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Who has the power? – Investment Executive



The term “attorney” is confusing to those who automatically think that the attorney under a power of attorney must be a lawyer. It needn’t be, and the only conditions to be appointed as an attorney are that the individual(s) must have reached the age of majority and must be capable of managing one’s financial affairs. To avoid confusion, note that in some jurisdictions the legal term for attorney is “substitute decision-maker.”

Fortunately, less confusion arises with trusted contact person (TCP).

I correlate a TCP with an emergency contact. The scenario I reference is filling out a form at the dentist’s office that asks who to contact if something goes awry while in the dental chair.

The TCP is part of regulatory measures that came into effect on Dec. 31, 2021, and was established to help financial advisors when they’re concerned that clients are being financially exploited or demonstrating diminished mental capacity and unable to make financial decisions. For example, a client may exhibit memory loss, an inability to communicate their wishes or an unusually dishevelled appearance.

The TCP acts as a resource for the advisor and is someone they can discuss their observations with. Ultimately, the TCP helps protect the client’s financial interests and assets. Additionally, if an advisor is unable to contact or locate the client, the TCP may be able to assist.

While some dealers may have space for only one name on the applicable form, a client is permitted to choose more than one TCP. Further, while there is no requirement that the TCP be the age of majority, it should be someone who can be trusted, understands the client’s personal matters and knows how to contact the client and their family members and loved ones. A TCP should not be the client’s dealing or advising representative on the account.

TCP versus PoA

A TCP can’t make financial decisions on behalf of a client, meaning they can’t initiate or authorize transactions on the client’s behalf. Nor can they make account changes in any form or be given access to accounts and account information.

A PoA can do anything that the grantor (client) could do unless constrained in the power of attorney document and by provincial and territorial law. They may have the ability to authorize the purchase and sale of securities in an investment account.

Each provincial jurisdiction in Canada has legislation governing the powers of attorney, and the rules vary by province. Typically, the duty to act arises when the PoA has accepted the appointment or has acted in a manner consistent with the appointment. In some cases, the power of attorney document will specify a date or an event that triggers the appointment. An example of an event would be a capacity assessment by medical professionals confirming that the grantor is incapable of managing their financial affairs.

Overall, the PoA must act in accordance with a fiduciary standard and abide by the terms and conditions of the power of attorney document. These duties include but are not limited to the following:

  • acting in the best interests of the grantor
  • exercising reasonable care and skill in conducting the grantor’s affairs
  • keeping records of all transactions and accounting for the grantor’s affairs
  • ceasing to exercise their authority and duties if the power of attorney is revoked

A PoA typically cannot do the following:

  • make a will on the client’s behalf
  • change an existing will
  • change the designated beneficiaries of any registered accounts (RRSP, RRIF, TFSA) or life insurance policies
  • grant a new power of attorney to someone else
  • provide gifts, unless allowed per the power of attorney document and authorized in specific jurisdictions, and the gift doesn’t impoverish the grantor
  • co-mingle the grantor’s assets with their own assets (except for property that is registered jointly)

As with a TCP, a grantor can specify more than one PoA, and there can be PoAs for specific assets.

Nuances of the TCP and PoA selection process

A TCP does not assume the PoA role under a client’s power of attorney document. The PoA is specified in the power of attorney document, and such document will specify the conditions required for the PoA to commence acting in this capacity and what duties and powers the selected PoA has.

A client may designate that their TCP and PoA be the same individual. But an advisor should encourage a client to select a TCP who is not making decisions with respect to the client’s account.

Consider this example. A PoA conducts affairs on a client’s account, but the instructions are inconsistent with the client’s best interests. If the PoA and TCP are the same individual, then the advisor is constrained to share their concerns with an independent third party. Further, a TCP who is not the PoA may provide insight into the client’s support network and help mitigate such a situation.

So, while the TCP has a limited mandate and is unable to directly impact the financial affairs of a client, the indirect impact can be significant.

While the roles and responsibilities of a TCP and PoA are distinct, what isn’t is the characteristics these individuals must have. At a minimum, they must both be trustworthy and responsible.

Michael Kulbak, MBA, CPA, CMA, TEP, is principal of Kulbak Trust Solutions in Mississauga, Ont.

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Venture capital investment slides to prepandemic levels in second quarter amid tech slowdown – The Globe and Mail



Canada’s tech sector has struggled since last fall as a mixture of macroeconomic events, including the pandemic and Russia’s invasion of Ukraine began triggering supply chain slowdowns and broad uncertainty.Nathan Denette/The Canadian Press

Venture-capital funding in Canada fell to prepandemic levels in the second quarter this year as the tech downturn hit privately held companies, the Canadian Venture Capital and Private Equity Association says, and financiers warn that the sector’s sudden caution may continue.

