Securities Commissions assist predatory behaviours

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Re: Securities Commissions predatory behaviours

Postby admin » Fri Mar 04, 2011 1:14 pm

Peter Foster: One flew over the regulator’s nest
National Post
Peter Foster March 3, 2011 – 8:40 pm

Regulators are congenitally incapable of grasping that they create more problems than they solve

Psychologist Abraham Maslow is famous for formulating a personal “hierarchy of needs” that stretches from breathing and eating at one end to conspicuous commitments to Save Africa at the other. He is also credited with the insight that if you are a hammer, the world looks like a nail. Regulators are perhaps more like another implement: a shovel. When they find themselves in a hole, they are inclined to keep digging (intriguingly, just like proponents of using aid to save Africa).

A recent paper by the University of Kiev’s Slavisa Tasic, Are Regulators Rational?, analyzes this mental peculiarity of regulators via the burgeoning field of cognitive science. He suggests that if regulators appear congenitally incapable of grasping that regulation creates more problems than it solves, it’s because they are congenitally incapable.

“Behavioural economics” has been a happy hunting ground for those who claim that the cognitive imperfections of market players justify more government regulation. Strangely, however, behavioural economists have been slow to turn their attention to the cognitive imperfections of governments. The University of Chicago’s Richard Thaler frets that the silly old average person (whom he describes as “Homer [Simpson] Economicus”) does things like “under-save” for his retirement and thus needs government to rescue him from himself. However, this notion is surely laugh-out-loud ridiculous given a situation where U.S. federal and state governments have promoted vast unfunded pension programs for public sector workers that threaten national insolvency (although there is a long list of other candidates).

Examples of regulatory pretension in the face of glaring failure are legion. Did the Basel I and Basel II agreements do nothing to prevent the 2008 banking crisis? Then the answer is obviously Basel III! Did the G20’s Financial Stability Forum — set up in 1999 to ensure that nothing like the Asian financial crisis could ever happen again — provide no stability? Just change its name to the Financial Stability Board (and lard on a few more levels of trans-global bureaucracy). Did “prudential” regulation fail more comprehensively? No problemo. Let’s have some Macro-prudence. Meanwhile, surely the ne plus ultra of wild-eyed regulatory aspiration is taxing global industrial emissions to control the weather.

Why do people not fall about laughing at these repeated failures and ever-mounting pretensions? Why do regulators never flag in their high hopes for a regulatory Holy Grail? Because we — and they — are (among many other cognitive shortcomings) as dumb as doorknobs when it comes to comprehending how economies work.

Worse, regulators, by definition, have no idea how dumb they are. They suffer from “illusions of competence.” These guys and gals are not like Canada’s Worst Handyman, a klutz who thinks he is competent to put up a set of shelves. They would regulate humanity at every level from the global to the domestic. For example, Agenda 21, the doorstop wish list that emerged from the vast 1992 UN conference in Rio, wanted both to regulate global climate and make sure men shared with the housework (I wish I was joking).

Nobel economist James Buchanan’s theory of “public choice” noted that although politicians and bureaucrats are far from selfless, policies tend to get formulated as if they were. He said Keynesianism in particular would lead to soaring national debt. He was proved right in the 1970s and has just been proved right again.

Regulators represent a subset of public choice. Let’s call it “Shovel Choice.” Their fundamental problem is not that they are trying to use a shovel to craft a chronometer. What they are attempting is even more impossible. The economy isn’t a machine built by humans, even though it builds lots of machines. It is an organic “natural order” that we mess with at our peril. In fact, Mr. Tasic’s paper barely skims the surface of that vast ocean of what Friedrich Hayek called the “fatal conceit” of interventionists.

Evolutionary psychology’s explanation for failure to grasp the Invisible Hand is remarkably simple. Although we have trading instincts, no extensive markets existed during the millions of years that the human mind evolved, so we have no intuitive appreciation of them. This is easy to say, but much more difficult to absorb. Even most evolutionary psychologists don’t get it.

Mr. Tasic notes that despite the lack of evidence for the positive effect of regulation, “the rise of the regulatory state still largely meets public approval.” He suggests that we are thus dealing with “embedded illusion.” But this illusion is not merely shared by politicians, it is fondly cultivated by them. Just look at the appalling way in which the government of Stephen Harper exploited junk-science fears about plastic baby bottles to sell new consumer protection legislation.

Indeed, to the extent that we realize that politicians are — whether consciously or unconsciously — more interested in exploiting cognitive biases than correcting them, Mr. Tasic’s conclusion that cognitive science “calls for a humbler approach to government intervention” appears a little naive.

Regulators may look to cognitive science to make “smarter regulation,” but don’t expect them to express too much interest in being told they are on a fool’s errand. They aren’t fools. They’re shovels.

(advocate comment, please see for one potential defence action)
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Re: Securities Commissions predatory behaviours

Postby admin » Tue Feb 15, 2011 4:41 pm

Feb 15th, 2011

Dear Alberta Securities Commission.

Enclosed in order:

1) some enforcement matters relating to an investment person in Alberta
2) An article from Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011, suggesting that it is "fraud" to allow the misrepresentation that appears to be allowed by your agency (s)
3) An article from Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011, which appears to be written by another investment protection agency, seemingly in contrast to industry rules and supporting the misrepresentation or "fraud" against the public
4) Alberta Securities Commission Important definitions of the ASC’s Different Market Registrant Licenses from the ASC web site

It seems as if there may be a different answer to the difficult question of what is allowed and what is not, depending upon who is asked. I write to you to see if you can clarify, on behalf of the public, the apparent misrepresentation of allowing persons licensed or registered in the category of "salesperson" (pre 2009) or "dealing representative" (post 2009) to call themselves anything and everything they wish to including such official license categories as "advisor", or non-official but equally misleading names such as "vice president", "wealth manager", "retirement advisor", "estate planner".

I realize in advance the difficulty that your organization may face in being truthful in this matter, but I urge you to please look past your immediate self interest, and look to the public interest instead. Millions of Canadians, friends and relatives of yourself, including your children, perhaps your children's children are at risk of being misrepresented by people who pose as professionals, without meeting the qualifications of having to act as professionals. This mistake should not be born on your head as well should it?

I thank you in advance for your reply with clarity so the public can be made aware in as simple and understandable terms as possible.

Larry Elford


enclosure #1

"Financial professionals and salespersons in Canada are allowed to call
themselves advisors, irrespective of their professional designation."

IIROC’s In the Matter of Dale Richard Wells – Penalty below that was released last week on February 11, 2011.

This timely IIROC Enforcement Notice Decision released last week suggests to me that not all / that some IIROC “Registered Representatives” are not registered—licensed in Alberta as “advisers / advisors”.

Does this IIROC Enforcement Notice decision last week definitively refute your statement in your FP Comment column today,
that “salespersons in Canada are allowed to call themselves advisors”?

Enforcement Notice
Please distribute internally to: Legal and Compliance
Warren Funt
Vice President, Western Canada
604 331-4750

Elsa Renzella
Director, Enforcement Litigation
416 943-5877
February 11, 2011

IN THE MATTER OF Dale Richard Wells – Penalty

Following a disciplinary hearing held on September 2, 2010, in Calgary, Alberta, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that Dale Richard Wells conducted his business in a manner contrary to IIROC Rules by providing advice in securities when he was not properly registered to conduct business of that nature.

Specifically, the hearing panel found Mr. Wells committed the following breach of the IIROC Rules:

During the period February 2006 to July 2008, he acted as an advisor, within the meaning of the Alberta Securities Act, without being registered as such, contrary to IIROC Dealer Member Rule 29.1.

The Hearing Panel’s decision and reasons on the merits can be found at: ... anguage=en

Following a penalty hearing held on February 1, 2011, the Hearing Panel imposed:

a $10,000 fine on Mr. Wells

and required him to pay Staff’s costs of $13,000. The Hearing Panel will issue its written reasons on the penalty on a later date, which will be made available

IIROC formally initiated the investigation into Mr. Wells’ conduct in March 2008. The violations occurred when he was a Registered Representative with the Lloydminster, Alberta Branch of First Financial Securities Inc., an IIROC-regulated firm. Mr. Wells continues to be employed as a Registered Representative with First Financial Securities Inc.

The Notice of Hearing is available at: ... anguage=en

IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS), IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

IIROC carries out its regulatory responsibility through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.


enclosure # (2)

Make advisors work for investors

Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011
In January 2004, the Ontario Securities Commission released a concept paper advocating a "fair dealing model." The paper acknowledged that the regulatory regime -- regulating dealers and their representatives through the products they sell -- was based on the outdated assumption that transaction execution is the primary reason people seek financial services. Recognizing that most customers are seeking advice, the concept paper proposed changing the regulatory framework to focus on the advisory relationship.

Financial professionals and salespersons in Canada are allowed to call themselves advisors, irrespective of their professional designation. Few, however, are compensated directly for their advice. Instead, they are paid commissions to sell specific products. Addressing the conflicts of interest that result from commission-based compensation, the paper proposed that retail clients should be entitled to rely on objective advice that is in their best interest and, when there are conflicts of interest, they should be clearly disclosed so that the client can understand the conflicts and how they may affect the advice given.

