Solutions, Self Defense and Best Practices

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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Dec 03, 2009 8:53 am

Stromberg: Champion of change

Canadian Investment Awards: Career Achievement Award

Wednesday, December 2, 2009

By Megan Harman

Canadian Investment Guide 2010

In a world in which many people resist change, Glorianne Stromberg embraces it. A securities lawyer and former commissioner with the Ontario Securities Commission, Stromberg has been chosen for the Career Achievement Award because of her outstanding contributions to securities regulation and oversight of the investment funds industry.

Along the way, Stromberg has become known for her tenacity and dedication to identifying problems in the industry and her work to resolve them.

“I’ve always been ready and willing to do whatever I could to make things happen,” says Stromberg, now chairwoman of the Toronto-based Public Accountants Council for the Province of Ontario. “That’s just part of my nature.”

Stromberg, 70, became known for this strong-willed attitude during her stint as an OSC commissioner from 1991 to 1998 — a role she took on after decades of practising corporate and securities law at Cassels Brock & Blackwell LLP in Toronto. Midway through the 1990s, a time when mutual funds were rapidly gaining popularity, Stromberg was commissioned by Edward Waitzer, then chairman of the OSC, to undertake a review of the investment fund industry.

“At the time we undertook the review of the mutual fund industry, it wasn’t that anything was broken,” explains Waitzer, now a partner at law firm Stikeman Elliott LLP in Toronto. “The industry had grown way beyond its own expectations and way beyond the regulatory framework.”

Waitzer chose Stromberg as the best candidate to conduct the review because of her vast knowledge of the industry and the law, and her willingness to steer her own course. “Glorianne is fiercely independent, in terms of her thinking,” Waitzer says. “She listens to people, but she comes to her own view.”

The result of the review was a groundbreaking report entitled Regulatory Strategies for the Mid-’90s: Recommendations for Regulating Investment Funds in Canada. The report called for a slew of regulatory reforms, including the creation of a self-regulatory organization, improved corporate governance for investment funds and improved disclosure requirements, among others. A key theme underlying the recommendations was the need to protect individual investors and enhance consumer knowledge.

This theme was also prominent in two subsequent reports overseen by Stromberg: one on investment funds and consumer protection, commissioned by Industry Canada’s Office of Consumer Affairs; and another on financial services industry regulatory recommendations, prepared for the Organization for Economic Co-operation and Development’s committee on financial markets.

Investor rights groups have praised her work. The Markham, Ont.-based Small Investor Protection Association, an organization committed to fair practices in the investment industry, calls Stromberg a “SIPA Hero” for supporting the needs of small investors in her reports.

Some investors have even offered Stromberg their gratitude in person. On several occasions, Stromberg says, individuals have approached her in public to thank her for her work in advocating change. “To me,” she says, “that made it all worthwhile.”

But Stromberg’s recommendations were considered controversial among other groups. Many mutual fund industry players argued the industry was functioning well, and were unprepared for the extensive changes that Stromberg encouraged. “There was a natural inclination on the part of the industry to say, at the time: ‘If it ain’t broke, don’t fix it’,” says Waitzer. “So, there was some degree of antagonism.”

David Velanoff, president and CEO of Winnipeg-based MGI Financial Inc., who has been in the industry for more than 30 years, says Stromberg’s ideas were simply ahead of their time. “A number of her recommendations were very forward-thinking,” he says. “But probably at the time, they were a little radical in the eyes of the mutual fund industry.”

Upon gathering a group of industry representatives to provide feedback on the recommendations, however, the industry’s tone was more receptive. A steering group of industry players submitted a report to the Canadian Securities Administrators (CSA) in response to Stromberg’s 1995 report, and ultimately supported many of her recommendations.

“When we got together a group of industry leaders to work through it, there wasn’t a lot of substantive disagreement,” says Waitzer. “They basically validated most of what she said.”

As a result, several of Stromberg’s recommendations became the foundation for much of the regulatory reform that was eventually adopted, as well as for changes that are still being shaped. For example, creating a mutual fund industry self-regulatory organization became a key priority for the CSA following the reports, leading to the creation of the Mutual Fund Dealers Association of Canada in 1998. Efforts to improve disclosure requirements have also been underway in the years since her reports, and recently have moved closer to implementation.

Although Stromberg admits that progress on reform has been slow, she’s frustrated by the widespread skepticism within the industry regarding the possibility for change in areas such as securities regulation. “Instead of sitting on the sidelines doubting,” Stromberg says, “why don’t we roll up our sleeves and make sure it happens?”

Her advice for the industry is simple, a caution that is well to keep in mind in a rapidly evolving business: “Don’t be afraid of change.” Rather, she says, “Change before you have to.”
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Re: Solutions, Self Defense and Best Practices

Postby admin » Fri Nov 27, 2009 9:55 am

White House pushes investor protection

Obama administration seeks new powers for the SEC to regulate compensation for investment advisors and other measures.

July 10, 2009: 3:47 PM ET
WASHINGTON (Reuters) -- The Obama administration on Friday proposed legislation to strengthen the Securities and Exchange Commission's investor protection authority, including the power to ban certain forms of compensation for brokers and investment advisers.

The SEC would get authority under the bill to establish consistent fiduciary standards for broker dealers and investment advisers and could ban bonuses or other forms of compensation for financial intermediaries that encourage them to steer investors into products that are not in the investors' best interests.

The bill, one of several financial regulatory reform bills sent by the U.S. Treasury to Congress this summer, also aims to improve disclosures to investors, close gaps in standards and pay whistleblowers for information that can be used in enforcement actions.

