timing!

On a day that the Caisse lost $39 billion for reasons that Diane Francis described as “not having proper personnel or controls” and by making too many large bets, we have the CD Howe issuing a statement that the pension funds have devised elaborate schemes to skirt their own rules, and for this reason the rules should be abolished? Sheesh Am I missing something here?

Give Pension Funds Greater Voice; Scrap 30 percent Limit on Voting-Equity Stakes: C.D. Howe Institute

TORONTO, Feb. 25 /CNW/ - Regulators should eliminate the 30 percent rule that restricts pension funds from holding more than 30 percent of the voting equity in a corporation, according to a study released today by the C.D. Howe Institute. In A Matter of Voice: The Case for Abolishing the 30 percent Rule for Pension Fund Investments, law professor Poonam Puri points out that pension fund managers have devised elaborate ways to effectively skirt the rule. She makes the case that it is time for regulators to enforce the rule or eliminate it entirely and give pension funds a voice commensurate with their equity stake.
The author outlines three principle challenges to the 30 percent rule: 1) the rule is only subject to superficial compliance as regulators have allowed companies to work around the rule, resulting in unnecessary complexity and increased transaction costs; 2) since no other OECD jurisdiction has a similar rule, Canadian plans are at a disadvantage relative to foreign competitors when competing for a given investment; and 3) there are governance problems that result from disaggregating ownership from control.
Professor Puri explains the case for adopting prudent person standards, combined with appropriate guidance and direction to pension fund managers, in place of quantitative restrictions.

1 comment:

Dr Mike said...

Who needs rules --they were probably a bunch of nonsense anyway--at least that is what the Caisse thought when it went on it`s merry way to a 39 billion dollar shortfall.


I wonder if it would help if the Feds killed income trusts a second time.

Dr Mike.