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Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - Solutions, Self Defense and Best Practices

Solutions, Self Defense and Best Practices

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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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Re: Solutions? Self Defense from financial predators?

Postby admin » Thu Jul 02, 2009 8:52 pm

FSA details the enhanced standards people can expect from all investment advisers

Jon Pain


This is a call to action for the industry
FSA/PN/082/2009
25 June 2009

The Financial Services Authority (FSA) has today published proposals to build people’s trust and confidence in the retail investment market.

The FSA has issued a consultation paper on its Retail Distribution Review (RDR), which sets out detailed proposals to implement the wide-ranging reforms it outlined in November last year. The changes, which will take effect from the end of 2012, will improve outcomes for savers and investors by enhancing the quality of advice they receive, and prepare both consumers and the industry for the future.

In particular, the FSA is consulting on rules to ensure that:

· Independent advice is truly independent and reflects investors’ needs;
· People can clearly identify and understand the service they are being offered;
· Commission-bias is removed from the system – and recommendations made by advisers are not influenced by product providers;
· Investors know up-front how much advice is going to cost and how they will pay for it; and
· All investment advisers will be qualified to a new, higher level, regarded as equivalent to the first year of a degree.
The FSA is calling on all investment advisers to consider how they will adapt to these reforms. Although challenging, the RDR presents a significant opportunity for firms and individuals in the retail investment market to modernise practices, raise standards and improve the way they treat their customers.

Jon Pain, FSA managing director of retail markets, said:

"The RDR is about regaining consumer trust and confidence in the retail investment market, building a more sustainable sector and making it easier for people to find their way around and get the help they need – this is more important now than ever before.

"We have today set out the specific changes we propose to make to implement our far-reaching package of measures. This is a call to action for the industry - all investment advisers need to consider how they will respond and implement these wide-ranging and challenging improvements by the 2012 deadline.

"Throughout this process there has been close involvement of the industry and consumer groups, and we look forward to stakeholders’ continued engagement and to receiving their views on the detailed proposals we are setting out today."

The FSA is inviting stakeholders to comment on its detailed rules for implementing the RDR – the closing date for responses is 30 October 2009.

Notes for editors

1. The FSA’s consultation paper on the RDR (CP09/18), was published today.
2. The FSA's RDR feedback statement was published in November 2008. The discussion paper on the RDR was published in June 2007, and the interim report was published in April 2008.
3. To help investment advisers understand the detailed proposals it is setting out today, the FSA has published a series of factsheets on its small firms website.
4. The FSA has today also published the research which has informed its consultation paper: ‘Retail Distribution Review proposals: Impact on market structure and competition’ by Oxera; ‘Describing advice services and adviser charging’ by IFF Research; and ‘Firm behaviour and incremental compliance costs’ by Deloitte.
5. The FSA will publish a separate consultation paper in Q4 2009 on the creation of an independent Professional Standards Board, which will be responsible for maintaining and enforcing the new professionalism standards in the RDR. It will also consult in Q4 2009 on the application of the RDR proposals to the corporate pensions market.
6. The FSA will be publishing a policy statement in Q4 2009 on prudential rules for Personal Investment Firms (PIFs), following its consultation paper of November 2008.
7. The Financial Services Skills Council will be consulting in August 2009 on the content of the higher level qualifications for investment advisers.
8. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
9. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
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Solutions. Self Defense. Best Practices.

Postby admin » Thu Jul 02, 2009 8:28 pm

From ADVISOR.CA

Opinion: Canada should ban commissions too

Jason M. Pereira / July 02, 2009


Last week's regulatory changes by Britain's Financial Services Authority (FSA) received little coverage here in Canada. However, these are changes that should grab the attention of Canadian advisors, suppliers and regulators alike.
The biggest change made was regarding how advisors get paid. The FSA has effectively banned upfront sales commissions from being attached to any financial instruments, including insurance policies. Instead advisors will have to provide clients with a fully disclosed, upfront choice of a one-time billable fee or an ongoing fee for service.
The FSA claims that the move will prevent unsuitable products from being pushed by unscrupulous advisors who care more about making money than helping people.
Read: British regulator bans commissions
What I found most surprising is the reaction from the U.K. advisor community. It claims that this will not be a big change. Now, I know very little about the U.K. marketplace but clearly it is miles away from the Canadian one. This sort of regulatory change would be earth shaking in Canada where DSC fees are the norm for mutual funds, and insurance products — with the exception of seg funds — are only available via an upfront commission.
As a fee for service advisor, I have to applaud this legislation and can only hope that it serves as a model for future regulatory changes in this country. I know this opinion will likely make me unpopular amongst many of my peers, but I think this sort of change would create a better industry for just about everyone involved.
Let's consider the parties involved.
Clients
The question of how much they are paying for advisory services would no longer be dependent upon which advisor they use and their level of disclosure. This type of transparency would lead to a greater emphasis on continuing service to justify the fees being charged, which could in turn lead to greater levels of client maintenance and, I hope, trust in the industry.
Existing advisors
The elimination of upfront commissions would help this industry transition from a sales industry to a client relationship based industry. All too often I deal with people who never hear from their advisor after they purchase a product, and the client is too often tied to DSC schedules or old policies that the advisor has no monetary incentive to maintain.
I am a believer that everything in this industry should be portable from one advisor to another, and that the only advisor who should receive any ongoing compensation should be the one who is actually advising the client. However this would require the elimination of DSC sales, the levelling of insurance commissions and the end of lifetime vesting on insurance policies. The tradeoff, of course, is that all products in an advisor's book would be paying them recurring fees and increasing the sale value of their book.
New advisors
This is the one group that would no doubt suffer from such legislation. The elimination of upfront commissions will make the early years far less profitable for advisors. However, they could structure their practice in such a way that they focus themselves on bringing in business that is looking for upfront, onetime fee-for-service advice.
Mutual fund companies
I was once told by a wholesaler that somewhere in the neighborhood of two thirds of all calls to a mutual fund company's back office are DSC related. Accurate or not, it is clear that the issuance of these commissions, as well as the maintenance of funds within a DSC structure, are of significant cost to mutual fund companies. Elimination of this structure would result in decreased costs and potentially decreased MERs to clients.
Insurance companies
These product issuers would see the biggest change if similar legislation was ever put into place in Canada. The large upfront commissions that are common to these products would disappear and potentially be replaced with an ongoing service trailer that would have to be significantly larger than the tiny sums that are currently paid out. However other negative aspects of the industry would disappear as well, including agents who offer no after-sale support to their clients, the financial incentive to twist policies and the need to finance enormous upfront commissions.
I think that the key principle the FSA took hold of here, in addition to the clients right to full disclosure, is that this industry should be one of advice and relationships and not one of sales. As such, the financial remuneration should be in line with that. No longer will unscrupulous advisors push products on clients because it pays well. Nor will advisors be able to hide what they are charging from the client.
As of 2012, every client in the U.K. will have the choice of either paying an advisor upfront for their work and walking away from the relationship or paying them on an ongoing basis to work for them.
Isn't that a right that Canadian investors deserve?
Jason M. Pereira, MBA FCSI FMA, is a financial consultant with Woodgate Financial Partners (IPC Investment Corporation) in Toronto.
(07/02/09)
Filed by Jason M. Pereira, editor@advisor.ca

FSA details the enhanced standards people can expect from all investment advisers

Jon Pain

This is a call to action for the industry
FSA/PN/082/2009
25 June 2009

The Financial Services Authority (FSA) has today published proposals to build people’s trust and confidence in the retail investment market.

