This article pertains to misleading marketing in the USA. Canada is yet to recognize such tactics.
--------------------------------------------------------------------------------
States to crack down on 'senior' designations
Model rule could stem fraud by demanding show of expertise
By Charles Paikert
May 26, 2008
Reacting to abuses in the marketing of financial products to seniors, several states are set to adopt model laws and regulations that will oversee designations and certifications that purport to demonstrate expertise in retirement and the financial needs of older investors.
Colorado, Maryland, New Hampshire, North Dakota, Virginia and Washington are readying new legislation or rules based on a model approved by the North American Securities Administrators Association last month. The model, developed by the Washington-based group of state regulators, is based on a pioneering Massachusetts rule adopted last year.
Some states, including Nebraska, already have adopted rules or legislation aimed at senior designations. Missouri, California and other states are expected to enact laws modeled on the NASAA template in 2009.
Widespread adoption of the model rule is expected to be aided by the Senior Protection Act of 2008, proposed legislation sponsored by Sen. Herbert Kohl, D-Wis., chairman of the Senate Special Committee on Aging. The bill would give states federal grants if they adopt the model.
The legislation has been referred to the Senate Judiciary Committee, but at press time a hearing had not been scheduled.
While Capitol Hill observers believe the bill is unlikely to become law before the end of the current congressional session in October, its prospects are considered good for the next session, especially if Democrats increase their majority in Congress.
Without adopting a standardized rule, states ran the risk of each "doing its own thing," said Keith Hickerson, vice president of marketing and student success for The American College in Bryn Mawr, Pa., which offers a senior designation, the chartered adviser for senior living.
"A lot of states were waiting for a common rule," he said.
Certifications or professional designations prohibited by the NASAA model rule include those obtained from an organization that "is primarily engaged in the business of instruction in sales and/or marketing [and] does not have reasonable standards or procedures for assuring the competency of its designees or certificants."
The rule requires organizations to monitor and discipline designees for "improper or unethical" conduct and to have reasonable continuing-education requirements to maintain the designation or certificate.
Keith Hickerson: Doesn't want states to do their own thing. "The rule is meant to eliminate designations that are nothing more than marketing documents," said NASAA president Karen Tyler, the Bismarck-based securities commissioner for North Dakota. "It strengthens the arsenal regulators can deploy in the fight against senior fraud."
Penalties for violating the rule will vary state by state, Ms. Tyler said. In North Dakota, where the model rule is expected to be in place by October, each violation could bring a penalty up to $10,000, she said.
In New Hampshire, where the rule is scheduled to become law next month, penalties include fines and revocation of the offending organization's license, said Mark Connolly, the state's Concord-based deputy secretary of state and its director of securities regulation.
"[The rule] puts users of these designations on notice that regulators are paying attention," said Melanie Lubin, the Baltimore-based Maryland securities commissioner, who led the NASAA task force on the model rule. "It sets a standard that credentials have to meet in order to be legitimate and makes investors more aware of what might be a dishonest practice."
The model rule also recognizes two Washington-based organizations, the American National Standards Institute and the National Committee for Certifying Agencies, as well as organizations approved by the Department of Education, as qualified to accredit organizations offering designations as long as the designations and credentials do not "primarily apply to sales and marketing."
The rule will "go a long way toward standardizing quality" for senior designations and certifications, said Roy Swift, ANSI's director of programs, certification and accreditation.
To date, no organization has submitted a senior designation or certification to the institute, he said.
The model rule may also serve as a standard for all financial services designations in the future, according to Dede Pahl, executive director of Denver-based Investment Management Consultants Association.
"It's well regarded and good for investors," she said. "It also has good, solid criteria and can be used to review any designation."
New Hampshire's Mr. Connolly agrees. "It could be a model beyond seniors. People are confused, and something is needed," he said.
While NASAA has not yet talked about expanding the model rule to designations beyond the senior markets, "it's certainly worth a discussion," Ms. Tyler said.
E-mail Charles Paikert at -cpaikert@investmentnews.com.
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Solutions, Self Defense and Best Practices
advice to a friend
by admin » Sun Apr 27, 2008 4:21 pm
----- Original Message -----
Sent: Sunday, April 27, 2008 3:05 PM
Subject: Voice from your past
Hi Larry,
Hope you remember me from years ago. I'm still living in XXXXX and still working with XXXXXX. however I am taking a year off to see if I can afford to retire. We even still live in the the same home we bought when moving here.
Anyway, the reason I am writing is because I just saw you on W5 and the timing was perfect. I read a bit about what you are doing now and I must say 'congratulations' to you. I think it's helping a lot of people to get a better understanding of just what really goes on behind the scene in some cases. It just happens that I am thinking strongly on making an 'investment adviser' move and my accountant had recommended someone at XXXX here in XXXXX. I'm having my second meeting with her on Wednesday. I've been with XXXXXX probably since you and I dealt together and just haven't been very satisfied with my broker. It's such a mine-field out there trying to find someone new, that I was wondering if you make any suggestions or recommendations. I have about half my RSP now in mortgages that I do myself, but I feel I should have diversification in the markets. If so many brokerage firms are driven by their interests rather than their clients, what is the solution?? Is there one?
I haven't read enough about what you are doing to know if I'm off base asking you this, but I know you and I felt you would give me good advice. Any help would be greatly appreciated.
Thanks so much,
thanks Eric. good to hear from you again. Of course I remember you. Everyone out here remembers you fondly.
My experience with investments, plus some of the real estate stuff I was doing while I was working led me to conclude that the real estate was a "more controllable" investment than other passive investments. Real estate is more difficult to manage of course.........
I must say it is difficult to make any suggestions Eric. It comes down to whether the person you go with is of high ethical fabric, and that is easily faked, and terribly hard to measure. Females, I found to be less "predatory" than males, but beyond that they still suffer from the system which rewards the hungry and punishes the ethical.
One solution (that will probably never work) is to find a broker who is willing to put in writing what their fiduciary obligations to you the client are. Now most salesmen would not know who to spell that word, much less live up to it, a few (small few) know and understand that. Your job as a client is to understand the 80/20 rule. that is Parado's law, which suggests that 80% of the professionals you meet, (realtors, judges, cops, financial advisors, etc., etc) are not living up to the role, but simply pretending. The other 20% are truly trying their best to be the best they can be. Your job is to find those who are truly trying to be professional and skim out all those who are simply "posing".
My advice is to start with the females, interview a few, let them show you copies of the professional "process" they follow. Is there a disclipline that they believe in (right or wrong) or are they simply making it up as they go along. Can they backup that investment process with records, track records, experience, and does it make sense?
What are thier educational designations. They are given out like candy in this day, so unless they are far past the old CFP, (they are pretty basic). Look for FCSI, the highest designtation for education and experience from the Canadian Securities Institute. Look for CIM, CFA. CFA is one of the most professional and demanding courses out there and only the most serious people will have it. (CFA's also have the lowest number of complaints against them in the industry)
Do they follow the "Uniform code of Fiduciary Conduct" or do they even know what it is? It is a USA standard that goes with the ERISA act (employee retirement income security act) and it gives the best guidelines for conduct for a broker to follow. If they are aware of that and can demonstrate that they follow it, you are dealing with someone exceptional. (The fact that it is a US code of conduct should never bar a true professional from rising to or recognizing its high standards of practice)
Do they give you a written letter of engagement, and can you please have a copy of it before you sign on? This is a letter that outlines what the expectations and obligations of your new relationship is. Or, again, are they winging it, and making it up as they go along?
Do they give you a written "Investment Policy Statement" which describes your situation to a tee, and understands your objectives, your risk tolerance etc,. etc, and is willing to work to obtain that? If not, they are making it up as they go along. (make sure their investment policy is not just "boilerplate" that they fill in with your name etc.
(None of the above will guarantee investment performance, just like simply pursuing happiness will not guarantee that one finds it.............but, with a very professional process in place, followed by disciplined, trained and experienced people, you are at least ......."on the the correct road towards investment performance".)