The bill comes just days after the administration proposed a new agency that would get sweeping powers to protect consumers on many financial products that fall outside of the SEC's jurisdiction.

The bill would give the SEC authority to require delivery of disclosures and prospectuses before investors buy into mutual funds, not after as is typically the case currently. The SEC could require a concise summary prospectuses and a simple disclosure form showing fund costs.

The SEC also would gain authority to establish a fund to pay whistleblowers for information leading to enforcement actions that result in significant financial awards. The money would come from penalties paid that are not distributed to investors.

"This authority will encourage insiders and others with strong evidence of securities law violations to bring that evidence to the SEC and improve its ability to enforce the securities laws," The Treasury said in a summary sheet on the legislation.

A new SEC investor advisory committee, which examines new products, trading strategies, fee structures and disclosures, would be made permanent under the legislation.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Nov 19, 2009 8:47 pm

Investor protection is Priority No. 1

INVESTMENT EXECUTIVE, Canada's Newspaper for Financial Advisors
http://www.investmentexecutive.com/clie ... m=&nbNews=
The head of FAIR Canada says the new investor rights advocacy group is filling a necessary role


By Rudy Mezzetta

Ermanno Pascutto tends to be blunt when talking about Canada’s regulatory regime, especially when it comes to effecting change to protect individual investors and shareholders.

“Glaciers move faster than the pace of reform [in Canada],” says the executive director of the Canadian Foundation for Ad-vancement of Investor Rights, a Toronto-based investor and shareholder rights advocacy group launched last year.

As an example, Pascutto cites the efforts taken by regulators and investor advocates to get the financial services industry to adopt point-of-sale disclosure for mutual funds and segregated funds. “To produce a two-page fund disclosure document has taken a decade,” Pascutto says. “Is that reform?”

Pascutto wants FAIR Canada to grab the financial services industry’s attention and to help regulators shake off what he feels is complacency when it comes to protecting small investors. He is specifically critical of the Ontario Securities Commission.

“The people who run the OSC are all from the financial markets, which is not to say that they’re not well intentioned — I’m sure they’re trying to do a good job — but they don’t have a passion for protecting investors,” Pascutto says. “I think [the OSC] has ceased to be the investors’ advocate, and because it seems to have given up a lot of that role, I thought that created a gap that needed to be filled.”

But in testimony before the Ontario government’s standing committee on government agencies in February, OSC chairman David Wilson defended the OSC: “Everything we do at the OSC has, at its core, investor protection of one sort or another; not necessarily just retail investors [but] all investors — institutional investors, global investors and small individual investors. They all form the universe of investors. We think that our commissioners and our goals are all focused in the right direction.”

In responding to stakeholder presentations made to the standing committee, the OSC said it would be establishing an investor secretariat, a body within the OSC, to “better identify and address issues of concern to investors.”

Pascutto says he welcomes the OSC’s initiative and is pleased the OSC continues to engage in dialogue regarding retail investor issues. That said, the OSC is one of the regulatory bodies that has become a target for FAIR Canada’s criticism as the advocacy group tries to establish itself as a legitimate and effective voice for investor and shareholder rights.

FAIR Canada is very much a product of Pascutto’s efforts, an advocacy group he first envisioned while he was serving as an independent director with Market Regulation Services Inc., which later merged with the regulatory arm of the Investment Dealers Association of Canada to create the Investment Industry Regulatory Organization of Canada. Pascutto received a one-time, $3.25-million grant from IIROC, taken from the money collected in fines, to fund the new organization.

Pascutto is a lawyer and a veteran in the world of financial services regulation. After starting his career with Toronto law firm Osler Hoskin & Harcourt LLP, he joined the Toronto Stock Exchange in 1981, at which he served as director of market policy. He moved to the OSC in 1984, as executive director and head of staff. In 1989, he moved to Hong Kong to become the vice chairman of the securities and futures commission there, and, in the mid-1990s, he joined the Hong Kong office of Toronto-based law firm Goodman Phillips & Vineberg LLP before returning to Toronto in 1998. Prior to taking on the role at FAIR Canada, Pascutto worked as a senior advisor, first for Montreal-based Stikeman Elliott LLP and, most recently, with U.S.-based law firm Troutman Sanders LLP.

In the 16 months since FAIR Canada launched, it has tackled several shareholder concerns, such as advocating for shareholder approval on major transactions or criticizing TMX Group Inc.’s role as a regulator of listed companies now that TMX is a “for-profit” firm. But, Pascutto says, the bulk of FAIR Canada’s work has been on the retail inves-tor side, including pressing for more efforts at boosting financial literacy among Canadians and advocating for POS disclosure materials for funds.

Earlier this year, FAIR Canada gained much attention when it publicly criticized firms that sold leveraged exchange-traded funds for what FAIR Canada feels is inadequate disclosure given to potential inves-tors about the risks of investing in ETFs. The financial services industry has responded that the charges were unfair, saying that investors were being provided with adequate information about how the underlying portfolios of the ETFs worked and the potential risk and rewards of investing in the product.

Pascutto says that at the moment, FAIR Canada has two overriding goals: to advocate for more investor representation at the various regulators and to find ways of providing compensation and redress to victims of fraud and other forms of financial misconduct.

Pascutto says his organization is in favour of efforts to create a national securities regulator, but believes it would be of benefit to retail investors only if it adopts the investor protection recommendations made in the Expert Panel on Securities Regulation’s report, which was released this year. These include the creation of an investor panel at the national regulator and implementing improvements on how investors are compensated in cases of fraud.

