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Ontario Regulators May Propose Stricter Hedge Fund Rules Soon

Date: Thursday, October 5, 2006
Author: Joe Schneider, Bloomberg.com

Oct. 5 (Bloomberg) -- Ontario securities regulators will probably propose stricter rules to regulate hedge funds within a ``few months,'' the provincial minister responsible for securities regulations said.

Gerry Phillips, the minister of government services, said if the Ontario Securities Commissions proposals don't go far enough he'll introduce laws to protect investors, in the wake of the collapse of two hedge funds in Canada in the past year.

``I'm waiting for their recommendation on how they want to deal with it, whether they can deal with it through rule making,'' Phillips said today in an interview following a speech in Toronto. If there is a need for new laws, ``we will act on it,'' he said.

The collapse last year of Norshield Asset Management (Canada) Ltd. and Portus Alternative Asset Management Inc. prompted new scrutiny of hedge funds. Last month, U.S. hedge- fund manager Amaranth Advisors LLC lost about $6.5 billion after its Calgary-based trader Brian Hunter made wrong-way bets on natural gas prices.

Laurie Gillett, Ontario Securities Commission spokeswoman, said she couldn't immediately comment on the issue. The OSC is Canada's main stock market regulator.

Yesterday, in a report that included 65 recommendations, the Investment Dealers Association of Canada said hedge funds in the country should be regulated the same way as mutual funds, to protect investors unfamiliar with their risks.

Canada's hedge fund market in 2004 was estimated to include C$26.6 billion ($23.6 billion) in assets under management, of which C$10.9 billion was invested by Canadian pension plans, C$14.1 billion by investors and the rest by foreign clients of Canadian hedge-fund managers, according to the report.

To contact the reporters on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net .