The FSA has issued a consultation paper on its Retail Distribution Review (RDR), which sets out detailed proposals to implement the wide-ranging reforms it outlined in November last year. The changes, which will take effect from the end of 2012, will improve outcomes for savers and investors by enhancing the quality of advice they receive, and prepare both consumers and the industry for the future.

In particular, the FSA is consulting on rules to ensure that:

· Independent advice is truly independent and reflects investors’ needs;
· People can clearly identify and understand the service they are being offered;
· Commission-bias is removed from the system – and recommendations made by advisers are not influenced by product providers;
· Investors know up-front how much advice is going to cost and how they will pay for it; and
· All investment advisers will be qualified to a new, higher level, regarded as equivalent to the first year of a degree.
The FSA is calling on all investment advisers to consider how they will adapt to these reforms. Although challenging, the RDR presents a significant opportunity for firms and individuals in the retail investment market to modernise practices, raise standards and improve the way they treat their customers.

Jon Pain, FSA managing director of retail markets, said:

"The RDR is about regaining consumer trust and confidence in the retail investment market, building a more sustainable sector and making it easier for people to find their way around and get the help they need – this is more important now than ever before.

"We have today set out the specific changes we propose to make to implement our far-reaching package of measures. This is a call to action for the industry - all investment advisers need to consider how they will respond and implement these wide-ranging and challenging improvements by the 2012 deadline.

"Throughout this process there has been close involvement of the industry and consumer groups, and we look forward to stakeholders’ continued engagement and to receiving their views on the detailed proposals we are setting out today."

The FSA is inviting stakeholders to comment on its detailed rules for implementing the RDR – the closing date for responses is 30 October 2009.

Notes for editors
1. The FSA’s consultation paper on the RDR (CP09/18), was published today.
2. The FSA's RDR feedback statement was published in November 2008. The discussion paper on the RDR was published in June 2007, and the interim report was published in April 2008.
3. To help investment advisers understand the detailed proposals it is setting out today, the FSA has published a series of factsheets on its small firms website.
4. The FSA has today also published the research which has informed its consultation paper: ‘Retail Distribution Review proposals: Impact on market structure and competition’ by Oxera; ‘Describing advice services and adviser charging’ by IFF Research; and ‘Firm behaviour and incremental compliance costs’ by Deloitte.
5. The FSA will publish a separate consultation paper in Q4 2009 on the creation of an independent Professional Standards Board, which will be responsible for maintaining and enforcing the new professionalism standards in the RDR. It will also consult in Q4 2009 on the application of the RDR proposals to the corporate pensions market.
6. The FSA will be publishing a policy statement in Q4 2009 on prudential rules for Personal Investment Firms (PIFs), following its consultation paper of November 2008.
7. The Financial Services Skills Council will be consulting in August 2009 on the content of the higher level qualifications for investment advisers.
8. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
9. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.




We need financial cops - and speed limits



June 28, 2009
Mary Schapiro, chairman of the Securities and Exchange Commission, is correct: Fiduciary standards for all who give investment advice won't be sufficient to deter fraud.
High standards are never enough. Consider that every state and municipality has traffic laws and speed limits that are posted and widely known. Yet the same jurisdictions also have police forces to enforce the laws and a jail to house those who violate them.
In most fields of endeavor, there are a few people who violate or try to game the rules and regulations for their own advantage. The investment advisory field is no exception, as the Madoff scandal and other recent cases of fraud have reminded us.
In fact, as reported in InvestmentNews last week, about a third of the 26 actions that the SEC has brought against Ponzi-type schemes since January involved investment advisory firms subject to fiduciary standards.
Simply declaring that all who provide investment advice must adhere to a fiduciary standard and act in the best interests of the client won't make them do so.
That is why President Obama's regulatory reform outline, put forward by Treasury Secretary Timothy Geithner almost two weeks ago, is merely a first step.
If Congress includes that fiduciary standard in any reform bill it passes — which by no means is a sure thing, given the intensive lobbying that will no doubt accompany the drafting of the law — it must also give the body assigned to regulate investment advisers the additional manpower and resources to enforce the standard.
That is true whether the authority and responsibility are assigned to the SEC, which now oversees investment advisory firms with at least $25 million in assets, the Financial Industry Regulatory Authority Inc. of New York and Washington, which oversees the brokerage industry, or the Washington-based Certified Financial Planner Board of Standards Inc., which is angling for the oversight role.
The SEC has the staff and structure, but needs more of both to properly oversee and enforce fiduciary standards at thousands of small independent advisory firms.
Likewise, Finra has some of the staff and some of the tools it would need for the task, but it would need more of both, and the staff would have to be trained in a new mindset.
The CFP Board would need to build the necessary staff and systems almost from scratch, which wouldn't necessarily be a bad thing because the new staff wouldn't have anything to unlearn.
Firms whose employees or affiliates give investment advice, whether financial planning firms, investment advisers or brokers, will have to adjust to a new regime. This new world no doubt will include different, probably more intrusive, and possibly more frequent audits — the cost of which will be borne by all financial advice givers.
Whichever institution receives a congressional mandate to enforce a fiduciary standard, it will have to conduct new and different audits to catch rule breakers in the act.
Just as traffic police in many jurisdictions use radar traps and sobriety checkpoints to catch speeders and drunk drivers, the responsible financial agency will have to be proactive in seeking signs of fraud. It can't wait for bad times to reveal the crooks who prospered in good times.
Doing so inflicts too much financial harm on too many investors and damages the integrity of the investment advisory profession and the capital markets.
Just as the sight of a police car parked on a highway shoulder deters speeders, so too will the presence of proactive overseers deter financial fraud.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Thu Jul 02, 2009 9:39 am

CBS MoneyWatch

Why We Don’t Even Notice Investment Fees
(Unlike High Gas Prices)

By Allan S. Roth | Jun 26, 2009 |

The price of gasoline is skyrocketing again and, as I filled the tank of my family car yesterday, I started
feeling the familiar pain of watching the digits spin at Warp Five and the corresponding toll it was taking
on my wallet. It got me to thinking of the possibility of gasoline hitting a new record of, say, $4.60 a
gallon. We could easily be paying $3,286 annually for fuel.



