Solutions, Self Defense and Best Practices

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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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admin
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Re: Solutions? Self Defense from financial predators?

Postby admin » Sun May 10, 2009 10:14 am

One thought that occurs to me as I talk to abused investors, and it is a mistake we all make, is to enter into the "fix-it" process or the complaint process that is set up by the investment industry.

After thirty years I have finally figured out that if you enter into a game where the referees are all hired and paid py the other team, you might not get fair treatment. Nevertheless, that is the way a trillion dollar industry has stacked the cards, and that is how most of us have to be dealt them. Not fair.

Fair would be to be able to call real police, when real crimes occur. When your signature gets forged, why do we not have access to the criminal code on forgery? Because it is the financial industry and we police ourselves, thank you.

When a bad salesman, at a bad firm misrepresents him or herself as a "trusted advisor", why do customers not have access to the misrepresentation laws in our competition act, or fraud criminal codes? Because we police ourselves. (see Competition act flogg topic for actual answers from Competition Law officers in Canada)

When a salesman violates the law, and trades your investment account without your say so, and you lose money? Sorry, we police ourselves.

To take your complaint to these very same people, the very industry who you are complaining about is to ask for failure. But what are ordinary clients to do? They cannot go to the police. They get told that it is not something that police deal with. Cannot go to the commercial crime people at the RCMP. That organization is riding a dead horse, and someone has failed to tell the poor mounties to get off it.

I am waiting for a person to step forward, and demand criminal action, when crimes of fraud, forgery, misrepresentation, negligence, and a myriad of others take place. It is going to take someone with the strength of will that can fight city hall until they win. It will be most difficult. And when it is over, it will appear self evident. People will wonder, how we ever, ever accepted a system where criminal violations were "handled" by some of our richest, most clever, most ethically deficient banksters.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Tue Apr 28, 2009 9:52 pm

Note the proposal from FINRA in the USA. Canada will not bring itself up to "best practices" for some time is my guess.

FINRA mulls permanent disclosure of disciplinary histories of former brokers

Monday, April 27, 2009

By James Langton

The U.S. Financial Industry Regulatory Authority is proposing to expand its broker database to make the records of final regulatory actions against brokers permanently available to the public, regardless of whether they continue to be employed in the securities industry, FINRA said Monday.

Under current rules, a broker’s record generally becomes unavailable to the public two years after they leave the securities industry and is therefore no longer under FINRA’s jurisdiction.

“It has never been more critical for investors to research the backgrounds of the people who approach them with investment proposals,” said Richard Ketchum, FINRA chairman and CEO. “Individuals previously barred by FINRA and other securities regulators have surfaced in a number of recent frauds responsible for millions lost by unsuspecting investors. Investors should be able to check if the financial professional they’re dealing with has been the subject of a disciplinary action by regulators.”

FINRA filed its rule proposal to expand its BrokerCheck service with the Securities and Exchange Commission late last week. The SEC will publish the proposal and solicit public comment in the near future.

IE
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Re: Solutions? Self Defense from financial predators?

Postby admin » Tue Apr 28, 2009 5:33 pm

Better disclosure seen as the key to avoiding another
financial crisis
Market regulations must account for the fact that humans are
not always rational, behavioural finance expert says
<http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=49125&I
dSection=148&cat=148>


Tuesday, April 28, 2009


By Megan Harman

Improving disclosure in the financial services industry is
crucial to avoiding more financial crises in the future, according to
Richard Thaler, a professor of behavioural science and economics at the
University of Chicago's Graduate School of Business.

Thaler spoke about behavioural finance at the CFA
Institute's annual conference in Orlando, Florida on Tuesday. He said a lack
of information available to investors and regulators was a key factor
contributing to the financial crisis. This is something Thaler calls
"bounded rationality."

For example, many people who took out sub-prime mortgages
didn't understand the terms of the loans, Thaler said. Furthermore, many
financial institutions did not explain these terms to consumers.

"There were a lot of unscrupulous mortgage brokers that were
pushing loans that they knew people wouldn't be able to repay, but it didn't
matter to them because they were getting paid on volume, not on quality,"
Thaler said.

A lack of awareness also existed among the top ranks of
financial firms, he added, since many executives were simply chasing high
returns without assessing the risks. "It's clear that many CEOs of our
largest financial services companies did not understand the risks that their
employees were taking on their behalf."

