MFDA Not Protecting

[admin]

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FUND REFORM HITS THE COURTS



9/19/2005 6:59:00 PM

By Paul B. Farrell

6:59 PM ET Sep 19, 2005




ARROYO GRANDE, Calif. (MarketWatch) -- The fund industry has finally met its match:
Federal trial judges. They can't be bought off by special-interest lobbyists. In the
coming year they will preside over trials guaranteed to reform the fund industry.

FundDirections, a magazine for trustees, directors and other insiders, recently
reported that a "new, aggressive and savvy plaintiffs' bar, including attorneys who
participated in huge settlements won against the tobacco industry, are now
methodically working on a nationwide scale" to challenge the fund industry.

So, as University of South Carolina Law School Prof. John Freeman, a former SEC
attorney, succinctly put it: "Fund insiders are now running scared. Their
special-interest lobby can control Congress, the SEC and the White House, but they
can't buy the judges." And the judges don't like what they see.

The background of this incredible turn of events is fascinating: For many decades
fund managers have had powerful lobbyists who won special protections from Congress,
the SEC and the White House. In fact, since the passage of the Investment Company Act
of 1940, fund-industry insiders have taken it for granted that they can run $8
trillion fund industry with impunity, putting their own personal interests ahead of
the fiduciary duties of America's 95 million small investors.

So after the Senate killed the Mutual Fund Reform Act in early 2004 I felt that the
fund industry's lobby was so powerful, so bullet-proof, that nothing could penetrate
and reform it. So when I reviewed two new books by highly respected critics exposing
corruption in the industry, it wasn't with any hope they would trigger change.

Fund industry is a 'colossal failure'

-----------------------------------------------------------------------

One book was "The Battle for the Soul of Capitalism," by Vanguard's founder Jack
Bogle. His arguments were familiar, after years of reading his speeches and books.

The second was "Unconventional Success" by David Swensen, the amazingly successful
manager of the Yale University endowment fund (16.1% average annual returns since
1982!). Swensen originally set out to share his experience with average investor.
However, he finally concluded that investors would never be able to use his
strategies.

Worse yet, Swensen concluded that fund industry conflicts of interest "lead to
behaviors that line the pockets of mutual fund managers at the expense of the
individual investor;" that the "colossal failure of the fund industry carries serious
implications for society, particularly regarding retirement security for America's
workers;" and that the industry is "seriously impairing the level of resources
available to support future generations." A brutal indictment.

Two powerful attacks by highly respected experts. Unfortunately, these two books
merely repeated criticisms we've heard many times before from big guns like former
SEC chairman Arthur Levitt in "Take on the Street," and other high-profile critics.

We heard the same indictments, to no avail, during the 2003-04 congressional
hearings from Sen. Peter Fitzgerald, author of the Fund Reform Act of 2004, and other
critics: Fitzgerald said "the fund industry is the world's largest skimming
operation, a $7 trillion trough from which fund managers, brokers and other insiders
are steadily siphoning off an excessive slice of the nation's household, college and
retirement savings."

But that didn't matter! The industry dodged the bullet anyway. Fitzgerald was
trumped by the fund industry's special interest "conspiracy," as Bogle called it.
After months of hearings, Sen. Richard Shelby, chairman of the Senate Banking
Committee, dismissed the reform legislation: "We must be sensitive to the current
political environment, in which I believe it will be very difficult to pass a bill."

SEC run by little Chihuahuas

-----------------------------------------------------------------------

When the Senate killed the reform bill, it handed the responsibility back to the
SEC. But since the SEC, like Congress, is also controlled by special interests, that
was like throwing the fox back into the henhouse: SEC "professionals are dedicated to
protecting the industry's managers, and the industry's managers have an agenda that
does not place the fund shareholders first," says Freeman. "The SEC has failed mutual
fund investors. [They are] a Chihuahua watchdog, not the Doberman that shareholders
need."

So my initial reaction was: So what. Unfortunately, even two great books by Bogle
and Swensen will have little effect. The industry lobby is so powerful, protected by
a conspiracy of friends in high places in Congress, the SEC and the White House,
these books will be old news in a week.

But then I learned the fund-reform movement had shifted to the federal courts, and
suddenly, massive changes are almost certain! The industry is in for huge reforms. So
fund insiders are running scared because they can't buy off trial judges as they can
Congress and the SEC. They are facing a full-court press rivaling the attack on the
tobacco industry.