In September 2004, the proposal was swept into a broader project of the Canadian Securities Administrators (CSA) and rebranded as the "client relationship model." Last month, the Investment Industry Regulatory Organization of Canada (IIROC) published its proposed reforms to establish requirements for the client relationship model. They specifically avoid imposing a duty on firms and their representatives to act in the best interest of clients, focussing instead on improving compliance with the existing "suitability" standard and improving disclosure with respect to conflicts of interest and performance reporting. IIROC noted that part of what influenced its thinking was an effort to harmonize with existing and proposed CSA standards (and other standards applicable to firms not under its jurisdiction).

To understand the difference between a "suitability" and "best-interest" standard, think of a student seeking advice at an electronics store about her need for a laptop. The salesperson recommends a highly priced unit with an expensive extended warranty -- all designed to generate the highest commission. The laptop is suitable--it will satisfy the student's needs. It clearly isn't the best solution and a disclosure obligation isn't likely to stand in the way of a motivated salesperson. If the salesperson had been bound by a "best-interest" standard, he would recommend a simpler, more reliable and affordable unit.

In the U.S., brokers and investment advisors are subject to different standards when providing investment advice. Many investors are unaware of these differences or their legal implications or find them confusing. In the wake of the global financial crisis, the Dodd-Frank Act required the Securities and Exchange Commission (SEC) to evaluate the effectiveness of existing legal or regulatory standards of care for providing personalized investment advice to retail customers. Five months later and with the benefit of over 3,500 comment letters as well as a survey conducted by the CFA Institute (which already requires both a suitability and best-interest standard of its members in order to use the Chartered Financial Analyst professional designation) SEC staff released its analysis and recommendations. It has proposed a uniform standard of conduct for all brokers, dealers and investment advisors providing personalized investment advice about securities to retail customers to act in the best interest of the customer.

The SEC staff study acknowledges that working through the details of such a standard so as to ensure it is practicable and cost effective will be complex. It does not propose a strict fiduciary duty, nor does it suggest rules to try to eliminate conflicts.

The U.K. Financial Services Authority (FSA) recently banned commissions for advised sales of retail investments and released proposals which would require advisors to explain why a product is better than a cheaper alternative. This and other more intrusive proposals are based on the FSA's realization that there are "fundamental reasons why financial services markets do not always work well for consumers."

The contrast in the direction, speed and intensity of regulatory reform between Canada and other major developed markets raises a number of questions and suggestions. Why did the OSC start down the path of a "best-interest" standard in 2004 and, while others (including the U.K., Europe and Australia) have caught up, we appear to have fallen back to where we started -- disclosure requirements and a relatively static "suitability" standard? To what extent is this a function of a fragmented regulatory framework suffering from bureaucratic inertia (and an industry suffering from regulatory fatigue)? What accountability mechanisms are required to motivate a more focussed and intense effort?

Why is it that Canadian regulators have shied away from proposing a "best-interest" standard? As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying." Many argue that it's the buyer's responsibility to do due diligence and shop around for the best price. But should caveat emptor apply when buyers think they are hiring a professional to do the shopping?

There may be light at the end of this tunnel. Hopefully, the robust regulatory reform efforts underway elsewhere will inform and impose some discipline on our own. The OSC has a new chair. It recently established a highly credible Investor Advisory Panel, which has added this issue to its list of initiatives. FAIR Canada, the Hennick Centre for Business and Law, and the Toronto CFA Society are convening a second annual symposium on the subject next week. Finance Minister Jim Flaherty has demonstrated genuine interest in investor protection -- most recently supporting a national strategy to strengthen financial literacy.

Canada takes justifiable pride in its financial institutions and infrastructure. In doing so we can ill afford to gloss over the nature of customer relationships or be perceived to lag other markets in our efforts to ensure fair dealing in financial markets.

- Edward Waitzer is a professor and director of the Hennick Centre for Business and Law at York University and a former chair of the Ontario Securities Commission.


enclosure #3



Searching for the right advisor
Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011
Over the course of a lifetime, the average Canadian makes some big expenditures -- such as housing, their children's education and eventually their retirement. The latter is especially important as government programs are inadequate for most Canadians and life spans have extended considerably.

But Canadians are too busy with job and family responsibilities and family life and lack the specialized expertise to manage their financial affairs as diligently as they need to be managed.

That is why most people need a trusted advisor to guide them through their financial decisions at every stage of their life.

A complex job requires professional commitment

Investment advice is a full-time job. This is not just because of the bewildering array of financial products and services, the incessant volatility of financial market asset prices, turbulence of the economy, expanding opportunities in a dynamic global marketplace and the importance of preserving capital given recent experience of unprecedented swings in financial markets and economic activity.

Financial management is a complex and full-time job because those assets selected to meet the return and risk objectives of the investor constantly change in value and risk, requiring corresponding portfolio adjustments to monitor the targeted risk-return investment objectives.

As well, investment objectives themselves change as investors move through their life-cycle, such as the shift from the goal of portfolio growth to income security as one approaches or enters retirement.

Where then do you find the right advisor? If the investor wants an advisor that can provide advice on the full array of financial products, including individual stocks and bonds, ETFs, mutual funds and privately managed funds, the starting point is to open an account with an IIROC-registered firm and an investment advisor employed by that firm.

The business activities of the IIROC-registered firm are subject to rules and oversight by the self-regulatory organization, the Investment Industry Regulatory Organization of Canada (IIROC).

An IIROC-registered broker meets high proficiency standards, duty of care to his or her client, rules governing the investment process and conduct of all client dealings, requirements for putting the client first in all transactions and ensuring best available price for purchased securities.

Moreover, IIROC-registered brokers are subject to high standards of supervision, regulatory oversight and audit. The IIROC-registered firm also meets rules and procedures for the safekeeping of client assets. It is no coincidence that the scandals that have beset the financial sector in recent years have occurred among firms outside the IIROC regulatory framework.

A good advisor must be more than someone able to give advice. The client must have confidence and trust in his or her advisor to forge a productive and successful working relationship.

The advisor, therefore, should have a good investment track-record, and provide clear financial statements to make all portfolio transactions, asset positions and performance understandable. The advisor must communicate frequently in terms comprehensible to the client, execute decisions in a thorough and diligent manner -- and charge reasonable fees for service. Further, an effective relationship is bolstered by the personal chemistry between the client and advisor.

The client should feel comfortable and open in dealing with his or her advisor and provide the personal financial information needed to make the appropriate investment decisions in line with portfolio objectives.

But all this comes back to the fundamental question. How does an individual find the right IIROC-registered Investment Advisor? Investors find advisors in many ways, through referrals from friends and family, from attending seminars hosted by an advisor, from advertisements in the media and from direct enquiries at IIROC registered firms.

Whatever the approach, it is important the client reserve judgment on his or her initial choice of advisor to ensure the right fit in terms of communication, quality of service and cost, and personal relationship. Investors should be prepared to shop around if they are less than satisfied with their initial choice. One wouldn't make any major decision without checking it out thoroughly. Choosing an investment advisor is one of the most important decisions you can make, and the potential benefits last a lifetime. A good advisor is well worth the time and effort of a thorough search.

-Ian Russell is president and CEO of the Investment Industry Association of Canada.


enclosure #4

Province of Alberta Securities Commission ... tions.aspx
Important definitions of the ASC’s Different Market Registrant Licenses
a person or company engaging in or holding out the person or company as engaging in the business of advising others with respect to investing in or the buying or selling of securities or exchange contracts (Examples: Portfolio Managers, Investment Counsel and Securities Advisers)

a person or company that trades in securities or exchange contracts as principal or agent (Examples: Investment Dealers, Mutual Fund Dealers and Scholarship Plan Dealers)

Investment Counsel
an adviser who shall not instruct any trades in securities, or exchange contracts on behalf of any client without advising the client of the specific trade being proposed, and obtaining the approval of the client for that specific trade

Investment Dealer
a firm that is registered to trade, buy or sell all types of securities. The Investment Dealers Association (IDA) registers these firms on behalf of the ASC.

Investment Fund Manager (or “Fund Manager”)
a person or company who has the power to direct and exercises the responsibility of directing the affairs of an investment fund

Mutual Fund Dealer
a firm that is registered to trade, buy or sell mutual funds

Portfolio Manager
an adviser registered for the purpose of managing the investment portfolio of the adviser’s clients through discretionary authority granted by the clients
a person or company registered or required to be registered under Alberta Securities Act or the regulations

an individual who is employed by a dealer for the purpose of making trades in securities or exchange contracts on behalf of that dealer

Securities Adviser
an adviser who provides advice to a non-specific client, for example a newsletter or magazine
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Re: Alberta Securities Omission