Thaler pointed to the example of former Citigroup chairman
Robert Rubin, who admitted he was unfamiliar with the term "liquidity put",
even though the company was engaged in the complex agreements to a large
extent.

This concept of bounded rationality challenges the
traditional theory of a rational economy, which assumes that all individuals
act rationally. Failing to recognize the importance of bounded rationality
-- and other realities of human nature -- was the biggest mistake made by
Alan Greenspan and financial industry regulators, according to Thaler.

He said it's crucial for market regulations to account for
the fact that humans are not always rational. He explores these ideas in a
recently published book called Nudge, which he co-authored with Cass
Sunstein, a professor at the Harvard Law School.

"We humans are mere humans, we're imperfect, we need all the
help we can get," he said. "We have to expect that people are going to make
errors."

According to Thaler, better disclosure is necessary to
improve the state of the financial system. Improved disclosure would allow
for better decision-making among all market players, he said.

"We need to devise disclosure rules that will allow all of
us -- investors and regulators and competitors -- to see enough of what's
going on to make sure firms are not risking our money, but not disclose so
much that they are not able to make money," he said.

"It would make everybody more intelligent consumers," Thaler
added, noting that better disclosure would also benefit the firms
themselves.

But Thaler warned it would be a mistake for governments to
respond to the financial crisis by implementing a slew of new, heavy-handed
regulation. It's unreasonable to think that greater power among government
employees would improve the state of operations in the complex financial
system, he said.

"The CEOs of these big companies did not understand what was
going on inside their companies. What hope is there that some government
regulator would?" IE
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Re: Solutions? Self Defense from financial predators?

Postby admin » Wed Apr 22, 2009 5:45 pm

Investors Bill Of Rights 2009
http://www.investoradvocates.ca

These are the basic rights that an investor in a developed country deserves. One who seeks help, or advice from someone purporting to be a professional. Anything less than delivery of these rights is considered to not be best practices, and may be actionable. This depends upon how the salesperson, advisor or investment firm represented themselves to the client.

The right to have the customer interests take priority over that of the advice giver.
(this means, all other things being equal, that if there are two or more nearly identical investment products available, that the advice giver must direct the client towards the one which is most beneficial to the client and not the one which pays the advice giver most.

The right to know whether the advice giver is licensed as a salesperson or as something else.
The right to know if the advice giver is compensated as a salesperson or in some other way.
The right to know, in writing, whether the advice giver, and or his or her investment firm owes a duty of care, a fiduciary duty to the client, or no duty to place the interests of the client first. Is the relationship one of a salesperson to a customer. Is it “buyer beware” or “duty of care”.
The right to an independent regulatory and investor protective body, outside of the capture, the funding, or the influence of the investment industry itself.
The right to fair, fast and adequate compensation for investment abuses where the client interests have been taken advantage of by the investment industry.
The right to have their investment plan, their objectives, their risk and reward tolerances placed in writing, by the advice provider, such that a third party could observe and understand what client and advice giver are agreed upon.
The right to have a simple, understandable one page written summary, from he advice giver, of each and every possible or potential form of compensation that is earned, could be earned, or earned indirectly as a result of the advice given by the advice giver.
The right to a written summary of all claims, judgements, awards against, penalties or any other sanctions against the professional standing of the advice giver.
The right to receive account statements that could be considered decipherable and understandable with regard to the age, the state of mind, the literacy and the competence of the client.
The right to full disclosure of investment positives, risks and negatives, with full and accurate information. To a standard of the best of efforts and practices by a prudent professional at the time.
The right to full, timely and fair recourse, despite any industry obfuscation, delay, distraction, untrue denial.
The right to damages of some multiple amount of the actual damages to the client, if the industry can be shown to practice any attempts at dishonesty, delay, bullying tactics, or anything less than the highest professional standards or care for a client who has a dispute or a complaint.
To a clearly defined process for raising and resolving a complaint.
Your right to know if your investment firm has a clear and concise policy of fairness, honesty, and professional due diligence process towards whistleblowers or employees who attempt to tell the truth about inappropriate corporate behaviors or customer abuses. Or do they shoot, shut up and shovel?
The right to approach and complain to independent, objective police agencies about matters which involve criminal or potential criminal violations. NOT a process where complaints are handled internally, by industry trade and lobby groups, or by regulators or self regulators who are paid for by the industry.