Paying that much for gas would be déjà vu all over again
from last summer, when Americans found that they needed
to start changing their travel plans to accommodate the price
increase. Those lazy summer days, since gas was too
expensive to go anywhere, had us dreaming of a more
fuel-efficient car, like maybe one that ran on water. Just grab
the hose from the front yard and fill ’er up. How
great would that be?

While there isn’t such an engine that I know of, there is
something even better. If you have a $200,000 portfolio
with typical total fees of two percent, you could actually save
more than owning a water-fueled car by lowering costs to
0.25 percent.

Don’t believe it? Well, let’s take a look at how much you could save with each:

Car That Runs on Water:
15,000 miles ÷ 21 miles/gallon
@ $4.60/gallon = $3,286

Low-Cost Mutual Fund: 1.75%
savings on $200,000 = $3,500

Eliminating the painful stops at the gas pump would save us $3,286 annually if gas reached $4.60 a
gallon, and $1,857 annually at today’s price of about $2.60 a gallon. Yet by cutting our fees on a $200,000
portfolio, investors would save a full $3,500 annually.

Pure economics dictates that the more money we lose, the worse off we are. Not exactly quantum physics.
Therefore, economic theory would predict that we’d change our investing habits before we’d change our
driving habits. But we don’t.

And the reason we don’t is that our actions are not typically ruled by the law of economics — or even logic,
for that matter. Any investor with two brain cells to rub together knows intellectually that they’re likely
paying high costs for their portfolios, but prefers to ignore them rather than take the effort to figure out
just how high they are. On the other hand, unless you pump gas with a blindfold, it’s pretty much
impossible to ignore how much it costs to fill up the gas tank.

My Advice

I wish the disclosure in the investment industry was as
transparent as the auto industry. Wouldn’t this disclosure on
our 401(k) plan be nice?



Unfortunately, the most that can be done is to try to hack
through the dense thicket of data to find this information. If
you have a planner, ask them in writing to estimate the total
fees you are paying. This would include fees:

n Based on a percentage of assets.
n Based on commissions.

Within the funds that are part of the portfolio.

Hidden within a portfolio or fund such as commissions, spreads between the bid and the ask price
when funds turnover stocks, and other fees known as market impact costs.

If you manage the portfolio yourself, go to Morningstar and look up the expense ratio, which will give you
the disclosed part of your fund’s fees. Then look up the fund’s annual turnover on Morningstar’s site,
divide by 100 and add the two together. For example a fund with a 1.25% expense ratio and a 75%
turnover would have an estimated 2.0% annual total fee (1.25% + 75%/100).

Of course the easiest way to rein in your fees is to make sure you have a few ultra low cost broad index
funds such as a total US, international, and bond index fund such as those of a simple second grader
portfolio. It won’t completely take the sting out of stopping at the pumps, but at least it may sting a little
less to know you are saving more on investments than you are spending on gasoline.

Allan Roth

Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory
firm that advises clients with portfolios ranging from $10,000 to $50 million. He is mocked on a
semi-regular basis by some financial professionals for his hourly fee model and its obvious inability to
make him rich.

Roth is also the author of How A Second Grader Beats Wall Street. He teaches behavioral finance at the
University of Denver and is an adjunct faculty member at Colorado College.

Allan Roth

Allan Roth has a lot of credentials (CFP, CPA, MBA) and business experience (McKinsey consulting and
officers of mega-billion dollar companies). But he insists that said credentials and business experience do
not interfere with his ability to keep investing simple.

Roth has worked with many a lawyer over the years, so he feels compelled to note that his columns are
not meant as specific investment advice, especially since any such advice would need to take into account
such things as each reader’s willingness and need to take risk, which can vary significantly. His columns
will specifically avoid such foolishness as predicting the next “hot stock” or what the stock market will do
next month. Roth’s goal is never to be confused with Jim Cramer.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Fri May 29, 2009 9:14 pm

In the TOP THREE TIPS from the Australian Securities Commission ( www.fido.gov.au )

they suggest as Tip # 2, to "Contact an independant complaints scheme"

This is the reason that white collar financial con men are able to get a free ride in Canada. There ARE NO independant complaints schemes in Canada. They are all staffed, funded and supported by the financial industry. Therefore you are playing in a money game where all the referees are hired by the money men. You will never win in a conflicted, one sided system like this.

Or perhaps it is better said by CEO Claude
Lamoureux of Canada's second largest pension plan. He is pro who spoke these words in the National Post
Saturday, August 12, 2006
By Diane Francis

........... "When we buy stocks in the U.S., or
trade stocks in the U.S., we're
protected by U.S. laws. It's easier to
sue there to protect your investment,
laws are tougher and they are also
more owner-friendly," he said in a
telephone interview this week.
The Teachers pension plan, secondlargest
in Canada after the Caisse de
depot et placements du Quebec, has ..................

In this telephone interview with Diane Francis, the top guy at Canada's second largest pension plan is quoted as saying that basically the game is "fixed" in Canada.

That should tell us a lot about the risks of investing in this country. Our regulators (current crop) are at best negligent, at worst guilty of the criminal offense Breach of trust, section 122, Canadian Criminal code. They assist in the yearly "con" of value equal to $2000 for every man, woman and child in Canada, due to predatory, non professional, self serving, often law breaking investment practices in Canada.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Wed May 27, 2009 7:59 am

with apologies if this document is duplicated, it is worth of being seen twice. It is Ken Kivenko's great work on effective complaining about abusive or predatory financial treatment of customers. see more of Ken's info at www.canadianfundwatch.com

Introduction
Over 10 million Canadians make investments in stocks, bonds, GIC’s and mutual funds. It’s a BIG business and highly profitable for the banks, fund companies, dealers and brokers. Mutual funds alone collect over $10 billion in fees each year. -the sales are commission based and include embedded sales commissions. When financially unsophisticated investors meet commission or quota- driven advisers, a toxic mixture can be created. So, it's not unnatural that problems will develop due to incompetence, greed, misrepresentation, or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses. A “Complaint” is defined to include any written or verbal statement of grievance from a client or any person acting on their behalf, former client or prospective client, alleging a grievance involving a firm or representative of a firm.

While formal mechanisms such as the International Standards Organizations’ (ISO) new complaint-handling standard, ISO 10002, Quality Management - Customer Satisfaction - Guidelines for complaints handling in organizations, may ultimately be adopted as the standard in Canada's financial services industry, financial institutions and Self-Regulating Organizations have adopted their own practices that guide the complaint-handling function. In this Guide we’ll review some ideas to manage a complaint so that justice is done when dealing with complaints made to an investment dealer. We exclude complex cases involving trading abuses or fund governance that may be best dealt with via class-action suits.