Postby admin » Fri Jan 14, 2011 9:32 am

Time for a regulatory overhaul: CFA’s Franklin
Steven Lamb / January 13, 2011
Canada’s securities regulation regime is in dire need of an overhaul, as individual investors question whether the system is rigged against them, according to the chair of the board of governors of CFA Institute.
Speaking to The Canadian Club in Toronto today, Marg Franklin called for the creation of a single national securities regulator in Canada.
“I would commend Finance Minister Flaherty for his determination in attempting to make this happen, given the vehement opposition by a small but nonetheless influential group, and the small amount of political currency he and his party will win by doing this,” she said. “It is one of the rare instances where the right thing appears to trump the politically expedient thing.”
But a single regulator would only be useful if it is also given real enforcement powers. The biggest problem with the current enforcement regime is that most of its staff are woefully under- qualified.
Franklin called for a complete overhaul of the RCMP Integrated Market Enforcement Teams (IMET), which was introduced with great fanfare in 2003. Since then, IMET has managed to charge just 26 individuals with 1,008 counts of capital markets fraud. The conviction record is even poorer, though: there have been only five. And the cost of IMET, as at March 31, 2009, has been in excess of $100 million.
“When we look at enforcement investigators employed by provincial administrators, it is striking how many have limited experience with the industry or many of its practices,” she said. “Too many investigators employed by regulators here and nationally are former, even retired law enforcement staff, with negligible backgrounds in the securities industry.
“Obtaining the Canadian Securities Course should be a minimum requirement for this type of employment.”
To that end, she announced that the CFA Institute will offer discounted educational programs to regulatory staff, which will equip them with the benefits of the CFA program body of
knowledge. These discounted programs were already available in the U.S. for SEC staff, but this is the first time they have been offered to Canadian regulators.
Finally, she said that when wrong-doers are caught, penalties must be meaningful and – more importantly – enforced.
At present, the self regulatory organizations share a pathetic track record on the collection of fines, as offenders can simply quit the industry to avoid paying. The MFDA has managed to collect just 38% of penalties it has imposed, while IIROC has collected only 20%.
“We believe, with the goal of enhancing enforcement, IIROC and the MFDA should be granted the statutory ability to collect fines...and of course, this would be greatly facilitated by a national single regulator,” she said, admitting that the CFA Institute also struggles to collect fines levied against charterholders who have been expelled.
Filed by Steven Lamb, Originally published on
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Re: Regulators in your pocket

Postby admin » Fri Dec 31, 2010 3:16 pm

G20 and EU 'posturing' could exacerbate future banking crises ... The efforts of the G20 and European Union to overhaul financial regulations have been lambasted for being "disingenuous political posturing" that are "increasing the likelihood of future meltdowns", an influential think-tank has warned. The TaxPayers' Alliance has published a paper accusing politicians and regulators of basing their response to the financial crisis on a "mistaken view of its causes" and "political considerations." – UK Telegraph

Dominant Social Theme: Regulation comprises a balance that must be found.

Free-Market Analysis: The article (excerpted above) is an interesting one because it actually explains the reality of what is taking place today regarding regulation. Regulation, in fact, often does nothing to address the "problems" it is intended to solve but does provide a justification for the powers and privileges that accrue to a ruling elite.

Regulation is inevitably presented as a necessary good in Western jurisprudence. One who contravenes regulations is a lawbreaker and there are variety of remedies available to the state. Unfortunately, the idea behind regulation does not seem to be based on economic logic. The two professions – law and economics – are seen as disparate entities when in fact no lawyer ought to be released into the world without understanding economics, preferably laissez-faire economics. Such a comprehension might go a long ways to reduce the amount of bad laws that circulate in society.

Drug laws provide us with example of regulatory futility. Reducing the flow of one drug or another merely drives up the price of that drug, which stimulates further production. If through aggressive interdiction, a particular drug is made unavailable, then other drugs will be found. The ramifications of Draconian enforcement of bad laws are not hypothetical. Colombia, for instance, was destabilized for decades by enforcement aimed at wiping out the cocaine trade.

Eventually, the largest dealerships were broken and industrialized cocaine trafficking was reduced in that former narco-state. But the trade merely moved to Mexico; and so did the "war." Today Mexico is widely regarded as a failed state and the results of expanded drug enforcement are seen in the murders of thousands and the displacement of millions.

Billions of taxpayer dollars that have been spent on drug enforcement but the rate of flow of drugs probably has not decreased noticeable. What such "wars" do accomplish, unfortunately, is to build up the power and infrastructure of the state itself. Policing officials – military and civilian – establish themselves and build enforcement empires that bear no relationship to the "problem" but merely act as sinecures.

As regulatory and legal battles are pursued over years and even decades, the level of violence usually increases. Again, we can see this in Mexico where the war on drugs has turned into a real war waged by the military of both the US and Mexico. Eventually, one presumes the superior firepower of the state shall rid Mexico of its drug-dealing enterprises or at least diminish them. But that will not solve the problem. Market demand will be met. The industry will merely migrate elsewhere.

In the white-collar arena, the militarization of what has been declared criminal is often less obvious. But in fact the damages are just as severe. What ends up occurring is a homogenization of strategies allowed to the investor. Thus, mutual funds can purchase instruments but not hedge against them; stock brokers can suggest stocks but not strategies that minimize risk (as these might be considered arcane and therefore "aggressive").

Ultimately, all regulation is a price fix, resulting in a queue, a misallocation of resources or other sorts of market distortion. Thus when one regulates a given practice, the very act of regulation provides opportunities for others not involved in the particular act being regulated.

If there is a market niche available within a given business continuum, people will try to fill it. If it is a strong enough market need, people will simply circumvent the regulation or law. If enforcement is stringent enough, providers will be driven underground, but they will continue to offer the service and receive compensation. We can see this reflected in the banking critique offered by the Taxpayer's Alliance, as follows:

The paper, which was co-written with the Lagatum Institute, an academic group that focuses on wealth, attacks the key aim of politicians including Prime Minister David Cameron and Chancellor George Osborne for internationally co-ordinated regulation. It warns that "global regulation causes global crises" ... That means that global regulations can be dangerous because they increase the amplitude of global credit cycles."

The paper adds: "The Basel regulations may still be procyclical, imposing more onerous requirements on institutions at times when the system is in trouble." The authors claim the new regulations, including the G20-sponsored Basel rules and the Capital Requirements Directive of the EU, have been based on too narrow a view that "greed and insufficient regulation" were the causes. They argue that "regulations and poor policy choices" were also to blame – and that the authorities are in danger of making similarly dangerous mistakes. – UK Telegraph

There is no doubt that financial regulation tends to exacerbate the volatility that it is supposed to address. By mandating that certain strategies and "best practices" be followed, lawmakers concentrate capital surges and make the market generally more susceptible to financial shocks, not less. In the case of banks, the Basel regulations will merely further restrict what banks are capable of providing to customers.

According to the website Nuwire Investor, banking officials have complained that "higher capital requirements and limited investment behaviour would restrict lending abilities, drive up borrowing costs and reduce banks' profitability by discouraging lucrative investments." By demanding that banks act in certain ways and forego certain "risky" businesses, regulators in fact weaken these institutions financially, which makes them less likely to withstand financial difficulties.

Higher capital requirements will ensure that banks will lend less, which will also affect the bottom line. And the increased "transparency" that is being demanded will further reduce the services that large banks are able to provide, since certain customers will look elsewhere for services rather than put themselves into situations where they will receive scrutiny.

Ultimately, the hypocrisy of the new banking regulations can be seen by the lack of attention paid to the relationship between central banking and commercial banking. It is mercantilist central banking, with its enormous money flows and ability to print money from nothing that causes the investment manias that end up ruining central banking's distribution system of commercial banks.

In fact, these banks are nothing more than conduits for fiat money. It is a given central bank that sets policy and determines the price and quantity of money in the current environment. The whole exercise of regulating banks capital reserves is fairly ludicrous given that banks have no control over the economic environment that central banks create. So long as central banks continue to flood economies with excess paper money, the commercial banking sector shall struggle with overwhelming booms and subsequent busts.

Conclusion: The unfortunate "facts on the ground" thus remain in force. An Anglo-American power elite that has evidently and obviously created a central banking economy worldwide continues to enjoy the privilege of printing money at will. When the process blows up economies singularly or all-at-once, the fingers are to be pointed at the distributors of the funds – the commercial banking community.

{Note: Fraudulent and other criminal behaviour by banks (money-laundering, and all the criminal activities associated with 2008) can't be ignored practically - someone will pay. That derivatives are still sold OTC in horrifically large amounts has to stop - or at some point, it will stop itself.

So yes, bad regulation and bad laws are often smoke and mirrors (unenforceable), but real white collar crime at street level by banks must be controlled. To suggest it can't or shouldn't be is impracticable - there is a difference between bad (unenforceable) regs and laws and good ones. I think that got lost here. JFR}
Jim Roache
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Re: Ontario Securities Commission

Postby admin » Sun Dec 12, 2010 10:34 am

OSC case closed after 24 years:! It took 24 years, five lawyers and a vigorous stalling campaign, but the Ontario securities regulator has finally given up. The Ontario Securities Commission has ended the oldest outstanding case in its files, dropping a civil lawsuit filed in 1986 on behalf of minority shareholders of real estate company Mascan Corp., which alleged that founder Bruce McLaughlin siphoned off $35-million from the company for his own use. Mr. McLaughlin has strongly denied the allegations.Over the years, the case was bogged down as witnesses passed away and Mr. McLaughlin repeatedly switched lawyers, filed numerous motions, and could not face questioning because of poor health.“This case was badly managed. There’s no excuse for anybody allowing an oppression claim to take 25 years go get to trial. I think this is an embarrassment for the OSC,” said former OSC chairman and securities lawyer Edward Waitzer .
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Re: Ontario Securities Commission

Postby admin » Fri Nov 26, 2010 8:11 pm

OSC chairman David Wilson was among the highest paid among crown agency employees again last year at $668,316. However this was down a bit from the previous year in which his salary was over the $700,000 mark.

The sunshine list of Ontario public sector workers earning over $100,000 shows that 227 employees of the Ontario Securities Commission were paid over $100,000 in 2009, taking home $37.6 million collectively.

