| Industry | Financial |
|---|---|
| Founded | 1954 |
| Founder | Donald Mercer Cormie |
| Defunct | 1987 |
| Fate | Bankruptcy |
| Headquarters | , Canada |
Area served | Canada |
The Principal Group was a group of interrelated Canadian financial companies that collapsed in 1987, resulting in losses to an estimated 67,000 people. Losses were in recovered in part through provincial governments paying compensation, based on findings as to deficiencies in regulatory oversight.[1]
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Transcription
History
The Principal Group was primarily three companies: First Investors Corporation, Associated Investors of Canada and Principal Savings and Trust Corporation. First Investors Corporation was established by Donald Cormie in 1954.[1] The company was initially based in Edmonton, Alberta. The company sold investment contracts, which were contracts by which investors remitted monthly amounts to First Investors Corporation, in return for a promised future redemption amount, plus interest. In 1959, First Investors opened offices in Nova Scotia, New Brunswick and Newfoundland. At the same time, it also opened offices in Washington, Oregon and Colorado as Principal Investors, since the First Investor's name was owned in the United States by another party.[1][2] Associated Investors of Canada was acquired in 1962.[1]
The companies were subject to Alberta Securities Commission regulation and also required licenses to sell investment contracts. Alberta regulatory concerns were expressed as early as 1961, which concerns continued until the demise of the companies some twenty-five years later. These concerns related to excessive valuations of transactions and the general solvency of the companies, among other matters.[1] On June 30, 1987, Alberta Treasurer Dick Johnston cancelled the operating licenses of First Investors Corporation and Associated Investors of Canada. Six weeks later, the Principal Group filed for bankruptcy,[1] owing more than 67,000 investors approximately $468 million ($0.97 billion today).[3]
Calgary lawyer William Code[4] was appointed in 1987 to conduct an inquiry into the financial affairs of the corporation, the findings of which were released in July 1989.[5] Code found fault with the regulatory conduct of the Alberta government. Two weeks after the report was released, the accountable minister during the period under review, Connie Osterman, was dismissed from cabinet by Premier Don Getty.[1]
The Ombudsman of Alberta, Aleck Trawick,[6] initiated a separate inquiry.[7] This inquiry was followed by inquiries initiated by Ombudsman offices in British Columbia,[8] Saskatchewan,[9] Nova Scotia,[10] and New Brunswick.[11][12] All the inquiries found degrees of fault in the regulatory oversight by the various provinces. Investors finally settled their various claims in 2001, at which time their estimated recovery rate was 90%, including compensation paid by provincial governments.[3]
References
- ^ a b c d e f g Brian Brennan, "The Principal Group Collapse: The Man Who Knew". Extracted from Boondoggles, Bonanzas, and Other Alberta Stories, Fifth House Publishers, 2003, as reprinted in Business Edge, January 6, 2004.
- ^ Now known as Foresters Financial: "First Investors Changes Its Brand Name to Foresters Financial". News Release, September 21, 2015. retrieved 2016-11-05.
- ^ a b Uncredited, Principal investors getting final payment. CBC News, May 2, 2001. Retrieved 2016-11-14.
- ^ Legacy.com, Obituary of William Code (1932-2016). Retrieved 2016-11-08.
- ^ William Code, Final Report of The Inspector, 1989. Retrieved 2016-11-08.
- ^ Legacy.com, Obituary of Aleck Trawick (1945-2010). Retrieved 2016-11-08.
- ^ . Aleck Trawick, Office of The Ombudsman for Alberta, The Role of the Provincial Government in the Regulation of The Principal Group of Companies. Special Report, 1989. Retrieved 2016-11-08.
- ^ Stephen Owen, Office of the Ombudsman for British Columbia, The Regulation of AIC Ltd. and FIC Ltd. by the B.C. Superintendent of Brokers (The Principal Group Investigation). Public Report No. 19, 1989. Retrieved 2016-11-08.
- ^ Gerald McLellan, Special Report On The Regulation of FIC Ltd. and AIC Ltd. By The Saskatchewan Superintendent of Insurance (The Principal Investigation). Office of the Ombudsman of Saskatchewan, 1989. Retrieved 2016-11-09.
- ^ Guy MacLean, In the matter of the Regulation of First Investors Corporation Ltd. Office of the Ombudsman of Nova Scotia, 1990.
- ^ Joseph E. Bérubé, A report and recommendations respecting the regulation of First Investors Corporation Ltd. (FIC) by the Province of New Brunswick. Office of the Ombudsman of New Brunswick, 1991. Retrieved 2016-11-11.
- ^ In its 1991 report, released in 1992, the Office of the Ombudsman of New Brunswick disclosed that it had "investigated a complaint lodged on behalf of 3,252 mostly elderly persons of limited means who suffered severe financial loss following the collapse of First Investors Corporation. Appendixes contain complaint summaries and statistical tables." National Criminal Justice Service, Abstracts Database, Office of the Ombudsman (New Brunswick), 25th Annual Report, 1991. Retrieved 2016-11-11.
Further reading
- Alberta. Office of the Ombudsman (1989). Special report: the role of the Provincial Government in the regulation of the Principal Group of companies. Edmonton: s.n.
- Smith, Wendy (1993). Pay yourself first : Donald Cormie and the collapse of the Principal Group of Companies. Toronto: Bruce Press. ISBN 978-0-9696750-0-6.
This page was last edited on 30 January 2024, at 18:04