OTTAWA -- Finance Minister Ralph Goodale attacked Canaccord Capital Corp.'s campaign to rally investors in defence of income trusts as politically tainted and dismissed the brokerage's charge that Ottawa is largely to blame for a recent $23-billion drop in the value of these investments.
"This particular firm has chosen to take a very political, a very partisan approach," Mr. Goodale said of Canaccord, which sent clients a research note on Wednesday accusing Ottawa of "a morally indefensible attack" on millions of investors.
The independent brokerage -- one of Canada's largest -- was targeting the fact that Ottawa is seriously considering clamping down on the once red-hot trust vehicle.
Canaccord's note questioned whether Ottawa's consultations on trusts were a "sham" and urged clients to lobby MPs in defence of trusts, providing them with names, e-mails and telephone numbers they'll need to press the case.
"The intentional or unintentional destruction of the existing trust market does not need to happen. Contact your MP and share your concerns before it's too late," Canaccord said.
Yesterday, Mr. Goodale shot back, pointing out to reporters that Paul Reynolds, an executive at Canaccord, is the son of Conservative MP John Reynolds, who is currently the co-chair of the national Tory election campaign.
He said it was Mr. Reynolds, the MP, who presented him the Canaccord report.
"I find it interesting that it was first drawn to my attention by John Reynolds, the former interim leader of the Conservative Party who, when he handed it to me, was happy to make the point that his son effectively runs the company," he said.
"I thought it was an interesting partisan comment on his part. So consider the source."
Mr. Goodale said there were "some unfortunate misinterpretations in the [Canaccord] material, a lot of alleging and a lot of innuendo that I think is quite unfortunate."
Mark Maybank, head of research and global capital markets operations at Canaccord, said he could see why Ottawa would like to malign the report because it's easier than refuting Canaccord's facts.
"If I were the government, I would want to discredit this report," said Mr. Maybank, who is also managing director. "There's a number of very raw and sensitive election issues in here: aging population, funding of retirements, double taxation, productivity, lack of consultation in a process -- and this report hammers them all."
Mr. Maybank said Canaccord's note is not intended to be a "partisan document" and he urged the minister to read the entire report.
He said Canaccord was merely giving clients advice to protect their investments. "Research's role is to provide unbiased and objective commentary for [our clients] to help manage their portfolio . . . And sometimes it's 'You should buy Suncor' and this time it's 'You should call your MP.' "
He said Paul Reynolds had nothing to do with the report.
Canaccord said Paul Reynolds, vice-chairman of its parent firm, is based in London and runs part of, but not all, the company. He is head of global capital markets. Mr. Maybank said the firm had no hand in John Reynolds' decision to present the report to Mr. Goodale.
It comes as Ottawa is seriously considering changes that could reduce the tax advantages of trusts. The market for this vehicle has slumped since September when Mr. Goodale put investors on alert and Canaccord's note to clients blames Ottawa.
"The income trust sector lost $23-billion in market capitalization over the past month, largely due to fear and uncertainty caused by the federal government," Canaccord said in its Wednesday note.
Mr. Goodale fiercely disputed this yesterday, saying it's unfair to blame him for the selloff in trusts because rising interest rates and softening energy prices played a role too. "For the argument to be made that there's only one single cause and that it's all a concoction of the government I think is a bit extreme and a bit misleading."
John Reynolds, the Conservative MP, said he contacted Mr. Goodale about the report because he was trying to arrange a meeting between Canaccord and the Finance Minister. He said it was "very unprofessional" of Mr. Goodale to drag partisan politics into the picture. "He's in trouble. He's got to try and get away from the real issue."
© The Globe and Mail
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