Pace Securities | General financial discussion | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
Pace Securities
May 15, 2020
3:21 pm
Yaftica
Member
Members
Forum Posts: 21
Member Since:
May 15, 2020
sp_UserOfflineSmall Offline

First post here but have been scouring the internet for anything related to what appears to be the collapse of Pace Securities. Nothing. My TFSA with them largely comprised of Pace Financial Ltd preferred stock has lost 40k, non pandemic related I guess. Got an official letter today from the Bank in my email that Ernst & Young has taken over for liquidation of the company. I’m guessing that’s why my broker hasn’t called me, out of a job over there. Looks like class action and years of waiting now to see what if anything might be recoverable. I’m hoping I don’t lose the other 20 tied up in Mutual Funds too. If there’s additional info out there go ahead and comment...

May 15, 2020
4:17 pm
AltaRed
Member
Members
Forum Posts: 1016
Member Since:
October 27, 2013
sp_UserOnlineSmall Online

Need some clarity. Are you talking about Pace Credit Union? Or some other Pace? And where?

May 15, 2020
4:29 pm
Kidd
Member
Members
Forum Posts: 496
Member Since:
February 27, 2018
sp_UserOfflineSmall Offline
May 15, 2020
4:34 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Yaftica said
First post here but have been scouring the internet for anything related to what appears to be the collapse of Pace Securities. Nothing. My TFSA with them largely comprised of Pace Financial Ltd preferred stock has lost 40k, non pandemic related I guess. Got an official letter today from the Bank in my email that Ernst & Young has taken over for liquidation of the company. I’m guessing that’s why my broker hasn’t called me, out of a job over there. Looks like class action and years of waiting now to see what if anything might be recoverable. I’m hoping I don’t lose the other 20 tied up in Mutual Funds too. If there’s additional info out there go ahead and comment...  

Very interesting. Thank you for alerting us to this. Are you saying your Pace Securities Corp. TFSA held preferred shares in Pace Financial, Ltd? Was Pace Financial a private or publicly listed stock?

Here's the official letter from Pace Credit Union on this...they had been hoping to find a buyer, but COVID-19 seemed to cause the Letter of Intent to collapse, so Pace Credit Union has put the subsidiary into liquidation, with Ernst & Young LLP appointed as receiver/monitor.

https://www.pacecu.ca/SharedContent/documents/2020/PACEsecuritiescorp.pdf

https://documentcentre.eycan.com/Pages/Overview.aspx?SID=2495

Nonetheless, if no buyer is found, your accounts are protected, to $1 million per account, by the Canadian Investor Protection Fund. Individual holdings may decline in market value, but CIPF will ensure that the number of units or shares of your accounts' individual holdings remains.

I suspect they will find a buyer, though, so you shouldn't worry about your mutual funds. Another IIROC dealer will likely step up to take on the assets, and Pace Credit Union will write off the value of their Pace Securities Corp. subsidiary.

Edit: "On May 14, 2020, the Ontario Superior Court of Justice issued a Court Order authorizing the Wind Up of Pace Securities Corp. (“PSC”), Pace Financial Limited (“PFL”), Pace Insurance Brokers Limited ("PIB") and Pace General Partner Limited (“PGPL”) (together the “Companies”). Pursuant to the Order granted by the Ontario Superior Court of Justice, Ernst & Young Inc. was appointed Liquidator of the Companies.

One of EY’s top priorities is to transfer customer accounts to another dealer as quickly.as possible. Clients will have EY’s support transitioning their accounts to a new brokerage firm, including the transfer of their investments. We will do our best to ensure this happens as quickly as possible, including restoring customer access to your accounts. In the meantime, if customers have any questions or concerns, they can contact us using the information below." Yep, CIPF would only kick in if there had been loss of funds. It's exactly as I suspected—prospective purchaser either balked at the price or couldn't finance the deal because of COVID-19. Rest assured, I'm confident another, larger mutual fund dealer will take on your accounts, as well as those of other clients. Pace Credit Union, and Pace members by extension, will suffer a loss on the subsidiaries in the form of reduced equity value in the company.

