(October 30 – 19:00) – The Ontario Securities Commission has initiated proceedings against Mark Bonham, SVC O’Donnell Fund Management Inc. and Bonham & Co. Inc., accusing them of manually repricing mutual funds in 1997 and 1998.

The OSC says that Bonham manually priced certain shares held by three of the seven mutual funds it managed for SVC: the Strategic Value Fund; Canadian Equity Value Fund; and the Dividend Fund. It says that SVC’s accounting department highlighted items on its daily price feed if a share price was 3% higher or lower than the previous day’s closing price, or if the price feed did not contain a price for the shares. The OSC says that Bonham would then review the highlighted items and determine a value of the shares based on his own discretion.

The OSC says that if Bonham’s price was different than the feed price, it would be used in the calculation of the value of the mutual fund. It also says that SVC did not have a written policy governing manually pricing shares and Bonham did not apply a consistent methodology in manually pricing shares. The OSC says he also did not record or maintain any notes on the determination of the manual price.

It says that the result of the manual pricing was that the Strategic Value Fund was overvalued for 201 of the 231 trading days between July 31, 1997 and June 30, 1998. The Canadian Equity Value Fund was overvalued for 123 days, and the Dividend Fund was overvalued for 60 days.

The allegations against SVC and Bonham & Co. generally relate to failing to supervise Bonham.

The OSC has scheduled a hearing for November 6 to consider a proposed settlement with SVC O’Donnell Fund Management Inc., and to set hearing dates for Bonham and his firm. SVC has since been sold to StrategicNova Inc., while Bonham is running Bonham & Co., offering funds sold in the exempt market.

The hearing will consider whether the registrations of Mark Bonham, SVC O’Donnell and Bonham & Co. should be suspended or restricted; possible reprimands; whether any conditions should be imposed on their registrations; whether SVC O’Donnell must submit to a review of its practices; and whether Mark Bonham should be prohibited from acting as a director or officer of an issuer

StrategicNova Inc. says that it has reached an agreement with the OSC regarding a proposed settlement. In a statement Strategic Nova noted that while total losses amounted only to about $400,000, it is imperative that the mutual fund industry protects unitholders.

StrategicNova says that its intent is that its unitholders may be promptly and fully compensated. The proposed settlement must be approved by the OSC before it becomes effective. The OSC will consider the proposed settlement is at the hearing scheduled for November 6.
-IE Staff