This is where many clients go wrong, they get sold on "pursuit of performance" as the only objective, and this (like pursuit of happiness) is impossible without a well drawn out plan, but many salesmen will sure promise it to you. Deal with someone who only does business in the most professional manner, and who has high enough qualifications (to deal with them) that they will not accept you as a client unless you agree to work within some of the "best practices" outlined above.
Last, but not least is the question of compensation disclosure. This is the terribly rare and often not done, bit of information where the professional give you, in writing, a copy of how and how much they charge or how they are paid, either by yourself, or through various incentives, kickbacks etc by product vendors, etc. This is a tough one to ask most salesmen, and it will truly separate the men from the boys, to use a phrase.
Get them to show you as much towards these "best practices" as possible, you will not find anyone to give you them all. (if you do, let me now and I wish to meet them, as they are a rare bird indeed)
Stay 1000 miles from anyone who calls themselves a "vice president". It (the title) is too often used as a sales reward, given to the top several hundred sales people, and it is too often given to them for sales performance, not client performance.
Stay 2000 miles from anyone who tries to sell you a "house brand" fund, or other propriatary product. They are not adisors at all, just product salesmen.
When they invite you to discuss "estate planning", remember that this is an invitation to a life insurance pitch, without ever using the word "life insurance". SOmetimes life insurance is a good estate planning tool, just like sometimes Amway really does help people, just be wary of those who invite you into the discussion without being honest enough to identify the product they are pitching.
That is enough out of me Eric. I will post in on my Flogg (names removed) under the topic of "solutions, self defense) can call it "advice to a friend"
I hope it will help you to better understand the sales game that is finance, and to separate the 80% who are often predators, from the 20% who are professional.
cheers and best regards
larry
www.investoradvocates.ca
Sent: Sunday, April 27, 2008 3:05 PM
Subject: Voice from your past
Hi Larry,
Hope you remember me from years ago. I'm still living in XXXXX and still working with XXXXXX. however I am taking a year off to see if I can afford to retire. We even still live in the the same home we bought when moving here.
Anyway, the reason I am writing is because I just saw you on W5 and the timing was perfect. I read a bit about what you are doing now and I must say 'congratulations' to you. I think it's helping a lot of people to get a better understanding of just what really goes on behind the scene in some cases. It just happens that I am thinking strongly on making an 'investment adviser' move and my accountant had recommended someone at XXXX here in XXXXX. I'm having my second meeting with her on Wednesday. I've been with XXXXXX probably since you and I dealt together and just haven't been very satisfied with my broker. It's such a mine-field out there trying to find someone new, that I was wondering if you make any suggestions or recommendations. I have about half my RSP now in mortgages that I do myself, but I feel I should have diversification in the markets. If so many brokerage firms are driven by their interests rather than their clients, what is the solution?? Is there one?
I haven't read enough about what you are doing to know if I'm off base asking you this, but I know you and I felt you would give me good advice. Any help would be greatly appreciated.
Thanks so much,
thanks Eric. good to hear from you again. Of course I remember you. Everyone out here remembers you fondly.
My experience with investments, plus some of the real estate stuff I was doing while I was working led me to conclude that the real estate was a "more controllable" investment than other passive investments. Real estate is more difficult to manage of course.........
I must say it is difficult to make any suggestions Eric. It comes down to whether the person you go with is of high ethical fabric, and that is easily faked, and terribly hard to measure. Females, I found to be less "predatory" than males, but beyond that they still suffer from the system which rewards the hungry and punishes the ethical.
One solution (that will probably never work) is to find a broker who is willing to put in writing what their fiduciary obligations to you the client are. Now most salesmen would not know who to spell that word, much less live up to it, a few (small few) know and understand that. Your job as a client is to understand the 80/20 rule. that is Parado's law, which suggests that 80% of the professionals you meet, (realtors, judges, cops, financial advisors, etc., etc) are not living up to the role, but simply pretending. The other 20% are truly trying their best to be the best they can be. Your job is to find those who are truly trying to be professional and skim out all those who are simply "posing".
My advice is to start with the females, interview a few, let them show you copies of the professional "process" they follow. Is there a disclipline that they believe in (right or wrong) or are they simply making it up as they go along. Can they backup that investment process with records, track records, experience, and does it make sense?
What are thier educational designations. They are given out like candy in this day, so unless they are far past the old CFP, (they are pretty basic). Look for FCSI, the highest designtation for education and experience from the Canadian Securities Institute. Look for CIM, CFA. CFA is one of the most professional and demanding courses out there and only the most serious people will have it. (CFA's also have the lowest number of complaints against them in the industry)
Do they follow the "Uniform code of Fiduciary Conduct" or do they even know what it is? It is a USA standard that goes with the ERISA act (employee retirement income security act) and it gives the best guidelines for conduct for a broker to follow. If they are aware of that and can demonstrate that they follow it, you are dealing with someone exceptional. (The fact that it is a US code of conduct should never bar a true professional from rising to or recognizing its high standards of practice)
Do they give you a written letter of engagement, and can you please have a copy of it before you sign on? This is a letter that outlines what the expectations and obligations of your new relationship is. Or, again, are they winging it, and making it up as they go along?
Do they give you a written "Investment Policy Statement" which describes your situation to a tee, and understands your objectives, your risk tolerance etc,. etc, and is willing to work to obtain that? If not, they are making it up as they go along. (make sure their investment policy is not just "boilerplate" that they fill in with your name etc.
(None of the above will guarantee investment performance, just like simply pursuing happiness will not guarantee that one finds it.............but, with a very professional process in place, followed by disciplined, trained and experienced people, you are at least ......."on the the correct road towards investment performance".)
This is where many clients go wrong, they get sold on "pursuit of performance" as the only objective, and this (like pursuit of happiness) is impossible without a well drawn out plan, but many salesmen will sure promise it to you. Deal with someone who only does business in the most professional manner, and who has high enough qualifications (to deal with them) that they will not accept you as a client unless you agree to work within some of the "best practices" outlined above.
Last, but not least is the question of compensation disclosure. This is the terribly rare and often not done, bit of information where the professional give you, in writing, a copy of how and how much they charge or how they are paid, either by yourself, or through various incentives, kickbacks etc by product vendors, etc. This is a tough one to ask most salesmen, and it will truly separate the men from the boys, to use a phrase.
Get them to show you as much towards these "best practices" as possible, you will not find anyone to give you them all. (if you do, let me now and I wish to meet them, as they are a rare bird indeed)
Stay 1000 miles from anyone who calls themselves a "vice president". It (the title) is too often used as a sales reward, given to the top several hundred sales people, and it is too often given to them for sales performance, not client performance.
Stay 2000 miles from anyone who tries to sell you a "house brand" fund, or other propriatary product. They are not adisors at all, just product salesmen.
When they invite you to discuss "estate planning", remember that this is an invitation to a life insurance pitch, without ever using the word "life insurance". SOmetimes life insurance is a good estate planning tool, just like sometimes Amway really does help people, just be wary of those who invite you into the discussion without being honest enough to identify the product they are pitching.
That is enough out of me Eric. I will post in on my Flogg (names removed) under the topic of "solutions, self defense) can call it "advice to a friend"
I hope it will help you to better understand the sales game that is finance, and to separate the 80% who are often predators, from the 20% who are professional.
cheers and best regards
larry
www.investoradvocates.ca
- admin
- Site Admin
- Posts: 2797
- Joined: Fri May 06, 2005 9:05 am
- Location: alberta
by admin » Wed Apr 16, 2008 1:15 pm
While I agree with the following article in principle, and have suggested in the past that "grand Jury" types of proceedings are one of the essential ingrediants required in our Canadian system to get to the truth faster...............it is apparent to most industry experts who contact this forum that the OSC and the RCMP are so far voted, "least likely to succeed" when it comes do enforcement and protection of Canadians.