As far as the Pace Financial Limited preferred shares, while that will be recorded in your accounts, whether there is value there, I'm not sure. It was indeed a subsidiary of Pace Credit Union that, presumably, paid dividends. I'm just not certain how those dividend payments were being derived and, since it is included in the companies Pace Credit Union has put into liquidation, you will be considered a creditor to which the non-segregated assets of the companies will be divided. In short, what a mess.

And it gets weirder, @Loonie will remember this...there had been an attempt by the previous executives of Pace Credit Union to have a subsidiary of Pace acquire Continental Currency Exchange Ltd. I see now that Pace Credit Union is going to acquire Continental Currency Exchange Ltd. directly and the FSRA has approved it (https://www.pacecu.ca/SharedContent/documents/2020/PACE%20Press%20release_April%2014,%202019.pdf)!

AltaRed said
Need some clarity. Are you talking about Pace Credit Union? Or some other Pace? And where?  

Yep, see my reply above.

Cheers,
Doug

May 15, 2020
7:55 pm
Yaftica
Member
Members
Forum Posts: 21
Member Since:
May 15, 2020
sp_UserOfflineSmall Offline

“Are you saying your Pace Securities Corp. TFSA held preferred shares in Pace Financial, Ltd? Was Pace Financial a private or publicly listed stock?”

I would say Yes to the first part and Private to the second it seems. It was sold to me by the broker as a low risk option to put my funds in. Not really knowledgeable with this stuff obviously. Learning the hard way now. Thanks for the insight. I’ve got an inquiry into E&Y so hopefully this preferred stock isn’t a total loss or it will be converted to something else during the liquidation but I’m feeling the explanation that I’m a creditor now comes into play. This is the email text, long read if you’re interested::

Sharing Timely News About Our Business and PACE Securities
From: Barbara Dirks, CEO, PACE Credit Union

Friday May 15, 2020

Dear Members,

Following the discussions from our AGM on April 28, 2020, the Board and the PACE Credit Union leadership team have worked diligently to ensure that we are serving the best interests of our members.

Like you, we are relieved to be slowly coming through the other side of the Covid-19 lockdown. We are so proud of our branch teams and members for the community spirit shared in these past months. It has renewed our commitment to ensure an appropriate, core-business foundation for PACE Credit Union on which we can all thrive.

The financial impacts of Covid-19 have been felt throughout the financial industry and around the globe. Many portfolios and companies have experienced downturns from which there will be no easy or quick recovery.

At the AGM, we indicated that we had received a Letter of Intent to sell PACE Securities Corp. (PSC). We were hopeful that this business would find a soft landing, despite unstable market conditions. However, since that time, PSC has been unable to raise and secure capital funding. Therefore, now is the right time to conclude our relationship with PSC and close that chapter of our history. This decision allows us to focus on helping those members who invested with PSC and keep PACE Credit Union stable.

Ernst & Young (E&Y) is overseeing the orderly wind up of PSC and supplying excellent support, including a hotline for our members who invested in PSC. Impacted members will have E&Y’s support transitioning their accounts to a new brokerage firm, including the transfer of their investments. E&Y is very experienced in these transitions and will ensure an orderly transfer of accounts to another broker; securities or investments will be transferred in-kind and are not being liquidated as a result.

Winding up PACE Securities will take some time and, while it directly impacts only a small number of members, we are committed to keeping everyone informed along the way:

If you are one of the members who invested, we will be reaching out to you directly when we have more details.

In the meantime, we have a Frequently Asked Questions (FAQ) posted on our website.

If you wish to speak with an expert at E&Y, there is a dedicated Toll-Free Hotline (North America): 1-855-943-7141 (local Hotline: 416-943-7141) with a commitment to responding to all queries within 48 hours if not sooner

E&Y will also set up a website dedicated to PACE Securities clients http://www.ey.com/ca/pacesecurities which includes an email pace.securities@ca.ey.com contact as well.

