Important Takeaways For Fund Managers From Recent Market-timing Decision

There are many important takeaways for investment fund managers from the Ontario Superior Court's recent trial decision in Fischer¹, a case in which two fund managers were found liable for failing to take reasonable steps to identify and deter "time zone arbitrage". While the plaintiffs' specific allegations concerning "market timing" trading practices are unlikely to repeat themselves in practice, the broader takeaways from this decision have significant implications for investment fund managers and their internal compliance and risk management teams.

Background

The Fischer class action was commenced against five investment fund managers that settled with the Ontario Securities Commission (OSC) following its investigation into "market timing" trading practices. The OSC investigation resulted in the five fund managers, including both defendants, entering into settlement agreements in which they paid over $200 million to their respective funds.