If laws were put into place, combined with regulators or police who were equipped and prepared to enforce them, we would be miles ahead of where we are today............advocate
New powers sought by OSC, police
Witnesses in fraud cases should be compelled to testify and speak to investigators, joint task force says
KAREN HOWLETT AND JANET MCFARLAND
April 16, 2008
Police would be able to force witnesses to testify in white-collar crime cases under a controversial proposal designed to give prosecutors sweeping new investigative powers, sources say.
A task force report prepared by securities regulators and the RCMP recommends that potential witnesses who are not the target of an investigation should be compelled to provide evidence, according to sources familiar with the document. The recommendation is part of a plan to strengthen Canada's dismal record for prosecuting securities fraud and other white-collar crimes.
The RCMP's white-collar crime unit has tackled many of Canada's biggest securities investigations, but has laid charges in only a few minor cases. It has faced criticism for probing cases including Nortel Networks Corp., Royal Group Technologies Ltd. and Norbourg Asset Management Inc., without laying charges.
The task force report says police officers need more investigative powers when witnesses refuse to be interviewed during the investigation phase of a case, before charges have been laid or a trial has begun, the sources said. The RCMP has long complained that the existing system hampers their ability to successfully prosecute a case.
The proposal has been opposed by some people within the justice community, however, because it is viewed as a potential encroachment on an individual's Charter rights, said a senior securities official.
The Charter of Rights and Freedoms protects individuals from being compelled to give testimony that can be used against them in a criminal matter.
"One would be hard-pressed to ever see that becoming a reality in the context of the Charter," said Peter Kormos, an Ontario New Democrat and former attorney-general.
The sources also said there have been concerns raised that something intended only for white-collar crime cases could be expanded to drug and murder investigations. "That's what justice has been grappling with," an RCMP source said.
Under the proposal, police would be given new witness subpoena powers to gather evidence from bankers, accountants and others involved with a company under investigation but who are not themselves the target of a probe. As things now stand, these individuals can refuse to answer questions.
The report was submitted to federal, provincial and territorial justice ministers last November but has not yet been made public.
Federal government justice officials were not available for comment yesterday. But Finance Minister Jim Flaherty addressed the proposal in the recent federal budget.
"This is a complex issue that requires careful study," he said.
David Wilson, chairman of the Ontario Securities Commission and co-author of the task force report, will talk about enhancing Canada's enforcement procedures in a speech today at the Economic Club of Toronto.
Prominent Toronto securities lawyer Joe Groia said yesterday that he would insist his clients be given immunity from prosecution before agreeing to give evidence to the RCMP for an investigation.
He said he would be concerned that police may interview someone as a witness who later is reclassified as a potential suspect as the investigation proceeds. He said legal problems would arise if that person is later charged in the matter.
"There's a fundamental constitutional right to remain silent that has to be considered in any criminal prosecution," he said.
The RCMP's white-collar crime unit, known as the Integrated Market Enforcement Team (IMET), has been lobbying for some time to get greater powers to investigate securities crime.
If laws were put into place, combined with regulators or police who were equipped and prepared to enforce them, we would be miles ahead of where we are today............advocate
New powers sought by OSC, police
Witnesses in fraud cases should be compelled to testify and speak to investigators, joint task force says
KAREN HOWLETT AND JANET MCFARLAND
April 16, 2008
Police would be able to force witnesses to testify in white-collar crime cases under a controversial proposal designed to give prosecutors sweeping new investigative powers, sources say.
A task force report prepared by securities regulators and the RCMP recommends that potential witnesses who are not the target of an investigation should be compelled to provide evidence, according to sources familiar with the document. The recommendation is part of a plan to strengthen Canada's dismal record for prosecuting securities fraud and other white-collar crimes.
The RCMP's white-collar crime unit has tackled many of Canada's biggest securities investigations, but has laid charges in only a few minor cases. It has faced criticism for probing cases including Nortel Networks Corp., Royal Group Technologies Ltd. and Norbourg Asset Management Inc., without laying charges.
The task force report says police officers need more investigative powers when witnesses refuse to be interviewed during the investigation phase of a case, before charges have been laid or a trial has begun, the sources said. The RCMP has long complained that the existing system hampers their ability to successfully prosecute a case.
The proposal has been opposed by some people within the justice community, however, because it is viewed as a potential encroachment on an individual's Charter rights, said a senior securities official.
The Charter of Rights and Freedoms protects individuals from being compelled to give testimony that can be used against them in a criminal matter.
"One would be hard-pressed to ever see that becoming a reality in the context of the Charter," said Peter Kormos, an Ontario New Democrat and former attorney-general.
The sources also said there have been concerns raised that something intended only for white-collar crime cases could be expanded to drug and murder investigations. "That's what justice has been grappling with," an RCMP source said.
Under the proposal, police would be given new witness subpoena powers to gather evidence from bankers, accountants and others involved with a company under investigation but who are not themselves the target of a probe. As things now stand, these individuals can refuse to answer questions.
The report was submitted to federal, provincial and territorial justice ministers last November but has not yet been made public.
Federal government justice officials were not available for comment yesterday. But Finance Minister Jim Flaherty addressed the proposal in the recent federal budget.
"This is a complex issue that requires careful study," he said.
David Wilson, chairman of the Ontario Securities Commission and co-author of the task force report, will talk about enhancing Canada's enforcement procedures in a speech today at the Economic Club of Toronto.
Prominent Toronto securities lawyer Joe Groia said yesterday that he would insist his clients be given immunity from prosecution before agreeing to give evidence to the RCMP for an investigation.
He said he would be concerned that police may interview someone as a witness who later is reclassified as a potential suspect as the investigation proceeds. He said legal problems would arise if that person is later charged in the matter.
"There's a fundamental constitutional right to remain silent that has to be considered in any criminal prosecution," he said.
The RCMP's white-collar crime unit, known as the Integrated Market Enforcement Team (IMET), has been lobbying for some time to get greater powers to investigate securities crime.
- admin
- Site Admin
- Posts: 2797
- Joined: Fri May 06, 2005 9:05 am
- Location: alberta
by admin » Sun Apr 06, 2008 9:06 pm
THE HILL TIMES, MONDAY, JANUARY 7, 2008
OPINION
Fixing Canadas Third World securities crime enforcement
OSC, RCMP, regional and municipal police forces cannot
continue to send all persons with complaints of wrongdoing
in the investment industry to the investment industry Self-Regulatory Organizations.
By DIANE URQUHART
We have to do a complete overhaul of Canada's process for receiving complaints from the public and whistleblowers about white collar securities crime, since the current approach is failing and is designed to fail.
There have been four advisory reports submitted to the Canadian government with recommendations for restoring the reputation and effectiveness of the RCMP. None of these advisory reports address the fundamental flaw of Canada not having a securities crime complaints intake system managed by police, rather than the investment industry Self-Regulatory Organizations (SRO) and provincial securities commissions.
The Report of the Task Force on RCMP Governance and Cultural Change submitted on Dec. 14, 2007 to Minister of Public Safety Stockwell Day and to President of the Treasury Board Vic Toews, is seeking greater control of policing functions by a new civilian Board of Management.
The Nick Le Pan Report, Enhancing Integrated Market Enforcement Teams [IMET], Achieving Results in Fighting Capital Markets Crime, submitted on Oct. 25, 2007 to RCMP Commissioner William Elliott, is asking for greater collaboration between the RCMP IMET and the investment industry Self-Regulatory Organizations and provincial securities commissions. The Report of the Standing Committee on Public Accounts, Restoring The Honour of the RCMP: Addressing Problems in the Administration of the RCMP's Pension And Insurance Plans, submitted by its chairman Liberal MP Shawn Murphy in December 2007 to Parliament, is not addressing the structural change necessary for proper white collar criminal investigations of internal RCMP personnel.
The Federal Provincial Justice Ministers Securities Enforcement Working Group Report submitted to Federal Minister of Justice and Attorney General Rob Nicholson and to the provincial justice ministers on about Nov. 13, 2007, is not being made public. David Wilson, chairman of the Ontario Securities Commission (OSC) and Co-Chair of this Working Group, and the RCMP IMET, were criticized in the Dec. 1-8, 2007 Toronto Star series, Ontario Enforcement Third World.