Like you, we believe that our credit union is and should be accountable and transparent in everything it does. Our Contact Centre is always ready to take your calls and our Branch teams are happy to speak with you. Rest assured that your deposits continue to be secure, and that your financial needs continue to be served. PACE Credit Union is here to stay.

We are working to uncomplicate and communicate; contact us any time.

May 16, 2020
10:00 am
AltaRed
Member
Members
Forum Posts: 1016
Member Since:
October 27, 2013
sp_UserOnlineSmall Online

FWIW, I checked the CIPF member's list and Pace Securities is on it.... so the OP's unit holdings will be secure....but not the value of them of course.

We don't know what mutual funds the OP is referring too, but their value will be whatever the market value of they are on any given day. Same with the Pace preferred shares though it seems like these could be worthless as E&Y winds up Pace Securities, Pace Financial, etc. Depends on their hierarchical position in the list of other creditors.

An expensive lesson for the OP, but one everyone should pay heed too.

1) Do not do business with 'fringe' or 'boutique' companies like Pace Securities when there are much classier and bigger outfits to deal with, and who have reputations to protect.

2) There is a terrible conflict of interest with an advisor who recommends purchase of securities with a firm in the same family* of companies, e.g. Pace Securities and Pace Financial. The regulatory and compliance department (if any) in Pace Securities should probably have forbid it, and particularly so if it is privately held (not publicly traded). That (former) advisor is highly suspect.

* There are exceptions in the big 5 banks for example where it may be quite appropriate for a Scotia McLeod advisor to recommend BNS stock over BMO or RY or TD depending on the valuation metrics...or to suggest a client choose which of 2-3 banks to buy. These firms are so big that whether a client purchases a product from them makes no difference to the firm's position/wellbeing.

Good luck to the OP.

May 16, 2020
10:46 am
Norman1
Member
Members
Forum Posts: 3078
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

The PACE Financial Limited preferred share recommendation is such a conflict of interest.

This is from Google's cached copy of a PACE Securities relationship disclosure. The PACE Securities web site is down for the moment:

(1) Pace Securities Corporation (PSC), is an investment dealer and Portfolio Manager wholly owned by the Pace Savings and Credit Union. We operate solely in the provinces of Ontario and Quebec for residents of those provinces and offer preferred and common stocks, bonds, mutual funds and listed equity and index options to our clients. We are also registered as an Investment Fund Manager in Ontario.

(12) PACE Financial Limited (PFL) has issued Series A 5% Cumulative Redeemable Retractable Preferred shares (5% Pref). PACE Capital Partners LP (PCP LP) has issued limited partnership units (LPU) to eligible subscribers. Both of these issues were offered under prospectus exemptions available under National Instrument 45-106. Both PFL and PCP LP are wholly owned or controlled by PACE General Partner Limited a subsidiary 100% owned by PACE Securities Corp so the securities they issue are related to us.

PACE Financial Limited (PFL) is not only in the same corporate family. PFL is actually wholly owned or controlled by PACE Securities through a wholly owned PACE General Partner Limited.

Those PFL, Series A, 5% Cumulative Redeemable Retractable preferred shares look like the preferred shares mentioned.

May 16, 2020
11:19 am
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

AltaRed said
[snip redundant information]

An expensive lesson for the OP, but one everyone should pay heed too.

1) Do not do business with 'fringe' or 'boutique' companies like Pace Securities when there are much classier and bigger outfits to deal with, and who have reputations to protect.

The problem, though, AltaRed, is that Pace Securities Corp. was wholly-owned by Pace Credit Union, which is a significant Ontario credit union. When it purchased All Trans Financial Services Credit Union, it was one of the largest issuers of prepaid credit cards and stored value cards in the country. In much the same way that the major banks' investment dealing subsidiaries benefited from their parent banks' brand cachet, Pace Securities did this as well.