According to Freeman, in the next year you can expect to see more than two dozen
cases going to trial in federal courts all over America, against Fidelity, Federated,
Franklin-Templeton, MFS, AIM and others. This is significant because they're based on
a totally new legal strategy: For two decades excessive-fee cases never got to trial.
Industry lawyers routinely got them dismissed based on the Gartenberg vs. Merrill
Lynch ruling that essentially said if a fund's expenses were in line with the
expenses of similar funds, the fees could not be excessive (no matter how high!).

But now federal judges are letting these new cases go to trial based on a new
theory: Plaintiffs argue that the fund industry's explosive growth has generated
economies of scale that fund managers are not sharing with all investors. Instead,
the benefits are shared primarily with larger investors, or favored institutional
clients, or simply pocketed by insiders, all of which is a violation of the fiduciary
duties imposed by the 1940 act.

Ironically, when the Senate avoided responsibility by passing the ball back to the
harmless Chihuahuas at the SEC, it didn't realize it was also turning loose a couple
dozen Dobermans in the plaintiff bar. And the Dobermans started attacking.

Bottom line: The Federal judiciary is now going to do what Congress, the SEC and the
White House have long refused to do: Reform a corrupt mutual fund industry.

[Guest]

From MarketWatch, online at:

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FUND INDUSTRY NEEDS SOME 'NEW RULES'



10/25/2005 12:00:16 AM

By Paul B. Farrell

12:00 AM ET Oct 25, 2005




ARROYO GRANDE, Calif. (MarketWatch) -- A dark picture of a greedy, corrupt and
secretive fund industry has emerged from my recent reporting. It' s made me
depressed. And as I often do, I escaped to my favorite bookstore. An old trick:
Ignore the problem, the solution will find you.

So I'm standing in the investing aisle. Suddenly, I turn and noticed the humor
section across the aisle. That's it! Bill Maher was staring at me from his new book,
"New Rules." I imagined him saying: "Lighten up, Paul. Yes, funds are a joke. So make
up some 'New Rules!' Help investors laugh. They got nobody to blame but themselves.
Nobody forced them to buy into what one senator called 'the greatest skimming
operation in the world.' Now that is funny!"

First, some background. Back in August, Reuters reported that Paul Stevens,
president of the Investment Company Institute, the mutual fund industry trade group,
said ICI "doesn't represent fund shareholders." Oops! He was contradicting a
65-year-old ICI policy. And that was a historic faux pas for a top securities lawyer
and lobbyist.

The next day Stevens sent a memo to ICI's insiders that confused matters even more:
"I categorically reject the implication of these reports that the ICI no longer
concerns itself about the interests of fund shareholders."

But then he confused things further by contradicting himself again: "The undeniable
fact is that the members of the Institute consist of investment companies and their
advisers. We are not an organization whose membership includes investors or
shareholders as such, and in this sense we do not and cannot claim to represent
them."

So I called and asked to interview Stevens. But ICI declined and sent a statement
that began: "We believe the interests of shareholders must come first."
Unfortunately, "comes first" is vague. So I followed up with four questions, hoping
for clarity:

-- Does "come first" translate into a fiduciary duty?

-- Does "come first" mean "always come first?"

-- If not "always," what specific problems trigger conflicts?

-- What are ICI's procedures for handling conflicts that arise?

Again ICI declined an interview, with this comment: "The statement speaks for itself
and is all we wish to share at this point." Unfortunately, it does not speak for
itself. ICI is obviously stonewalling. Forget clarity. See previous Paul B. Farrell.

So I sent the statement and questions to several fund-industry leaders for comments.
Their replies became these "New Rules." Mine aren't as funny as Maher's. But writing
them did help me lighten up about the duplicity and greed that has consumed the fund
industry and blinded its members to their conflicts of interest.

New Rule: You're not selling Big Macs and fries

-----------------------------------------------------------------------

An "embarrassing PR snafu" says Mercer Bullard, former SEC attorney, founder of the
Fund Democracy shareholder-advocacy group and law professor at the University of
Mississippi: "By law, investment advisers owe a fiduciary duty to their clients. But
the ICI is not using 'come first' in a fiduciary-duty sense. It is saying that it's
'good business' putting shareholders first, just as it is good business for
McDonald's to put customers first. It might be a smart move for the ICI to stop
pretending that it is not the industry group for fund-management companies."

