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Mark Rabinovitch v. CIBC Asset Management Inc.
CASE SUMMARY
In October 1996, the Atlas American RSP Index Fund was created and Atlas Asset Management was the mutual fund administrator. One of the fundamental objectives of the Fund was to enable Canadian investors to invest Canadian money based on the performance of U.S. stock indexes without assuming the normal U.S. dollar currency risk. The fund was designed to allow the Canadian money invested to appreciate or decline in value by the same percentage as certain U.S. stock indexes, irrespective of any fluctuations in the exchange rate between the U.S. and Canadian dollars.
The fundamental objectives of the fund were defined by the Trust Agreement under which it was created. Canadian securities legislation and the National Instrument and Companion Policy (issued and adopted in regard to Mutual Funds pursuant to the legislation and to the prospectus issued by the Fund administrator) stated that the fundamental objectives of the fund could not be changed without the prior approval of the investors by way of a majority vote at a duly called meeting of investors.
From October 1996 until early 2002, the Canadian money invested in the fund in fact rose and fell in value in accordance with the U.S. stock indexes being tracked by the fund - notwithstanding that there were significant fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar at various times over this period.
The fund became known as the Renaissance U.S. RSP Index fund in early 2002 and CIBC took over as the mutual fund administrator. At this time, there were approximately 36,000 Canadians with their retirement savings invested in the fund. At no time did CIBC file a material change notice disclosing a change to any fundamental feature of the Fund, and at no time did CIBC seek the approval of investors to make a change to a fundamental objective of the fund.
From the time CIBC began administrating the Fund until November 21, 2003, the U.S. dollar decreased by approximately 18% relative to the Canadian dollar. Such fluctuation in the exchange rate had not affected the value of the investments in the fund in the past as the fund was designed to virtually eliminate currency risk. However, over that period of time the Canadian money invested in the fund underperformed the U.S. stock indexes tracked by the fund by approximately 18% - matching the fluctuation in the exchange rate. This translated into a collective loss of more than $22 million dollars for 36,000 Canadian investors and their retirement savings.
On November 21, 2003, Mark Rabinovitch filed a motion asking that he be authorized to act on behalf of all the fund's investors in a class action against CIBC. His motion was granted and none of the 36,000 investors opted out of the class action. Further to the Authorization Judgment, Mr. Rabinovitch instituted a class action alleging that:
i.CIBC added U.S. dollar currency risk as a risk factor for Canadian money invested in the fund;
ii.By adding U.S. dollar currency risk, CIBC significantly changed a fundamental objective and feature of the fund;
iii.CIBC did not notify the 36,000 investors that it would be adding U.S. dollar currency risk and did not obtain the investors’ approval for the significant change;
iv.CIBC committed a fault by adding U.S. dollar currency risk as a risk factor for the fund in the manner that it did;
v.Due to CIBC’s failure to notify investors of the significant change, the illegally added U.S. dollar currency risk only became public on November 21, 2003 when Mr. Rabinovitch made his Motion for Authorization;
vi.As a result of the fault – the addition of the U.S. dollar currency risk – the investments of the 36,000 investors of the fund decreased in value by more than $22 million dollars by the time the U.S. dollar currency risk became public.
The action was settled on December 17, 2007 for the sum of 20 million dollars Canadian.
To read more about this case please follow the proceedings included in the Litigation section.
The Litigation
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Judgment Approving Memorandum of Agreement of Amendment 21 February 2008
Memorandum of Agreement of Amendment 20 February 2008
Notice of Final Judgment December 2007
Notice to Unit Holders December 2007
Final Judgment 17 December 2007
Motion to approve a class action settlement agreement and transaction (C.S.) 11 December 2007
Settlement Agreement 10 December 2007
Declaration of Inscription on the Roll for Hearing (C.S.) 28 September 2006
CIBC Asset Management Inc. v. Rabinovitch (C.A.) 16 June 2006
Declaration of Inscription on the Roll for Hearing (C.S.) 24 May 2006
CIBC Asset Management Inc. v. Rabinovitch (C.A.) 22 February 2006
Defendant's Plea (C.S.) 3 June 2005
CIBC Asset Management Inc. v. Rabinovitch (C.A.) 11 March 2005
Rabinovitch v. CIBC Asset Management Inc. (C.S.) 3 December 2004
Re-amended motion introductive of class action (C.S.) 27 September 2004
CIBC Asset Management Inc. v. Mark Rabinovitch (C.A.) 2 September 2004
CIBC Asset Management Inc. v. Rabinovitch (C.A.) 24 August 2004
Rabinovitch v. CIBC Asset Management Inc. (C.S.) 15 July 2004
Notice to Members (8 March 2004)
Contact
You may contact counsel representing members of the Class in these actions.
Neil Stein
Stein & Stein Inc.
4101 Sherbrooke St. West
Montreal, Quebec
Canada H3Z 1A7
Tel: 514 866 9806
Ext. 209
Robert Kugler
Kugler Kandestin, L.L.P.
1 Place Ville Marie
Suite 2101
Montreal, Quebec
Canada H3B 2C6
Tel: 514 878 2861