If you are investing in any country which does not have these kinds of rights and protections for each investor, you will be placing your economic future at risk of loss or theft.

To be candid, Canada is failing on nearly all of these rights and basic protections. Canadians are totally under the care and protection of industry paid, industry driven organizations, which means you are being protected entirely by the foxes of the industry.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Wed Apr 22, 2009 5:44 pm

Financial Consumers Guide to Effective Complaints

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 greed, misrepresentation, incompetence or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses.

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 in Canada's financial services industry ,financial institutions and trade associations have adopted their own practices that guide the complaint-handling function. In this Guide we’ll review how best to file a complaint so that justice is done when dealing with investments that have gone awry. 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 a financial institution requires a unique tailored approach. The complaints can cover a wide range of issues from unauthorized trading, failure to follow instructions, fraud, 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 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 unsuitable trading.

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 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) –so called self –regulating organizations ( SRO's). Remember, it's often not a lawyer writing the letter, but they are attempting to put it forward as a legal conclusion. These are numerous examples of claimants that have received a letter from the firm or IIROC 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 case

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.

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

Preventing problems
Nobody likes complaining 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) or your provincial securities regulator if he or she has been disciplined in any way but note that not all bad guys are in the database. 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.

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 all of your investment decisions. This helps to suitably balance return seeking and risk taking; increasing the probability of success in achieving your investment goals. 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 broker and 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 act within the statute of limitation periods applicable in your province you will lose your right to sue.

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.investorism.com/"www.investorism.com, HYPERLINK "http://www.Canadianfundwatch.com/"www.Canadianfundwatch.com, HYPERLINK "http://www.sipa.to/"www.sipa.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. 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

You will receive the best response, the more accurate and complete the information you provide.  If you have a complaint about a broker or salesperson, specific details of how, why, and when you were financially assaulted, sold unsuitable investments or encountered problems with investments or your broker/ advisor is required.

The success of many complaints against greedy or incompetent advisors and the firms that employ them hinges on what the client investor told the advisor about the type of investments desired as determined by the New Account Application Form [this 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 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 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 these Commissions to order restitution for retail investors.


The elements of claims
To varying degrees you may file claims for the following:
actual investment losses due to purchase of unsuitable investments
excessive fees paid
early redemption penalties to exit unsuitable investments
interest charges for unnecessary margin or loans
excessive sales commissions
undue income tax liabilities as a result of churning or unsuitable investments
the costs associated with preparing the claim/complaint
opportunity losses
emotional stress, pain and suffering( rare)

As part of your negotiating tactics you may wish to include some items (e.g. 8. and 9.) that, albeit legitimate, are difficult to quantify or debatable, realizing that any settlement will be a tough negotiation and usually less than you feel is fair. 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. You may in fact not have a legitimate or winnable claim or one that’s worth the time , effort and frustration.

Investor Complaints- Self-Regulatory Organization (SRO) Rules

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

Investment Industry Regulatory Organization of Canada (IIROC)Rule BookThe 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 IIROC Policy # 2-page 392)
procedures for reporting of client complaints (see IIROC Policy # 8-page 474) HYPERLINK "http://www.iiroc.ca/English/ComplianceSurveillance/RuleBook/Pages/DealerMemberRules.aspx"http://www.iiroc.ca/English/ComplianceSurveillance/RuleBook/Pages/DealerMemberRules.aspx
Mutual Fund Dealers Association (MFDA)
( 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/investors/complaints.html"http://www.mfda.ca/investors/complaints.html


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.pdf HYPERLINK "http://www.mfda.ca/Enforcement/HowToComplain.pdf"

The Mutual Fund Dealers Association Member Regulation Notice MR-0025

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" (cover your butt) 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. See also the well written MFDA Suitability Guidelines HYPERLINK "http://www.mfda.ca/regulation/notices/MR-0069.pdf"http://www.mfda.ca/regulation/notices/MR-0069.pdf

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, high MER funds (index ETF’s rarely recommended), and high- risk securities incompatible with the NAAF, KYC or common sense.