New Rule: Enter the 'no-spin zone' and tell the truth

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Ted Aronson's AJO Partners manages $22.5 billion for pension funds: "When I read
that shareholders must come first, I immediately thought, why limit it just to first?
Why not first, second and third? Their language is something out of the White House's
spin control center. I'd certainly respect the ICI more if they told the real truth:
'We represent the interests of investment companies (duh) first, not the
shareholders.' Now that would be refreshing!"

New Rule: Weasel words will always trap weasels

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Roy Weitz's FundAlarm.com is one of America's leading mutual fund critics: "Since
the ICI can't claim that 'comes first' means 'always comes first', then it has to be
qualified, as in 'sometimes comes first,' or 'occasionally comes first,' or 'mostly
comes first.' But all are essentially empty phrases and offer no comfort to fund
shareholders." Weitz, like the other commentators, complained of ICI conflicts of
interest and concluded: "in every case, the ICI has explicitly or implicitly come
down on the side of the fund companies."

New Rule: You can't serve two masters, flip a coin

-----------------------------------------------------------------------

Allan Mostoff, president of the Mutual Fund Directors Forum (MFDF) says: "You can't
have it both ways ... where interests diverge, ICI represents the interests of
management." ICI has a $47 million annual budget, most of which comes directly or
indirectly out of the shareholders pocket. MFDF is a rival that works solely for
independent directors and shareholders on a budget of less than a million bucks.
ICI's biggest fear is that MFDF might legally have the right to the money ICI takes
from shareholders. (So, let's sue ICI!)

New Rule: The SEC will always be a pro-manager puppet

-----------------------------------------------------------------------

After the "PR snafu" the SEC made a lame PR attempt to disguise the fact it would do
nothing: "Use of fund assets to pay ICI dues is a matter within the business judgment
of fund directors," said Meyer Eisenberg, the SEC's mutual funds division boss. Ted
Siedle of Benchmark Financial Services, a former SEC attorney and now an investigator
of money-manager abuses disagreed: "The SEC should never have allowed the ICI to
claim it represents the interests of mutual fund investors, because it's a blatant
falsehood."

New Rule: 'Extreme makeover' time -- from ICI to ICMI

-----------------------------------------------------------------------

Vanguard's founder Jack Bogle said: "Certainly the shareholder does not come first
when fees are being negotiated. The management company chairman presents the fee to
the fund chairman, who can't help but agree -- they are both the same person ... If
they were really honest, they would call it 'The Investment Company Managers
Institute,' and ICI would morph into ICMI."

How about you, got any "New Rules" ideas for ICI and your fund managers?

[Guest]

Marketwatch.com from Dow Jones



A mutual fund tale from Oz
Commentary: Fund lobbyists twist away from shareholder interests

By Paul B. Farrell, MarketWatch
Last Update: 1:57 PM ET Oct. 18, 2005


LOS ANGELES (MarketWatch) -- Little Dorothy pulls the curtain and, oh my, the big, scary Wizard of Oz is just that loveable charlatan Professor Marvel who makes us all laugh! That is, everyone except Dorothy: she's hurt: "Oh, you're a very bad man!" But the Wizard is cool: "Oh, no, my dear. I'm a very good man. I'm just a very bad Wizard."

How about a sequel, with a new cast of characters? Because events in the mutual fund world would seem to fit the classic script.

First, Dorothy's our stand-in for America's 95 million mutual fund investors. We need a strong, spunky young lady! And the Investment Company Institute is the Wonderful Land of Oz. Of course we know ICI is actually a very exclusive club, a trade industry lobby whose members only include fund managers. No shareholders allowed, ever, period.

That's a crucial fact in this remake, folks. ICI was organized right after Congress passed the Investment Company Act of 1940. And a lot of tension has been building between ICI's members and fund shareholders who aren't represented among their membership. Yep, 65 years of conflict all because ICI was launched as a special-interest lobby for the fund managers who wanted to make certain the 1940's law was interpreted in their favor.

Now you ask, when the curtain is flung open and the "Great and Powerful Oz" is exposed as our loveable Professor Marvel, who do we see in the role? None other than the ICI president, Paul Schott Stevens, a securities lawyer and former Washington lobbyist.

Unfortunately, his famous curtain scene is no more endearing to fund holders as it was to Dorothy. There's no magic here, only "an embarrassing PR snafu," says Mercer Bullard, a former SEC attorney, now a law professor at the University of Mississippi and founder of the Fund Democracy shareholder advocacy group.