Never before in history has so many stolen so much from so few.
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Re: Regulators in your pocket

Postby admin » Mon Nov 22, 2010 10:07 am

This is yet another disturbing case of investors taking a hit without apparent good reason. As part of its investor protection mandate the CSA/OSC must get involved. The complexity is too high for retail investors to understand and the potential consequences for Main Street dire. We recommend the CSA/OSC immediately review the case to see if any securities laws have been breached and have a frank chat with the IRC. They should also reassess NI-81-107 and reconsider the need for enhanced fund governance to protect retail investors
Fund governance in question ( again ) : A series of articles by NP's Barry Ctritchley points to another breakdown . We quote from his writings: "..Some recent actions by the board at VenGrowth, a private-equity fund manager active in the labour-sponsored field that has agreed to one transaction that is subject to a competing offer, are in the spotlight. In short, the board has placed the interests of the managers too high in the pecking order -- which means it didn't place the interests of unitholders high enough. Otherwise it wouldn't have agreed to some of the terms and conditions included in the offer by Covington Funds set to be voted on by shareholders next week..” The managers of the VenGrowth Funds stand to pocket at least $13-million in management termination fees under the Covington proposals . “..For two funds there are also administration termination fees of $6.29-million. In total, that's almost $20-million in fund asset depletion with seemingly no explanation for the basis on which the fees were determined. Oh, by the way , if the deal doesn't go through, then there is a $1-million break fee payable by VenGrowth.

In effect, Covington is paying nothing for the right to manage the VenGrowth assets...”. Under the “ plan of arrangement”, brutalized unitholders, including those who've held on for 8 years, will be offered a punitive immediate redemption option ( it's subject to a whopping 40% redemption fee and any applicable tax credits or DSC fees ).

“.."The managers are getting paid to leave but unitholders are left holding the bag. We are [under the Covington offer] being forced to stay in for another four-five years," said one unitholder. "This is ridiculous. I wouldn't mind paying management fees if there was some value for them," he said, noting none of VenGrowth's funds have a positive return since the management have been around. ...” Some questions: Why are there any payouts since managers are terminating themselves ? Why didn't the board terminate the managers for chronic underperformance? Why is the entire burden of the transaction falling upon VenGrowth fund shareholders ( it will result in a significant reduction in the NAV of their investment after payment of fees) ?Why did the board have discussions with just two firms before settling on the Covington Group of funds ? Why did they not include GrowthWorks, a major consolidator in the retail LSIF venture capital industry in the bid process? If any funds are borrowed , what will be the cost to the funds? Where is the IRC in all this since conflicts-of-interest abound ? Primary Source: B. Chritchley, Vengrowth deal raises questions, NP, Nov. 16, 2010 pg FP2 [ the GrowthWorks proxy circular can be found at ... 1-2010.pdf ]

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Re: Ontario Securities Commission

Postby admin » Wed Nov 17, 2010 8:56 am

(in prison, the letters OSC are often tattooed onto the bodies of criminals who consider themselves "above" other petty, gangbanger criminals. I had an occasion to meet such a person and was fascinated by the "OSC" tatoo on his arm. When I finally worked up the courage to ask him what it was for, he was reluctant to tell me. After much prodding it finally came out that in prison it stood for "OLD SCHOOL CRIMINALS". I find that this moniker applies just as well to the Ontario Securities Commission. Pretending to protect the public interest while helping to make sure that crime pays for friends who pay their salaries.)

OSC slaps BMO with a feather
Barry Critchley, Financial Post · Friday, Nov. 12, 2010

Reaction continues to be negative to the settlement reached this week between the Ontario Securities Commission and BMO Nesbitt Burns, the lead underwriter of a $197.5-million financing done by FMF Capital Group in March 2005. The U.S. issuer flamed out about eight months after taking money from the public.

The OSC alleged -- and BMO Nesbitt Burns agreed--that "it conducted due diligence in a manner that did not comply with reasonable underwriting practices. Such lapses were inconsistent with the Act's goal of fostering confidence in the capital markets." For that, a $3.3-million fine, of which $300,000 is for the OSC's costs.

"The settlement really puts into question BMO's motives and at the same time shows how useless the OSC is. They conduct a five-year investigation, [that shows] obvious wrongdoings by BMO, with an end result of nothing. BMO breaks even, investors out many millions, let's turn the page," said one broker.

Noted one investor:

"If the role of lead underwriter is to perform proper due diligence and BMO failed to do so, why was the penalty so light?"

This week's settlement with the OSC is BMO's second regulatory infraction in the past three months. In August it was fined $250,000 plus $15,000 in costs after it admitted breaching the Universal Market Integrity Rules (UMIR) "when it failed to make reasonable efforts to meet its best price obligations by connecting to all available protected marketplaces."
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Re: Ontario Securities Commission

Postby admin » Sat Nov 13, 2010 6:06 am

Outgoing OSC Chairman David Wilson says: “Protecting investors from fraudulent and misleading practices is the most important element in the OSC’s dual mandate.” IE, Oct., 31, 2010 Yes , he really said that. ... ilNews.asp? Id=55490&cat=8&IdSection=8&PageMem=&nbNews=&IdPub=

the above quote and link comes from The Fund OBSERVER Mid -November , 2010

(advocate comment......I read this and had to jump in and add my two cents worth. The quote from David Wilson is really nice talk, but unfortunately Mr. Wilson's OSC actions did never quite measure up to his talk. His intentions may have been quite honourable, and his job very difficult, but those of us watching his work are judging him by his actions, not his intentions. Therefore, we have no way of knowing or seeing (by his words) that his is not simply another industry paid, industry sponsored "yes man", hired to do the bidding of unethical persons seeking greater wealth. History may judge the man otherwise, but I have yet to see evidence.

"following the path of least resistance is what causes rivers to run crooked" Elbert Hubbard

(He could have been writing about Mr. Wilson when he describes following the path of least resistance)
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Re: Ontario Securities Commission

Postby admin » Thu Nov 04, 2010 2:28 pm

(Advocate comment.....Well, here we are on our third OSC chairperson, since this flogg was started five years ago. It is still perfectly acceptable for the financial industry to abuse or do financial violence against the public, and it is still perfectly accepted that they just might continue to do for many years to come. God help us to get arrests and jail terms for corporations, regulators, and or politicians who allow or aid in the abuse of the public.)