The OSC, RCMP, regional and municipal police forces cannot continue to send all persons with complaints of wrongdoing in the investment industry to the investment industry Self-Regulatory Organizations the Investment Dealers Association and the Mutual Fund Dealers Association. These SROs have no legislative authority, nor public accountability mechanisms, to ensure that wrongdoers are properly investigated and prosecuted.
(a) the SROs lack any of the legislative tools necessary to properly investigate and enforce fines on wrongdoers;
(b) the SROs have no authority to lay criminal or quasi-criminal charges involving jail sentence penalties, either directly or by presenting such charges to a court;
(c) the SROs are private sector organizations that are not required to refer cases with evidence of criminal offences to the RCMP or any other regional and municipal police force;
(d) the SROs interest to protect the reputation of the investment industry usually trumps investor interests and the public interest, particularly when they have no legislative basis to conduct their delegated investor protection functions effectively.
The RCMP, regional and municipal police forces cannot continue to send all persons with complaints of wrongdoing in the investment industry and in public corporations to the provincial securities commissions;
(a) the provincial securities commissions have legislative tools to investigate and enforce fines and other remedies, but it cannot conduct proper justice when their investigations and adjudication functions are both done under one roof and under one chairman, who makes all the decisions on who is investigated and prosecuted and who supervises the commissioners that adjudicate all securities law violations;
(b) the provincial securities commissions have authority to lay quasi-criminal charges involving jail sentences, by presenting such charges to a court; however, the provincial securities commissions have no authority to prosecute criminal charges under the federal Criminal Code;
(c) the provincial securities commissions are Crown regulatory agencies, but they are not required to refer cases with evidence of criminal conduct to the RCMP or any other regional and municipal police force;
(d) the provincial securities commissions are Crown regulatory agencies, but their record shows bias to protect the reputation of the investment industry and Canadas corporate and professional elite rather than to protect investors, due to: their investment industry funding sources; senior executives and commissioners being drawn from the investment banking, corporate accounting and legal communities; and the lack of public accountability mechanisms, such as hearings before standing committees of the provincial legislatures or regular independent audits on the thoroughness and integrity of enforcement activities.
The RCMP IMET and the regional and municipal police forces throughout Canada must establish a new co-coordinated securities criminal complaint intake process. In doing so, the RCMP IMET would eliminate its sole reliance on the investment industry SROs and the provincial securities commissions for the receipt and preliminary assessment of complaints from the public and insider whistleblowers about securities crimes.
(a) A new multi-jurisdiction police co-ordination committee should be established to set the protocols for assignment of securities criminal investigations to the most logical police force to do the job;
(b) The public should be able to make a securities criminal complaint at their local police station, with the knowledge that their complaint will be properly attended to under the protocols established by the new multi-jurisdiction police co-ordination committee;
(c) The participating RCMP IMET, regional and municipal police force white collar crime units will need higher budgets, more skilled resources and the new legislative tools sought to become effective in white collar crime policing. The provinces should be reallocating budgets away from the securities commissions into the regional and municipal police white collar crime units. These units will play a larger and essential role in receiving securities criminal complaints from the public and in criminal investigations that are best completed at the regional level;
(d) The RCMP IMET, regional and municipal police force white collar crime units, would conduct investigations assigned to them according to the established assignment protocols accepted by all the participating police forces and administered by the new multi-jurisdiction police co-ordination committee.
Diane Urquhart is an independent analyst and investor advocate who supports better investor protection laws, enforcement, and adjudication in Canada.
OPINION
Fixing Canadas Third World securities crime enforcement
OSC, RCMP, regional and municipal police forces cannot
continue to send all persons with complaints of wrongdoing
in the investment industry to the investment industry Self-Regulatory Organizations.
By DIANE URQUHART
We have to do a complete overhaul of Canada's process for receiving complaints from the public and whistleblowers about white collar securities crime, since the current approach is failing and is designed to fail.
There have been four advisory reports submitted to the Canadian government with recommendations for restoring the reputation and effectiveness of the RCMP. None of these advisory reports address the fundamental flaw of Canada not having a securities crime complaints intake system managed by police, rather than the investment industry Self-Regulatory Organizations (SRO) and provincial securities commissions.
The Report of the Task Force on RCMP Governance and Cultural Change submitted on Dec. 14, 2007 to Minister of Public Safety Stockwell Day and to President of the Treasury Board Vic Toews, is seeking greater control of policing functions by a new civilian Board of Management.
The Nick Le Pan Report, Enhancing Integrated Market Enforcement Teams [IMET], Achieving Results in Fighting Capital Markets Crime, submitted on Oct. 25, 2007 to RCMP Commissioner William Elliott, is asking for greater collaboration between the RCMP IMET and the investment industry Self-Regulatory Organizations and provincial securities commissions. The Report of the Standing Committee on Public Accounts, Restoring The Honour of the RCMP: Addressing Problems in the Administration of the RCMP's Pension And Insurance Plans, submitted by its chairman Liberal MP Shawn Murphy in December 2007 to Parliament, is not addressing the structural change necessary for proper white collar criminal investigations of internal RCMP personnel.
The Federal Provincial Justice Ministers Securities Enforcement Working Group Report submitted to Federal Minister of Justice and Attorney General Rob Nicholson and to the provincial justice ministers on about Nov. 13, 2007, is not being made public. David Wilson, chairman of the Ontario Securities Commission (OSC) and Co-Chair of this Working Group, and the RCMP IMET, were criticized in the Dec. 1-8, 2007 Toronto Star series, Ontario Enforcement Third World.
The OSC, RCMP, regional and municipal police forces cannot continue to send all persons with complaints of wrongdoing in the investment industry to the investment industry Self-Regulatory Organizations the Investment Dealers Association and the Mutual Fund Dealers Association. These SROs have no legislative authority, nor public accountability mechanisms, to ensure that wrongdoers are properly investigated and prosecuted.
(a) the SROs lack any of the legislative tools necessary to properly investigate and enforce fines on wrongdoers;
(b) the SROs have no authority to lay criminal or quasi-criminal charges involving jail sentence penalties, either directly or by presenting such charges to a court;
(c) the SROs are private sector organizations that are not required to refer cases with evidence of criminal offences to the RCMP or any other regional and municipal police force;
(d) the SROs interest to protect the reputation of the investment industry usually trumps investor interests and the public interest, particularly when they have no legislative basis to conduct their delegated investor protection functions effectively.
The RCMP, regional and municipal police forces cannot continue to send all persons with complaints of wrongdoing in the investment industry and in public corporations to the provincial securities commissions;
(a) the provincial securities commissions have legislative tools to investigate and enforce fines and other remedies, but it cannot conduct proper justice when their investigations and adjudication functions are both done under one roof and under one chairman, who makes all the decisions on who is investigated and prosecuted and who supervises the commissioners that adjudicate all securities law violations;
(b) the provincial securities commissions have authority to lay quasi-criminal charges involving jail sentences, by presenting such charges to a court; however, the provincial securities commissions have no authority to prosecute criminal charges under the federal Criminal Code;
(c) the provincial securities commissions are Crown regulatory agencies, but they are not required to refer cases with evidence of criminal conduct to the RCMP or any other regional and municipal police force;
(d) the provincial securities commissions are Crown regulatory agencies, but their record shows bias to protect the reputation of the investment industry and Canadas corporate and professional elite rather than to protect investors, due to: their investment industry funding sources; senior executives and commissioners being drawn from the investment banking, corporate accounting and legal communities; and the lack of public accountability mechanisms, such as hearings before standing committees of the provincial legislatures or regular independent audits on the thoroughness and integrity of enforcement activities.
The RCMP IMET and the regional and municipal police forces throughout Canada must establish a new co-coordinated securities criminal complaint intake process. In doing so, the RCMP IMET would eliminate its sole reliance on the investment industry SROs and the provincial securities commissions for the receipt and preliminary assessment of complaints from the public and insider whistleblowers about securities crimes.
