Investment Board members question Integrity Commissioner’s recommendation of personal-trading policy

Feb. 5, 2018

By Arianne Robinson

Toronto’s Integrity Commissioner, Valerie Jepson, is recommending the Toronto Investment Board establish a personal-trading policy, as members begin the process of managing approximately $5 billion of City of Toronto assets – what Jepson calls “a significant responsibility.”

The purpose of a trading policy is “to protect the City and the public by minimizing the risk of the improper use of confidential information,” Jepson wrote to Signal Toronto.

However, some members of the newly formed Investment Board were heard questioning the reasoning for the policy at their meeting at city hall on Monday, calling it redundant with existing securities laws, and pointing to differences in how the Investment Board will operate compared with other major funds.

“The [examples of] companies that are mentioned [in the integrity commissioner’s request] are quite different than ours in that they do active management within the company,” board member Sharon Ranson said, referring to OMERS, Public Service Pension, the Canada Pension Plan and Ontario Teachers’ Pension.

“I found this rather curious, especially when the companies identified, to me, are at a very different level,” Ranson said, characterizing the city’s investment fund more like a “blind trust.”

Jepson, who could not attend Monday’s meeting, wrote in an email to Signal Toronto that “blind trust” is not the appropriate term for the type of fund the Toronto Investment Board is managing.

Ranson was not the only board member to question the integrity commissioner’s recommendation of a personal-trading policy.

“She gave me a call last Friday afternoon and I had a little chat with her,” Chair John Crocker said at the public meeting. “My sense is this is an area she’s totally unfamiliar with, and as Sharon said, drawing these parallels with organizations that aren’t what we are at all.

“I encouraged her to work with Randy [LeClair, senior investment advisor at the City of Toronto] and bring back a simple, principled declaration as to what we should be doing – personal-trading policies to prevent people like us and associated staff who are somehow profiting from our knowledge here and, in fact, as Sharon said, we aren’t going to have any knowledge of trading particular trades at all, and we’re all governed by securities law whether it’s captured in the civic material. She seems amenable to working with Randy and city staff to come up with a proposal that meets that definition.

“I think there’s also a whole host of material, already, on the record in terms of taking gifts and having lunches and all that kind of thing anyway, so, I’m pretty sure a one- or two-page policy should cover this. She seemed amenable.”

Jepson confirmed by email that the policy could be short, but will require careful consideration of a number of factors including the types of information that will be available to the board, types of funds the board will manage on its own, and the terms when working with third-party service providers.

In response to questions about how familiar Jepson actually is with the topic, the integrity commissioner detailed the research she conducted for council when reviewing and amending the city’s code of conduct for local boards, which was passed last week by council. Jepson says this involved changes to improve the confidentiality rules and to reflect the applicability of securities legislation. She also spent time digging into the policy frameworks of major investment funds similar to Toronto’s, including Alberta Investment Management Corp., BC Investment Management Corp., Ontario Pension Board, OPTrust, Healthcare of Ontario Pension Plan, Public Service Pension Investments, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, OMERS, and the conflict of interest rules for provincial agencies.

Jepson also consulted with University of Toronto Faculty of Law’s Professor Anita Anand who told her a personal-trading policy is considered a best practice for boards with similar mandates to the Investment Board, although the size and scope of the policy could be limited based on how the board conducts its business.

The board moved to refer the policy question to the city’s corporate finance staff to work with Jepson on a draft policy for the board’s review.

“I look forward to working with the Toronto Investment Board to help it to establish a personal trading policy that adequately protects the City and the public and one that is practical and reflective of the way in which the Board carries out its work,” Jepson wrote to Signal Toronto.  “In my view, this is an important opportunity for the Board to demonstrate leadership with respect to its own governance.”

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