2) There is a terrible conflict of interest with an advisor who recommends purchase of securities with a firm in the same family* of companies, e.g. Pace Securities and Pace Financial. The regulatory and compliance department (if any) in Pace Securities should probably have forbid it, and particularly so if it is privately held (not publicly traded). That (former) advisor is highly suspect.

In my opinion, while I had a reasonable opinion of Pace until now, the fact they put Pace Securities and Pace Financial into liquidation, to the significant detriment of its members who were invested in Pace Financial Limited preferred shares has soured my opinion of the company. What they should've done is converted the Pace Financial Limited preferred shares into non-cumulative investment shares of Pace Credit Union with a par value at a conversion ratio that sees both Pace Financial and Pace Credit Union members taking a hit. Forcing only Pace Financial Ltd holding Pace Credit Union members to take a hit is wrong, in my view, given the obvious conflict of interests.

* There are exceptions in the big 5 banks for example where it may be quite appropriate for a Scotia McLeod advisor to recommend BNS stock over BMO or RY or TD depending on the valuation metrics...or to suggest a client choose which of 2-3 banks to buy. These firms are so big that whether a client purchases a product from them makes no difference to the firm's position/wellbeing.

Given Pace Credit Union's involvement, wouldn't you argue that this saga has put into question the wisdom of allowing small and medium sized credit unions the ability to own mutual fund, investment dealing, or investment counsel subsidiaries? I'm not talking of the top 10 Canadian credit unions, but anything smaller than, say, Alterna Savings & Credit Union, Limited., basically. We should be having a larger conversation about forcing all credit unions to sell, forthwith, their investment subsidiaries to companies like Worldsource Investment Management (which many credit unions, including the large ones, already use), Aviso Wealth, or some other large player, no?

Good luck to the OP.  

Indeed. sf-cool

Norman1 said
The PACE Financial Limited preferred share recommendation is such a conflict of interest.

This is from Google's cached copy of a PACE Securities relationship disclosure. The PACE Securities web site is down for the moment:

(1) Pace Securities Corporation (PSC), is an investment dealer and Portfolio Manager wholly owned by the Pace Savings and Credit Union. We operate solely in the provinces of Ontario and Quebec for residents of those provinces and offer preferred and common stocks, bonds, mutual funds and listed equity and index options to our clients. We are also registered as an Investment Fund Manager in Ontario.

(12) PACE Financial Limited (PFL) has issued Series A 5% Cumulative Redeemable Retractable Preferred shares (5% Pref). PACE Capital Partners LP (PCP LP) has issued limited partnership units (LPU) to eligible subscribers. Both of these issues were offered under prospectus exemptions available under National Instrument 45-106. Both PFL and PCP LP are wholly owned or controlled by PACE General Partner Limited a subsidiary 100% owned by PACE Securities Corp so the securities they issue are related to us.

PACE Financial Limited (PFL) is not only in the same corporate family. PFL is actually wholly owned or controlled by PACE Securities through a wholly owned PACE General Partner Limited.

Those PFL, Series A, 5% Cumulative Redeemable Retractable preferred shares look like the preferred shares mentioned.  

Exactly, Norman. Pace Financial Limited (PFL) is indirectly wholly owned by Pace Credit Union. A terrible conflict of interest that, I think, is seeing Pace Credit Union not share appropriately in the negative consequences. They, through their shared management team, used their branch staff and brand cachet to sell to their members an investment product that wasn't a regulated investment of the credit union. That is, it was a retractable preferred share callable by its PFL subsidiary under certain provisions. Members weren't aware of the ramifications of buying preferred shares in one of their subsidiaries. I'm not saying PFL preferred stockholders should be made whole, but it seems to me the solution here is to implement a conversion ratio to convert PFL preferred shares into non-dividend paying investment shares of Pace Credit Union such that all Pace members are diluted alike.