Now, please listen closely to this amusing tale, as we describe how the facts unfolded in ICI's Land of Oz. Focus on the key scene, which may be the single most powerful turning point in the history of America's mutual funds. Why? Because suddenly the truth is revealed as fiction -- everything ICI has been telling investors for 65 years is exposed as a dream that ICI wants America's 95 million investors to believe, a wonderful fairy tale that distracts us from seeing that the Wicked Witch and her Flying Monkeys are secretly stealing rubies from our retirement slippers.

Here's the historical turning point: On Aug. 18 Reuters reported that the ICI, the "lobby for the fund industry, has quietly changed its stance and now says it doesn't represent fund shareholders." Wow! ICI does not represent us.

Former SEC Chairman David S. Ruder called that admission "startling," adding that at least Stevens "was straight for once." Ruder is now Chairman of the Mutual Fund Directors Forum (MFDF), an organization serving independent directors. ICI doesn't like MFDF because MFDF is challenging ICI's ongoing attempts to control all fund directors.

The next day, on Aug. 19, Stevens attempted to put out a rapidly spreading firestorm by distributing a memorandum to thousands of ICI members. That just made matters worse. Steven's memo says "I categorically reject the implication of these reports that the ICI no longer concerns itself about the interests of fund shareholders."

Stevens also admitted "the undeniable fact that the members of the Institute consist of investment companies and their advisers. We are not an organization whose membership includes investors or shareholders as such, and in this sense we do not and cannot claim to represent them."

But while that sounds like a securities lawyer is saying that ICI cannot represent investors, he just added to the confusion: "In light of the biting criticism leveled at the Institute in the past for claiming to 'represent' fund shareholders, we have sought to be careful in the way we articulate our role. The distinction is an important one, if somewhat too subtle to be captured accurately by the press," he said.

Answering ICI's challenge

So I called and asked ICI for an interview with Stevens. Why me? Because I'm one member of the press who may be capable of accurately capturing the subtleties of conflicts of interest between shareholders and fund managers. Since graduating from the University of Virginia Law School in 1967 I have written many times about conflicts of interest.

However, ICI refused to let me interview Stevens. Why? They said I was too "biased," partly because I wrote 68 columns between 2002 and 2004 about the fund scandals and often called into question the fund industry's vigorous opposition to congressional reforms.

ICI did send me a statement: "We believe the interests of shareholders must come first, because that's the right thing to do and, frankly, is the only way the fund industry can truly prosper. The Institute has been a strong and consistent advocate for the interests of shareholders over many years ..." The rest of ICI's e-mail simply copied a list of ICI's accomplishments which I later learned had been posted on their Web site months ago. See the list.

Unfortunately, "comes first" is open to interpretation. And I'm sure every securities lawyer in America knows it would never hold up under cross examination. "Comes first" totally fails to capture the subtleties of ICI's conflicts of interest. So I sent ICI four questions, hoping the answers would clarify the muddy waters they've stirred up:

Does "come first" translate into a specific fiduciary duty?
Does "come first" mean "always come first?"
If not always, then in the past what specific situations have given rise to conflicts?
And what are ICI's procedures to balance those specific conflicts, if they arise?
But ICI declined with this terse reply: "The statement speaks for itself and is all we wish to share at this point."

Unfortunately, ICI's statement does not speak for itself. And America's mutual fund shareholders deserve far more clarity from ICI. Obviously, ICI is stonewalling and would rather speak in platitudes than clarify real conflicts of interest, such as fee issues.

Ruder easily cut to the heart of the conflict: "Investors want the smallest fees and managers want the largest" and that creates an "inherent conflict of interest!" That's why it's the main conflict in this drama, because fund managers pay their ICI dues with shareholder money!

We asked other industry leaders, including Jack Bogle, for their answers to the four questions. Next week we'll discuss what they said, because now that the curtain's pulled back, Professor Marvel isn't scary anymore.

We know the ending of this fantasy. And how appropriate is it, in the good professor's case, that it involves a lot of hot air. But what of Dorothy, we fund shareholders, as that balloon floats off?

[admin]

yesterdays globe (sept 5, 2005) had an article about Larry Waite, president of the MFDA attempting to posture the MFDA in a more favorable light. It struck me as funny at the very least, and perhaps dishonest at the very worst.

It all appears to revolve around the "jockeying" for position and job protection that is underway between themselves and the IFIC, the IDA, and the myriad of other self regulatory industry trade associations all finding themselves under suspicion of doing little to nothing for the public interest.

Some highlights:

Larry Waite is quoted as saying they are not a trade association, but rather a "regulator". I am not sure that this comment can be supported by any legislation, but by experience I can say that they walk, talk, sing and dance more like a trade association than a regulator.