Committee Transcripts: Standing Committee on Government Agencies
- November 02, 2010 - Intended appointments
The Chair (Mr. Ernie Hardeman): No objection? Third party, Mr. Hampton.
Mr. Howard Hampton: Thank you very much.
I wanted to ask your views on a number of issues. In the United States, the Securities and Exchange Commission is moving to introduce a fiduciary duty across the board. In my understanding, they just passed that legislation a couple of months ago. Australia has already implemented it. My understanding is that the requirement would then be that anyone dealing with investments must actively be able to show that they have acted in the best interest of their clients at all times.
How do you feel about that direction, and how do you see it being implemented in Ontario and possibly in Canada?
Mr. Howard Wetston: Mr. Hampton, I think that’s a really good question. As you might imagine, I’ve not been involved directly in securities regulation for the last seven years. I’ve kind of held a bit of a watching brief on this issue and watched what has been going on with the SEC. I believe that in order to make this issue of acting in the best interests of one’s client viable, it needs to become a statutory duty, as opposed to a lesser duty that is not statutory.
I think there’s a lot of discussion on this issue today in Canada. A considerable amount of work has been done on this by some organizations, and I think the best way for me to describe this is that I think it’s an important issue and I think it’s one that the OSC has to give a lot of consideration to.
The best thing I can say about it is that I think becoming a statutory duty obviously raises the bar considerably and it might be one of those matters that does level the playing field between investors and market participants. Without being able to commit to whether or not that could become a statutory duty—obviously, that would be up to the government—I would say that it’s a matter that needs to be looked at, and looked at seriously. I think it’s an important issue. I believe in the US the fiduciary duty is legislated—or it’s certainly made effective in rules—at the SEC, but I’m not sure how they’ve incorporated it.
Mr. Howard Hampton: As one person put it to me, in the euphoria of the boom, the investment industry forgot that there are many practices in the financial business world which are legal but which are also totally and completely unethical. As one person said to me, in their perspective that was the root of the problem. People simply said, “Well, if it’s legal, do it. Don’t ask the question if it is unethical.”
Mr. Howard Wetston: Well, you know what they do in those situations, Mr. Hampton. Having practised law yourself, you understand very well what happens. You have these accidents and then they bring the lawyers in to kind of clean up the mess; they’re like medics, so to speak. That’s kind of what’s occurred there, I believe.
The question for me would be—if you’re thinking of the US situation versus what’s occurred in Canada; if you’re thinking about what happened in the US with respect to the market crisis that occurred there, I don’t think there’s any question about the fact that there were a lot of questions asked about whether or not, indeed, the practices were legal or whether or not, basically, what occurred was a lot of risk taking, which may have been legal but, as you say, unethical. I can’t really say whether the practices were unethical or not, but I will say this: I think when you expose investors to such risk, as occurred in the United States, in the name of, for example, enhanced liquidity, where fairness and transparency suffer in the face of those market risks—the best thing I could say about that is that we need to continue to look at these kinds of issues and, as I said in my opening remarks, we need to level the playing field. If it’s a matter of ethics—ethics are important. I think those concepts come out when you talk about concepts like “know your client” rules and other such things.
So I think that the point you’re making is very well taken, and I believe that simply saying it’s legal might create, as I say, this uneven playing field between investor and marketplace. It’s something we need to look at carefully.
Mr. Howard Hampton: Given that we seem to be in a state of flux in Canada—the federal government wants a national approach, but due to our historical and constitutional precedents, we have a provincial approach. In that context, what do you see as the role of the OSC?
Mr. Howard Wetston: I think the government has committed to participation in a Canadian securities regulatory authority. I believe that the OSC’s commitment to that, in supporting the government’s policy initiative in this area, is to ensure that we provide a great deal of support to the creation of that national commission. That would mean providing the expertise that we have, resources where necessary, but not resources to the extent that we reduce the importance of the oversight of capital markets by the Ontario Securities Commission during this transition period. There’s an important balance that needs to be maintained there.
I think the role is necessarily to provide that expertise—we have a great deal of it at the securities commission in many areas—and to obviously assist in the regulation-making function that the transition office will be undertaking over the next couple of years. I believe that in supporting that work, as I say, we need to ensure that the Canadian Securities Transition Office and the support that it gets from the OSC ensures that this new entity is of the highest quality as a national regulator. So I believe that the OSC can contribute to ensure that the standards that are maintained by this national commission are no less than the high standards that the OSC has today in its oversight of the capital markets.
Mr. Howard Hampton: I want to ask you a bit about the OSC today.
Should it be simply a referee that reviews disclosure or should it be an investor advocate or guardian of investors?
Because they’re very different roles.
Mr. Howard Wetston: Yes, it’s a very different role. I think there’s a very fine line between both. What I’m advocating, as I indicated in my opening comments, is that we need to put the investor at the centre of the work of the OSC. Investors expect more protection, and we need to do our best to ensure that that occurs. It’s not simply a matter of reviewing disclosure in the way you described; I think we need to elevate the importance of investor protection at the OSC going forward.
Mr. Howard Hampton: How should we do that?
Mr. Howard Wetston: It’s more than just education. We’re starting with the investor advisory panel, which has just been formed. We will take their advice. I’ve looked at the roster; I’ve looked at the panel members. I think it’s an excellent group. They’ve just had one meeting. I’ve looked at the minutes of this meeting. I think that it’ll take some time for it to get going, but I think they’ll make a valuable contribution to the work we’re doing at the commission.
As I indicated in my opening remarks, everything that we do has to be risk-oriented. We have to look to see where the risks are for investors. We have to try and get ahead of the curve and try and enable ourselves to meet these challenges more quickly.
Mr. Hampton, one of the issues with the fragmented system we have, as you very well know, is that it takes a long time to do national instruments because we have to do it across Canada with regulators across the country. My belief is, if we have a national commission, even if we have a Canadian securities regulatory authority made up of seven provinces and not all 10 at this point, we will be able to get to rule-making more quickly and, along that line, be able to protect investors more thoroughly in the less fragmented context.
So I truly believe that we need to keep that focus in summary, keep the investor at the heart of the work we do, look at the risks and ensure that we try and get them early on and move towards a national commission, which will help get speedier results from the point of view of the actions that the commission needs to take, both in enforcement and in rule-making.
The Chair (Mr. Ernie Hardeman): Very, very quickly, Mr. Hampton. You have one minute left.
Mr. Howard Hampton: Putting the investor at the heart of what you do, some have suggested that what needs to happen is the appointment of part-time commissioners who can bring more of a retail investor perspective. What do you think of that idea?
Mr. Howard Wetston: I think that you get the best person that you can on the commission, and I think the most qualified people are the people—depending on the qualifications you need at any point in time—for the commission. The creation of the investor advisory panel is a very good start. As I understand it, they’re going to include that in the national legislation as well, which, as you know, is before the Supreme Court as well as before two courts of appeal in two other provinces. So I do think that it’s important to look at it.
There are members of the commission now who do have a retail investor background, and I suppose most of them are also retail investors. But, having said that, I think it’s important to look for the person who has the most qualifications at any moment in time, depending on the needs that are required at the commission, and of course, you should look at individuals who have that background. If they’re the right people with the right competencies, then I think the commission should look at them and the government should look at them. ... ntID=25325
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Re: Regulators in your pocket

Postby admin » Sun Sep 19, 2010 9:32 am

Securities crimes that breached Canada's Criminal Codes have been:

- Given settlement fines with zero admissions of guilt

- Paid zero financial restitution to the financially abused consumer, the commission keeps the money.

-settled conveniently by commissioners whose salaries are 100% funded by the investment industry

-have been cash cows for our securities commissions.

-unlikely to ever be referred to police for criminal code prosecution, unless it is in the commission interests to do so.

Securities Crimes in Canada are a free ride for those who work within the securities industry. The public is not usually included in the equation or considered worth protecting with proper consumer protection standards.

It is a very profitable, very low risk for of organized crime, where the industry has bought its way into the wonderful position of being "above the law".
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Re: Ontario Securities Commission

Postby admin » Tue Sep 07, 2010 8:56 am

Financial Post · Tuesday, Sept. 7, 2010

Executives at Canada’s largest pension funds say they don’t want to be Canada’s market watchdog. Increasingly, however, they appear to be playing that role.

The funds, including the $96.4-billion Ontario Teachers’ Pension Plan, have long worked behind the scenes. But their latest high-profile battle over a controversial share transformation at Magna International proved they are increasingly willing to take their battles public — and spend millions of dollars to make a point.

While they lost the skirmish to derail Magna’s controversial plan to eliminate its dual-class share structure by purchasing founder Frank Stronach’s controlling shares for $863-million in cash and stock, the pension players say they still achieved an important outcome: they built a unified front.

“In my memory, this is the first time all the major pension plans came together and co-operated,” said Jim Leech, president and chief executive of Teachers. “Up until now, frankly, it’s been kind of lonely.”

Teachers has taken an activist approach for more than a decade, including a lawsuit against Nortel Networks Corp., challenging accounting improprieties. It has frequently filed documents with U.S. regulators in activist moves about shareholder value, targeting companies such as BCE Inc. and Petro-Canada. Teachers recently stirred U.K. shareholder unrest, calling for the ouster of mobile group Vodophone’s current chairman John Bond, citing concerns over significant structural and strategic weaknesses.

Other pension funds supported Teachers’ activist approach, but “no one else was putting their reputation on the line and help fund [a legal challenge against Magna],” said Mr. Leech. Until now.

“We have never seen a transaction proposed that was so unfair ... and that of course galvanized us to make our views public very forcibly,” said David Denison, president and chief executive of the Canada Pension Plan Investment Board. “We hope there is not going to be another case like this one, honest to God,” he adds.

But if it happens again, the pension funds will be ready.

“We can pick up the phone and talk to each other,” said Doug Pearce, chief executive of the British Columbia Investment Management Corp.

Mr. Pearce said his fund will approach future battles on case-by-case basis, but adds “we can certainly share the costs and it makes [the fight] more tolerable.” Whether the pension funds will unite publicly on another issue remains to be seen. “It depends on the principal and precedent involved,” said Mr. Pearce.

Industry watchers were pleased when the Ontario Securities Commission stepped into the Magna fight even though it was not required to, but were disappointed that Canada’s biggest market regulator failed to halt the controversial deal. Instead, the OSC simply demanded further disclosure of the deal’s details from Magna.

“The OSC is the OSC,” said Mr. Leech.

As far back as 1979, Mr. Leech said, he has attended hearings about eliminating the dual-class share structure, which gives one class of shareholder voting rights over another. “But they have always blinked at the end,” he said. “One thing as I walked away from this — I said to myself, this is the perfect rationale as to why we need a national regulator.”

The big pension funds were criticized during the Magna saga for spending millions of dollars on financial advisors and lawyers to fight the deal despite owning a small stake in the auto parts maker.

But Mr. Leech said there was more at stake then one company’s stock: “The intended goal is the efficiency and integrity of Canadian capital markets,” he said.

He argues large investors must take a stand on such issues because they are not in a position as are other investors to walk away from certain types of companies if they are unhappy with corporate plans. You can’t, for example, be a large investor in Canada without being exposed to dual-share structures.

“If you have a [theoretical] $250-million investment in [dual-class] structures, and if every one of those companies thought Mr. Stronach has shown them a road map to a billion, and they are going to propose an 11% dilution, that would cost us $27-million,” he said.

Collectively, the Canadian pension funds own billions of this stock; they have the most to lose, he added. “That is what is at stake. I look at that and I look at the costs we’ve incurred.”

The global track record for institutional activism has not been stellar. A recent survey by the Investment Management Association in the U.K. found that while managers recognized the need for active engagement, they do not hold high hopes in their ability to hold boards to account. One reason is that large pension fund managers are globally diversified and therefore hold less stock in local companies in which their views can carry greater weight.

But there are signs that shareholders’ rights are being heard. On Aug. 25, the U.S. Securities and Exchange Commission adopted changes to allow investors to put forward their own names for board seats alongside the company’s preferred nominees. It’s expected that large activist funds will now launch a campaign to shake up under-performing companies.

Mr. Denison is pleased at the progress achieved in the past 18 months by the Canadian Coalition for Good Governance, which he currently chairs, particulary in the area of executive compensation.