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 industry to counter 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
Bond mutual funds may be unduly accepted as satisfying the criteria of fixed income in asset allocation decisions –investor advocates argue this classification is misleading,
There could be an attempt to use the KYC. form. even if it is in congruent with the investors signed New account application Form (NAAF) 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 loads, commissions, wrap fees and fund early redemption penalty fees
Mutual fund capital gains distributions might be considered as income
There will be little compensatory consideration even if the funds chosen were high MER, are high turnover with heavy-duty sales loads. Opportunity costs/losses aren't normally part of the current industry mindset
If it is favourable to them, they may backtesting data to argue that even if the proper asset allocation had been followed, losses would still have been incurred
Selling a DSC fund with a six-year redemption schedule to a 89-year-old may not be deemed inappropriate behaviour.
While a malpractice, fund churning by itself may be disregarded if the net effect does not result in a net capital loss for the portfolio
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
The time value of money may be ignored
Currency exchange losses may be ignored
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
Decisions may be inconsistent, as they do not follow normal judicial practices of jurisprudence.
On top of all this, they may 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.

The complaint sequence

A proper protocol is to first complain in writing to your advisor. If no resolution results you should contact his supervisor or branch manager. 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 statues 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.

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.
For the next stage you have a few choices. Your provincial securities regulator will likely refer you to the IIRC, MFDA, OBSI or to civil action if your looking for financial redress. 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
Another alternative is the Ombudsman for Banking Services and Investments (OBSI; HYPERLINK "http://www.obsi.ca/"www.obsi.ca). Restitution here can go up to $350,000, there is no direct charge for the complaint evaluation service and the final report is non-binding on either party. The two systems are fundamentally different and investors should research the pros and cons of each. Consider sending copies of the complaints to the Provincial Regulator, the MFDA, or the IDA as it may help your case. 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. Both the IIROC and OBSI are industry- sponsored organizations so their independence is far from obvious and in fact they have been criticized by Independent studies and Task forces, the media, investor advocates and investors. The MFDA does not assist abused investors in civil claims against dealers or direct dealers to reimburse clients for losses claimed.
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 the IIROC website, a lawsuit typically costs $37,500 and take two years before it even gets to trial. Nevertheless, it’s an option that has met with some success. Alternatively, you can work with firms that work on a contingency fee basis. In some cases mediation could be useful – in this event consider an external mediator but realize there are costs involved. If the amount is relatively small –under $10,000- Small Claims Court may be an appropriate channel.
How to write a winning 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 individual’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 and hint at the “consequences” of no 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
Remember too, that any comments you make can and will be used against you should the case turn ugly. You might want to register the complaint letter to ensure you know it’s been received. If you can’t find the correct mailing address ( a less than rare occurrence these days) try searching the internet for the Company.
Here’s 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 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 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)
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.
as set out in the terms of OBSI’s reference, the Ombudsman may not recommend the payment of an amount greater than $350,000 as part of the resolution of a Complaint.
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.
OBSI recommended that the financial service provider take substantial action in favour of the client in about 50% of the investigations completed i
The final recommendation is non-binding but historically member firms have accepted the decision(s), at least after behind-the scenes negotiations. According to hearsay, and we stress, hearsay, member firms are not always quick to respond to OBSI queries.
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 itself has complained that a majority of firms fail to advise complainants of OBSI's free dispute resolution service
Never forget that 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 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 or prejudicing your future case should you decide to sue. Lawyer John Hollander of DOUCET MCBRIDE LLP in his Aug. 19,2004 submission to the Ontario Standing Committee on Finance and Economic affairs (securities legislation) cautioned “… Last, the process of submitting claims for review by the IDA and by the Ombudsman takes such a long period of time that the new Limitations Act (Ontario) may prevent the claims from proceeding; they may become statute-barred...”In Ontario you have just 2 years to file a civil action.

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 winning 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 broker accepted payment from the mutual fund company to flog the fund but you were not advised of this
you were not advised of reduced sales commissions or MER discounts for large purchases/holdings
the dealer does not comply with securities regulations, SRO rules, or company policies
unduly expensive funds were purchased without advising you of alternative equivalent but lower MER funds
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. 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 independent board members or fund trustees
contact provincial securities regulators
contact professional accreditation organizations
go to the media
post details of your alleged maltreatment on internet chat rooms or use FACEBOOK as was done in the non-bank ABCP fiasco
tie in with consumer or seniors groups
start a petition using ipetition.com
file civil and/or criminal charges via a lawyer ( other than Small Claims Court, litigation cases should involve at least $100,000)

Conclusion

The journey to a successful conclusion can be stressful, aggravating and time consuming –resolution requires diligence and determination .In the end though, persistence pays. Some shrewd investors have not only received their money back but have received “ consideration ” in the form of waived fees, free trades or reduced early redemption time frames. 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 happy with the amount, hold your nose and sign off. Move on to living your life.