Cheers,
Doug

May 16, 2020
11:50 am
AltaRed
Member
Members
Forum Posts: 1016
Member Since:
October 27, 2013
sp_UserOnlineSmall Online

Quoted from Doug: The problem, though, AltaRed, is that Pace Securities Corp. was wholly-owned by Pace Credit Union, which is a significant Ontario credit union. When it purchased All Trans Financial Services Credit Union, it was one of the largest issuers of prepaid credit cards and stored value cards in the country. In much the same way that the major banks' investment dealing subsidiaries benefited from their parent banks' brand cachet, Pace Securities did this as well.

Pace may be a significant Ontario credit union but it is still 'small potatoes' in the overall scheme of things. It doesn't have national implications or a national reputation to uphold like a big 6 bank or even the likes of Home Capital, Equitable Group, Laurentien Bank, Canadian Western Bank, etc. There is just too much that can go wrong within thin/weak/inexperienced governance structures. What was the Board of Pace Credit Union thinking with this incestuous arrangement that was no doubt cheerleaded by Pace executives? Where was the regulator? Think of the scam like Earl Jones that have destroyed people's investments. No robust oversight from a strong governance structure.

It is one thing to 'bank' with CIDC or CU insured deposits with 'smaller' firms. It is quite another thing to trust one's assets like securities (outside the deposit network) to ANY boutique securities/mutual fund dealer. There are a lot of boutique securities firms out there. I wouldn't touch any of them.

Off my soapbox now......

May 16, 2020
12:06 pm
Briguy
Member
Members
Forum Posts: 440
Member Since:
March 17, 2018
sp_UserOfflineSmall Offline

Doug said

Members weren't aware of the ramifications of buying preferred shares in one of their subsidiaries. I'm not saying PFL preferred stockholders should be made whole, but it seems to me the solution hereis to implement a conversion ratio to convert PFL preferred shares into non-dividend paying investment shares of Pace Credit Union such that all Pace members are diluted alike.

Cheers,
Doug  

I looked at old thread about Pace Credit Union and you said you liked them.
https://www.highinterestsavings.ca/forum/general-financial-discussion/dico-placed-pace-credit-union-under-admininstration-due-to-governance-issues/page-4/

"I like what PACE Credit Union is doing and how they're consolidating credit unions much like Alterna Savings. If they'd open up their bond of association, they are one of three or four Ontario credit unions I'd join"

Do you still feel that way? sf-surprised

May 16, 2020
12:07 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

AltaRed said
Quoted from Doug: The problem, though, AltaRed, is that Pace Securities Corp. was wholly-owned by Pace Credit Union, which is a significant Ontario credit union. When it purchased All Trans Financial Services Credit Union, it was one of the largest issuers of prepaid credit cards and stored value cards in the country. In much the same way that the major banks' investment dealing subsidiaries benefited from their parent banks' brand cachet, Pace Securities did this as well.

Pace may be a significant Ontario credit union but it is still 'small potatoes' in the overall scheme of things. It doesn't have national implications or a national reputation to uphold like a big 6 bank or even the likes of Home Capital, Equitable Group, Laurentien Bank, Canadian Western Bank, etc. There is just too much that can go wrong within thin/weak/inexperienced governance structures. What was the Board of Pace Credit Union thinking with this incestuous arrangement that was no doubt cheerleaded by Pace executives? Where was the regulator? Think of the scam like Earl Jones that have destroyed people's investments. No robust oversight from a strong governance structure.

It is one thing to 'bank' with CIDC or CU insured deposits with 'smaller' firms. It is quite another thing to trust one's assets like securities (outside the deposit network) to ANY boutique securities/mutual fund dealer. There are a lot of boutique securities firms out there. I wouldn't touch any of them.

Off my soapbox now......  

Agree with you on all of that. The original board was fired, much too late, by the regulator, and now the regulator has appointed a new board after a national recruitment campaign (one of whom includes the former CFO of Street Capital Bank of Canada, whose book value eroded significantly at the time of its sale), though Pace is, rightly, still under administration. It just doesn't have to get FSRA's EVP, Prudential and Credit Union, to sign off on any matters requiring board approval.

