USC Education Savings Plans Inc.
and Global Educational Marketing Corp. have not been barred from doing
new business. They cannot hire new sales staff or open new branches
under conditions placed on their registration by the Ontario
Securities Commission. USC is a wholly owned subsidiary of the
not-for-profit International Scholarship Foundation. Incomplete
information was published yesterday.
Securities regulators have known for at least two years that
Canada's fast-growing registered education savings plan sector is
riddled with problems.
This week, the Ontario Securities Commission took the rare step of
imposing conditions on six scholarship-plan dealers, including barring
two of them from expanding their operations. Five of the dealers must
submit monthly progress reports to the commission beginning Sept. 15.
The commission went public with its findings following earlier
attempts to get the industry to clean up its act. Compliance reports
done every year since 2002 by regulators in Ontario and Alberta have
outlined numerous problems involving the dealers' business, sales and
"In many cases, we identified issues, which had been previously
brought to the attention of the dealers by other securities
regulators," the OSC says in a report released this week.
The OSC sent a report to the dealers in August, 2003, outlining the
problems. During follow-up compliance reviews in March and April this
year, the OSC said all the dealers had made some improvements but
numerous problems remained.
"Due to the repeated non-compliance, more stringent measures are
being taken and varying terms and conditions have been imposed on the
registration of these dealers," the OSC report says.
Investor advocate Ken Kivenko wonders why the regulator waited so
long before cracking down on the burgeoning industry. After all, the
OSC published a brochure in October, 2002, to help investors
understand the risks associated with registered education savings
plans (RESPs), including the "often-misunderstood" pooled group
scholarship trust plans.
"When reports are written nothing happens anyway, so what kind of
investor protection do we have?" Mr. Kivenko asked.
Five companies singled out by the OSC are the largest players in
the RESP industry. However, unlike a handful of mutual fund dealers
that also sell these investments, the five companies sell the pooled
group plans that invest mainly in government bonds.
The three largest players --
Allianz Education Funds Inc., CST Consultants Inc.
and USC Education
Savings Plans Inc. -- account for nearly $5-billion of the $12.8-billion in assets
managed by the industry.
Educational Marketing Corp.
have been barred from hiring new staff and opening new branch offices.
A sixth company in the start-up phase, H&R Block Canada Financial
Services Inc., has been barred from having employees in sister company
H&R Block Canada Inc. sell scholarship plans.
Peter Lewis, vice-president of administration at CST Consultants,
said the industry has addressed many of the concerns raised by the
"I think we have basically made some tremendous strides forward and
I guess the OSC felt that we should have turned the ship on a dime so
to speak and are asking for a little bit faster response."