“The Canadian coalition had meetings with 30 board chairs of compensation committees, none of which were in the headlines,” he said. “The year before we did 10 [meetings], and the year before that we didn’t do any.”

There have been other breakthroughs.

“In 18 months, we’ve moved from zero to 37 companies that have adopted say-on-pay, [shareholder input on compensation], and the vast majority did it voluntarily,” said Mr. Denison.

In addition, the coalition convinced 150 companies in Canada to adopt a majority voting resolution and scrapped the old slate vote system that requires shareholders to vote for the board as a group. If shareholders do not approve the slate, their only option is to withhold their votes; they can’t vote against the board. Under the new system, directors must secure 51% of shareholder votes.

Mr. Peace argues that the institutions have made quiet headway because they approached companies not as activists per say but more as “engaged shareholders.”

“We’ve distinguished ourselves by being well-prepared, reasonable people who are willing engage,” he said. “We are no longer seen [by company boards] as the scary enemy.”

On the governance side, Mr. Pearce said corporate Canada is getting in better shape. But he’d like to see companies and their boards take a more active role on environmental and social responsibility.

On Aug. 13, Mr. Pearce sent a letter to the National Energy Board, which regulates drilling off Canada’s Arctic and west coasts, urging them to impose strong rules on offshore petroleum drilling in Canada, calling the collapse of BP PLC’s stock price since the Gulf of Mexico oil spill “one of the greatest environmentally related destructions of shareholder value in history.”

“When we look at [environmental and social governance issues] we are looking in the context of return and risk,” he says.

Financial Post

Read more: ... z0yrMkhbtL
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Re: Alberta Securities Omission

Postby admin » Wed Sep 01, 2010 10:44 am

following is from a viewer after seeing my youtube channel with eight videos, also available on ... ature=mhum

Yours is a sad but true story. I had an experience with an investment opportunity that the securities commission eventually deemed suitable, however the money they seized went to themselves and a couple of individuals that were never even investors as they got Bennett Jones LLB of Calgary involved. They got the million and we received 9.8% of our original investment. It is interesting that the last three Directors for the AB. Sec. Commission were previous lawyers working for Bennett Jones. An investment colleague of mine had a friend experience a call from the AB. Sec. Comm. and when he mentioned that his legal team was from Bennett Jones, all was fine and no further questions were asked. End of story. Take care. Fred.
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Re: Ontario Securities Commission

Postby admin » Mon Aug 23, 2010 8:50 am

Screen shot 2010-08-20 at 7.40.31 PM.png
Kenmar Associates
The 2010 OSC Annual Report : An Investor's Commentary

The OSC is the regulatory body responsible for overseeing Ontario’s capital markets. The OSC is a self-funded Crown corporation accountable to the Ontario Legislature through the Minister of Finance. A large part of its
Act (OSA) and the Commodity Futures Act, and administers certain provisions of the Business Corporations Act. This legislation sets out the OSC’s authority to develop and enforce rules that are designed to protect investors, deter misconduct and foster fair and efficient capital markets and confidence in the markets. The Chairman of the Commission is David Wilson, a former senior executive at the Bank of Nova Scotia. - his annual compensation is about $668,000. Since he traded in his banker stripes for public service almost five years ago, Mr. Wilson has maintained a low profile, rarely venturing off the script of his carefully prepared speeches .

The OSC’s organizational structure consists of two main components: the commission itself, which the Ontario Securities Act specifies shall number between 9 and no more than 13 people; and the staff, whom the commission employs to enable it to carry out its duties. In addition to being responsible for the administration of Ontario securities laws, commission members also serve as the Board of Directors. In this capacity, the
member of the commission as chair, and either one or two members as vice-
chair. The Chair also serves as the chief executive officer. The securities regulator is heavily staffed with lawyers and accountants, and pays a number of its staff members more than $100,000 a year. Salaries and benefits make up about 75% of the OSC's budget.

In it's 2010 Annual Report the OSC identified 5 main areas which it claims demonstrated strong investor focus :

1. Consulting Investors - “ ..The seven members of the Investor Advisory Panel, including its Chair, will have a range of relevant experience, skills and perspectives, including knowledge of both the capital markets and the OSC’s regulatory responsibilities. The members will be appointed by the end of
O Pamela Reeve

While financial services industry participants have routine contact with executives at Canada’s largest securities regulator, the Ontario Securities Commission, retail investors seem shut out. Industry participants meet face to face with OSC staff on important issues as a glance at the visitor’s logbook will testify. Lobby groups such as the Investment Funds Institute of Canada have direct access to decision makers. Senior OSC management often speaks / attend financial industry meetings and conventions. Events such as the Dialogue with the OSC charge a hefty entrance fee, out of range for most retail investors ( there was no Dialogue in 2009) . Most of the Advisory Committees are stacked with representatives from law firms, dealers and brokers. If there is a retail presence, the person must pay his/her own travel and parking expenses- there is no compensation. Of course, the firms have ample staff to send to these meetings and consider attendance an integral part of their decision influencing initiatives.

Annual public meetings at which the public are free to speak are common in Australia and the UK for all the major regulators, including securities regulators. In contrast, they are not a prominent feature at the OSC. The OSC’s first Investor Town Hall meeting in May 2005 was a notable exception The Investor Town Hall was organized by the OSC, and representatives from the IDA ( now IIROC) , MFDA, OBSI and SIPA were invited by the OSC to attend to respond to consumers views and concerns. Over 400 investors attended the meeting, which continued well past the set time. Unfortunately, there has not been a meeting since.

The OSC`s advisory committees rarely include retail investor delegates. For instance there isn’t a single retail representative on the Securities Advisory Committee The Securities Advisory Committee (SAC) provides advice to the OSC on legislative and policy initiatives and capital markets trends.
Including retail reps on this committee would most certainly aid in protecting retail investors. An independent research report on how regulators could improve investor involvement recommended that all investor advisory committees / consumer panels have a clear remit, are adequately remunerated, have an independent budget to allow them to commission research; have timely access to all relevant information, including research conducted by the regulator or others, and are given the necessary training to enable them to be effective. Source:

Access to decision makers by retail is constrained via a oppressive policy that retail investors must channel communications through the Inquiries
office, a unit not equipped or staffed to deal with policy matters .This lack of dialogue is responsible for many deficient rules, policies, regulatory exemptions and practices that could so easily be resolved by direct, unimpeded access to policy makers.

Annual public meetings at which the public are free to speak are common in Australia and the UK for all the major regulators, including securities regulators. In contrast, they are not a prominent feature at the OSC. The OSC’s first Investor Town Hall meeting in May 2005 was a notable exception The Investor Town Hall was organized by the OSC, and representatives from the IDA ( now IIROC) , MFDA, OBSI and SIPA were invited by the OSC to attend to respond to consumers views and concerns. Over 400 investors attended the meeting, which continued well past the set time. Unfortunately, there has not been a meeting since.

Public consultation on proposed rules or changes to rules through notice and comment processes offers the potential for involvement. As practiced, the proposed rule is posted on the OSC’s website with a Request for Comments. Retail investors don’t even know when a proposed rule change is posted. Documents are usually set out in legalese and their impact and relevance can be hard to guage for Main Street. Commenting on proposed changes to securities laws requires a level of interest, knowledge and time that most retail investors do not have. Typically, any retail investor input is lost in a blizzard of industry and lobbyist Comment letters.

2. Supporting Investor Education - The Investor Education Fund is an unbiased, non-profit source of information and tools that help financial consumers make better decisions when investing and managing their money. Established by the OSC, the Investor Education Fund is funded through fines and settlements from OSC enforcement proceedings. The site, is an excellent connection with investors that attempts to keep them up to date on current developments that impact small investors.
The OSC’s website was recently redesigned. Unfortunately, some important old links were not preserved. There is no retail investor link on the HOME page. We have recommended better organization of the site, a dedicated retail investor section, better Search capabilities and some material on seniors issues would be helpful. We also suggested an investor-friendly manner to comment on regulatory matters . We recommended that the Commission establish an internal Access to Information centre obviating the need for formal processes via the Minister of Finance. Action to date:NIL.

3. Investor Protection – All the OSC can list as accomplishments are that it published rules for Scholarship Plans, created an Order Protection Rule and put forward a proposal for the Point -of-Sale disclosure for mutual funds. This latter proposal has been criticized by the media, Morningstar Canada , FAIR Canada and the Small Investor Asdsociation of Canada . The proposals are weak on risk disclosure , do not require inclusion of a benchmark and do not articulate the ojectives of the fund.
Who could argue for instance that if respected forensic accountant Al Rosen`s 2008 missives on reverse/leveraged ETF`s had been heeded, that a number of serious issues would have been addressed far earlier. Or how about Dr.P .Reeves`s penetrating analysis of fundamentally flawed SRO complaint handling proposals that have been permitted by the Commission. See ... _REGULATIO N.html

The Annual Report does not acknowledge the efforts and personal sacrifices of the investor advocacy community.

The OSC was one of four co-founding organizations of the Joint Standing Committee on Retail Investor Issues (JSC) in 2008. The other JSC partners are the Investment Industry Regulatory Organization of Canada (IIROC), the Mutual Fund Dealers Association of Canada (MFDA) and the Ombudsman for Banking Services and Investments (OBSI). The stated purpose of the JSC is to provide an effective forum for executives of the four organizations to discuss and consider retail investor issues. The JSC's stated mission is to coordinate ways to address emerging issues that affect retail investors. One big problem-no retail investors are part of this committee.