FAIR Canada is also concerned about commissions-based advisor compensation, which creates a conflict of interest that doesn’t serve investors well, Pascutto says: “The interests of advisors and their clients are generally not aligned. That concerns us. Firms put pressure on advisors to sell products that generate high fees. And, often, that’s not in the best interest of the client.”

Pascutto says FAIR Canada wants to work with the financial services industry and regulators to look at different ways advisors can be compensated, including examining the ideas of banning commissions, something being considered in Australia and Britain (see story on page 1), and imposing a fiduciary duty on advisors, which is being considered in the U.S. Next spring, FAIR Canada will be participating in a conference to be held at the Toronto-based Hennick Centre for Business and Law, to look at how best to align the interests of advisors and clients.

“There are a lot of advisors out there who would like to sell products that are in their clients’ interests,” Pascutto says, “because they want to be in the business for the long run. They want to feel good about what they do.”

Pascutto has staffed FAIR Canada with two associate directors to assist him in designing policy and making submissions to relevant bodies, a research analyst and an office manager. The original funding for the organization is expected to run out at the end of 2012, but Pascutto hopes FAIR Canada will attract new funding to continue its efforts before then. For now, the top priority is becoming an effective body. “If we can show we’re having some impact,” he says, “that we’re providing bang for the buck, that means next year we’ll [be in a good position] to start looking for funding.”

Pascutto says he hopes to have FAIR Canada on more established footing, and to prepare a successor to take over from him, by next summer, at which time he hopes take a more limited role: retaining his position on the board and perhaps taking over as chairman. He hopes then to take a breather in order to pursue personal interests. IE
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Re: Solutions, Self Defense and Best Practices

Postby admin » Tue Nov 17, 2009 12:08 am

I received some feedback recently after a speech I gave on, “How To Make Financial Crime Pay”. It prompted me to write the following for the investing public, based on what I learned working over twenty years inside the investment industry.

The feedback referred to the Certified Financial Planning designation as if it were a license or a profession when sadly it is not.  Not yet at least. It is a correspondence course that anyone can take, with no minimum requirements.  It does not replace, improve, or over-rule the fact that nearly every single person calling themselves a CFP, CIM, or CF “anything” is being paid by sales commissions. An “eat what you kill” incentive plan. It might serve to mislead the public, however into believing otherwise and that unfortunately is the intent of some sellers. To mislead. To sell.

When I worked in the investment industry approximately 100% of persons selling financial products were legally licensed and registered in a category called “salesperson”.  However this name was always cleverly hidden from the public using the many other names financial salesmen call themselves. Some call themselves planners, some advisors, some consultants. Zero called themselves what they were licensed as. Zero referred to themselves by how they were paid. The public should be asking government why this is allowed. All licensed salespersons found methods to avoid using the “saleperson” word. In some circles that is called misrepresentation. In my financial industry this is called “standard industry practice”. Call your MP and MLA and tell them if this is no longer acceptable to your financial health.

The fact that many industry people might have taken a course, titled Certified Financial Planning, or any one of a thousand such courses anyone can take, has little to do with their license, their practice or their behavior.  I provided industry sales statistics in my speaking presentation that showed how most mutual funds are sold with the highest reward to the salesperson and the greatest penalty to the customer. This is not “advice”, nor is it financial planning. It is not even professional. This is predatory selling under the clever disguise of giving advice. It is also against the law and every code of conduct and industry rule. Again, sadly, this is the standard industry practice so people who should protect end up looking the other way. Having a Certified Financial “anything” course does not change this reality. It just makes misleading the public into parting with their money a bit easier. Many courses are simply used for marketing, to allow a salesman to proclaim a “sort of professional” status while operating totally as a commission product seller. 

To mistake the name of a “course” for a “profession” and to begin calling oneself a “certified financial planner” when ones license with the government says something else, and ones compensation comes from commissions, is just one of many sleight of hand misrepresentations that my speech included that permits financial crime to pay so well.  Using the same logic, should I be calling myself a Doctor, since I took a first aid course? The logic would be yes if we were talking about the investment industry. It would sell better.

Until members of the investment industry display an actual license on the wall in their office, the public will never know whether they are dealing with a salesperson, or a trusted professional advisor, or the brand new name given to nearly all 130,000 formerly licensed “salespersons” in Canada; “dealing representative”. Yes, the securities commission in your province cleverly and quietly just removed all reference to the word “salesperson” on Sept 29 of this year, and replaced it with “dealing representative”. I will let you think through the possible motivations of doing this, and while you are thinking this through, keep in mind that the salaries of each person at the provincial regulator are paid by fees charged to the industry they regulate, the investment industry.

Other developed countries have learned that one cannot both be a trusted professional advisor and a commission salesperson at the same time. Canada is a bit behind and is struggling to have it both ways as long as it possibly can. We have five major banks here who do over 90% of the investment business in the country and they very much enjoy the Canadian way of having your cake and eating it too.

Further info and background to this can be found at http://www.breachoftrust.ca as well as full video of the Southern Alberta Council speech titled “Making Financial Crime Pay” A How to Guide by a former industry insider.

Signed Larry Elford   (formerly a Chartered Financial Planner, Certified Investment Manager, Fellow of the Canadian Securities Institute and Associate Portfolio Manager, now retired)
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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Nov 12, 2009 10:46 pm

from http://www.investmentnews.com
INVESTMENT NEWS is the USA's LEADING NEWS SOURCE FOR FINANCIAL ADVISORS


Dodd's financial reform bill would eliminate the ‘broker-dealer exemption'
Legislation would give SEC authority to allow principal trades
By Sara Hansard
November 10, 2009
Brokers who provide investment advice would no longer be exempt from registering as investment advisers under draft legislation unveiled today by Senate Banking Committee Chairman Christopher Dodd, D-Conn.
The 1,136-page discussion draft of financial reform legislation circulated by Mr. Dodd would eliminate the so-called “broker-dealer exemption” from the Investment Advisers Act of 1940. The exemption spares brokers from registering as advisers if the advice they provide to clients is “solely incidental” to selling products.