Advisors have felt the sting of the MFDA once since 1998, and nine other hearings are in process. (busy guys)

Firms are never pursued, just advisors. (firms pay the association fees remember, not advisors) Firms pay for protection (immunity) from this association.
(just like the IDA, and the IFIC)

"Intense" bureaucracy within the fund industry. (actually it is intensely bureaucratic in the circle of folks posing as regulators, while serving and being paid by an industry of dealers)

"The proposed merger of the two regulators would weaken the MFDA's resolve and ignores the 80 year history of the IDA. (in the 80 year history of the IDA, almost never has a client received compensation for poor and or self serving advice from an industry member.......and likely NEVER has a major (read bank owned) investment firm been penalized by the investment dealers association.) The 80- year history of the IDA speaks eloquently.........that it is nothing but a trade association and any suggestion of impartial or honest efforts as self regulation are a masquerade.

David Goodman of goodman and Co investment counsel is quoted as saying, "what is missing is a defence of the industry".
He is failing to recall the "INVESTMENT DEALERS ASSOCIATION, MUTUAL FUND DEALERS ASSOCIATION, INVESTMENT FUNDS INSITUTE OF CANADA, etc". All of which are paid by, report to and support the industry.

Perhaps David was misquoted by the reporter, and what he actually said was what is missing is a defense of the client.
Find me one independant (non cosmetic) organization that is acting as the "INVESTMENT CLIENTS ASSOCIATION", and my reason to rant will be dramatically reduced. Until then, watching these industry folks work towards their own job protecting agendas is a bit humorous, disgusting and pathetic at the same time.
\
the advocate

[urquhart]

Now we have another case of a provincial securities commission enforcment head resigning due to intereference by senior management, this time at the Quecbec Authorite des Marches Financiers. The provincial securities commissions are not protecting investors by thorough and consistent enforcement of securities laws. It appears that the senior managements are interfering to protect their friends in the financial industry and to cover up the amount of fraud and malfeasance so that investors remain confident in the integrity of the market. This is, of course, unacceptable and cannot be tolerated by the investing public.

--------------------------------------------------------------------------------

Norbourg probe beset by politics at Que. agency

But regulatory watchdog says enforcement head's resignation was unrelated to case

By BERTRAND MAROTTE
Friday, September 2, 2005

Montreal — The investigation into allegedly improper transactions at Norbourg Asset Management Inc. took place against a backdrop of turmoil at Quebec's regulatory watchdog that culminated in the recent resignation of the agency's enforcement officer, sources say.

Claire Lewis, who took over as head of enforcement at the Autorité des marches financiers last year, quit in mid-July, AMF spokesman Philippe Roy confirmed Thursday.

But he said her departure was not related to the AMF's probe of Montreal-based Norbourg.

Last week, a provincial securities tribunal ordered Norbourg to cease all activities in the wake of allegations by the AMF that about $70-million of the asset-management firm's cash came from embezzlement.

Quebec Finance Minister Michel Audet has appointed Ernst & Young to run Norbourg and try to recover the $70-million in missing investor funds.

Norbourg's president and controlling shareholder, Vincent Lacroix, had his right to sell securities suspended, but he has said he will co-operate with the recovery efforts.

The AMF's investigation into dealings at Norbourg was hampered by instability and political interference in the executive ranks of the enforcement and compliance division, said a source close to the events.

Mr. Roy said that Nathalie Drouin, head of the AMF's legal affairs branch, has taken over Ms. Lewis's duties until someone is found to replace her. In addition, a Quebec City civil servant from the justice department, Giselle Gauthier, will step in to provide assistance to the new head of compliance, he said.

A second source said the sudden departure of Ms. Lewis after only one year reflects the state of near-paralysis at the AMF. “It was clear she wasn't being given any power. The upstairs people interfere,” he said, pointing out that it was the white-collar crimes unit of the RCMP that ended up taking the lead on the Norbourg investigation, with raids it spearheaded on company offices last week.

Yves Roussel, an officer with the RCMP's Integrated Markets Enforcement Team, refused to comment on events related to the Norbourg investigation.

Meanwhile, the former head of the powerful Caisse de dépôt et placement du Québec, Jean-Claude Scraire, confirmed in an interview Thursday that he recently accepted an invitation by Mr. Lacroix to head up a special advisory board to Norbourg that was scheduled to have its first meeting next week.

“He contacted me,” Mr. Scraire said. “He wanted to explore ways of bringing in more outside directors and improving corporate governance.”