Ken Kivenko P.Eng
May , 2009
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Re: Solutions? Self Defense from financial predators?

Postby admin » Tue Apr 21, 2009 9:21 pm

PERSONAL FINANCE: LEGAL REMEDIES
Portfolio battered? You may have a case
Bad financial advice shouldn't have to cost you. Two lawyers with expertise in the area explain the ins and outs
ROB CARRICK
E-mail Rob Carrick | Read Bio | Latest Columns
April 21, 2009
rcarrick@globeandmail.com

The stock market has recovered a bit from the depths of last fall, but not enough to fix the damage done to some investor portfolios by bad financial advice. One option for investors who believe their advisers have cost them money is to take legal action. To learn more about suing an adviser, I spoke with Harold Geller and John Hollander, lawyers with the Ottawa firm Doucet McBride LLP, who spend much of their time representing investors.

Gentlemen, how's business right now?

Mr. Geller: A bit of a tsunami. There's clearly a high level of interest among people to find us and discuss their situation. But there's also an element of the ostrich here. People don't want to think about the degree of loss. What we're hearing is that advisers are saying, 'Look, you haven't got a loss because you haven't sold.' To me, that's poppycock.

Are you getting lots of phone calls?

Mr. Hollander: Several a week.

How long does it take people to get out of the shock-and-dismay phase of suffering a big financial loss and start taking action?

Mr. Hollander: If it follows the pattern of the last bear market, then it may be anywhere from six months at the earliest to 24 months at the latest. But there's a reason why that's a problem. In the last bear market, you had six years from the time losses occurred in order to start a lawsuit. In 2004, a new limitations act went into effect in Ontario. So now you have two years from when you discover a loss. If you don't act fairly quickly now, you may find your complaint has been barred by statute.

What are you seeing in the portfolios of the investors coming to you for help?

Mr. Hollander: What you find are people who should not have had all their eggs in the equity basket. The issue is a misallocation of assets.

Can you tell us about a current client?

Mr. Hollander: A woman, nearing retirement, came into funds, has an income but intends to retire in a few years. She goes to see a discretionary portfolio manager (has discretion to make investing decisions without consulting the client). All the money is put into small-cap stocks. In the debacle we've just seen, if the banks are down 40 per cent, the small caps are down by 80 per cent. And in some cases, there is no bid (no one wants to buy them).

How often do you look at an investor's complaint and find it's not legitimate, that his or her losses were in line with the correct set of benchmarks and thus not out of line?

Mr. Hollander: I would say that two or three [prospective clients] in 10 think they have a claim, but don't.

Mr. Geller: This immediately begs a second question - is it a claim which, on a financial basis, makes sense to proceed with?

So, how do you decide on a dollar basis?

Mr. Geller: If somebody's talking to me about $30,000, $50,000, $70,000, then we have real concerns about the price efficiency.

So we're talking at least six figures?

Mr. Geller: Yes.

You're both paid on a contingency basis for the investor cases you handle - how does that work?

Mr. Geller: Essentially, it's payment upon result, although clients can be asked to pay out-of-pocket expenses. There's a [base] rate of 30 per cent [of the settlement].

Mr. Hollander: Most lawyers require a fixed fee to determine whether or not they like the case. We call it an investigatory retainer. The range would be $2,500 at the low and, so far, $10,000 at the high end.

What percentage of cases are settled before trial?

Mr. Hollander: In my own situation, there have been four trials and four abandoned cases on about 70 cases that I initiated. The rest were settled for financial compensation that some clients would have said was fine and some clients would have been left unhappy, but at least it was worth their while."

With a settlement, how many cents on the dollar can the client expect on average?

Mr. Hollander: It's a huge range. I've had cases where the settlement has been 200 per cent of the loss and I've had cases where it was 10 per cent of the loss.

What are my chances of getting a settlement on my own, sans lawyer?

Mr. Hollander: Remote. Occasionally, we get calls from people who say, "This is what they're offering, should I take it?" That has happened.

Next week: Mr. Geller and Mr. Hollander on the usefulness of the financial industry's ombudsman offices, and their take on investment advisers.

*****

RECOVERING YOUR LOSSES

What you need to know about hiring a lawyer to recover funds lost to bad investment advice.