(a) A new multi-jurisdiction police co-ordination committee should be established to set the protocols for assignment of securities criminal investigations to the most logical police force to do the job;
(b) The public should be able to make a securities criminal complaint at their local police station, with the knowledge that their complaint will be properly attended to under the protocols established by the new multi-jurisdiction police co-ordination committee;
(c) The participating RCMP IMET, regional and municipal police force white collar crime units will need higher budgets, more skilled resources and the new legislative tools sought to become effective in white collar crime policing. The provinces should be reallocating budgets away from the securities commissions into the regional and municipal police white collar crime units. These units will play a larger and essential role in receiving securities criminal complaints from the public and in criminal investigations that are best completed at the regional level;
(d) The RCMP IMET, regional and municipal police force white collar crime units, would conduct investigations assigned to them according to the established assignment protocols accepted by all the participating police forces and administered by the new multi-jurisdiction police co-ordination committee.
Diane Urquhart is an independent analyst and investor advocate who supports better investor protection laws, enforcement, and adjudication in Canada.
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You might be dealing with a salesman if............
by admin » Thu Mar 20, 2008 1:12 pm
tips to try and understand if you are dealing with a salesperson or a financial professional:
1. Go to the www.osc.gov.on.ca site and under the category of "registrations" look up your service provider. Here it will tell you exactly how they are registered and licensed. Notwithstanding what they "tell you" they are, this is the actual legal registration category they hold. If it does not match what they tell you they are, then you are probably dealing with a salesperson.
2. See what educational designations they have. Forget titles (see #1 above) Education counts. People who hold the CFA designation have the highest training that I am aware of in the sales industry, as well as the least number of client complaints. The CFP is like your belly button, everyone has one, but it is better than not having one. People with no educational designations might be from the "old school", and it might clue you in to how professional they take their jobs.
People who have "vice president" or a new one I saw today, "Associate Director" are simply using fairly useless marketing titles which in days past where given to the top commission producers as a sales reward. I am not sure if this has changed for the better. (see Markarian v CIBC case at www.investorvoice.ca for judges comments on the sales and marketing titles used by that firm) Misrepresentation were the comments the judge felt were appropriate, but if you have not read of the case, you are missing financial history never before allowed to be seen in Canada.
3. If you buy all of your mutual funds using the DSC option, then you are helping your advisor serve him or herself with the highest compensation choice going. It may indicate to you that you are dealing with a salesperson, and not a trusted professional.
4. If your investments are "gravitating" towards "house brand" or proprietary investment funds, which are branded and owned by the firm, you are helping your advisor and the firm to "earn twelve to 26 times more money" from your investment fund than if they were to sell you an objective and independant fund. (source OSC Fair Dealing Model study on compensation bias, appendix F, page 10, 11)
I will keep adding to this list in case it may be of help to everyday consumers, and if you have comments or thoughts I am open to listening.
advocate
1. Go to the www.osc.gov.on.ca site and under the category of "registrations" look up your service provider. Here it will tell you exactly how they are registered and licensed. Notwithstanding what they "tell you" they are, this is the actual legal registration category they hold. If it does not match what they tell you they are, then you are probably dealing with a salesperson.
2. See what educational designations they have. Forget titles (see #1 above) Education counts. People who hold the CFA designation have the highest training that I am aware of in the sales industry, as well as the least number of client complaints. The CFP is like your belly button, everyone has one, but it is better than not having one. People with no educational designations might be from the "old school", and it might clue you in to how professional they take their jobs.
People who have "vice president" or a new one I saw today, "Associate Director" are simply using fairly useless marketing titles which in days past where given to the top commission producers as a sales reward. I am not sure if this has changed for the better. (see Markarian v CIBC case at www.investorvoice.ca for judges comments on the sales and marketing titles used by that firm) Misrepresentation were the comments the judge felt were appropriate, but if you have not read of the case, you are missing financial history never before allowed to be seen in Canada.
3. If you buy all of your mutual funds using the DSC option, then you are helping your advisor serve him or herself with the highest compensation choice going. It may indicate to you that you are dealing with a salesperson, and not a trusted professional.
4. If your investments are "gravitating" towards "house brand" or proprietary investment funds, which are branded and owned by the firm, you are helping your advisor and the firm to "earn twelve to 26 times more money" from your investment fund than if they were to sell you an objective and independant fund. (source OSC Fair Dealing Model study on compensation bias, appendix F, page 10, 11)
I will keep adding to this list in case it may be of help to everyday consumers, and if you have comments or thoughts I am open to listening.
advocate
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by admin » Wed Mar 12, 2008 9:43 pm
Prof. Max H. Bazerman, Harvard Business School concludes in a recent study on the cost of ignoring unethical practices, that, "We believe executives should..........be held responsible for the harm that their organizations predictably created, with or without intentionality or awareness."
Max H. Bazerman
Jesse Isidor Straus Professor of Business Administration
Biography
In addition to being the Straus Professor at the Harvard Business School, Max is formally affiliated with the Kennedy School of Government, the Psychology Department, the Institute for Quantitative Social Sciences, the Harvard University Center on the Environment, and the Program on Negotiation. In his prior position at Kellogg, Max was the founder and director of the Kellogg Environmental Research Center.
(advocate comments.........one of the key factors that seems to allow white collar crimes and damages to go often unpunished, even in countries like the US, where they actually try to punish, .........is the limitation of "having to show criminal intent" on those who end up with a few hundred million dollars in their own pockets while their company or other owners and shareholders get robbed. The requirement to prove criminal intent (as opposed to good luck, dumb luck, timing, or bad luck) perhaps needs to be looked at in light of Prof. Bazerman's comments.
In what other area of the law do we give such leniency to those who have damaged others? If your driving does damage to another person or vehicle, there is no such thing as "good luck, dumb luck, or bad luck" when determining if charges should be laid, or compensation paid. Why must it be so much more complicated when white collar criminals or "Banksters" if you will, create social and economic havoc whilst trying to serve themselves first.)
Max H. Bazerman
Jesse Isidor Straus Professor of Business Administration
Biography
In addition to being the Straus Professor at the Harvard Business School, Max is formally affiliated with the Kennedy School of Government, the Psychology Department, the Institute for Quantitative Social Sciences, the Harvard University Center on the Environment, and the Program on Negotiation. In his prior position at Kellogg, Max was the founder and director of the Kellogg Environmental Research Center.
(advocate comments.........one of the key factors that seems to allow white collar crimes and damages to go often unpunished, even in countries like the US, where they actually try to punish, .........is the limitation of "having to show criminal intent" on those who end up with a few hundred million dollars in their own pockets while their company or other owners and shareholders get robbed. The requirement to prove criminal intent (as opposed to good luck, dumb luck, timing, or bad luck) perhaps needs to be looked at in light of Prof. Bazerman's comments.
In what other area of the law do we give such leniency to those who have damaged others? If your driving does damage to another person or vehicle, there is no such thing as "good luck, dumb luck, or bad luck" when determining if charges should be laid, or compensation paid. Why must it be so much more complicated when white collar criminals or "Banksters" if you will, create social and economic havoc whilst trying to serve themselves first.)
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by admin » Thu Feb 21, 2008 6:53 pm
Andrew Teasdale tells it like it is, without a hint of self serving salesman baloney.
I like his philosophy, his approach to best practices, and I have no problem in telling good people who want good advice to visit his site.
(John De Goey is another person who understands best practices for the client)
Here is one link I found interesting, to an article about financial abuse, on his site:
http://moneymanagedproperly.com/new_fol ... 0abuse.htm
Keep up the good work Andrew, you are one of a few folks among tens of thousands out there who truly work for your clients.
Larry
I like his philosophy, his approach to best practices, and I have no problem in telling good people who want good advice to visit his site.
(John De Goey is another person who understands best practices for the client)
Here is one link I found interesting, to an article about financial abuse, on his site:
http://moneymanagedproperly.com/new_fol ... 0abuse.htm
Keep up the good work Andrew, you are one of a few folks among tens of thousands out there who truly work for your clients.
