July 8, 2005

CP Ships gets warning letter

The Ontario Securities Commission yesterday issued a warning letter to CP Ships Ltd.

The warning letter followed an investigation into:

  • CP Ships Ltd.'s disclosure that the financial statements for the years ending December 31, 2002 and 2003 and the financial results for the first quarter, 2004 would have to be restated; and
  • trading by insiders in the shares of CP Ships during the period May 19 to June 4, 2004.
  • In the opinion of the Ontario Securities Commission staff who investigated these matters, the determination by CP Ships management in June 2004 that the financial statements needed to be restated constituted a material change which should have been disclosed forthwith. The fact that the magnitude of the restatement was not known until early August 2004 did not mitigate the responsibility of the company to disclose forthwith the fact that a restatement was required.

    Trades in the shares of CP Ships were executed by four insiders between May 19 and June 4, 2004 at a time when the insiders knew that the financial results of CP Ships for the second quarter ending June 30, 2004 were expected, based upon internal forecasts, to be materially below publicly disclosed estimates of analysts. It is Staff's opinion that the fact that the financial results of CP Ships would be materially below analysts' estimates was an undisclosed material fact.

    It is the opinion of Ontario Securities Commission staff that the conduct of CP Ships and these insiders may not have been in the public interest and that such conduct could have formed the basis of proceedings against them.

    However, in light of the high level of cooperation received from CP Ships and its advisors, the Ontario Securities Commission says "it is possible to adequately protect the public interest by issuing a caution rather than commencing formal proceedings."

    The Ontario Securities Commission also says that CP Ships has agreed that the restitution paid to the company by the four insiders in the amount of Canadian $1,434,112.25 will be re-directed to the "MFDA Investor Protection Corporation". The Mutual Fund Dealers Association of Canada established the MFDA Investor Protection Corporation June 29, 2005 as a protection plan for customers of mutual fund dealers that are members of the MFDA.

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