Under the draft, the Securities and Exchange Commission would be given rulemaking authority to allow brokers who provide advice to conduct principal trades that otherwise would be restricted under the Investment Advisers Act. Investors would have to be protected against conflicts of interest, and the SEC would have to determine allowing brokers to conduct such “prohibited transactions” is in the public interest.

The so-called “broker-dealer exemption” in the Investment Advisers Act of 1940 has long been contentious for investment advisers. In 2007, the Financial Planning Association won a major lawsuit against the SEC based on the provision. The U.S. Court of Appeals for the District of Columbia Circuit ruled that the SEC had incorrectly applied the exemption by allowing brokers who collect asset-based fees to escape from registering as advisers.

Adviser and consumer groups welcomed the Dodd approach to harmonizing adviser regulations.

“It would be a dramatic change,” said Mercer Bullard, president and founder of Fund Democracy Inc., a mutual fund shareholder advocacy group. “Virtually every broker-dealer would have to register as an investment adviser.”

Mr. Bullard said that eliminating the broker-dealer exemption would allow the SEC to increase scrutiny of firms that have escaped adviser registration. One such firm, such as Bernard L. Madoff Investment Securities LLC, perpetrated a massive Ponzi scheme over two decades.

“We think this is a sound approach,” said Neil Simon, vice president for government relations of the Investment Advisers Association, which represents federally registered advisory firms. “This would be a way to give brokers relief from provisions of the Advisers Act” that interfere with the business model of brokerage firms, Mr. Simon said.

Conducting principal transactions, in which brokers sell products to clients from their firm's inventory, is a major part of the brokerage business. Restrictions on principal transactions in the Investment Advisers Act have been a major stumbling block for brokers who want to provide investment advice to clients.

Like the proposed Investor Protection Act approved Oct. 28 by the House Financial Services Committee, the Dodd bill would require any financial service professional providing personal advice to act as a fiduciary.

However, the Dodd bill takes a different approach from the House bill. The House bill would require the SEC to write regulations defining the fiduciary standard for advisers. The Senate bill extends the fiduciary duty to broker-dealers by eliminating the broker-dealer exclusion, and otherwise leaves the Investment Advisers Act unchanged.

“It's the best and simplest approach,” said Dan Barry, director of government relations for the Financial Planning Association. “It makes it clear that the standard that applies to advisers and brokers is the same exact standard, the same exact remedies,” he said.

But the Securities Industry and Financial Markets Association continued to call for rewriting the fiduciary standard to harmonize standards for brokers and advisers. SIFMA supports “the creation of a new, federal fiduciary standard for broker-dealers and investment advisers when they provide personalized investment advice,” Kenneth Bentsen, executive vice president, public policy and advocacy, said in a release.

Adviser groups oppose creating a new fiduciary standard, which they fear would be weakened.

Unlike the House bill, Dodd's draft would allow the SEC to keep fees it collects to fund its operations. SEC Chairman Mary Schapiro has called for such a self-funding mechanism.

That would allow the agency to bypass the congressional appropriations process and it would increase the agency's funding considerably. The agency expects to collect $1.5 billion in fees for the fiscal year that began Oct. 1, SEC spokesman John Nester wrote in an e-mail. The Obama administration has proposed an SEC budget of just over $1 billion for the same fiscal year.

Under the proposed legislation, an Office of the Investor Advocate would also be created within the Securities and Exchange Commission.

The Office of the Investor Advocate would report directly to Congress annually on the 20 most serious problems encountered by investors in dealing with the SEC and the Financial Industry Regulatory Authority Inc., the length of time that each item has remained on the list, actions taken by the SEC or SROs to resolve the problems, and/or why actions have not been taken.

The head of the office would be the Investor Advocate. The Investor Advocate would be appointed by and report to the commission, but the officer would have the power to employ independent counsel, research and service staff that the officer would deem necessary to carry out the functions of the office.

“It creates a position with an enormous amount of clout,” said Mr. Bullard.

The Investor Advocate’s Office “would wield a very large club within the commission,” he said.

No such provision is contained in the Investor Protection Act approved Oct. 28 by the House Financial Services Committee.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sun Oct 18, 2009 10:45 am

as one of the solutions that is being applied in other jurisdictions, see a Bill introduced into congress in April of this year.

It has been referred to in the bill as the "CONFLICTED INVESTMENT ADVICE PROHIBITION ACT OF 2009"

I describes how the current environment allows for investment account owners to have access to investment advisors who have self interests or conflicts of interest, and it goes about changing the rules and codes to compensate or protect the public interest from these conflicts of interest.

We could expect something similar in Canada, were it not for the fact that we only have five or six really large financial players, and they seem to be as effectively in control of our legislative process as the legislators are. Canada is the poster child for conflicts of interest and for not bothering to correct same.

search 111th congress, 1st session H.R. 1899 bill introduced by Mr. Andrews April 21, 2009
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Oct 10, 2009 1:58 pm

this post goes to a bit larger picture than the flogg, overall, but bear with me for one moment while I take you on a flight of fantasy.