I'm just thinking of Interior Savings Credit Union...I'd trust them with CUDIC B.C. guaranteed deposits, but they have investment management and private investment counsel subsidiaries. They're not that much larger than Pace Credit Union in the grand scheme of things, and I'm less than impressed by their governance practices. Would it be fair to say you wouldn't trust their investment management subsidiaries to manage your investments? This was the example I was thinking of when I said we should have a larger conversation about requiring credit unions with less than, say, $15 billion in assets, to divest their asset management and wealth counselling subsidiaries. Better yet, we should require all credit unions to divest their asset management and wealth counselling subsidiaries to the credit union centrals, I think. sf-cool

Cheers,
Doug

May 16, 2020
12:41 pm
AltaRed
Member
Members
Forum Posts: 1016
Member Since:
October 27, 2013
sp_UserOnlineSmall Online

No, I wouldn't trust Interior Savings investment management either. Not sure any CU should have Investment Management subsidiaries although I would have to look at the biggest ones like Vancity to be sure. It might be different if a CU farmed out investment management to someone like Desjardins, etc. that operated at arms length.

May 16, 2020
1:19 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

AltaRed said
No, I wouldn't trust Interior Savings investment management either. Not sure any CU should have Investment Management subsidiaries although I would have to look at the biggest ones like Vancity to be sure. It might be different if a CU farmed out investment management to someone like Desjardins, etc. that operated at arms length.  

Yeah, I agree, Desjardins would be a credit union central, so I would trust them. The difference between the Desjardins model and the ex-Quebec CU model is that Desjardins is both the front- and back-ends to members. It's the CU and the CU central, with the local CUs being mere legal entities with local boards to provide direct and local representation between members and the large behemoth that is Desjardins. In many respects, I would say the Desjardins model is safer for members as they're essentially Canada's unofficial sixth largest "bank"—more or less tied with National Bank of Canada, essentially. Vancity is probably fine as well, but I would still prefer to see them outsource their investment management to Worldsource (part of Guardian Capital Group) like Coast, Prospera, and so forth do, or to Credential Qtrade (majority owned by Desjardins, with the balance held by the other CU centrals and Cooperators) like others do.

Cheers,
Doug

May 16, 2020
2:20 pm
Norman1
Member
Members
Forum Posts: 3078
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Yaftica said
… I’ve got an inquiry into E&Y so hopefully this preferred stock isn’t a total loss or it will be converted to something else during the liquidation but I’m feeling the explanation that I’m a creditor now comes into play. …

Is there anything to indicate that there's going to be a shortfall?

I had a look at the Ernst & Young site and only saw a May 14 order to windup

  • Pace Securities Corp.,
  • Pace Financial Limited,
  • Pace Insurance Brokers Limited, and
  • Pace General Partner Limited.

The order was applied for by the companies themselves.

There's no application or order for bankruptcy or creditor protection.

Looks like no-one wants the companies and they are just going to be wound down, liquidated, and dissolved after the money is distributed.

May 16, 2020
2:49 pm
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Briguy said

I looked at old thread about Pace Credit Union and you said you liked them.
https://www.highinterestsavings.ca/forum/general-financial-discussion/dico-placed-pace-credit-union-under-admininstration-due-to-governance-issues/page-4/

"I like what PACE Credit Union is doing and how they're consolidating credit unions much like Alterna Savings. If they'd open up their bond of association, they are one of three or four Ontario credit unions I'd join"

Do you still feel that way? sf-surprised  

@Briguy, circumstances have changed. I fully stated above, did I not, that I used to like Pace Credit Union. I'm not impressed with the way they have handled this, given the credit union's culpability here. 🙁

Pace Credit Union is now on my second strongest possible avoid list (after Meridian Credit Union and Motus Bank, though they are at the bottom of the list for entirely different reasons). As well, I'm unconvinced by the quality of the board of directors the FSRA has appointed, or by new CEO Barbara Dirks. I don't know anything about her. Also, why did the FSRA decide to allow the purchase of Continental Currency Exchange, Ltd.? I liked the interim CEO, Rubina Havlin, the FSRA recruited away from Wealth One Bank of Canada to manage Pace, but until Pace is ultimately merged into a larger credit union, with its brand and product names dissolved and merged into successor products, I can't recommend them.

