Toronto – Ontario Securities Commission (OSC) Chair David Brown said today that the most important lesson learned from the year-long probe into mutual fund trading practices is that investors' interests must always be kept paramount and that their trust will only be restored by giving them a 'fair shake' in the process.

Brown made the comments in a speech to the Economic Club of Toronto when he released the final Report on Mutual Fund Trading Practices Probe providing the details of the biggest investigation in OSC history that resulted in $205.6 million being returned to harmed investors. Brown said the year-long probe of all mutual funds available to retail investors in Ontario found no late trading, no insider abuses and no systemic market timing. He added that any market timing that was discovered had been shut down by the time the investigation started.

"When we saw trading abuses roiling investor confidence in mutual funds in the United States, we knew that our obligations here were clear: we had to make sure that investors could trust mutual funds in the future," said Brown. "Ontario's investors must be in a position to believe that their investments will be treated with the utmost care by those in whose trust they are placed."

In late 2004 and early 2005, the OSC entered into settlement agreements with five mutual fund managers to compensate investors who suffered harm from market timing activities in affected funds. As a result, those five fund managers will distribute to affected investors a total of $205.6 million in what is by far the largest settlement in OSC history. These funds will be distributed to investors under the supervision of independent consultants, in accordance with a distribution plan approved by the OSC.

"The settlements were a reiteration of the fact that mutual fund managers have a duty to act in the best interests of their funds and the investors who have entrusted them with their money. A select group of investors must not be given preferential treatment to the detriment of others," noted Brown. "This was a case where some knowledgeable investors exploited the system to make money at the expense of others. By taking advantage of the difference between the stale value and an expected price movement of a fund the following day, and trading in anticipation of those price movements, they were able to make gains. Those gains could only come at the expense of every other investor in the fund.

"One of the things we learned from this probe is how regulators must act in 2005. The probe was successful because it was a quick response and it addressed the issue in its entirety. It brought together all relevant provincial regulators and the two affected self-regulatory organizations - the Investment Dealers Association and the Mutual Fund Dealers Association. And it was given coordinated, priority attention by all branches of the OSC.

"We found some market timing had occurred, but it had been shut down. We then ensured that investors would be reimbursed for losses. The case is closed with a fair result, and a clear message."

The Report on Mutual Fund Trading Practices Probe provides the background, description, results and conclusion of the OSC's probe into the trading practices of the mutual fund industry, and proposed policy responses. Copies of the speech and of the report are made available on the OSC's web site (www.osc.gov.on.ca).