Finding a lawyer: Very few specialize in this area, so you'll need to ask lawyers, accountants and financial planners in your community for referrals.

The size of your losses: It takes at least $100,000 or so in losses to make legal action economical.

The cost: Lawyers who work on contingency take a percentage of the funds they recover; others charge a flat fee

What to expect: With legitimate claims, the typical outcome is for the investment firm involved in a dispute to make a settlement offer.

A typical complaint: You lost more than you should have in the bear market because your portfolio was more exposed to stocks than it should have been, based on your personal situation.
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Re: Solutions? Self Defense from financial predators?

Postby admin » Fri Apr 10, 2009 7:20 pm

APRIL 11, 2009

Investors Face Tough Duel With Brokers


Heath Heingardner

Investors Face Tough Duel When Fighting Brokers


THE INTELLIGENT INVESTOR
By JASON ZWEIG
As my Aunt Betty once told me, it's only when the rinse cycle begins that you see how dirty the laundry really was.

With the market still off more than 40% from its peak in 2007, investors are examining how their portfolios ended up so filthy -- and blaming brokers. Through March 31, investors filed 1,264 arbitration cases with the Financial Industry Regulatory Authority, or Finra, up 114% from the year-earlier period.

Many will walk away disappointed.

If your broker has lost your money, it may not really be lost. In some cases, arbitration is possible. WSJ's Jason Zweig explains the recourse investors have if they feel their broker's specific advice went against their risk profile, best interests or instructions.

With rare exceptions, when you sign a brokerage-account application you also sign away your rights to sue the broker or the firm for any bad advice they might give you. Instead, you must settle any dispute through the arbitration system run by Finra, which is funded by the brokerage industry.

Losses alone aren't enough. "Everyone has lost money," says David Robbins, an arbitration specialist at Kaufmann Gildin Robbins & Oppenheim in New York. "Even the arbitrators have lost money." In general, you must demonstrate that your broker put you into investments that violated your stated instructions, financial objectives or risk tolerance.

Consider Edward and Jean Marnell of Pleasanton, Calif. In 2005, at age 82, they had no investment experience; Mrs. Marnell had been diagnosed with Alzheimer's disease a year earlier. That February, the Marnells gave $100,000 to a broker at Morgan Stanley.

According to Christopher Ulrich, a law student who represents the couple through the securities arbitration clinic at the University of San Francisco, the Marnells instructed the broker that they needed steady income and had a low tolerance for risk.

The Marnells contend the broker put all their money into only four securities issued by Ford Motor, General Motors, GMAC and Sears Roebuck Acceptance; they quickly fell. By December 2005, when the Marnells finally sold the securities and closed their account, they had lost more than $20,000.

"Morgan Stanley denies the allegations," a spokesman stated by email, "and intends to contest them."

Compelling as their case might sound, the odds of getting most of their money back aren't in the Marnells' favor. At least 60% of cases that are filed for arbitration end up being settled before a hearing. In arbitration hearings, investors win at least something in about 42% of cases, down from more than 60% in the 1990s. Richard Ryder of Securities Arbitration Commentator estimates that the typical investor recovers about 40 cents on the dollar.

Finra has had an effective monopoly over arbitrations since 2007, when it absorbed the regulatory operations of the New York Stock Exchange. An industry member -- someone from within the brokerage industry -- is often required in arbitration panels.

"Other alternatives [to Finra's system] would be too expensive for customers," says Linda Fienberg, president of dispute resolution for Finra. "Also, if a broker doesn't pay an award, Finra suspends the broker or firm until they do pay. So I think Finra's forum is at least as fair and beneficial as any outside forum."

Here are some steps you can take to improve your odds.

Keep good records. Incomplete or sloppy documentation works against you.

Ask what happened. Write to your broker explaining why you feel your account was mismanaged. Be polite but specific, detailing what you told the broker about your level of experience, investment objectives and risk tolerance. Ask your broker to explain what went wrong.

Lock in the loss. Get a second opinion from another broker and your accountant, then dump whatever you should never have owned in the first place. You can't usually make a convincing claim without a realized loss.

Get help. To learn more about whether to arbitrate, try finra.org/ArbitrationMediation. To find an attorney: piaba.org. If your losses are under $100,000 or you are on a spartan budget, law clinics are at sec.gov/answers/arbclin.htm.