Imagine sitting in a helicopter, in the hover, and pulling power without allowing any of the other controls to change.......up, up, up, but not away. Climb vertically several thousand feet (if you have the power) and gain some perspective on the overall landscape. If you have never done this, I urge you to pay $500 bucks to a flight instructor to give you a private spin in a helicopter before you die. You won't have experienced anything quite like it, but I digress. They say perspective is worth 50 IQ points and thus I need this from time to time.

The machine gets a lot harder to control in the hover as you rise from the ground, the reason is that you begin to lose visual references to judge your position by. The trees, the ground, fenceposts etc. All these become less useful at 3000 feet agl, but other things become clearer.

Here is what I intended to say to start with, and it relates to a "repair" of capitalism. There is a "bug" in the system and it should be worked out. And also, it is one public response to Mike Moore's plea for action in the wake of his good film, CAPITALISM, A LOVE STORY. Now if a guy could only contact mike moore?
03_1.JPG


Humanism. A new form of capitalism
The name is HUMANISM.
The game is how to improve Capitalism so that it can function as it should, without resorting to so much financial cannibalism of each other. So much greed, and so much financial abuse.

We have seen Communism. We have seen Socialism. We have seen Capitalism. They could all be defined this way:
In the first one, man is allowed to exploit his fellow man. In the other two it is just the opposite.

Humanism, on the other hand, is where human beings and human lives are given a place of importance. A priority if you will. How?
Humanism is Capitalism with accountability. With responsibility for ones actions. Not simply the kind we have now were the man with the most lawyers beats up the other man with the least. But real, societal support for fairness, and accountability. Where when one man is beaten or abused by another by capitalistic means, the entire society acts in a manner to correct this. Where predators are not simply allowed to prey on the weakest members of society at will.
Milton Freidman, the Nobel winning economist, with his "FREE TO CHOOSE" motto, left only one small item out. That item is the fact that with freedom comes responsibility. As we all tell our 16 year old son when we first give him the keys to the family car, "son, with this freedom, comes responsibility to behave and to act in a manner so as to not hurt anyone. You have a big responsibility and if you do not live up to it, you WILL lose this freedom". We need to put together a world where every one of us is told the same thing; "with economic freedom, comes a responsibility to behave in a manner appropriate". If you do not, you will be held to account.

Greed is good.......but not it if is used to hurt others. It all too often is allowed to.

Accountability means an entire new industry being introduced. An industry to ensure responsible humane behavior. To curtail the financially insane. To hold them to account for the damage done to other humans, or to the planet. It is an attempt to make our economy sustainable, and sustainable for more than just the top 1% of the population.

Who will pay for this industry? How will it function? See second thoughts on the topic at http://improvecapitalism.blogspot.com/
POSTED BY LARRY AT 5:23 PM 0 COMMENTS
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Re: Solutions, Self Defense and Best Practices

Postby admin » Fri Oct 09, 2009 7:33 am

Many mutual fund fines remain unpaid
The Chronicle Herald Halifax
By CLARE MELLOR Business Reporter
Fri. Oct 9 - 4:46 AM
Seven of 17 fines levied by the Mutual Fund Dealers Association of Canada during the latest fiscal year were not collected.

The national organization regulates mutual fund dealers and their representatives, who are licensed with provincial securities commissions.

The 17 fines that were imposed by the association between July 1, 2008, and June 30, 2009, amounted to $5.6 million, according to Hugh Corbett, director of litigation for the Toronto-based association.

Of that $5.6 million in fines, "$480,000 was actually paid," Mr. Corbett said in an interview.

One of the seven unpaid fines amounted to $2.6 million. In that case, a mutual fund dealer became insolvent, he said.

On Tuesday, former Halifax mutual fund salesman Bruce Schriver was disciplined by the association for infractions that included redeeming about $116,000 from a client’s account and not repaying it. Part of Mr. Schriver’s penalty included a $200,000 fine, even though a hearing panel acknowledged that the fine might not be collected.

Mr. Schriver’s lawyer, Peter Kidston, argued at the disciplinary hearing against levying a financial penalty as it would be "a paper fine" because Mr. Schriver has no means to pay.

The association does not have the legal authority to collect fines from those who have left the mutual fund industry.

Self-regulatory investment watchdog organizations like the Mutual Fund Dealers Association and the Investment Regulatory Organization of Canada "don’t have any judicial enforcement mechanism in our powers to be able to go to court and collect those fines," Mr. Corbett said.

"When someone remains in the (mutual fund) industry, obviously they have to pay their fine to stay in the industry. Where there is difficulty collecting fines is when people leave the industry," he said.

The self-regulatory organizations have asked the Canadian Securities Administrators to give it authority under law to collect fines.

"As of yet, those powers have not been granted to us," Mr. Corbett said.

If the Nova Scotia Securities Commission issues a penalty or fine against an individual or company for breaking securities laws, it has the ability under law to collect the fine.

Any order of the Nova Scotia Securities Commission can become an order of the Supreme Court, Scott Peacock, the commission’s director of enforcement, explained Wednesday.

Mr. Peacock was not able to provide figures on how often the securities commission has to seek a judgement through the courts against individuals or companies to collect fines or penalties it has issued.

A recent amendment to the Nova Scotia Securities Act will allow the commission to order an individual or company to pay restitution to its clients in certain cases where there have been breaches of securities laws. However, that amendment is yet to be proclaimed.

( cmellor@herald.ca)

On 9-Oct-09, at 4:32 AM, Ken wrote:

A better solution would be to fine the dealer ; that would get management's attention to root causes of problems.
The fines should also include restitution money for abused investors.

If this cannot be effected, than maybe the SRO model needs to be rethought.