Mr. Scraire would have been joined by at least two other people on the board — Nathalie Bourque, a spokeswoman for CAE Inc., and Jean Morissette, a former executive with mutual fund distributor Groupe Financier Partenaires Cartier Inc.

Mr. Scraire said Mr. Lacroix gave no indication that he knew he was about to be removed from his duties at Norbourg and its operations taken over by an administrator.

[admin]

If she was any more rabid, she would need medication???

give us a break from the childlike name calling please. It indicates your argument is perhaps weak, as may be your ability to convey it rationally, and these forums are not the place for this.

these forums are for improvement in the level of investor treatment and protection and it appears to me that urquhart is right in her call for improved enforcement of securities violations. The public record supports the idea that those in charge are not in control or at very least may be in need of some simple ethics courses. The facts speak for themselves and they are speaking louder every day.

Thanks for keeping future comments on a more mature level.

the advocate

[urquhart]

I agree we cannot jump to any conclusions with respect to the investigation of Norbourg Asset Managment. My suggestion is that the IDA, MFDA and the provincial securities commissions secede their enforcment authority to the RCMP and other police authorities. I support this suggestion due to the abysmal record of these organizations in terms of the small percentage of complaints investigated and prosecuted and the inadequate penalties imposed for illegal securities activities. The regulators and self-regulators only stepped up their enforcement actions after citizens complained at the Ontario Standing Committee of Finance and Economic Affairs in August 2004 and after the Globe and Mail's investigative report on market timing abuses in the Canadian mutual fund industry.

The RCMP and police are accountable to the public through citizen oversight boards, while the regulators and self-regulators are essentially accountable to no-one (except perhaps their provincial ministers who never get involved in complaints from the public on the integrity of enforcement matters).

The recent list of alleged and proven misconduct in the investment funds industry is now staggering:

Norbourg
Portus
Crocus
Norshield
Commercial Food Workers' Pension Plan
United Co-operative Multi-Employer Pension Plan

Mutual fund Market timing abuse settlements:
Investors Group $19.2 million
AIC Funds $58.8 million
AGF $29.2 million
CI Funds $49.1 million
Franklin Templeton $49.1 million
TD Waterhouse $20.6 million
RBC Dominion $17.0 million
BMO Nesbitt Burns $3.7 million
HSBC Securities $??? to be announced August 31, 2005
Another 15 mutual fund companies with evidence of market timing abuses, that the OSC arbitrarily decides not to prosecute

[urquhart]

The Chairman of IFIC resigns after his firm is raided by 30 police officers today. It does not appear that the MFDA was responsible for the raid. Would the MFDA investigate the Chairman of IFIC? I think the RCMP and police forces should take over all securities enforcement in Canada, because the self-regulators and provincial securities commissions cannot be trusted for comprehensive investigation and prosecutions without interference from politicians, the financial industry and the "so-called reputable" fraudsters themselves.

Police raid Norbourg officesThursday, August 25, 2005 Updated at 5:33 PM EDT

Globe and Mail Update with Canadian Press

RCMP and Quebec provincial police swooped down on the offices of asset manager Norbourg Asset Management Inc. in Montreal Thursday and made related searches in Toronto as part of a major fraud investigation.

Michel Fragasso, a senior vice-president with Norbourg Asset Management, stepped down as chairman of the board of directors at the Investment Funds Institute of Canada (IFIC).

In a late Thursday press release, IFIC said it had "regretfully accepted" his resignation. The move arrives in the wake of new from the Autorite des marches financiers that it is investigating Norbourg, including Fonds Evolution Inc., IFIC said. Mr. Fragasso is chair of Fonds.

Mr. Fragasso has held his position at IFIC, a mutual fund industry lobby group, since October, 2004. Brenda Vince, the president of RBC Asset Management Inc., is taking on the position of acting chair, IFIC said.

About 100 people, including locksmiths and 30 provincial police officers, were involved in Thursday's raids in Montreal and Toronto, an RCMP spokesman said.

Quebec financial market regulators ordered the halt of all activities at the firm and froze its assets and bank accounts, alleging that the company's annual financial statements for the past three years were false or misleading.

The Autorite des marches financiers also alleged the embezzlement of $69.8-million from the Evolution and Norbourg family of funds, the falsification of documents and a gap of $70.7-million between Norbourg's last financial statements and the assets under management.

Norbourg has $34-million in assets under management while the Evolution funds oversee about $146.2-million in assets, according to Globefund.com.