Unlike a physical product, complaining about investments requires a unique tailored approach. The complaints can cover a wide range of issues from unauthorized trading, failure to follow instructions, fraud, misappropriation and undisclosed fees to account churning, inappropriate leveraging (borrowing to invest) and unsuitable investments. Any of these issues can cause investors an undue financial loss, sometimes a very significant one. The primary objective of a complaint is to obtain restitution from the firm for salesperson or broker wrongdoing, realizing that all investment products carry some degree of risk.

The basis for a complaint is the duty of care owed by an advisory firm to its clients. In some relationships there is also a fiduciary duty. There are 5 factors that courts typically consider in determining whether a fiduciary relationship exists: trust, reliance, discretion, vulnerability and the existence of professional rules or codes. In a non-discretionary account, despite its validity, abused investors will face vigorous opposition to the necessary ‘trust’ and ‘reliance’ elements [to make a case for breach of fiduciary duty]. All of the industry manuals, training and codes of conduct implore advisors that they owe a duty of care to clients…anything less would contradict millions of dollars worth of industry advertising on the topic. Investors also have rights of action for breach of contract and negligence if a broker/advisor carries out unauthorized or excessive trading.

Denial and the stress of financial loss can cause an investor to take 6 months to 2 years before they consider action. Even then, most investors do not complain because they do not believe they have any rights, do not understand the complaint process, are embarrassed by the losses incurred or do not believe they have a chance of getting their money back. Some just don't want the hassle and decide to lick their wounds, perhaps discouraged by the strong initial response from the dealer or the Investment Industry Regulatory Organization of Canada (IIROC)/Mutual Fund Dealers Association (MFDA) –industry self –regulating organizations (SRO’s). These are numerous examples of claimants that have received a first response letter from the firm or an SRO saying that they have a invalid complaint, and the case is ultimately settled for a large sum of money because it was in fact a very valid claim.

An illustrative example

Here’s an interesting actual case that exhibits a variety of investor abuses. Ms X is a 78-year-old widow, functionally blind, speaks English poorly and has a grade school education. Further, the advisor knew she was in Florida from Nov-March and did not have access to her mail. Several letters are on file stating she does not understand the confusing statements, the fees charged by the fund companies and can’t figure out if she’s losing or making money. In fact she lost about half her RRIF within 2 years, her advisor never advised her of the risks involved and he knew that she was heavily dependent on RRIF withdrawals to pay her rent, clothe herself and eat. She was advised to put 80% of her portfolio in equity growth funds for her RRIF; all purchased on a DSC basis and all high MER proprietary funds with lucrative trailer commissions. Her trust in the advisor was completely abused but the brokerage firm thinks all is well and won’t settle the $175,000 claim without a fight. Precisely defining and making a claim for unsuitable investments isn’t always easy, but in this case, she got her money back but it took 2 years of aggravation, persistence and the support of an investor advocate.

Investors need to be aware that the complaint process is adversarial. They need to be aware that compliance officers work for the firm and that firms are investigating their own dealings and may be influenced by an incentive to act in their own interests.
Investment advisors have an obligation to know their client and to make only those recommendations that are suitable. They also have an obligation to understand what they are selling you. This means that the recommendations must be in the client’s best interest and must be consistent with their needs, investment objectives, and risk tolerance. Investments or recommendations that fail to meet these criteria would be considered unsuitable. Generally, unsuitable investments are investments that are riskier than what is appropriate for the client, and might include (among other things) strategies such as investing in small-cap stocks, building undiversified portfolios, speculating with derivatives (options), or leveraging for investment purposes.
The standard of care necessary to consider a negligence action are largely based upon the Know-Your-Client (KYC) rule which requires that an investment advisor ascertain material information about a client's financial circumstances, investment objectives, time horizon and he is required to make investment recommendations in light of this information. The courts rely upon the codification of this obligation which is found for example in Regulation 1300 of the Investment Industry Regulatory Organization of Canada HYPERLINK "http://iiroc.knotia.ca/Knowledge/View/ViewAttachment.aspx/B3241_en.pdf?kType=445&dBID=200706344&ftID=B3241_en.pdf"http://iiroc.knotia.ca/Knowledge/View/ViewAttachment.aspx/B3241_en.pdf?kType=445&dBID=200706344&ftID=B3241_en.pdf Supervision of Accounts

In general, those investors who have limited investment knowledge/experience and a low tolerance for risk will have a better chance of recovering losses than an experienced investor with a high risk tolerance as defined in the New Account Application Form (NAAF). For example, a 80-year-old widow GIC refugee with very limited investment experience will have a better chance of recovering losses than an affluent executive in his 40’s with considerable investment experience.
Preventing problems
Nobody likes losing money and getting involved in disputes so first a few words on how to prevent problems.

First, choose your advisor carefully, making sure there is a fit. You can check with the IIROC (HYPERLINK "http://www.iiroc.ca/"www.iiroc.ca), Mutual fund Dealers Association (HYPERLINK "http://www.mfda.ca/"www.mfda.ca) and/or your provincial securities regulator if he or she has been disciplined in any way. Secondly, make sure you fill in the New Account Application Form with great thought and don't let your ego get in the way. These little tick marks can prove to be very expensive should a dispute arise. Be sure to document what you told the advisor and what the advisor told you. If you are given the KYC to sign, you might consider writing in plain English exactly what you expect. i.e., “I want low- risk investments to produce an income for my retirement”, or “I am seeking growth and willing to accept some (high, medium, low) degree of risk with 20% of capital”. And to be very careful in signing any powers of attorney or authorizations to allow the advisor to trade on your behalf. Never make cheques out to anyone other than the firm.

Be realistic about your expectations. Be sure to a obtain a Letter of Engagement which establishes the rules of the client/advisor relationship and the expectations of each party and an Investment Policy Statement (IPS), a document that outlines your financial situation, objectives and risk/loss tolerance. The IPS is an important written document that should clearly (not jargon filled and incomprehensible…it should be understandable by yourself or any member of your family) define your objectives and constraints over a relevant, explicitly stated time horizon. The IPS is the linkage between you, the advisor, and your portfolio. The IPS is the foundation of managing your investments, and serves as a structured decision making process to make most l of your investment decisions. It lays down the strategies and expectations of the portfolio. The IPS process helps to balance return seeking and risk taking; increasing the probability of success in achieving your investment goals.

Ask some critical questions. If you have an Investment Policy Statement, most of these questions are already answered.)
What is the expected annual return on this portfolio over 1, 3, 5, and 10 years?
What is the worst likely performance over 1, 3, 5, and 10 years?
What is the annual total of all the fees I will be paying on this portfolio?
What investment strategy or rationale is this portfolio based on?
What is the benchmark against which we will measure performance?
What is the approach to rebalancing?
What actions are being taken to optimize after-tax returns?
And above all, read the offering documents/fund prospectuses especially as regards risk, volatility, fees and performance.

