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The market timing scandal is all but over, leaving behind a mess of legal bills, tarnished reputations and a rare tick in the "win" column for the Ontario Securities Commission.

A who's who of Canadian finance -- Investors Group Financial Services Inc., CI Fund Management Inc., AGF Management Ltd., AIC Ltd., RBC Dominion Securities Inc., BMO Nesbitt Burns Inc. and TD Waterhouse (Canada) Inc. -- will cough up more than $200-million for turning a blind eye to market timing, the rapid in and out trading practice that reduces returns and increases costs for the unit holder.

But there's a long list of unanswered questions that have left many in the mutual fund industry scratching their heads.

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Why was Thursday, the day of three back-to-back settlement hearings, such a mess?

It was a daunting schedule. The Ontario Securities Commission at 10 a.m. One hour later, the Investment Dealers Association of Canada and finally at 2 p.m., the Mutual Fund Dealers of Canada.

The IDA and the MFDA claim the OSC scheduled its morning hearing at the last minute, upsetting their scheduling. An added complication was Jim Tory's client roster. The lawyer represented the interests of both AGF and TD Waterhouse and had to dash from the OSC hearing to the IDA. The OSC hearing ran later than expected, pushing the IDA's event back two-and-a-half hours to 1:30 p.m.

Why did AIC stall 24 hours longer than the other three mutual fund companies before agreeing to settle with the OSC?

AIC is not talking, but sources indicate it all came down to money. The private fund company took the biggest financial hit, agreeing to pay $58.8-million in restitution to unit holders. The terms of the settlement took some time for billionaire owner Michael Lee-Chin to digest, sources said.

What happened to Jay Naster?

Mr. Naster, the OSC's tough-as-nails senior enforcement litigator, led the commission's case against the mutual fund companies. Then suddenly, in the midst of negotiations in October, he disappeared.

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Word is that the tenacious Mr. Naster was taking a hard line with the fund companies, a stance that was sure to lead to a protracted legal action. Outgoing OSC chairman David Brown, meanwhile, was anxious for a victory.

Chairman trumps litigator.

Why was Franklin Templeton Investments Corp. targeted alone?

In September, the OSC said more than 20 fund companies were scheduled for in-depth reviews. The assumption was that another batch of four firms would be named in the months to come. Many were baffled Dec. 13 when the OSC said Franklin alone had been identified for potential enforcement action.

Despite evidence that many other fund companies permitted market timing, Franklin will be the last fund to face market timing allegations. The OSC said the message has been sent and there is no point in dedicating further resources to the probe. "They have lost their appetite and moved on," said one fund executive.

When will mutual fund unit holders be paid?

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Don't hold your breath -- the fund companies have some intense number crunching ahead. One fund company will unwind about 1.2 billion transactions from more than one million clients to pay out an estimated $35 per unit holder.

While the fund companies argue the process will go smoothly and expect to make payouts by the end of next year, the OSC is wary. It took close to three years to successfully distribute more than $20-million to Laidlaw Inc. shareholders following former chief executive Michael De Groote's agreement to settle insider-trading charges.

Mutual fund restitution in the United States is happening at a snail's pace. Since the U.S. fund scandal broke in September, 2003, nearly $2-billion has been earmarked for direct payment to investors. The U.S. Securities and Exchange Commission is expected to sign off on the first distribution agreements next spring.

Will the market timers that profited face any penalties?

Nope. A long list of unidentified investors -- domestic and offshore retail clients, hedge funds and institutions -- made millions from market timing. Securities lawyers say they'll keep their profits because, after all, market timing is not illegal.

What have the fund companies and dealers said to reassure investors?

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Not much. All seven firms claim to have improved their monitoring of fund trading but there are no regulatory checks and balances.

Lawyers and executives ducked questions and only four offered up statements confirming settlements had been reached -- RBC Dominion, AGF, AIC and CI.

In the most bizarre public relations move, AIC's website posted an on-line video interview between the fund company's spokeswoman Terri Oswald and her boss, Mr. Lee-Chin.

AIC "will continue to work diligently to maintain its reputation as a fund manager," he said, adding "I personally want to thank the unit holders that stood by us."

Might be a good time for Mr. Lee-Chin to review some sales numbers. Performance issues have taken a bite out of AIC's assets under management, falling from a peak of about $15.4-billion a few years ago to about $10.9-billion today.

Forget the mutual fund and buy the stock.

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Equity analysts have shrugged off the fallout from the OSC probe. CI, AGF and IGM Financial Inc., parent of Investors Group, are all publicly traded.

In Dec. 16 report, Brad Smith of Merrill Lynch Canada Inc. notes the OSC fines were "less than expected" and "will not have a material or enduring impact on the company share prices."

That same day, John Aiken of National Bank Financial Inc. said the settlements "can easily be absorbed by the strength of each manager's balance sheet." In fact, the settlements could have a "positive valuation impact" on the three fund companies, citing the potential end of negative press and "an overhang" on valuation, Mr. Aiken said.

The financial impact of the settlements varies depending on each analysts' 2005 earnings forecast. Its estimated the settlements will cut 5 cents to 7 cents a share from IGM's profit this year, an 11 cents to 17 cents a share hit at CI and lastly, 23 cents to 32 cents a share earnings reduction at AGF.

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