Larry
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by admin » Thu Jan 31, 2008 12:52 am
It should have been he very first post and the very first suggestion in this thread, but better late than never:
End self regulation in financial services.
Stop allowing the foxes to oversee the henhouse.
It just does not get any simpler than this step. Other steps can and should accompany this move, but until the financial "Wizards" are no longer allowed to police themselves, your finances remain doomed, or at very least damaged by self interest.
End self regulation in financial services.
Stop allowing the foxes to oversee the henhouse.
It just does not get any simpler than this step. Other steps can and should accompany this move, but until the financial "Wizards" are no longer allowed to police themselves, your finances remain doomed, or at very least damaged by self interest.
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by admin » Tue Jan 22, 2008 11:14 am
Here is a great solution that was suggested to me the other day by police and industry experts. ( I truly mean experts)
They suggest that the reporting and intake of white collar crime and fraud simply be done to each local police force, with a few responsible people in each force given proper training and ability to funnel these complaints upwards to the right national investor protection agency, police force, or government agent.
This puts the complaint into the record, in the hands of a police agency which is independant of any industry, regulator, or self regulator. It allows the victim to walk in the front door of the police, and recieve assurance that a report will be taken and action occur.
This is a step towards what might be called "best practices" in financial investigation.
Compare this process with what we have now:
A client has a complaint.
They go to their broker who brushes them off. (no process followed)
If they have the strength and patience they then,
Got to the manager who listens politely and tries to brush them off.
If they have the strength and patience they then,
Go to the head office who gives them a polite brush off in writing.
If they have the strength and patience they then,
get handed over to the compliance department (thinking compliance is objective) and compliance's role at this point is to protect the firm
If they have the strength and patience they then,
Go to the provincial securities commission (in charge of the law)
The securities commission shows them the back door and sends them to the self regulatory agency which has no authority to enforce the law
The self regulatory agency will do everything in it's power to protect it's industry members, and so another brush off is given
If they have the strength and patience they then,
Write to an MLA or member of parliament to tell them the system is broken
The MLA or MP sends them a polite thank you and copies it to the finance minister who is in charge (in the provinces) of the securities commission (the circle is complete)
The securities commission then send a polite letter back to the client and the MP or MLA telling them that all has been looked into and that the rules and regulations have been followed to a tee.
No further investigation. Client driven in a complete, dysfunctional, incestuous circle with no investigation usually performed at any level.
WHY
All of the industry parties in this circle have a connection, a loyalty, a job, a conflict, or something political owed to each other, and thus the entire process is smothered in conflicts of interest.
If they have the strength and patience they then,
Talk to Banking ombudsman, IDA arbitration or whatever else the industry has set up to favor itself and further place hurdles in front of a client from obtaining justice.
If they have the strength and patience they then,
Talk to a lawyer about civil action, which starts at about $50,000 to begin, will take five to ten years out of the client's life, and probably ruin their last best years, while fighting a large corporation that has enough power and money to hire ten lawyers for every one you can afford.
If they have the strength and patience they then,
give up, knowing the system is indeed broken, or worse, designed to fail the client in this manner, while maintaining the pretense of serving the client.
This is called worst practices, and it is the system of self policing that Canada has today.
A retailer can and will refund your money for buying a faulty toaster.
A manufacturer can be forced to recall and refund money for a faulty or tainted product.
Sellers and manufacturers of money and investment products are the only folks I can think of who can knowingly get away with selling tainted investment products, and once you bought them, you own them. No refund. No recourse. No law applies.
They suggest that the reporting and intake of white collar crime and fraud simply be done to each local police force, with a few responsible people in each force given proper training and ability to funnel these complaints upwards to the right national investor protection agency, police force, or government agent.
This puts the complaint into the record, in the hands of a police agency which is independant of any industry, regulator, or self regulator. It allows the victim to walk in the front door of the police, and recieve assurance that a report will be taken and action occur.
This is a step towards what might be called "best practices" in financial investigation.
Compare this process with what we have now:
A client has a complaint.
They go to their broker who brushes them off. (no process followed)
If they have the strength and patience they then,
Got to the manager who listens politely and tries to brush them off.
If they have the strength and patience they then,
Go to the head office who gives them a polite brush off in writing.
If they have the strength and patience they then,
get handed over to the compliance department (thinking compliance is objective) and compliance's role at this point is to protect the firm
If they have the strength and patience they then,
Go to the provincial securities commission (in charge of the law)
The securities commission shows them the back door and sends them to the self regulatory agency which has no authority to enforce the law
The self regulatory agency will do everything in it's power to protect it's industry members, and so another brush off is given
If they have the strength and patience they then,
Write to an MLA or member of parliament to tell them the system is broken
The MLA or MP sends them a polite thank you and copies it to the finance minister who is in charge (in the provinces) of the securities commission (the circle is complete)
The securities commission then send a polite letter back to the client and the MP or MLA telling them that all has been looked into and that the rules and regulations have been followed to a tee.
No further investigation. Client driven in a complete, dysfunctional, incestuous circle with no investigation usually performed at any level.
WHY
All of the industry parties in this circle have a connection, a loyalty, a job, a conflict, or something political owed to each other, and thus the entire process is smothered in conflicts of interest.
If they have the strength and patience they then,
Talk to Banking ombudsman, IDA arbitration or whatever else the industry has set up to favor itself and further place hurdles in front of a client from obtaining justice.
If they have the strength and patience they then,
Talk to a lawyer about civil action, which starts at about $50,000 to begin, will take five to ten years out of the client's life, and probably ruin their last best years, while fighting a large corporation that has enough power and money to hire ten lawyers for every one you can afford.
If they have the strength and patience they then,
give up, knowing the system is indeed broken, or worse, designed to fail the client in this manner, while maintaining the pretense of serving the client.
This is called worst practices, and it is the system of self policing that Canada has today.
A retailer can and will refund your money for buying a faulty toaster.
A manufacturer can be forced to recall and refund money for a faulty or tainted product.
Sellers and manufacturers of money and investment products are the only folks I can think of who can knowingly get away with selling tainted investment products, and once you bought them, you own them. No refund. No recourse. No law applies.
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by admin » Sun Jan 20, 2008 1:49 pm
proposed fraud, crime, white collar offense reporting and intake system
What if, instead of reporting white collar crime, directly to those who are often paid, or previously paid, or hope to be paid by the investment or financial industry........................
What if crime were instead reported to police agencies, who would be given the training, the resources and the authority to undertake looking into these crimes.
So instead of reporting crime in the henhouse to the foxes, it goes to a credible police agancy, not bought and paid for by the foxes.
This is what those in the know, are talking about. Stay tuned and get yourself well informed. If you are not aware of what is going on in this area, then you are also not aware that you are being victimized by it each and every day in Canada.
Remember, fraud is "secret theft" where something is taken from you, and you remain happy and content, because you do not even know that something has been taken from you.
Isn't it time that we allowed real policemen to investigate this kind of thing, rather than allow the fraud artists themselves (not all salesmen of financial services are fraud artists, but all financial services fraud artists fall inside the protection of this "self regulated, self policing" industry.
What if, instead of reporting white collar crime, directly to those who are often paid, or previously paid, or hope to be paid by the investment or financial industry........................
What if crime were instead reported to police agencies, who would be given the training, the resources and the authority to undertake looking into these crimes.
So instead of reporting crime in the henhouse to the foxes, it goes to a credible police agancy, not bought and paid for by the foxes.
This is what those in the know, are talking about. Stay tuned and get yourself well informed. If you are not aware of what is going on in this area, then you are also not aware that you are being victimized by it each and every day in Canada.
Remember, fraud is "secret theft" where something is taken from you, and you remain happy and content, because you do not even know that something has been taken from you.
Isn't it time that we allowed real policemen to investigate this kind of thing, rather than allow the fraud artists themselves (not all salesmen of financial services are fraud artists, but all financial services fraud artists fall inside the protection of this "self regulated, self policing" industry.
