MSC sets date for Crocus hearing

The Manitoba Securities Commission today launched enforcement proceedings against the Crocus Investment Fund and certain current and past members of the fund’s board of directors.

The MSC hearing will be held on May 6.

MSC staff allege:

• the procedures set out in the labour sponsored investment fund’s prospectus were not followed with respect to the pricing of Class A shares of Crocus;
• certain members of the board failed to follow the procedure for pricing Class A shares that is set out in the prospectus and in The Crocus Investment Fund Act;
• the board failed to act in the public interest on matters involving the process used to value Crocus’s investment portfolio.

In a news release, Crocus said that the substance of MSC allegations was communicated to representatives of the Crocus board in a briefing meeting on April 4. At the meeting the MSC clarified the basis for each of the various allegations.
“It is clear from the report and briefing meeting that the allegations are primarily related to procedural issues and the assessment by the MSC that the Crocus Board should have voluntarily ceased trading as early as November 19, 2004 rather than Dec. 10, 2004,” said Alfred Black, interim CEO at Crocus, in a statement. “Crocus believes it can address these issues in a timely manner in collaboration with the MSC.”

In response to each of the allegations, Crocus and the directors named in the report will file a formal reply in the coming weeks. This reply is anticipated to lead to a settlement with the MSC, consistent with preliminary discussions that have been undertaken to date.

The Crocus board has approved a decline of approximately $46 million in the fund’s net asset value. Crocus added that when operating expenses incurred by the fund since trading was halted on Dec. 10, 2004, are included in the valuation, the fund’s share value would be slighlty below $7.

The final share price won’t be set until approved by the MSC.

The Crocus board also advised that it received a briefing today from Deloitte and Touche LLP, which included a number of recommendations for changes in governance and operational procedures. The Deloitte report is one of several initiatives undertaken by the Crocus board associated with their decision to voluntarily cease trading on December 10.

“Recommendations in the final report will provide a sound basis for achieving a settlement with the MSC,” Black added.