Helping Investors Protect Themselves – What can one say? If a bunch of investor brochures is the measure of success, then OK. The SEC and the UK's FSA actually have better materials. All in all, not much really to show for such a huge budget. Seniors issues continue to be absent from OSC activities. The sad thing is, investors have had to protect themselves- a growing CAVEAT EMPTOR mindset has taken root.

5. Handling investor Inquiries and Complaints - The commentary is basically motherhood and sin . Generally though, the Inquiries unit works well. Complainats to the OSC are referred to industry SRO's or told to get a lawyer. Addtionally, access to decision makers by retail investors is constrained via an oppressive policy that retail investors must channel communications through the Inquiries office, a unit not equipped or staffed
to deal with policy matters .This lack of dialogue is responsible for many deficient rules, policies, regulatory exemptions and practices that could so easily be resolved by direct, unimpeded access to policy makers and enforcement staff.

In its 2009 Annual Report OBSI disclosed that Ontario accounted for 57.8 % of complaints with 38.8 % of the population. Quebec on the other hand accounted for just 12.5 % of complaints with 23.4 % of the population.
Other observations

The industry-sponsored and funded Ombudsman for Banking Services and Investments (OBSI) has had to deal with a record number of complaints. Its 2009 Annual Report highlights include.

Opening of 990 case files, a 48% increase from 2008. Over 200% increase in total case files opened over the last 3 years. A 73% increase in investment case files opened over 2008.
Unsuitable investments is the #1 cause of investor complaints

Just 35 % of OBSI's recommendations support complainants. The Annual Report has little to say by way of explanation or corrective action.

An assessment made by a recent all-party Ontario parliamentary committee that looked into the regulator criticized the OSC's performance, particularly its lack of leadership and MIA status during the ABCP fiasco. During the non- bank ABCP disaster the OSC did not come forward to assist distressed retail investors. Were it not for the determined efforts of several investor advocates, these folks would have been left high and dry. The $28 million in settlements against CIBC and HSBC Bank Canada were regarded by investor advocates and other commentators as mere wrist slaps given the havoc the defective securities created.

In 2009–10, the Commission concluded just 16 proceedings that had been commenced by the Enforcement Branch in relation to the actions of 32 respondents . The sanctions imposed included orders totaling all of about $35.9 million in administrative penalties, disgorgement and settlement amounts. The sanctions imposed by adjudicative panels of the Commission also included 18 Director and Officer bans and 18 cease trade orders. Retail investors meanwhile suffered from Ponzi schemes, advisor fraud , excessive fees , account churning etc. but enforcement for these important matters
has been delegated to Self Regulating Organizations , the MFDA and IIROC. Most of the “advisors” sanctioned by these SRO's do not pay their fines.

FAIR Canada has released a report with options for improving the management of conflicts- of- interest at the Toronto Stock Exchange (the TSX), in connection with the TSX’s regulation of listed companies. FAIR Canada has expressed concerns since its establishment about the inherent conflict at the TSX between the TSX’s listings business and listing regulation functions, and has pushed for regulators to address this conflict -of- interest in a way that is consistent with international standards. The OSC response is not known.

Earlier this year the United Kingdom moved to outlaw by 2012 the sales commissions that are embedded in fees for investment products. Australian regulators proposed something similar. Then, late in July, the U.S. Securities and Exchange Commission (SEC) voted to cap such fees for mutual funds at a quarter the 1 per cent fee included in some funds in Canada. Meanwhile, the CSA/ OSC fumbles around with Point-of-Sale disclosure as if that will stop the abuses Canadian mutual fund investors endure .

Magna's reorganization plan is controversial to say the least. The OSC, after considerable pressure from the country's largest public-sector pension funds, held a two-day hearing into Magna's plan. A number of investors -- particularly those who took a long-term view of the markets rather than those were merely satisfied with the short-term boost to their returns by a share conversion -- argued the OSC should deem the transaction abusive. But OSC staff, and later, a three-party Hearing Panel, gave the green light, provided investors were given more information. The OSC's actions -- in effect intervening and doing nothing of substance -- have added weight to the widely held view that investor protection is not a major priority at the OSC.

There are many more examples demonstrating the Commissions weak regulation of securities markets, lack of investor engagement and low level of investor protection.

For the first time in four years, the country's largest securities commission says it needs to raise annual fees, and even that won't be enough to keep it from running a deficit over the next 3 years. The Commission has proposed
a 12.2% increase in the participation fees it collects from investment dealers and companies to help make up for shortfalls in revenue to cover its expenses. For the 3 years ending March 2013, operating costs are projected to exceed revenues by $27.3-million. The shortfall is nonetheless expected to be covered by an accumulated surplus from better times. Such close to the edge budgeting hardly gives investors confidence that their interests are in good hands.

The Canadian Foundation for Advancement of Investor Rights (FAIR) has weighed in on the OSC, given the term of the current Chairman comes due in 21⁄2 months. It has written to Ontario's Premier and Finance Minister "urging the appointment of a proactive investor-focused OSC chair." Indeed, it argued the appointment is for "the most important OSC chair in modern times." We couldn't agree more.
The Annual Report demonstrates just how distanced the OSC is from retail investor issues and needs. There has never been a greater need for improved investor protection. Each day we learn of new threats to nesteggs ranging from ABCP through to creative Ponzi schemes. Hopefully, a changing of the guard will finally make investor protection “real” at this AWOL regulator .
Kenmar Staff August 2010
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Re: Regulatory Failure

Postby admin » Fri Aug 20, 2010 9:12 am


March 27, 2010

Mr. Chris Forbes
Federal-Provincial Relations and Social Policy Branch
Department of Finance
L’Esplanade Laurier
15th Floor, East Tower
140 O’Connor Street
Ottawa, Ontario K1A 0G5

Dear Mr. Forbes

Re: Ensuring the Ongoing Strength of Canada’s Retirement Income System

I wish to submit my views regarding Canada’s Retirement Income System as per the invitation for the public to do so.

To understand my comments it is important that your committee understands my background. Please note that I am 66 years old, have been retired for 5 years and have been born and raised in British Columbia. I graduated from UBC in mechanical engineering in 1968 and worked as a wage earner throughout my life. Until I became involved in saving for retirement and administrating my self directed company pension plan I had no previous experience in investing, a situation I am sure is typical of most Canadians.

My comments that follow are based upon my opinion that your committee is or needs to be considering the income system from all sources for Canadian’s retirement. If you are restricting your review to only Government sources of income, such as the CPP and OAS, then your committee will be dodging many of the equally significant issues faced by Canadian’s as they save for and later try to enjoy retirement.

Let me begin;


a. Corruption wide spread throughout the investment industry.
How can Canadian’s possibly save for retirement and remain in retirement when there is so much corruption within the industry-world wide but also within Canada-that gobbles up your savings far more quickly than it took to earn and save these monies.

b. Dishonest guidance within the investment industry
The investment industry collectively hides behind itself with it’s off the shelf directions which have so little meaning for retirees. For example:
“Invest for the long term”. Does anyone within the industry bother to advise investors that in the stock market crash of 1929-1932 it was not until the mid 1950’s ( a span of 25 years) that stocks as measured by the DJIA returned to their pre depression levels?
Does anyone within the industry advise investors that the Nasdaq, which measures technology stocks, reached close to 5,500 points before the tech bubble burst in early 2000 and that now, 10 years later, this index is only half of what it was at its peak?
So at what age does the expression “Invest for the long term” lose its meaning?

“Diversify one’s equity investments”. The industry has urged Canadian’s to diversify their investments by placing a portion of their equity investments outside of Canada since Canada represents only “3% of the worlds equity market”. No one within the industry seemed to have the knowledge or wished to let investors know that with the Canadian dollar at about 62 cents there was a risk if it regained its strength to what it is today that the increase in the value of our dollar would reduce US investments inversely to the gain in our dollar.

“The Power of Indexed Funds”. In 1999 Mr. Ted Cadsby, a VP with CIBC published his book entitled “The Power of Index Funds”. Many ‘experts’ praised Mr. Cadsby for his book and his expertise as being “Canada’s foremost expert on index fund investing”. Mr. Cadsby’s 223 page book is filled with detailed data and graphs to support his claims that indexed funds are the best thing since sliced bread. It is to be noted that Mr. Cadsby’s book was published in 1999 and that in March of 2000 the technology sector took its plunge and has 10 years later only recovered to 50% of its 2000 level. No where in his book does Mr. Cadsby seem to think it is relevant for investors to know that the TSE was heavily weighted upon one company only-Nortel. In fact Nortel made up approximately 30% of the value of the TSE at the time and when Nortel started dropping from its peak of over $120 per share this proportionately affected the value of the TSE and therefore the value of any TSE related index fund. Thanks Mr. Cadsby because I went out and purchased a considerable amount of equity indexed funds based upon your book and lost accordingly. Whether it was Nortel or not, the DJIA as well as the TSE were heavily weighted on technology stocks and Mr. Cadsby did not believe it appropriate to advise investors there was an incredible bubble forming. Nor for that matter did anyone selling indexed funds or technology stocks or mutual funds utter a word.

c. Money Purchase versus Defined Benefit pension plans, RRSP’s, Tax Free Investments.
Increasingly for private companies the Money Purchase pension plans are replacing the Defined Benefit pension plans. The result of this is employees are increasingly responsible for self-directing the monies held within their pensions and there is no ‘defined’ benefit upon their retirement. Employees therefore need to make many investment decisions with their pension monies. It takes time, knowledge and energy to invest ones money wisely and many employees have neither the time, the knowledge nor the energy to properly invest their money. As a consequence it is highly probable that a high percentage of employees will make poor investment decision with their pensions which of course will affect their financial well being in retirement.

