“We offer a number of products that we don't make a lot of money on – in some cases next to no money,” he said. “Why do you have them? Because you have to have a range of money market alternatives in your system.”
And brokers at Canaccord have the freedom to choose the best options for their clients, he adds.
“On this one, they weren't pushed, there was no grid, there was no push for fees on this,” Mr. Maybank says. “The brokers have the ability to choose the best product to suit their client needs. We didn't say you can't sell this – but I wish we had.”
By last summer, Canaccord had more than 1,430 retail clients with more than $138-million worth of ABCP, representing about 1 per cent of its total account base. Credential Securities had 335 individual investors with $48-million, meaning less than half of 1 per cent of its customers held ABCP. Credential has investment advisers in more than 135 credit unions in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.
National Bank of Canada had 340 clients, out of a total of about 150,000 accounts, with about $170-million of affected paper when the market froze. National has already repurchased that paper at par, with accrued interest.
Other individuals – a number never publicized – owned asset-backed commercial paper last summer and had their positions bought out by their brokerage firms.
There were almost 20 firms that reported having clients with frozen third-party ABCP when the Crawford committee hired an independent group, Broadridge Financial Solutions Inc., to assess who held ABCP and how much.
Susan Wolburg Jenah, who heads brokerage industry regulator, the Investment Industry Regulatory Organization of Canada, said one firm, whose identity she cannot disclose, approached IIROC last August to seek the regulator's permission to buy back ABCP from its clients.
The cost raised concerns about the firm's capital adequacy, but the buyback was allowed.
“They had a reputational issue, and they were trying to do the right thing,” she said.
Surprisingly, even many involved in the creation of ABCP say they only realized earlier this year that hundreds of small investors had money stuck in their product.
One problem may have been the wholesaler system, which meant that the makers of the paper at Coventree and other firms didn't have a clear idea of who owned the paper. The dealers who directly sold the product were the only participants who knew who was buying it.
Mr. Allan of Coventree said his firm would not have known whether or not the product was being sold to retail investors, “and, honestly, we were finding out with everybody else,” he noted.
“Would we have known about some of the larger institutional investors? Sure. But most of the names, even the corporates, those would not have been names that were known to us.”
An official at rating agency DBRS, who insisted his name not be used, said the firm's only comment would be to note that third-party ABCP was sold as part of the so-called “exempt” market, so it was intended for sophisticated, experienced investors.
Unfortunately, a growing number were not so sophisticated.