Norman1 said
Is there anything to indicate that there's going to be a shortfall?

I had a look at the Ernst & Young site and only saw a May 14 order to windup

Pace Securities Corp.,
Pace Financial Limited,
Pace Insurance Brokers Limited, and
Pace General Partner Limited.
The order was applied for by the companies themselves.

There's no application or order for bankruptcy or creditor protection.

Looks like no-one wants the companies and they are just going to be wound down, liquidated, and dissolved after the money is distributed.

That's helpful speculation, Norman, but is there anything to indicate there are any assets of PFL Financial, Limited, for which Pace Securities Corp. clients held preferred shares? I don't think there's going to be a shortfall in terms of any other assets, mutual funds, GICs, and the like that Pace Securities Corp. clients held, but those assets are segregated and won't be distributed to make up the shortfall of PFL Financial, Limited. It's, sadly, quite possible those holding PFL Financial, Limited, preferred shares will see those shares in their accounts, but see no market value to them. 🙁

PACE Savings & Credit Union, Limited 2019 Consolidated Financial Statements said

From p. 46:

Section 16, p. 46, 2019 Consolidated Financial Statements of PACE Savings and Credit Union, Limited

What do you make of that, Norman, specifically that PACE Financial, Limited, issued preference shares in itself, which were considered borrowings of PACE Savings & Credit Union, Limited? As well, we do know that Laurentian Bank Securities Inc. called in their margined securities because the PACE CEO letter to members said as much.

From p. 47:

PACE Savings & Credit Union, Limited 2019 Consolidated Financial Statements said
Section 16, p. 47, 2019 Consolidated Financial Statements of PACE Savings and Credit Union, Limited

Cheers,
Doug

May 16, 2020
3:00 pm
Briguy
Member
Members
Forum Posts: 440
Member Since:
March 17, 2018
sp_UserOfflineSmall Offline

Doug said

Pace Credit Union is now on my second strongest possible avoid list (after Meridian Credit Union and Motus Bank, though they are at the bottom of the list for entirely different reasons).
Cheers,
Doug  

I disagree with putting Meridian on bottom of list. They quite often have GIC promos for new money, so it's a good strategy to move money out and then back in again if they have a promotion. The other main benefit is that they have quite a few branches ( for a credit union ) in Ontario. I think @Loonie really likes them.

May 16, 2020
3:22 pm
Loonie
Member
Members
Forum Posts: 6072
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

I do like Meridian for the reasons Briguy has given. I have sometimes had exceptional service from my local branch and I ap preciate that in-person access.

But I have yet to find an FI that doesn't have weaknesses. The most annoying one with Meridian/motus is the slowness of their transfers..

May 17, 2020
8:25 am
Norman1
Member
Members
Forum Posts: 3078
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Doug said

From p. 46:
Section 16, p. 46, 2019 Consolidated Financial Statements of PACE Savings and Credit Union, Limited
What do you make of that, Norman, specifically that PACE Financial, Limited, issued preference shares in itself, which were considered borrowings of PACE Savings & Credit Union, Limited? As well, we do know that Laurentian Bank Securities Inc. called in their margined securities because the PACE CEO letter to members said as much.

The preferred shares were issued by PACE Financial. They are not borrowings of the credit union.

Inclusion in a consolidated statement of the credit union and being treated as debt are just for accounting purposes. The debt/liability treatment of retractable preferred shares, instead of equity, is a recent accounting rules change and only affects financial statements.

The retractable preferred shares are still legally shares and not debt. Neither the credit union, PACE Securities, nor PACE General Partner are on the hook for them unless there is an explicit guarantee.

Laurentian Bank Securities is not even mentioned in the May 15 PACE Credit Union CEO's letter.

