Chou Associates Management Inc. - Opportunity to be Heard

Director's Decision
[Update: The terms and conditions imposed by the Director in this decision were removed as at November 30, 2006.]








June 1, 2006
David M. Gilkes
Manager, Registrant Regulation
Capital Markets Branch
Isabelita Chichioco
For the staff of the Commission
James T. Morrow
For Chou Associates Management Inc.



1. Chou Associates Management Inc. (CAM) has been registered in Ontario in the categories of Limited Market Dealer, and Investment Counsel and Portfolio Manager since October 1986.

2. CAM was due to file its financial statements with the Ontario Securities Commission (OSC) on March 31, 2006. CAM filed the statements on April 6, 2006.

3. On April 7, 2006 staff of the OSC wrote CAM indicating that a late filing fee was due and that it had recommended that terms and conditions be imposed on CAM's registration.

4. On April 18, 2006 CAM paid the late filing fee.

5. On April 24, 2006 CAM requested an Opportunity to be Heard (OTBH) by the Director pursuant to subsection 26(3) of the Securities Act that states:


(3) Refusal -- The Director shall not refuse to grant, renew, reinstate or amend registration or impose terms and conditions thereon without giving the applicant an opportunity to be heard.

6. The OTBH was conducted through written submissions.



7. OSC staff focus on three criteria in determining whether an applicant is suitable for registration: proficiency, integrity and financial solvency.

8. Financial statements are the principal tool used by the OSC to monitor a registrant's financial viability and its capital position.

9. The failure to file or late filing of audited financial statements is an important factor in determining the continuing suitability of a registrant. The experience of OSC staff has been that delays in filing statements can be indicative of a serious underlying financial problem with the registrant.

10. Counsel for CAM explained that the delay in filing the statements was a result of a failure of its auditors. According a letter dated April 21, 2006 from Burns Hubley, the financials were filed late because the auditors had a scheduling conflict and they misunderstood NI 81-106.



11. All registrants are required to meet the filing requirements of the Securities Act within the prescribed time limits. The filing of annual audited financial statements is a serious regulatory obligation placed on registrants.

12. When these obligations are not met, OSC staff has regularly recommended that terms and conditions to monitor the financial situation of the firm be imposed on its registration. Only in rare circumstances would this course of action not be followed. A scheduling conflict with CAM's auditors is not a persuasive reason not to impose monitoring terms and conditions.

13. Therefore, the terms and conditions as set out in Schedule A are imposed on the registration of CAM. CAM must continue to meet all requirements under the Act that apply to it as a registrant.

June 1, 2006

"David M. Gilkes"


Schedule A

Terms and Conditions on the Registration of

Chou Associates Management Inc.


1. Chou Associates Management Inc. shall file on a monthly basis with the Compliance section of the Ontario Securities Commission, attention Financial Analyst, effective with the month ending May 31, 2006, the following information:


a. year-to-date unaudited financial statements, which includes a balance sheet and income statement prepared in accordance with generally accepted accounting principles;

b. month end calculation of excess free capital;

no later than three weeks after each month end.