Don't "go on the papers." You might be offered an all-paper arbitration, in which neither side appears in person. If you "go on the papers," you release the brokerage firm from its obligation to send people to a hearing, thus reducing its incentive to settle with you.

Pick your panel. You can choose who will arbitrate your case, and you are free to ask Finra for more information on any potential arbitrator. You can research an arbitrator's past decisions at www.arbchek.com. Exercise your right to veto anyone who seems hostile to investors.

(advocate comments..........if you have any dispute with anyone who represented themselves to you as an "advisor" in Canada, look up their true license category through the securities commission web site.......and if you find that they are in fact licensed in the category of "salesperson", demand a full refund of your money back on the basis of false representation. See a lawyer and force the issue if you do not get satisfaction. You have been lied to, and your trust has been taken and taken advantage of based on this misrepresentation. Do not accept this kind of financial abuse.)
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Re: Solutions? Self Defense?

Postby admin » Sat Mar 07, 2009 11:17 pm

If you have lost money on your investments, get it back.
http://web.me.com/lelford/breachoftrust ... inute.html

My name is Larry Elford. I worked inside Canada’s top financial firms for twenty years. When I finally figured out the game, and refused to play it the way they wanted it played, I left the industry and chose to document it instead. See some of my efforts at http://web.me.com/lelford/breachoftrust ... inute.html

It takes three minutes to view the film trailer of some of what I have learned in my decades inside the industry. Nearly thirty years of study, boiled down to three minutes. But oh, what a journey!

And go get your money back if you were lied to by the investment industry.

Best of luck to you and best wishes.

Get it back if the investments were sold to you by someone who told you that they were an “investment advisor”. I can almost assure you that their license and registration category is instead, “salesperson”. You can look this up yourself on the “registration” section of your local securities commission. (see osc.gov.on.ca if your provincial commission does not list registration categories)

The following criminal code sections may be of use to you in getting your money back:

Fraud, section 380
Negligent Misrepresentation, section 219
Fraudulent concealment, section 341
False Pretences, section 361
(not to mention all internal codes, rules and regulations against industry misrepresentation of job titles)
(see also Competition Act of Canada criminal violations for misleading and misrepresentation)

If you purchased investments from someone claiming to be an “investment advisor”, and with the experience of some hindsight and some research, find that you purchased the highest compensating investment (to your salesperson) that you could possibly purchase, and that there are several choices of the identical product that would have saved you money, get your money back. See DSC, Deferred Sales Charges for the most common method of making the largest commissions on your purchase.
(See “salesperson or advisor” flogg topic at www.investoradvocates.ca for research)


If your “investment advisor” has moved your investments into their own proprietary or “house brand” funds, then they have used your investment assets to increase their own remuneration by between “12 to 26 times” according to Ontario Securities Commission studies on house brand funds. (IFIC sales figures show that 92 of all mutual fund sales in 2008 went into “wrap” accounts, the largest component of which would include house brand funds.


To give an analogy to what the banks have done since taking over 90% of the entire brokerage industry in Canada................imagine IF.........................IF the pharmaceutical industry were to take over 90% of the medical clinic's in the country, putting them under the ownership of the drug co's.

Then change the title of every drug sales rep in the country to that of "doctor", and have them not only dispense pill product, but dispense medical advice as well.

Finally incent them to sell only house brand drugs, due to the higher profit margins available when the house brand drugs are sold.

Like this analogy, when we give everyone in Canada the title of "advisor" we will end up with no one in the country giving advice. And when all that are sold (or most of) are house owned mutual funds, there will be nothing in the way of choice.

Canada will have the highest costing, and lowest performing mutual funds in the world, and the highest profit banks in the world..................hey! We are already there.

Get your money back! You have been misled, misrepresented and you have been cheated. My research is free. My motivation is to help right wrongs, not to charge. You must provide a large dose of your own spunk, your own motivation in order to get over the huge hump of an entire industry telling you that you have no right to have your money back. I disagree. I say that they are lying to you. Demand the same consumer redress as you would if you bought a defective toaster from WalMart, or if you were lied to with any other consumer product.


Check www.investoradvocates.ca

www.investorvoice.ca

www.canadianfundwatch.com

My name is Larry Elford. I worked inside Canada’s top financial firms for twenty years. When I finally figured out the game, and refused to play it the way they wanted it played, I left the industry and chose to document it instead. See some of my efforts at http://web.me.com/lelford/breachoftrust ... inute.html

It takes three minutes to view the film trailer of some of what I have learned in my decades inside the industry. Nearly thirty years of study, boiled down to three minutes. But oh, what a journey!