From p. 47:
PACE Savings & Credit Union, Limited 2019 Consolidated Financial Statements said
Section 16, p. 47, 2019 Consolidated Financial Statements of PACE Savings and Credit Union, Limited

That doesn't prove anything. At this point, things that could impact long-term solvency don't matter. What matters right now is whether or not PACE Financial is solvent now.

May 17, 2020
8:44 am
Doug
British Columbia, Canada
Member
Members
Forum Posts: 3462
Member Since:
December 12, 2009
sp_UserOfflineSmall Offline

Norman1 said
The preferred shares were issued by PACE Financial. They are not borrowings of the credit union.

Inclusion in a consolidated statement of the credit union and being treated as debt are just for accounting purposes. The debt/liability treatment of retractable preferred shares, instead of equity, is a recent accounting rules change and only affects financial statements.

The retractable preferred shares are still legally shares and not debt. Neither the credit union, PACE Securities, nor PACE General Partner are on the hook for them unless there is an explicit guarantee.

Laurentian Bank Securities is not even mentioned in the May 15 PACE Credit Union CEO's letter.

That doesn't prove anything. At this point, things that could impact long-term solvency don't matter. What matters right now is whether or not PACE Financial is solvent now.  

Thanks, Norman. Regarding Laurentian Bank Securities being mentioned, it wasn't mentioned in either of the Pace Credit Union letters to members, but it was mentioned in the member FAQ document.

Snippet from member FAQ about Pace Securities Corp wind-up

It's a bit complicated, but it seems like the Pace Financial, Limited, preferred shares were recorded on Pace Credit Union's balance sheet as preference shares for the noted amount from their 2019 financial statements. They were dually recorded as unsecured borrowings of Pace Financial, Limited, for which they were used to finance other investments. The market value decline of those other investments led Laurentian Bank Securities, as carrying broker, to call the margin loan, and seek to end the brokerage relationship, which, together, precipitated this wind up.

Are you saying the Pace Financial, Limited preference shares have value and that the amount recorded on Pace Credit Union's balance sheet, less any amounts owed to Laurentian Bank Securities, would be distributed to Pace Financial, Limited, preference share owners on a pro rata basis as cash as part of the liquidation of Pace Financial, Limited?

Cheers,
Doug

May 17, 2020
9:54 am
Norman1
Member
Members
Forum Posts: 3078
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Doug said

It's a bit complicated, …

Yes, it is complicated because of the second-rate disclosure. For example, "PACE Financial declined 31%." Is that the value of PACE Financial on the credit union's consolidated balance sheet that's down 31%? Is that the "market value" of the PACE Financial preferred shares?

As well, what kind of junk were they involved in. Scotia iTRADE currently charges around Prime + 1.20% = 2.45% + 1.20% = 3.65% for a margin loan. That margin loan from Laurentian was likely around that as well.

The preferred shares paid 5%. So, the debt securities must have been paying at least 5% + 3.65% = 8.65%! Doesn't sound like government bonds or CMHC-insured mortgage securities.

Are you saying the Pace Financial, Limited preference shares have value and that the amount recorded on Pace Credit Union's balance sheet, less any amounts owed to Laurentian Bank Securities, would be distributed to Pace Financial, Limited, preference share owners on a pro rata basis as cash as part of the liquidation of Pace Financial, Limited?

It is possible that the preferred shares still have value. Can't tell if it is $25 per share or 2.5¢ per share. Would be able to tell if there was a first-rate disclosure of a PACE Financial Limited balance sheet.

Carrying value on the credit union's balance sheet is irrelevant. When a corporation is liquidated and dissolved there is a pecking order for the cash. Claims from lenders, like Laurentian Bank Securities, need to be paid. Claims from suppliers, like their Internet service provider and maybe an office coffee vendor, also need to be paid. What's left is then distributed to shareholders, including holders of those preferred shares, according to the terms of the shares.

Kind of like probate and settlement of an estate when someone dies.

If anyone is looking for some office furniture and is near a PACE Financial or a PACE Securities office, one should contact the liquidator Ernst & Young!sf-laugh

No permission to create posts

Please write your comments in the forum.