Don’t sit on an unauthorized transaction, knowing that it was unsuitable or unauthorized, in hopes that it works out - and then turn around and sue the firm if it doesn’t work. Act promptly, call /write the advisor-broker and move decisively before things get out of hand-you have an obligation in fact to do so. Note that if you don't file a civil action within the statute of limitation periods applicable in your province you will lose your right to sue. In Ontario, this period is a short 2 years. Some firms may exploit this constraint and drag out the case eventually limiting your recourse actions.

Complaining Ground rules
Now some ground rules. Make sure you have a legitimate case. If you were greedy and lost money, you’ll have to take your lumps. Do your homework and research your position. Visit such investor-friendly websites as HYPERLINK "http://www.Canadianfundwatch.com/"www.Canadianfundwatch.com, HYPERLINK "http://www.sipa.to/"www.sipa.ca, HYPERLINK "http://www.financialloss.ca/"http://www.financialloss.ca/, HYPERLINK "http://www.investored.ca/"www.investored.ca and HYPERLINK "http://www.fcac-acfc.gc.ca/eng/default.asp"http://www.fcac-acfc.gc.ca/eng/default.asp .Be prepared to put in some effort as financial institutions rarely concede easily or promptly. Some may try to intimidate you by writing you a formal looking letter summarily stating you have no valid claim. Don't be shocked if the firm's response ignores all the issues you have raised. It's part of the game. Others may ask you for tons of back- up documentation that you likely don’t have. Still others try to slough off accountability by claiming that the abusing broker or salesperson is no longer employed by them. They may claim you are a knowledgeable investor and were well aware of the risks involved. Don't be put off by any of these maneuvers, as they are often ploys to get you to go away. Here's a typical rebuff:

“As you know, our firm mails account statements to its clients on a quarterly basis, as well as for months in which activity occurs, wherein the current value of investments is reflected. Trade confirmations are also issued shortly after each trade that occurs in an account. If at any time Ms. X’s intentions were not followed as you have suggested, we believe the seriousness of such a situation would have prompted notice to Branch Management for timely resolution. We have no record of any expressed dissatisfaction until we received the letter of complaint and claim. We suggest that investment advice is intended to provide a client with the guidance necessary to make a reasoned and informed decisions but it is not intended to substitute for the client’s own decision making.”
-actual text of a letter from broker advisor to Ms. X’s legal counsel

As you prepare to file your complaint you should have a copy of the following documents organized in your file:
The Letter of Engagement
the signed NAAF for each account
the account statements for the period of interest
transaction confirmation slips
records of any meetings, correspondence, emails, prior complaints or phone calls
copies of investment proposals and the IPS
copies of fund ads, brochures and other sales literature
a copy of the relevant Know Your Client (KYC) Form
a copy of Offering documents/prospectuses , promotional materials
handouts or notes from any “educational” seminars attended
any brochures the firm may have on how to file a complaint

If there is any information that you feel you might be missing, ask the firm to provide all documents in your name, including the adviser's notes about your conversations. Under Section 8 of the Personal Information Protection and Electronic Documents Act (PIPEDA), they are obligated to give them to you.
You will receive the best response, the more accurate and complete the information you provide. Create a time line showing all milestones and significant events, such as your initial discussion with the advisor, setting up your accounts, significant trades or discussions, date that you first complained, emails etc. This will provide a chronology of the main issues surrounding the complaint and make it easier for the complaint investigator to assess your case.

The success of many complaints against greedy or incompetent advisors and the firms that employ them hinges on what you told the firm about the type of investments desired as determined by the New Account Application Form [the NAAF should be signed by clients, a copy retained and updated as required NOTE: forgeries and adulterations have occurred!] and how the advisor interpreted this instruction when he/she filed out the firm’s Know Your Client (KYC) form. Few firms provide a copy of the completed KYC form to clients; it seems to suddenly pop up at dispute time. KYC forms and terminology are not standardized and vary from Company to Company. Suitability, along with churning and unauthorized trading make up the bulk of investment complaints.

Before you start on your complaint journey, realize that the odds of a fast, totally satisfying settlement are not high. The financial services industry didn't get to be so powerful and profitable by easily parting with its money. They are skilled at rebutting claims and are seasoned veterans of investor litigation. They have experienced negotiators and lawyers ready and willing to negate your claim. Expect a protracted, emotional and frustrating trip.

A starting reference here is “A step-by-step Guide to Making a Complaint” available from the Ontario Securities Commission. (HYPERLINK "http://www.osc.gov.on.ca/Investor/Resources/res_making-a-complaint_en.pdf"http://www.osc.gov.on.ca/Investor/Resources/res_making-a-complaint_en.pdf). The document cautions however that the OSC cannot give advice on an investment, unwind a transaction, act as your legal counsel or get your money back. They can however answer your questions about investment products, tell you if your advisor is registered in Ontario and investigate complaints. To date, it has been extremely rare for provincial securities Commissions to order restitution for retail investors.

The elements of claims
To varying degrees you may file a restitution claim due to the actual investment losses due to purchase of unsuitable investments. Misrepresentation is the legal term for “lying”. If your advisor deliberately withheld or misrepresented material facts in making a recommendation he/she can be held liable for the consequences. Failure to disclose all the risks in an investment may also be grounds for a claim. Regulators use the term “misappropriate” to describe a situation where an advisor simply misappropriates (aka “steals”) from an investor's account. This could occur in situations where the advisor is not reporting a particular transaction to his employer or when transferring client’s funds to his own accounts. Even if the firm employing the advisor is unaware of the transaction in question, or even of the existence of the customer, the investor can have a valid claim as the firm .is responsible for supervising its staff.

If you can demonstrate that there has been negligence, misrepresentation or a breach of contract you might also be able to claim for:
excessive undisclosed fees paid
early redemption penalties to exit unsuitable investments
interest charges for unnecessary margin or loans
Don't count on receiving compensation for opportunity costs or your emotional pain and suffering.

Be sure to definitize the time period covered by the claim. It’s wise to have an investor friend, accountant or lawyer double-check your claim rationale, clarity and figures. If you are a member of the Small Investor Protection Association, a lawyer will give you a free Quick-look analysis of the merits of your case. Some specialized firms can provide a second opinion for a fee e.g. HYPERLINK "http://www.secondopinions.ca/"www.secondopinions.ca For large or complex claims, a review by counsel is absolutely necessary.

After review it may turn out that in fact you may not have a legitimate or winnable claim or one that’s worth the time, effort, aggravation and frustration.

Investor Complaints- Self-Regulatory Organization (SRO) Rules

Self –Regulating Organizations (SROs) such as the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association publish rules or by-laws to which members must adhere. Complaint related links are listed below.