Respectfully,

Ken Kivenko

http://thechronicleherald.ca/Business/1146678.html

Larry chimes in:

Ken, I could not agree more with your comments.............."fine the dealer"

This would solve all problems of the firms being able to "look the other way" while a few brokers and salespeople get caught.

Your second comment about restitution money is also perfect. If there were a "fund" or insurance program to fund this, which everyone in the business had to pay money into, in order to belong in the industry........it could create a culture of compliance, which is the opposite of the culture we now have.

I finally agree with "maybe the SRO model needs to be rethought"

all good

well done
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Re: Solutions, Self Defense and Best Practices

Postby admin » Mon Oct 05, 2009 3:57 pm

IA Co-op Fair Practices Code
from http://investors-aid.coop/

1. Advisors and their firms must put members’ interests first, as prescribed by
industry regulations.

2. Members are entitled to objective information from advisors and their
firms.

3. Members are entitled to know their total annual investment costs.

4. Members are entitled to ongoing and complete return calculations
compared to a relevant benchmark.

5. All transactions should be transparent including all advisor current and
ongoing commission.

6. Members are entitled to strategies and products that promote fair returns.

7. Members should be warned about the negative effects of trading, market
timing, high cost, excessive risk, and leverage.

8. Members are to be offered indexing and other low-cost investment options.

9. Members should be asked to consider only mutual funds rated A or A+ by
Globefund.

10. Advisors should not recommend proprietary or other investment products
managed or promoted by their firm.


from http://investors-aid.coop/
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Re: Solutions, Self Defense and Best Practices

Postby admin » Fri Oct 02, 2009 12:41 pm

"inability to police its profession in a timely way"

This quote applies directly to the investment and investment regulatory business. I believe they have lost the moral right to regulate and the current financial regulatory regime needs to be replaced by those capable of doing an effective job.

It is my understanding that current regulators do not even quite know who they work for, and who they owe a duty of care to. The purport to protect the public, while collecting a salary and future benefits from the industry, and the conflicts of interest are far too great for those currently in this job.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sun Sep 27, 2009 9:51 am

A compensation fund that paid victims back out of every financial service provider pockets just might make a few more of them in opposition to rampant looting. It might make Canada less of a free ride for crooks. I am not sure it is the only solution, but might be part of the solution.

see complete post at topic Investors Bill of Rights
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Sep 12, 2009 11:42 am

The Sydney Morning Herald

Planners face clean-up
Financial planners are expected to finally dump trailing commissions in an effort to lift their game.

Richard Webb
August 16, 2009
FINANCIAL planners are preparing to bow to public pressure and eliminate the controversial ongoing trailing commissions they receive from many fund managers in return for recommending their investments.

The move is part of far-reaching changes soon to be introduced by leading industry body the Financial Planning Association to raise standards in the industry and move to a more transparent fee-for-service method of payment.

It follows mounting public concern that the trailing commissions represent a fundamental conflict of interest for the industry.

The move will also remove the question of why the commissions continue to be paid to the financial planner every year you remain in the fund regardless of whether you consult that financial planner again.

The transition to a solely fee-for-service regime should also help restore the industry's tarnished image following the collapse of financial planning giant Storm Financial this year, jeopardising $4.6 billion in client investments.

Jo-Anne Bloch, chief executive of the association, said the perceived conflict of interest the commissions represented was so deeply embedded that the industry had no choice but to abandon them.

She said financial planners needed to move to a situation in which the customer clearly paid for all of their financial advice rather than the product provider contributing to the planner's remuneration.

''The days of commissions are probably over,'' she said.

''We have to be transparent in this environment, and it's fair to say that these commissions have not necessarily served financial planners or their clients particularly well.''

She said the industry wanted to remove the perceived conflict of interest and return to promoting the value of ''good quality financial advice''.

The association has 12,000 members managing the financial affairs of more than 5 million Australians with investments valued at $630 billion. It is expected to release its final recommendations to members soon, Ms Bloch said. The recommendations are expected to include removal of all commissions by July 2012.

Under the fee-for-service system, you will pay for financial advice with an upfront fee, or the financial adviser will charge a percentage of your assets under management, or at an hourly rate.

''The difference is that the client negotiates the fee and it comes out of the client's account - it's not from the product provider,'' Ms Bloch said.

Peter Johnston, executive director of the Association of Independently Owned Financial Planners, has been calling for the change for some time.

''It means the adviser can sit down and negotiate a fee with a client,'' he said.

''Once we have negotiated this, we can then begin to decide which product and strategy suits your circumstances without commissions getting in the way.''

He said the removal of the fees would also make it easier to rate the performance of funds. ''It's far better that fund managers compete on a wholesale rate,'' he said.

But Paul Moran, of Paul Moran Financial Planning in Carlton, said there was nothing inherently wrong with commissions as they were clearly declared with all other remuneration received on all statements to the customer. They suit some people and not others, he said.

''It's not how people get paid, the issue is whether the client is getting value for that fee.

''The investment decisions should always be driven by the client - they should never be driven by the adviser getting more revenue.'' Mr Moran believed the trailing commission retainer was more appropriate in certain circumstances than the charging of an hourly fee (likely to be $150 to $300 an hour).

''Say an adviser invests $20,000 into a fund with a trailing commission of 0.4 per cent - that's $80 a year but you can call the adviser at any time. If it's $200,000 that's $800 and you would expect to see the adviser once or twice a year - that's appropriate, but if it's $1 million and $4000, well that's probably excessive.''