The CVCA said in a new report Thursday that there was $1.65-billion in venture capital (VC) deployed across 182 deals in the second quarter of 2022. It was the lowest quarter since the pandemic prompted a flood of cash into digital-services companies, down 67 per cent from $5.1-billion in the same quarter in 2021. But it was roughly on par with 2019′s $1.66-billion second-quarter investment.

The investment figures the association released for the first half of 2022, however, suggest that the downturn’s true impact will be more starkly revealed in the coming quarters as data catches up with the gap between when deals are first negotiated, closed and then announced.

What crisis? Venture capitalists bet big on crypto

Where are venture capitalists investing in Canada?

In its report, the CVCA said that the $4.5-billion in investments announced in the first quarter – the country’s second-highest quarter on record – was largely comprised of 25 “mega-deals” worth more than $50-million that were “largely residual transactions” from 2021.

Particularly among later-stage companies, “we’re going to see a slowdown that might persist,” Christiane Wherry, the CVCA’s vice-president of research and product, said in an interview. While some of the institutional investors her association works with are “able to stay the course” with financings, she said she’s seen much more caution among smaller VC firms, funds and family offices.

There may now be a “more realistic air” to the venture ecosystem as venture investors spend time “digesting the end of the pandemic and where we go from here,” said Matt Golden of Golden Ventures. Michael Hyatt, entrepreneur, investor and Northleaf Capital Partners adviser, said that financiers “are being highly discriminate about what they are going into.”

Sean O’Connor, managing director of Conexus Venture Capital in Regina and chair of the CVCA’s data committee, said that “founders and VCs are not seeing eye to eye as we figure out what the new world looks like,” which could lead to tension in calculating company valuations.

“We’ve seen the VC space move back into something a bit more normalized from before the pandemic, but it’s a struggle to figure out how much of that regression will show up in valuations.”

The swelling of valuations in both public and private markets during the first two calendar years of the pandemic has been broadly recognized, in hindsight, as a unique moment in which a global shift to digital services coincided with historically low interest rates.

The moment was also precarious. Ms. Wherry acknowledged that 2021′s record-breaking Canadian venture investment levels, which the CVCA calculated as reaching $14.2-billion, was an “outlier year – with record high levels that we probably won’t return to any time soon.”

The tech sector has struggled since last fall as a mixture of macroeconomic events including the pandemic and Russia’s invasion of Ukraine began triggering supply chain slowdowns and broad uncertainty. Subsequent high inflation put pressure on central banks to boost interest rates, making capital more expensive and drying up the pools of investor money that flooded the market for tech companies since the Great Recession.

Not all segments of the tech sector are facing the same headwinds in Canada, according to the CVCA’s numbers. Young, seed-stage companies aren’t exposed to the same investor pressures and economic factors as bigger, cash-consuming firms. They saw $263-million in financing across 104 deals, making the second quarter the highest on record both in terms of total investment and deal number.

Environmentally friendly or sustainability-focused companies, classified as “clean tech,” saw investment levels surpass 2020 levels in the first half of 2022, and the CVCA said the sector could reach 2021 investment levels by the end of the year. “As investors shift their focus from the pandemic, which was an emergency situation, now they’re shifting their focus to something equally as urgent,” Ms. Wherry said.

But in general, the public-market pullback was a shock for later-stage companies that might hope to tap into public markets: the CVCA didn’t record a single initial public offering last quarter, it said.

After numerous massive deals in the first quarter, such as a $775-million round for password-protection company 1Password (AgileBits Inc.), the biggest deals last quarter were much smaller. They included $185-million for Calgary challenger bank Neo Financial Technologies Inc., $101-million for “unbreakable” pantyhose maker Sheertex Holdings Corp., US$100-million for biotechnology startup Ventus Therapeutics Inc. and $100-million for Toronto virtual-private-network company Tailscale Inc.

The CVCA also reported Thursday that Canada saw $3.3-billion worth of private-equity deals in the second quarter – a 32-per-cent drop – across 202 transactions.

With a report from Sean Silcoff

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Thailand's investment pledges slump in H1 as foreign projects wane – SaltWire CB powered by Cape Breton Post



BANGKOK (Reuters) – Investment applications in Thailand dropped by 42% in the first half of 2022 compared to the same period last year, official data showed on Wednesday, led by a sharp fall in foreign projects as the global economy slowed.

Foreign investments, which made up 60% of the overall 220 billion baht ($6.22 billion) of applications in January-June, more than halved year-on-year, data from the Board of Investment (BOI) showed.

But a surge in electric vehicle (EV) and digital investments bucked the trend, and the BOI said on Wednesday it had approved several new major investment pledges.

“We will continue to monitor the situation and adjust our policies and incentives to ensure Thailand remains the resilient destination of choice for global investors in fast growing sectors such as electric vehicles,” BOI said in a statement.

The Southeast Asian country has promoted high-tech sectors and supported EVs to maintain its status as a regional auto production base.