Investment Dealers Association of Canada (formerly the IDA) HYPERLINK "http://www.iiroc.ca/"www.iiroc.ca)
Rule Book
The rule book contains:
rules pertaining to complaint handling and ombudservices that must be followed by IDA members (see IDA By-law 37.1- 37.2 (Alternative Dispute Resolution) -page 160)
standards for the handling of client complaints (see IDA Policy # 2-page 392)
procedures for reporting of client complaints (see IDA Policy # 8-page 474)
HYPERLINK "http://www.ida.ca/Files/Regulation/RuleBook/RuleBook_en.pdf"http://www.iiroc.ca/English/ComplianceSurveillance/RuleBook/Pages/default.aspx
Mutual Fund Dealers Association
(HYPERLINK "http://www.mfda.ca/"www.mfda.ca)
MFDA Policy No. 3
Handling Client Complaints

Policy establishes minimum industry standards for handling client complaints for MFDA members.
HYPERLINK "http://www.mfda.ca/Policies/policy03.pdf"http://www.mfda.ca/Policies/policy03.pdf


A very useful document is IIROC’s Disciplinary Guidelines
HYPERLINK "http://www.iiroc.ca/English/Enforcement/Policies/Documents/IDADisciplinarySanctionGuidelines_en.pdf"http://www.iiroc.ca/English/Enforcement/Policies/Documents/IDADisciplinarySanctionGuidelines_en.pdf especially para 3. Improper Sales Practice. This will give you a good idea of how you should have been treated by the firm. We quote:” The core of a registered representative’s business activity is to make recommendations for his/her clients. Registrants have a basic duty to ensure that the recommendations are suitable, and in accordance with the clients’ investment objectives and risk factors. The courts have generally held that a registrant owes a fiduciary duty to the client where the client relies upon the advice and recommendations of the registrant. This fiduciary relationship requires the registrant to act carefully, honestly and in good faith in dealing with the client. Therefore, a registrant who makes unsuitable recommendations has breached his/her fiduciary duty owed to the client.”

In Member Regulation Notice MR-0025 - Suitability Obligations for Unsolicited Orders, the MFDA says that the suitability notice intends to clarify dealer and rep obligations in the event that they receive an unsolicited order that they determine is unsuitable for the client. It says that firms and reps are required to make clients aware that the proposed transaction is not suitable based on the information provided on the current New Account Application Form or “Know-Your-Client” form and provide appropriate cautionary advice. It advises dealers to adopt "appropriate safeguarding procedures” where the client insists on proceeding with the order.

Where an unsolicited order is determined to be unsuitable for the client, the record of the order must include, at a minimum, evidence that: the transaction was unsolicited; a suitability review was performed; and the client was advised that the proposed transaction was unsuitable.

Representatives must clear unsuitable, unsolicited orders with their branch managers or compliance officer before proceeding with the trade. As well, dealers must set out procedures for dealing with unsuitable, unsolicited orders in their Policy and Procedures Manual. It notes that firms are not obligated to accept a purchase order from a client that is determined to be unsuitable. Investors should apply their own safeguards when being solicited by a dealer to make a purchase. Keep a record of the conversation and the reason the fund was recommended and if you were advised of fees, risks, dealer compensation and Terms &Condition’s. Unsuitable investments have been at the root of investors problems. Examples include inappropriate asset allocation, inadequate diversification and high- risk securities incompatible with the NAAF, KYC or common sense. See also the well-written, informative and useful MFDA Suitability Guidelines HYPERLINK "http://www.mfda.ca/regulation/notices/MR-0069.pdf"http://www.mfda.ca/regulation/notices/MR-0069.pdf So, if you’re going to complain about advice or wrongdoing, it’s wise to review the rules industry participants play by.

For complaints about mutual fund dealers, be sure to read How to Make a Complaint to the MFDA HYPERLINK "http://www.mfda.ca/Enforcement/HowToComplain.pdf"http://www.mfda.ca/Enforcement/HowToComplain.pdfHYPERLINK "http://www.mfda.ca/Enforcement/HowToComplain.pdf"

Some observations on industry complaint resolution responses

Here’s a few lessons learned that should prepare you for the types of controversial defence arguments used by the financial services industry to counter restitution claims:

Expect industry claims analysts to try to limit the period of time for losses by claiming that definitive loss mitigation action should have been taken early. You'll be advised that you should have acted quickly to mitigate your losses. Since you didn’t, compensation will be limited. It is indeed a principle of dispute resolvers and legal jurisprudence that clients have a duty to mitigate losses when they become aware of them. Easier said than done, especially if faced with early redemption penalties and what behavioural finance researchers refer to as Loss Aversion, the psychological force that makes it painful to take a loss. Since Client Statements don’t provide enough information to really determine how you’re doing versus plans, so timely mitigation is hard to do. It is rare indeed for a Client Statement to present personalized rate of return information for example. Further, the advisor may tell you to buy- and- hold while he/she of course collects trailer commissions. Finally, investor advocates argue that an advisor should pro-actively recommend a change in Portfolio if it is not performing in accordance with expectations and /or the NAAF-KYC? After all, you are also paying for his/her expertise and timely advice on selling/ portfolio rebalancing, not just purchases is part of the advice. The management of risk is an integral part of providing advice. When the answers you’re getting make no sense to you, you’ll have to take mitigation action, preferably on counsel’s advice. This will help define the end date for the claim. If you wait too long, any restitution will not cover losses incurred beyond this date.
There could be an attempt to use the KYC. form. even if it is in congruent with the investors signed New Account Application Form and even if it contains material errors. In any event, anything favourable to their pro-industry case can and will be used against you, so be careful what you put down on the NAAF at the outset.
the NAAF (s) and KYC (s) may or may not be applied to separate accounts depending on which position minimizes the claimed loss i.e. they may apply the investment objectives and risk tolerance from account A to all your accounts if it suits their case, or any other combination
The eligible loss may be limited to cash out/ cash-in and may exclude all sales commissions, wrap fees and early redemption penalty fees
If it is favourable to them, they may use backtesting data to argue that even if the proper asset allocation had been followed, losses would still have been incurred
The firm may claim the advisor was “off book' meaning he wasn't authorized to sell a particular security and therefore they are not responsible
An argument could be put forward that a non-discretionary account deserves little sympathy even if all buy/sell recommendations came from the broker, fund salesperson or advisor. The industry- promoted concept of trust seems to melt away at the time of dispute, arbitration or trial.
They may argue that if an investors’ income (or net worth) from all sources, including those outside the account(s) in dispute is “adequate”, then a higher proportion of equity/income is justifiable and not inconsistent with the stated objectives of the designated accounts
They may claim that the signed NAAF suggested that you claimed to be an experienced investor and could understand and accept risk
Specific aspects of your case may be addressed and others ignored in the firm's responses

On top of all this, they may unilaterally close the file and simply refuse to correspond further, leaving arbitration, ombudsman services or civil litigation as the only alternatives. Some of these responding arguments might in fact not be totally unreasonable IF most investors weren’t financially illiterate, could understand confusing NAAF’s/transaction slips, could decode foggy client statements, were provided with personal rate of return information and didn’t exhibit blind trust in their advisors.