Mr Moran said many customers wanted their financial adviser to keep an eye on their investments during the year, and in these cases it was appropriate there was some sort of retainer rather than an hourly rate.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Sep 12, 2009 11:41 am

FSA aims to separate cost of advice, products

The British regulator’s significant proposals are aimed at putting an end to clients’ lack of confidence in the industry’s integrity

By James Langton
January 2009

Britain’s financial Services Authority has long been on the leading edge of efforts to devise better regulation on behalf of retail investors. Now, the FSA is forging ahead with a plan to overhaul the way retail financial services products are sold, which could sound the death knell for traditional commission structures in that market.

In late November, the FSA published its plans for a new model of retail regulation.
· The ambitious plan aims to deal with what the FSA terms “the many persistent problems” it has observed in the retail investment market over the past 20 years, many of which stem from the great imbalance in knowledge and market power that exists between the financial services industry and retail clients.
“Insufficient consumer trust and confidence in the products and services supplied by the market lie at the root of what we are seeking to address,” the FSA plan says. “The poor standards of practice that we continue to observe in our supervision of some firms serve only to exacerbate this issue.”

Some of this lack of confidence in the industry’s integrity is the result of bad practices; some of it stems from the industry’s poor image with consumers. The FSA hopes that its new regime addresses both sources of concern by enhancing investor protection and improving customers’ perception of the quality of that protection, thereby encouraging new investors to enter the market.

The FSA project represents an effort to go beyond simply treating the symptoms of fractured investor confidence and aims to tackle the root cause. “We have deliberately taken a different approach,” its plan declares, “to resolving the long-standing issues in this market than we and previous regulators have done.”

The three primary goals of this effort are: reducing the inherent conflicts of interest in industry compensation structures by improving cost transparency; raising professional standards; and drawing clearer distinctions between the types of services on offer and improving clients’ understanding of those differences.

In short, the FSA is planning to draw a clear line between firms that offer independent advice and those that provide sales, such as firms with captive sales forces, or execution-only firms such as discount brokers. Advisors in both categories would have to meet new, higher professional standards.

Firms and advisors in the sales category would have to separate the cost of the product from the cost of their advice and clearly disclose the cost of the advice. Those in the independent advice channel would be required to agree with the client on the cost of advice up front. In addition, product manufacturers will be taken out of the advisor compensation equation as much as possible.

The overriding goal of these measures to reform remuneration practices, the FSA plan says, is “for customers to understand clearly the different services being provided. To recognize the value of advice, separate disclosure is required of the costs of advisory services from product costs.”

Also, the regulator says, firms that purport to provide impartial advice must remove any ability for product manufacturers to influence advisor compensation, if that advice is to be regarded as truly independent. There are two basic ways for advisors to get paid: by the client directly or by a third party such as a product manufacturer. The FSA believes that the latter method is not necessarily a problem. That said, it worries that the process for determining what gets paid can cause conflicts of interest, which can create risks that advisors may not act in their clients’ best interests.

Arrangements in which manufacturers determine what gets paid, and when, create the potential for bias in an advisor’s recommendations, the FSA believes. Its plan suggests that this potential for bias can undermine consumer confidence. And, it notes, it may also encourage advisors to churn their accounts. That’s why the regulator intends to impose new requirements designed to curtail that influence and require distributors to set their own charges for advice.

The FSA plan notes that the FSA would like to go further and completely cut manufacturers out of the compensation chain, but that it may not be able to do this for various legal and tax reasons at this point.

Instead, under the new regime, any compensation provided to an advisor by a product manufacturer must be funded directly by a simultaneous, matching deduction from the client’s product. The FSA is also aiming to eliminate pre-determined payments, such as trailer commissions, as much as possible. The idea is to ensure that clients are bearing the cost of the advice they receive and advisors are setting their own levies, so that manufacturers can’t sway advisors with outsized or unearned commissions.

“Our approach to advisor remuneration will be designed to reduce significantly the potential for providers to influence independent advisors’ remuneration, reducing the potential for bias (and the perception of bias) and improving overall industry sustainability and consumer confidence,” the FSA plan maintains. “We also want to improve consumer awareness that independent advice has a cost and has a corresponding value, to empower more consumers and further boost their confidence in the market.”

Introducing a new regulatory paradigm is never easy. In Canada, recent efforts such as the B.C. Securities Commission’s British Columbia model and the Ontario Securities Commission’s fair-dealing model plugged along for a couple of years. But ultimately, they were either abandoned, as in the case of the B.C. model, or revised beyond recognition, as in the case of the FDM. It eventually became the registration reform project, with far less ambitious goals than originally conceived.

However, Britain’s financial services industry is reacting favourably to the FSA’s plans. Following the announcement of the FSA’s proposed approach, the British Bankers’ Association came out in support of the proposals.

“The banks support the FSA’s approach to reforming financial advice: ensuring that everybody knows what they are paying for and that they get what they are paying for,” said the BBA’s CEO Angela Knight in a statement. “Separating the cost of the product from the cost of advice will bring clarity and certainty to consumers, and the drive toward greater professionalism among advisers will ensure their advice is of a reliable quality.”

The Association of Private Client Investment Managers and Stockbrokers said in a release it welcomes “any moves toward increasing professional standards and transparency for clients.” However, it warns, “the devil is in the details.” The FSA must be careful of unintended consequences.

The FSA concedes that there are risks in changing long-standing compensation practices and driving the industry toward charging for advice: “We need to be mindful that the market for investment advice is by no means perfectly competitive,” its plan says. “Consumers may engage an advisor because they lack the skills, information or confidence to understand financial products and services — and they may exhibit price-taking behaviours as a result.”

