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Regulators ask court to approve ABCP payout

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Investors whose holdings were caught up in the freeze of the Canadian asset-backed commercial paper market in 2007 will be closer to getting a payout if a court approves a plan by regulators to distribute about $60 million they have collected from sellers of the paper.

The two regulators, the Ontario Securities Commission and the Investment Industry Regulatory Organization of Canada, said on Thursday they have applied to Ontario's Superior Court of Justice to approve their plan to distribute the funds to investors who purchased third-party asset-backed commercial paper (ABCP).

The application is scheduled to be heard on March 13 in Toronto.

The paper was essentially short-term debt issued by banks and other financial institutions and collaterized by a mix of financial assets.

The supposedly safe, $32-billion market froze up in August 2007 as investors worried about exposure to U.S. subprime mortgages. With no buyers and sellers for the paper, the market seized up.

Regulators said the funds come from settlement deals that Ontario's securities watchdog and IIROC, a self-regulatory organization that oversees investment dealers and trading activity, reached with ABCP issuers.

CIBC World Markets Inc and HSBC Bank of Canada agreed to pay $21.7 million and $5.92 million, respectively, to Ontario's securities commission.

Scotia Capital Inc., Canaccord Financial Ltd and Credential Securities Inc agreed to pay $28.95 million, $3.1 million and $200,000, respectively, to IIROC.

The settlements were reached in December 2009. The decision on how to disburse the money was made once all matters in connection with the ABCP market freeze were concluded, said David Thomas, director of public affairs at IIROC.

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