To determine if you've received a substantive response, the response should provide the final decision in plain language, a statement of facts, identification of any assumptions, the rationale, rules, principles and standards applied to the decision, the documents, files and records used in the analysis, the basis behind the method of calculation if restitution is offered and clear articulation that if the offer is rejected it can appealed to OBSI.
The complaint sequence

A proper protocol is to first complain in writing to your advisor. If no resolution results you should contact his supervisor / branch manager or the firm’s compliance officer. If this fails, you should contact the organization’s ombudsman office if they have one. If your contact methodology is telephonic which is not recommended, be aware that your call may be recorded for “quality control purposes”. Because of statutes of limitation, time is of the essence.

Describe your complaint in as much detail as possible, including the full name(s) on the account, the exact type of account/account #, the dates of specific transactions or conversations, the name or code/ symbol of the security (ies) involved, and the names of all the people at the firm you have contacted about this complaint. At this point you may not be able or willing to cite a specific dollar figure for your claim.

Present the letter of complaint with copies of all relevant account documents (NAAF, KYC, account statements, etc), a timeline, an opinion on suitability and damages and correspondence. Present the complaint and backup data as a package, so the firm has everything needed to conduct an investigation without undue delays,
In some cases this will be the end of it but truth to tell, only a minority of cases will be satisfactorily resolved at this stage. This process can typically run from one month to well over a year You likely may have to escalate the complaint.

For the next stage you have a few choices. The Ontario Securities Commission HYPERLINK "http://www.osc.gov.on.ca/Investor/Complaints/cpt_money-back.jsp"http://www.osc.gov.on.ca/Investor/Complaints/cpt_money-back.jsp provides the following table identifying organizations may be able to help you get your money back. You can contact the OSC (or any provincial securities regulator) if you have questions or need information.
:Organization
What you need to know
How to contact
Ombudsman for Banking Services and Investments (OBSI)
Free, independent service for resolving banking services and investment disputes
You have up to 180 days after receiving the firm's response to get in touch with OBSI
Can recommend compensation up to $350,000
If you or the firm decides not to accept OBSI's recommendation, you can still pursue arbitration (if the dispute involves an IIROC member) or take legal action
Tel: (416) 287-2877
1-888-451-4519
E-mail: HYPERLINK "mailto:ombudsman@obsi.ca" ombudsman@obsi.ca
Website: HYPERLINK "http://www.osc.gov.on.ca/url/obsi.html" \t "new" www.obsi.ca
Investment Industry Regulatory Organization of Canada (IIROC) Arbitration Program
You have to complete the firm’s complaint process before you can use this service
Up to $100,000
Arbitrates complaints against IIROC member firms and their representatives
ADR Chambers conducts the arbitration process. It is a national alternative dispute resolution company and is independent of the IIROC
You can choose to have legal representation but it is not required
Generally faster and less expensive than going to court
Decisions are binding and final, which means that you cannot appeal a decision through the courts
Tel: (416) 362-8555
1-800-856-5154
E-mail: 
 HYPERLINK "mailto:adr@adrchambers.com" adr@adrchambers.com
Website:
 HYPERLINK "http://www.osc.gov.on.ca/url/iiroc.html" \t "new" www.iiroc.ca
 HYPERLINK "http://www.osc.gov.on.ca/url/adrchambers.html" \t "new" www.adrchambers.com
Small Claims Court
Up to $10,000
You can choose to have legal representation but it is not required
Generally faster and less formal than the Superior Court of Justice
Decisions are binding but may be appealed
See the blue pages in your local telephone directory or contact The Ministry of the Attorney General
Tel: (416) 326-2220
Website:
 HYPERLINK "http://www.osc.gov.on.ca/url/attorneygeneral-jus.html" \t "new" www.attorneygeneral.jus.gov.on.ca
{ rules and limits vary by province)
Superior Court of Justice Any amount
Legal representation is recommended
Generally a lengthy process
Decisions are binding but may be appealed
The industry supported and funded Ombudsman for Banking Services and Investments can recommend. restitution up to $350,000, there is no direct charge for the complaint evaluation service and the final report is non-binding on either party. OBSI will not accept a complaint until the firm has completed its investigation (new proposed rules would quantify the period as 90 days maximum after which they will take on the case) . There is nothing in the OBSI complaints brochure that is remotely close to a caution that clients need to be vigilant to protect their interests during the complaint process.The OBSI complaint form can be found at HYPERLINK "http://www.obsi.ca/images/up-Online_complaint_form_text_for_download.pdf"http://www.obsi.ca/images/up-Online_complaint_form_text_for_download.pdf Some lawyers advise against using OBSI (naturally) suggesting that that process could compromise any future litigation.
The IIROC's binding arbitration program allows restitution up to $100,000- but the verdict is final and can cost several thousand dollars. According to IIROC, total costs (including a filing fee, the arbitrator's hourly rates, room rentals and other disbursements) can be expected to range between $3,000 to $4,000 for a typical dispute. Costs are generally split equally between the parties, but the arbitrator can make a different determination. Moreover, as with the costs for arbitration, the arbitrator, as his or her discretion, may assign one party’s legal costs to the other party in the arbitration. The rules may vary from province to province. Some observers point out that about 50-60 % of claims find in favor of the investor with about 50 –65 % of the amount claimed as the settlement. See HYPERLINK "http://www.ida.ca/Files/Enforcement/ArbitrationStatistics_en.pdf"http://www.ida.ca/Files/Enforcement/ArbitrationStatistics_en.pdf
Consider sending copies of the complaints to the Provincial Regulator, the MFDA, or the IIROC as it may help support your case (or not). The IIROC and MFDA do not have the authority to order a firm to pay compensation; they are however the appropriate organizations to complain to if a breach of securities laws or member rules/policies/by-laws is suspected. Be aware that the IIROC and OBSI are industry- sponsored and funded. SRO’s do not assist abused investors in civil claims against dealers or direct dealers to reimburse clients for losses claimed.
Small Claims court rules vary by province so be sure to check them out. For small dollar claims this is the cheapest, less stressful route.
If none of the above approaches are working out you may need to retain legal counsel (one experienced in securities cases), and proceed in civil court. Unfortunately, this can be a long, very expensive, emotional and frustrating experience and your chances of recouping your losses uncertain. Be sure you understand the implications and consequences before proceeding down this route. According to some reports, a lawsuit typically costs $37,500 and take two years before it even gets to trial. There are some firms that work on a contingency fee basis but they may require a retainer of between $2500 and $10,000.Lawyers specializing in this field posit that claims less than $100,000 are likely uneconomical. Nevertheless, it’s an option that has met with some considerable success. In some cases, mediation could be useful – in this event consider an external mediator but realize there are costs involved.
Writing an effective complaint letter
Each complaint situation is so unique that it's virtually impossible to create a prototype letter. Nevertheless there are some basic points about all effective complaint letters:
A complaint letter should be businesslike and to the extent practical, avoid emotion
the letter should include contact information and be dated-include your full name, mail address, email address and telephone numbers
address your letter to a real person; send a copy of the correspondence to the adviser’s supervisor or branch manager
begin your letter with a good reason to read it
clearly state the problem, time lines, employee names and the specific reason(s) you believe you have a valid complaint
back it up with documentation, facts, background, special circumstances and chronological detail
ask for what you want i.e. restitution
set a definitive deadline for a response
your letter should be courteous and professional; never use profanity -stay civil
be careful not to make any libelous comments –attack the problem, not the person
CAUTION: Any comments you make can and will be used against you should the case turn ugly. That’s why it’s wise have someone review your complaint before you submit it. You might want to register the complaint letter to ensure you know it’s been received.
Some persuasive arguments