Last edited by admin on Thu Jan 31, 2008 12:47 am, edited 1 time in total.
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by admin » Sun Jan 20, 2008 1:22 pm
research tells me that a GRAND JURY system, if implimented in Canada would go a long way towards opening up the "blockage" that prevents prosecution of white collar fraud in Canada.
I am not certain that the blockage is intentional, but when one looks at the track record of having the smartest, richest and oft times, most pathalogically deficient individuals be allowed to police themselves AND manage trillions of dollars of investments............well, it makes one wonder if it is intentional or not.
The "established" individuals are asking for a system of crime reporting that stays pretty much the same as we have now. Whereby financial fraud is reported to the RCMP IMET or similar, which would be saved by being overseen by a board of "established" people.
This would be akin to having the same "see no evil" people, looking over a police organization, restricting what it is they are able to do. At last count the RCMP was quoted as having "eight cases, a full case load, and could not take on any investigations". I am not making that up.
The RCMP, if it is to be returned to credibility, has to be removed from the investment industry, political influence etc.
Next post talks about the new proposed "crime reporting input system" that is being dreamt of and talked about within the circles who advocate "best practices", and not "best coverups".
I am not certain that the blockage is intentional, but when one looks at the track record of having the smartest, richest and oft times, most pathalogically deficient individuals be allowed to police themselves AND manage trillions of dollars of investments............well, it makes one wonder if it is intentional or not.
The "established" individuals are asking for a system of crime reporting that stays pretty much the same as we have now. Whereby financial fraud is reported to the RCMP IMET or similar, which would be saved by being overseen by a board of "established" people.
This would be akin to having the same "see no evil" people, looking over a police organization, restricting what it is they are able to do. At last count the RCMP was quoted as having "eight cases, a full case load, and could not take on any investigations". I am not making that up.
The RCMP, if it is to be returned to credibility, has to be removed from the investment industry, political influence etc.
Next post talks about the new proposed "crime reporting input system" that is being dreamt of and talked about within the circles who advocate "best practices", and not "best coverups".
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by admin » Fri Dec 28, 2007 10:46 am
thanks Jim
great idea.
two thoughts to pass by the drafter:
It would be great if the letter would require the firm to confirm to the client if the salesperson is acting as a "salesperson" or acting in the role of an "advisor". (this may be one and the same as below, but it would be useful in disputes to have it spelled out in these simple terms as well)
I might also add in somewhere that the letter should ask the firm to clarify,explain, or illustrate any differences they perceive in the definitions of:
1. "duty of care"
and
2. "fiduciary duty"
I find that there are at least a thousand different version of those two used, and they mean something different to each and every use. It is those "technicalities" that allow firms to weasel out of their obligations to clients when push comes to shove.
keep up the good work and thanks much
larry
----- Original Message -----
From: "Jim MacDonald" <jamesmacdonald@rogers.com>
To: "Larry Elford" <lelford@shaw.ca>
Cc: "Stan Buell" <stanbuell@rogers.com>; "Robert Kyle" <robertkyle@rogers.com>; "Pamela Reeve" <pj.reeve@utoronto.ca>
Sent: Friday, December 28, 2007 9:50 AM
Subject: Breach of Trust
> Just saw the latest video update on your website.. Re your proposed letter to the broker, I have spoken to Dan Solin about this. That is what he recommends in his book.
>
> www.dansolin.com
>
> We need to get a Canadian lawyer to draft the equivalent which you could post on your site.
>
> Dan's letter simply asks for the brokerage firm to confirm in writing:
>
> -that the firm (and advisor) will always be acting in the best interests of the client;
> -that there is a fiduciary relationship as defined in law;
> -that the firm will always provide full disclosure of any and all risks and conflicts.
>
> Rather than ask people to write a letter, it would be much easier if we could get a "canned" "lawyer approved" letter.
>
> Then when the brokerage firms receive these letters, it will be interesting to see how they squirm and likely refuse to sign them.
>
> By copy of this email to Stan, I would ask that you ask the five legal advisors to SIPA to create such a letter and that it be posted on your website and made available to Larry and others to post on their respective websites.
>
> Jim.
> Best wishes.
> Jim MacDonald MBA
great idea.
two thoughts to pass by the drafter:
It would be great if the letter would require the firm to confirm to the client if the salesperson is acting as a "salesperson" or acting in the role of an "advisor". (this may be one and the same as below, but it would be useful in disputes to have it spelled out in these simple terms as well)
I might also add in somewhere that the letter should ask the firm to clarify,explain, or illustrate any differences they perceive in the definitions of:
1. "duty of care"
and
2. "fiduciary duty"
I find that there are at least a thousand different version of those two used, and they mean something different to each and every use. It is those "technicalities" that allow firms to weasel out of their obligations to clients when push comes to shove.
keep up the good work and thanks much
larry
----- Original Message -----
From: "Jim MacDonald" <jamesmacdonald@rogers.com>
To: "Larry Elford" <lelford@shaw.ca>
Cc: "Stan Buell" <stanbuell@rogers.com>; "Robert Kyle" <robertkyle@rogers.com>; "Pamela Reeve" <pj.reeve@utoronto.ca>
Sent: Friday, December 28, 2007 9:50 AM
Subject: Breach of Trust
> Just saw the latest video update on your website.. Re your proposed letter to the broker, I have spoken to Dan Solin about this. That is what he recommends in his book.
>
> www.dansolin.com
>
> We need to get a Canadian lawyer to draft the equivalent which you could post on your site.
>
> Dan's letter simply asks for the brokerage firm to confirm in writing:
>
> -that the firm (and advisor) will always be acting in the best interests of the client;
> -that there is a fiduciary relationship as defined in law;
> -that the firm will always provide full disclosure of any and all risks and conflicts.
>
> Rather than ask people to write a letter, it would be much easier if we could get a "canned" "lawyer approved" letter.
>
> Then when the brokerage firms receive these letters, it will be interesting to see how they squirm and likely refuse to sign them.
>
> By copy of this email to Stan, I would ask that you ask the five legal advisors to SIPA to create such a letter and that it be posted on your website and made available to Larry and others to post on their respective websites.
>
> Jim.
> Best wishes.
> Jim MacDonald MBA
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by admin » Tue Nov 13, 2007 1:35 pm
Kenmar Associates Nov. 12, 2007
2010 Islington Ave. Suite 2602
Etobicoke ON, M9P3S8
TO:
Leslie Pearson
Legal and Policy Counsel, Regulatory Policy
Investment Dealers Association of Canada
416.943.5878
lpearson@ida.ca
Manager of Market Regulation,
Ontario Securities Commission,
20 Queen Street West, 19th Floor, Box 55,
Toronto, Ontario, M5H 3S8.
dwilson@osc.gov.on.ca
Subject: Comments on IDA proposed changes to complaint handling process
IDA Amendments to Complaint Handling Requirements -- Client Complaint Handling Rule and Guidance Note and Amendments to By-laws 19 and 37 and Policy No. 2
Kenmar is delighted that the IDA has taken some initial steps to reform the complaint handling process in the brokerage industry. We are pleased to respond and offer suggestions that are based on real world experiences.
Kenmar is focused on investor education and protection. As such, fair-dealing issues, complaint systems and restitution are our priorities. We maintain www.canadianfundwatch.com for the benefit of retail investors. Twice monthly we distribute our eNews letter the Fund OBSERVER to over 4000 individuals, regulators and financial services industry participants in 5 countries.
INTRODUCTION
While at the S.E.C. in 1939, Mr. Louis Loss argued a case before the United States Court of Appeals for the Second Circuit that established what became known as the ''shingle theory” holding that a brokerage firm [e.g. an IDA member firm], when it puts up its shingle to do business, implicitly promises that it will deal fairly, honestly and promptly with its customers and can be sanctioned if it fails to do so. This is further reinforced by your rules that define a client as someone who has opened a trading account with a member firm and your definition of a actionable complaint; one that includes, but is not limited to: misrepresentation, churning, allegations of theft, fraud, misappropriation of funds or securities, excessive fees, forgery, unsuitable investments, or unauthorized trading involving the client's account(s). We define a complaint as any expression of dissatisfaction, whether oral or written, and whether justified or not, from or on behalf of an eligible financial consumer about provision of, or failure to provide, a financial service. These proposals suggest that the IDA is now taking the complaint process more seriously.