One of the primary risks the FSA foresees is firms adopting harmful practices such as discriminatory pricing — charging more to consumers that they perceive to be financially unsophisticated. Another risk is product manufacturers trying to undermine the rules by exerting influence over distributors in new ways. The FSA plans to address these sorts of issues in consultations, as it finalizes just how its proposals will work in practice.

The FSA is planning to phase in this new regime over the next few years. It expects it to be fully implemented by the end of 2012. IE
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sun Aug 16, 2009 9:28 am

With the UK recently banning commissions in the financial advice game, and this article from Australia talking about banning trailing commissions on mutual funds, it is time for Canada to rid itself of some of the more self serving, self regulatory bodies and move forward towards best practices:

http://www.smh.com.au/
Financial planning clean-up
Richard Webb
August 16, 2009
Financial planners are expected to finally dump trailing commissions in an effort to lift their game.

FINANCIAL planners are preparing to bow to public pressure and eliminate the controversial ongoing trailing commissions they receive from many fund managers in return for recommending their investments.

The move is part of far-reaching changes soon to be introduced by leading industry body the Financial Planning Association to raise standards in the industry and move to a more transparent fee-for-service method of payment.

It follows mounting public concern that the trailing commissions represent a fundamental conflict of interest for the industry.

The move will also remove the question of why the commissions continue to be paid to the financial planner every year you remain in the fund regardless of whether you consult that financial planner again.

The transition to a solely fee-for-service regime should also help restore the industry's tarnished image following the collapse of financial planning giant Storm Financial this year, jeopardising $4.6 billion in client investments.

Jo-Anne Bloch, chief executive of the association, said the perceived conflict of interest the commissions represented was so deeply embedded that the industry had no choice but to abandon them.

She said financial planners needed to move to a situation in which the customer clearly paid for all of their financial advice rather than the product provider contributing to the planner's remuneration.

''The days of commissions are probably over,'' she said.

''We have to be transparent in this environment, and it's fair to say that these commissions have not necessarily served financial planners or their clients particularly well.''

She said the industry wanted to remove the perceived conflict of interest and return to promoting the value of ''good quality financial advice''.

The association has 12,000 members managing the financial affairs of more than 5 million Australians with investments valued at $630 billion. It is expected to release its final recommendations to members soon, Ms Bloch said. The recommendations are expected to include removal of all commissions by July 2012.

Under the fee-for-service system, you will pay for financial advice with an upfront fee, or the financial adviser will charge a percentage of your assets under management, or at an hourly rate.

''The difference is that the client negotiates the fee and it comes out of the client's account - it's not from the product provider,'' Ms Bloch said.

Peter Johnston, executive director of the Association of Independently Owned Financial Planners, has been calling for the change for some time.

''It means the adviser can sit down and negotiate a fee with a client,'' he said.

''Once we have negotiated this, we can then begin to decide which product and strategy suits your circumstances without commissions getting in the way.''

He said the removal of the fees would also make it easier to rate the performance of funds. ''It's far better that fund managers compete on a wholesale rate,'' he said.

But Paul Moran, of Paul Moran Financial Planning in Carlton, said there was nothing inherently wrong with commissions as they were clearly declared with all other remuneration received on all statements to the customer. They suit some people and not others, he said.

''It's not how people get paid, the issue is whether the client is getting value for that fee.

''The investment decisions should always be driven by the client - they should never be driven by the adviser getting more revenue.'' Mr Moran believed the trailing commission retainer was more appropriate in certain circumstances than the charging of an hourly fee (likely to be $150 to $300 an hour).

''Say an adviser invests $20,000 into a fund with a trailing commission of 0.4 per cent - that's $80 a year but you can call the adviser at any time. If it's $200,000 that's $800 and you would expect to see the adviser once or twice a year - that's appropriate, but if it's $1 million and $4000, well that's probably excessive.''

Mr Moran said many customers wanted their financial adviser to keep an eye on their investments during the year, and in these cases it was appropriate there was some sort of retainer rather than an hourly rate.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Wed Jul 29, 2009 2:13 pm

Subject: 07-10-09 CNNMoney: White House pushes investor protection

White House pushes new investor protections
Obama administration seeks new powers for the SEC to regulate compensation for investment advisors and other measures.

July 10, 2009: 3:47 PM ET
WASHINGTON (Reuters) -- The Obama administration on Friday proposed legislation to strengthen the Securities and Exchange Commission's investor protection authority, including the power to ban certain forms of compensation for brokers and investment advisers.

The SEC would get authority under the bill to establish consistent fiduciary standards for broker dealers and investment advisers and could ban bonuses or other forms of compensation for financial intermediaries that encourage them to steer investors into products that are not in the investors' best interests.

The bill, one of several financial regulatory reform bills sent by the U.S. Treasury to Congress this summer, also aims to improve disclosures to investors, close gaps in standards and pay whistleblowers for information that can be used in enforcement actions.

The bill comes just days after the administration proposed a new agency that would get sweeping powers to protect consumers on many financial products that fall outside of the SEC's jurisdiction.

The bill would give the SEC authority to require delivery of disclosures and prospectuses before investors buy into mutual funds, not after as is typically the case currently. The SEC could require a concise summary prospectuses and a simple disclosure form showing fund costs.

The SEC also would gain authority to establish a fund to pay whistleblowers for information leading to enforcement actions that result in significant financial awards. The money would come from penalties paid that are not distributed to investors.

"This authority will encourage insiders and others with strong evidence of securities law violations to bring that evidence to the SEC and improve its ability to enforce the securities laws," The Treasury said in a summary sheet on the legislation.

A new SEC investor advisory committee, which examines new products, trading strategies, fee structures and disclosures, would be made permanent under the legislation.
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