Here are some sample arguments that individually and/or collectively have helped recover money from dealers:
the advisor failed to disclose his conflicts -of- interest regarding fees leading to unsuitable investments
the portfolio’s asset allocation is wholly unsuitable either because it is inconsistent with your stated needs, temperament, age, marital status and health or physical/ mental disabilities or loss tolerance
the portfolio character is a significant departure from your historical conservative investing pattern and/or risk tolerance
the advisor failed to deliver required offering documents/a fund prospectus
the advisor failed to disclose the risks-market risk, currency risk, volatility [high standard deviations and betas are indicators of excessive risk]
your investment knowledge is demonstrably limited and all buys/sells were based on your advisor’s recommendations i.e. you trusted him-defacto control granted
there is no persuasive rationale for the account churning.
the dealer does not comply with securities regulations, SRO rules, or company policies
the KYC form is incongruent with the NAAF and/or contains material errors
your financial and/or linguistic literacy is such that you were totally dependent on your advisors investment recommendations for buying, selling or switching investments and the timing of such transactions
the signed NAAF form was confusing with vague, ill-defined terms that even experts can’t agree on
there was ineffective supervision of the advisor/broker
point out that you are a senior, a retiree, a widow or disabled and incapable of making up the losses from the unsuitable investments

Tactics to speed resolution

Oftentimes the negotiation process gets stalled with dealers hoping they can wear you down and wait out the limitation period time clock. There are a few tactics you might consider using to get things moving again. All can be time-consuming and will likely add to your aggravation level. Nevertheless, you can threaten to:
transfer your account and your accounts at affiliated companies to a competitor
contact provincial securities regulators or police in the case of fraud
contact professional advisor accreditation organizations (the advisers’ business card should indicate his professional designation e.g. CFP Certified Financial Planner; if no designation is annunciated, it is possible you are dealing with a salesperson masquerading as a financial adviser)
go to the media- in a select few cases this has been effective
post details of your alleged maltreatment on internet chat rooms or use FACEBOOK as was successfully done in the non-bank ABCP fiasco

Conclusion

The journey to a fair settlement can be stressful, aggravating and time consuming –resolution requires diligence, hard work and determination .A settlement of a valid complaint is deemed to be fair if it puts the client back in the position he would have been if the error, omission, mal-advice, action. /inaction or fraud had not occurred. Persistence pays. Assuming all has gone well, you'll have to sign a settlement release in order to receive compensation. Part of this may be a “gag order” preventing you from discussing the case or the terms of settlement with anyone. Assuming you’re not too unhappy with the amount, hold your nose and sign off. Move on to living your life.

APPENDIX I: Some of the things you should know about OBSI

Many investors mistakenly believe OBSI is a government agency. You should understand who you are dealing with and its ground rules when you deal with OBSI. Here’s the lowdown:

the OBSI is funded and sponsored by Member firms- OBSI salaries and expenses are paid for by industry participants .The Ombudsman’s dispute resolution services are at no direct cost for complainants and legal representation is not required.
OBSI has a general guideline that investors must bring complaints to them within six months of completing the exhausting process at their financial services provider.
OBSI deals only with abuse effects (symptoms), not root causes
if the Ombudsman recommends that a investor receive monetary compensation, the amount is limited to the loss or damage suffered.
When OBSI does adjudicate a decision on behalf of a financially abused investor, there is no public warning to other investors that may be affected by a similar pattern of abuse (plans are underway to give OBSI a mandate to deal with systemic issues)
the OBSI Board of Directors will not consider a request to hear an appeal of any recommendation made by the Ombudsman, or of the rejection of a Complaint by the Ombudsman
the discussions and correspondence of the Complainant, the member firm, the firm’s representatives and the Ombudsman that form part of the dispute resolution process will not be disclosed or used in any subsequent legal or other proceedings. (arbitration, mediation, litigation etc) - OBSI staff cannot be subpoenaed as witnesses in any civil court action.
Historically, OBSI has recommended that the financial service provider take action in favour of the client in about 50% of the investigations completed.
The final recommendation is non-binding but historically member firms have accepted the decision(s), at least after behind-the scenes negotiations.
The industry- sponsored OBSI Board of Directors isn’t peppered with demanding investors or investor advocates who demonstrably represent investors interests by challenging OBSI policies, budgets, methodology or decisions. OBSI does not serve any investor advocacy role.
OBSI itself has complained that a majority of firms fail to advise complainants of OBSI's free dispute resolution service
The Ombudsman's decision on the resolution of a complaint is normally based on four basic criteria:
Accepted industry standards and practices
Standards established by the individual financial services provider, professional associations or industry regulatory bodies
Overall fairness as determined by the analyst/investigator
Good business practices NOT Best practices ((even though you may have been promised BEST practices by the firm and the advisor advertising)

These aforementioned points are troubling and there have been criticisms on how investment complaints have been handled by OBSI and other industry-sponsored organizations. Right now however, it’s the cheapest route to use to obtain redress consideration. At the very minimum, you’ll get a detailed report analyzing the situation from a third party without laying out a dime. But be aware that if you mis-speak during the investigation, the firm can and will use anything you disclose in any future litigation.

Disclaimer
Information contained herein is obtained from sources believed to be reliable, but the accuracy is not guaranteed. The material does not constitute a recommendation to buy, hold or sell. The purpose of this Document and others in the series is to educate investors by bringing together personal finance information from a variety of sources. It is not intended to provide legal, investment, accounting or tax advice and should not be relied upon in that regard. If legal or investment advice or other professional assistance is needed, the services of a competent professional should be obtained.










Kenmar Associates
Investor Protection and Education


May, 2009 HYPERLINK "http://www.canadianfundwatch.com"www.canadianfundwatch.com Page PAGE \* MERGEFORMAT 1



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