The Ontario Superior Court has approved a motion that could result in a monetary settlement for a limited group of Portus investors.
Justice Colin Campbell has ordered the Market Neutral Preservation Fund (MNPF) to be wound up and its proceeds paid to investors in the fund. The process will involve terminating a futures contract between the fund and RBC, as well as a call option with French bank Société Générale.
Judge Campbell ordered Computershare, the trustee of the fund’s assets, to engage legal counsel and take “such steps as are necessary and desirable for the winding up of MNPF, subject to the prior consent of this Court.”
In a letter filed on June 7, KPMG lawyers said: “Based on existing case law, it is unclear whether the trust is a ‘person’ within the meaning of the Bankruptcy and Insolvency Act, meaning that it can be declared bankrupt; therefore, it may not be possible to declare MNPF and/or MNB Trust bankrupt.”
Because of this uncertainty, they filed to liquidate the fund rather than declare bankruptcy.
Judge Campbell also ordered KPMG to continue developing the claims process for investors in MNPF. MNPF had raised approximately $19.2 million from accredited investors across Canada before Portus was shut down by the OSC.
Most of the assets that flowed into Portus products were commingled in omnibus accounts, making ownership difficult to trace. However, the assets in the MNPF remained segregated, leading to investors’ requests that the assets be paid out rather than simply thrown into a common pool to be shared by all Portus investors.
Most of the $19.2 million that flowed into the fund remained untouched. KPMG had already recovered $14.9 million by exercising the Ontario bonds, and the SGP call option was valued at about $1.4 million in August 2005.
In the recipient’s report, KPMG identified write-offs of $4.4 million, which reduced the fund’s net liabilities to approximately $14.8 million.
Submitted by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/12/06)