And go get your money back if you were lied to by the investment industry.

Best of luck to you and best wishes.

Larry Elford
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Re: Solutions? Self Defense?

Postby admin » Sun Feb 01, 2009 11:21 am

Goodbye trailer commissions for DIY’s, but…
Toronto-based Questrade's (an IIROC member firm) Mutual Fund Maximizer is a service
that reimburses mutual fund trailer commissions directly to investors. The trailer
commission is one of the expenses associated with actively-managed mutual funds. It can
be as much as 1%+ (less for fixed income funds) of the value of your investments. The
stated purpose of trailer commissions is to pay your financial advisor or broker for
ongoing services they may provide you. They are paid for as long as you own the fund
whether or not you want, need or use advice. The fund company pays the same trailer
commission to your broker no matter how much or little advice they provide or the
quality of the advice provided. The trailer commission is an ongoing expense; as your
portfolio grows, so do the commissions. Most mutual funds pay the trailer directly to the
brokerage where your funds are invested. You don’t see the trailer commission deducted
from your fund because it is typically embedded in the fund's MER, thus quietly reducing
returns while out of sight .The average trailer commission is about 1% for equity funds.
The primary competitor to mutfunds are ETF’s with MER’s a fraction of an activelymanaged
mutfund, TD’s efunds and TBC DI’s D series.
Questrade's Mutual Fund Maximizer reimburses trailer commissions back to you.
Questrade deducts a monthly processing fee of $29.95 per account from the trailer rebates
received from the mutual fund company and reimburses you everything above this
threshold. This processing fee is never charged to your account, so there is no additional
payment if your rebate is less than $29.95 for a given month. The trailer fee rebate will
show up as a rebate on your statement. It is not clear whether or not the rebate is taxable.
Trailer commission rebates are deposited into your account as cash, and cannot be used
as part of a re-investment program. However if you own mutual funds that issue
dividends, you can register your mutual fund as part of our dividend re-investment
program. Once you start your account application you will have access to MyQuestradethe
admin aspect of your account. Within MyQuestrade the firm offers a Mutual fund
Center which is powered by Morningstar Canada. This gives you access to a variety of
news, charts, and a lookup function.
To check out the kind of rebate you’ll receive go to the link for the mutual fund
maximizer calculator. The listings of all fund companies are in middle section; the actual
fund names are below. This link will take you straight through to the calculator:
http://www.questrade.com/trading/mutual ... lator.html
Typically, the breakeven point is about $45,000 (for a 50:50 bond/equity portfolio mix).
On top of the processing fee, online mutfund trades will cost you $9.95 per trade; for
mutfund phone trades the cost is $9.95 plus a $25 telephone surcharge. If the fund
company is negligent or delayed in disbursing trailer commissions, Questrade says it will
pursue full and timely payment. When and if a fund company disburses a tardy trailer
commission, your account will be credited the full eligible amount. Note that fund returns
will still be calculated using the posted MER.
http://www.questrade.com/trading/mutual ... tails.aspx Exclusive to
Questrade, you can also trade U.S. stocks and options in registered accounts without the
9
currency conversion hit imposed by other firms. Questrade is covered up to $1M by the
Canadian Investor Protection Fund in the event of insolvency.
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Re: Solutions? Self Defense?

Postby admin » Sun Feb 01, 2009 11:08 am

this expert writes and tells it like it in the financial services industry

New Book: Warren Mackenzie’s latest book New Rules of Retirement: What your
financial adviser isn’t telling you (co-authored by Ken Hawkins) is now available. It’s
targeted at retirees and those planning to retire in the next 10 years or so. The authors
attempt to debunk many of the myths perpetuated by the financial service industry and
provides an insightful and unbiased approach to planning for your retirement. The
paperback lays out 38 Retirement Rules and, unlike most retirement-focused books,
covers both the financial and non-financial aspects of retiring. Warren MacKenzie’s
credentials include a chartered accountant (CA), certified financial planner (CFA),
certified investment management analyst (CIMA) and teacher (B.Ed.). He runs Second
Opinion Investor Services Inc. You can order the book on-line for about $16-17.
Publisher: Collins Canada (Dec 22 2008); ISBN-10: 1554680018
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