In January-June, investment pledges in EVs surged 212% from a year earlier to 42.4 billion baht while ones in the digital sector jumped 202% to 1.45 billion baht, the BOI said.

On Wednesday, the BOI approved investment pledges worth 44.5 billion baht – including China’s BYD’s 17.9 billion baht project to produce EVs, and PTT’s 18 billion baht gas production project, the agency said.

($1 = 35.38 baht)

(Reporting by Kitiphong Thaichareon, Satawasin Staporncharnchai and Panarat Thepgumpanat; Writing by Orathai Sriring; Editing by John Geddie)

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Quebec pension giant Caisse takes $33.6 billion investment hit in worst markets in 50 years – Financial Post



Pension fund writes off $150-million investment in bankrupt Celsius

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The Caisse de dépôt et placement du Québec posted a negative return of 7.9 per cent for the first six months of the year, in what chief executive Charles Emond noted was the worst period for stock and bond markets over the past 50 years.

As of June 30, the Caisse had net assets of $392 billion, with the $28.2-billion decrease due to investment losses of $33.6 billion offset by $5.4 billion in net deposits. The losses included a full write off of the fund’s US$150 million investment in crypto lender Celsius Network LLC, which is now in Chapter 11 bankruptcy proceedings in the United States.

“The first six months of the year were very challenging,” Emond said in a statement. “The mix of factors we faced had not been witnessed in several decades: spiking inflation that triggered rapid and sharp interest rate hikes, rare simultaneous corrections in both stock and bond markets, fears of an economic downturn and the war in Ukraine with its many collateral effects.”

Over the same period, the Ontario Teachers’ Pension Plan Board reported a positive return of 1.2 per cent on Monday.

During a news conference Wednesday to discuss the Caisse results, Emond said the Quebec pension fund wrote off the Celsius crypto investment even though it is considering its legal options and intends to preserve its rights in the court-monitored U.S. bankruptcy proceedings.

“We decided to take it now” out of prudence, Emond said of the writeoff. “The last chapter hasn’t been written.”

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He said his team conducted extensive due diligence with outside experts and consultants. They were aware of management and regulatory issues at Celsius and underestimated the time it would take to resolve them, he said, adding the Caisse was keen on “seizing the potential of block chain technology” and perhaps the investment in Celsius had been made “too soon” in the company’s development.

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He noted that the investment was a very small part of a large venture portfolio that has produced 35 per cent returns over the past five years.

“In these disruptive technologies, there’s ups and downs…. Some big winners and many losers,” Emond said.

Although the Caisse posted an overall return in negative territory for the first six months of the year, the performance exceeded that of its benchmark portfolio — which posted a negative return of 10.5 per cent.

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“Over five and 10 years, annualized returns were 6.1 per cent and 8.3 per cent respectively, also outpacing benchmark portfolio returns,” the pension manager noted.

Emond said the Caisse is managing the “turbulence” with a combination of asset diversification and strategic adjustments made since the COVID-19 pandemic began.

“For the past two years, we’ve been working in an environment of extremes characterized by particularly fast and pronounced changes. These unusual and unstable conditions will persist for some time,” he said.

“In the short term, we’ll be watching what central banks do to contain inflation and how that impacts the economy.”

  1. The Ontario Teachers’ Pension Plan board eked out a 1.2 per cent return in the first half of the year.

    Ontario Teachers’ Pension Plan Board ekes out small return in ‘difficult’ markets

  2. The Canada Pension Plan Investment Board reported a 4.2 per cent loss, equivalent to $23 billion, for the three months ending June 30.

    CPPIB breaks winning streak with $23-billion loss amid ‘market turbulence’

  3. In July, crypto lender Celsius Network filed for Chapter 11 bankruptcy protection and owes users about US$4.7 billion.

    Canadian watchdogs join probe of Celsius’ multi-billion-dollar collapse, sources say

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During the first six months of the year, negative returns in equities and fixed income were partially offset by gains in the Caisse’s investments in real assets including infrastructure and real estate.

The pension giant posted a negative return of 13.1 per cent in fixed income, which beat the negative 15.1 per cent return for its benchmark portfolio. This represented nearly $3 billion in “value added” attributable to all credit activities, the Caisse said.

A negative return of 16 per cent in equities beat the negative 17.2 per cent return in the benchmark portfolio.

The Caisse’s real estate and infrastructure portfolios, meanwhile, generated a 7.9 per cent six-month return, “demonstrating their diversifying role which contributes to limiting inflation’s impact on the total portfolio.”

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The real asset class performance also beat the benchmark portfolio’s return, which was 2.4 per cent.

“So that asset class played its role. The two portfolios are doing well,” Emond said.

He said it is challenging to compare the short-term performance of Canadian pension funds because they have e different mandates and investment models. The Ontario Teachers’ Pension Plan, for example, has less exposure to equity markets than the Caisse and more exposure to natural resources and commodities, which performed well in the first half of the year.

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