Many Canadian’s purchase RRSP’s at great sacrifice every year as a means of building a retirement nest egg. Again, as with the investment of pension monies, it takes time, knowledge and energy to properly invest RRSP’s and many workers do not possess any of these. It is without question that many make very poor investments with their RRSP’s and this again will negatively affect their well being in retirement.

The Tax Free Investment allowance of $5,000 per year, recently introduced, adds yet another means whereby workers and employees are encouraged to put money aside for retirement or otherwise. This is yet more money that Canadians now need to invest, combined with their self directed money purchase pension plans and their RRSP’s.

It is no longer that workers company pension plans in the form of a defined benefit plan will form the basis of their retirement income. Increasingly, self directed money purchase pension plans, RRSP’s and Tax Free Investments are intended to be primary sources of retirement income. The horror of this is that the investment industry is devouring investor’s life time’s savings similar to a thief in the night. Far too much of Canadian’s and retirees well being is placed in the hands of the investment industry which is proving time and again they as an industry cannot be trusted. Scandal after scandal, market correction after market correction, all at the expense of the working men and women of this country and all while incredible stories reach the headlines of the wealth of executives who are mismanaging investor’s money.

d. “Market Corrections”. In 1998 investors experienced the “Asian Flu”. In 2000 there was the crashing of the technology bubble. In 2008 there was the subprime mortgage scandal. As an investor I was always invested with investment branches of major banking companies. Not once did I receive any notice from my ‘investment advisors’ that there were storm clouds on the horizon. How is it possible that there are all of these highly paid executives employed to understand the economy within the banks and their respective investment branches and none of them could pass onto investors through their major employers that there were these storm clouds on the horizon? Is the real truth the fact that the investment industry will simply not work if investors on a large scale are told of these storm clouds? Is the cop out for the investment industry that investors need to be “invested for the long term” and therefore investors need not worry about storm clouds---“markets will correct, they always do” (just don’t tell investors it may take 25 years to do so and that during this time they will make no return on their investments). It is outrageous that this situation exists and investors are being caught helplessly while the investment industry continues to live with its lavish bonuses and pay outs.

e. “Regulations”. In 2000 I experienced some very ruthless investment advice from an advisor with an investment branch of a major Canadian bank. The advice caused my wife and I to lose 66 % of the value of our investments over the next two years and when I awoke to the cause of the problem I made complaint to the investment company. Eventually I was given a payout to recover 100% of our losses and I managed this without a lawyer—a unique situation I am well aware. However it took me close to two full years and one entire drawer of a file cabinet filled with my letters until I was able to receive compensation for our losses. What saved me was that the BC Securities Commission finally took my case and pursued it with the various parties involved. In the meantime I gained a painful insight into the behind the scenes operations of our regulatory organizations, as follows:
Complaints to the Financial Institution: In the information provided by the major bank overseeing their financial branch there was a process one was to follow if one had a complaint such as I did with our investment advice. Complaints were to be addressed to the banks compliance department and such complaints would be ‘thoroughly investigated’ and responded to promptly. In my case it was a full four months before I received a reply from the banks compliance department and their reply was literally filled with lies. I then wrote the President of the financial institution but could not receive a reply other than my complaints had been investigated. The financial institution was not honouring its own written complaint policy and I was then helpless with them to deal with the matter.
Complaints to the Banking Ombudsman. Following any satisfaction with the compliance department of the investment institution I then wrote to the Banking Ombudsman. At the same time I wrote to the Investment Dealers Association. When the Banking Ombudsman learning I had written to the IDA, he said he could not review my complaints when they were under the review of the IDA.
Complaints to the Investment Dealers Association. It took the IDA about 17 months before they gave me a reply to my complaints and their reply was that they could find no major wrongdoings of the investment advisor and that he would receive verbal reprimand only. My wife and I had lost $35,000 due to the inappropriate investment advice he gave us and all he would receive from the IDA was a verbal reprimand. It was very clear to me then that the IDA, supported financially by its member organizations, was not representing me in the complaint process. The IDA was protecting one of it member organizations along with that organizations compliance department and one of their ruthless unscrupulous employees who altered my wife’s and my signed forms to support his investment advice and who neglected to consider my written portfolio outline as to where the investments with him were intended prior to his giving us his advice.
Complaints to the Canadian Banking Ombudsman. After receiving notice from the Banking Ombudsman that he would not review our complaints and during the lengthy period that the IDA was reviewing our complaints I made complaint to the Canadian Banking Ombudsman. He also advised me he would not be able to review our complaints when they were under the review of the IDA and until I had received complaint from the Banking Ombudsman.
BC Securities Commission. Following the unsatisfactory reply I received from the IDA I wrote the BC Securities Commission. After some difficulties the Chief Litigation Counsel with BC Securities became involved with my complaints and immediately seemed to understand the many complaints to which I was now making. As per the above, eventually I received full compensation for our losses which to me confirms the validity of all my above assertions regarding the wrongdoings of the investment advisor, the improper ‘investigation’ the investment company undertook of my complaints, the biased review of the IDA and the lack of assistance provided by either the Banking or the Canadian Banking Ombudsmen.
Company Pension. Late in my working years I discovered that upon retirement the funds invested in my self directed ‘money purchase’ company pension plan would be turned over to a different classification within the company in which our pension was placed. To my surprise I also learned that in the different classification our pension would be placed upon retirement, the management fees charged for our investments would more than double from what they were as an active employee and such management fees would also be greater than similar investment products available to an individual in the open market. I expressed my concerns and disagreement with this to my employer with no satisfaction and I therefore addressed my complaints to the federal regulatory agency overseeing our pensions, the Office of the Superintendent of Financial Institutions (OSFI). The reply I received from the OSFI was that they have no authority over management fees within company pensions. Without a union to represent me I was therefore without recourse with the company I was employed and therefore upon retirement I would have no benefit from group management fees as one would normally expect through a ‘company’ pension plan.

As per the above, the regulatory agencies as I have experienced have been a hopeless mess. How does anyone void of the necessary wealth to employ lawyers, defend themselves against the atrocities that are occurring in our investment industry. Although I was successful in receiving compensation for our losses experienced through inappropriate investment advice, I fully recognize few people have the time, confidence, convictions or determination to go to the work I did to recover our losses. Further, many do not have the tools (computers, word processors, e-mails etc.) or the ability (written, verbal, knowledge) to defend themselves. The financial industry of course recognizes all of this and hence the conduct of their compliance departments and the refusal of the financial institutions to honour their own complaint processes and the refusal of these institutions to honour their own POLICY STATEMENTS (for its “officers and employees to scrupulously observe, in letter and spirit, all laws governing business and security activities”; for its “officers and employees to deal fairly, honestly and in good faith with clients”). The IDA, the Banking and the Canadian Banking Ombudsmen profess to be there to regulate the industry and to protect the investor but they are employed by the investment industry and they serve it accordingly, not the investor. Even the Office of the Superintendent of Financial Institutions proved of no use to me with my identification of excessive management fees in my company pension. Regulation of the investment industry is essentially non existent and the industry feasts on the ignorance and helplessness of the small investors.

f. Interest Rates
Interest rates are at historic lows all as a result of the economic problems created by the subprime issues. This in turn is making it very difficult for retirees to make a respectable return on fixed income investments and is virtually forcing many to take more risk by going into equity investments. It is ironic that the ruthless, uncontrolled investment industry has robbed investors and especially retirees of varying portions of their retirement nest egg and through their ways they are now forcing investors to make riskier investments all controlled by the very people who created these problems. Paint the industry with the same brush—absolutely because no one within it has stood up to be counted for their silence on the extent of the problems in the making. No one over the past 12 years within the investment industry has stood up to the plate and been accountable.

g. Excessive Payouts and Bonuses
I recently heard on a news broadcast where two presidents and CEO’s of major investment companies received massive payouts at the start of the subprime issues. One of the individuals was from Bear Stearns and I cannot remember the other. I do recall that the payouts were for one in the high $300 million and the other in the high $400 million.

Further, it is common to hear of huge bonuses being paid for executives of the very companies that were largely responsible for the subprime issues that cost Canadians so dearly. If not these companies one hears repeatedly of huge salaries and annual bonuses being paid to executives of various investment companies and banks.

It is repulsive to hear of these amounts of money being paid, all of which is coming from investors who mostly have done poorly with their investments over the past 10 years. How can retirees make money on their investments if it is all being suctioned off by those at the heads of the investment organizations with the remaining portions going to lower level investment advisors?

Questions 2 through 10 on “Questions for Consultations”
I leave the above as an outline of the extent of the problems within the investment industry. I believe others are better able than me to identify the means to correct the horrible situations investors are now living with year after year.

Please accept my above items a through h as being my views of the main issues/challenges that Canadians face in saving for retirement.

I am available at any time to discuss any of the above.

Yours very truly,


Prince Rupert, B.C.
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