Needles to say, complaint handling is at the top of the priority list for investors .The CSA has recently reported that over a million Canadians are exposed to wrongdoing/fraud. Financial assault has terrible consequences for victims, especially seniors. We find the suggested changes a step in the right direction. We especially are positive about the restrictive time limits on acknowledgements and complaint closure times and faster access to OBSI. As the OSC IAC has spent considerable time on this issue we strongly recommend consultation with them before finalizing any changes. Ditto for SIPA www.sipa.ca.
RECOMMENDATIONS
Some specific points we wish to make:
1. We would like to see the industry adopt ISO 10002 as the standard
2. We believe finding wrongdoers on the IDA website archives should be made easier and more user-friendly to search
3. We would like to see a bi-audit of compliance with the revised Rule.
4. A review of the recent Navigator assessment of OBSI clearly indicates that they should be increasing the scope of their operations even suggesting that should address systemic issues. In order to identify oneself as an Ombudsman, OBSI must fulfill the prime requisite of accessibility -we see no evidence of this behavior in your case. OBSI holds a unique, important and privileged position in Canada and we expect that effective governance would require it err on the side of the financial consumer in a case where there is any doubt as to access. We would like confirmation that the IDA (its member firms) as a sponsor and financer of OBSI will require prompt adoption of the 24 improvements recommended by Navigator. We view OBSI as an integral part of an integrated complaint process.
5. We believe better enforcement of client signatures on NAAF’s is required as this often forms the basis for complaint decisions and restitution recommendations. KYC’s should as a matter of Rule be provided to clients.
6. We recommend an industry-standard NAAF that is client- friendly and compliant with plain language principles. There will be less complaints if the relationship starts off on the right foot.
7. email should be an accepted form of communication with client consent
8. We would ask that the IDA publicly disclose in its Annual reports the amount of fines actually collected and the reasons for non-collection. We believe this would highlight the point that the current fining and sanctioning process does not modify behavior in the same way that fining firms instead would.
9. Policy language, definitions and timelines should be harmonized with the MFDA proposals
10. We recommend that the special needs of seniors, the handicapped and immigrants be a consideration in the Rule.
We certainly agree that Confidentiality restrictions, if any, in a settlement agreement must not restrict a client from initiating a complaint or continuing with any pending complaint in progress or participating in any further proceedings. We of course continue to be skeptical and highly critical of Confidentiality Agreements in general because they leave countless other investors exposed to similar wrongdoing. We would recommend some positive language confirming that the IDA will as a matter of routine, turn over complaint cases to law enforcement as appropriate and statistically summarize this activity in its Annual Report.
The proposed rule requires that a Member firm appoint a Designated Complaints Officer (DCO) with the knowledge, experience, and authority to manage the complaint handling process and to act as a liaison with the IDA. The DCO should be someone trained in dispute resolution. While Member firms may choose to name the Chief Compliance Officer or an individual acting in a supervisory capacity over the complaints process for the DCO position, specific training should be mandatory .We would also suggest that the DCO be the process owner for the entire dispute resolution system including IT and privacy related issues. Without clear accountability the process will break down. We add parenthetically that a more positive label might be DRO-Designated Resolution Officer. The role, if any, of corporate Ombudsman should be clarified.
We’re not at all sure that there will be additional costs associated with Members handing/sending out the IDA approved complaint handling process brochure at time of account opening, complaint acknowledgement and substantive response. They already must, but too often do not, hand out the OBSI brochure when required. Such processes are fundamental to being in the business. We strongly believe that the benefits associated with greater client awareness of the complaint handling process are significantly greater than these additional costs, if indeed there are any.
OTHER FACTORS
A number of financial advisers are licensed to sell stocks, bonds, segregated funds and mutual funds. When a complaint arises it is important for clients to have a single point of complaint .We therefore suggest that clients, at their option, could request that the IDA [or the MFDA] be the central point of filing for regulatory issues and that OBSI be mandated to do the same for restitution issues. This is consistent with the principle that the investments are part of an integrated portfolio and such issues as suitability can only be determined by a holistic approach.
We note that one of the objectives is to promote the protection of investors, just and equitable principles of trade and high standards of operations, business conduct and ethics. We would prefer this was rephrased to include best practices and the highest ethical standards to reflect the fiduciary obligations of firms and the role of the IDA as an authorized SRO. We note that the IDA as an entity has positioned itself as owing no Duty of Care to individual investors.
As to the complaints brochure, we ask that it be clear, actually delivered and written in plain language with clear warnings about limitation time periods and the limits of a complaint to the IDA as regards restitution. In no event should a complaint to the IDA be a reason for OBSI not taking on a case or opening a file.
SUMMATION
In order to prevent complaints we recommend that firms acquire compliance software that could detect small problems before they become big ones. This could be added as an IDA Rule.
Finally, we ask that the IDA itself accept a framework for its handling of investor complaints. This could be ISO 10003, modified NASD or some other recognized standard. Perhaps a firm like Navigator could be contracted to establish a benchmark.
We presume that all responses to this proposal will be publicly posted for review and assessment and that the review process will be transparent. .
Should you have any questions please do not hesitate to call us.
Sincerely,
Ken Kivenko P.Eng
President, Kenmar Associates
2010 Islington Ave. Suite 2602
Etobicoke ON, M9P3S8
TO:
Leslie Pearson
Legal and Policy Counsel, Regulatory Policy
Investment Dealers Association of Canada
416.943.5878
lpearson@ida.ca
Manager of Market Regulation,
Ontario Securities Commission,
20 Queen Street West, 19th Floor, Box 55,
Toronto, Ontario, M5H 3S8.
dwilson@osc.gov.on.ca
Subject: Comments on IDA proposed changes to complaint handling process
IDA Amendments to Complaint Handling Requirements -- Client Complaint Handling Rule and Guidance Note and Amendments to By-laws 19 and 37 and Policy No. 2
Kenmar is delighted that the IDA has taken some initial steps to reform the complaint handling process in the brokerage industry. We are pleased to respond and offer suggestions that are based on real world experiences.
Kenmar is focused on investor education and protection. As such, fair-dealing issues, complaint systems and restitution are our priorities. We maintain www.canadianfundwatch.com for the benefit of retail investors. Twice monthly we distribute our eNews letter the Fund OBSERVER to over 4000 individuals, regulators and financial services industry participants in 5 countries.
INTRODUCTION
While at the S.E.C. in 1939, Mr. Louis Loss argued a case before the United States Court of Appeals for the Second Circuit that established what became known as the ''shingle theory” holding that a brokerage firm [e.g. an IDA member firm], when it puts up its shingle to do business, implicitly promises that it will deal fairly, honestly and promptly with its customers and can be sanctioned if it fails to do so. This is further reinforced by your rules that define a client as someone who has opened a trading account with a member firm and your definition of a actionable complaint; one that includes, but is not limited to: misrepresentation, churning, allegations of theft, fraud, misappropriation of funds or securities, excessive fees, forgery, unsuitable investments, or unauthorized trading involving the client's account(s). We define a complaint as any expression of dissatisfaction, whether oral or written, and whether justified or not, from or on behalf of an eligible financial consumer about provision of, or failure to provide, a financial service. These proposals suggest that the IDA is now taking the complaint process more seriously.
Needles to say, complaint handling is at the top of the priority list for investors .The CSA has recently reported that over a million Canadians are exposed to wrongdoing/fraud. Financial assault has terrible consequences for victims, especially seniors. We find the suggested changes a step in the right direction. We especially are positive about the restrictive time limits on acknowledgements and complaint closure times and faster access to OBSI. As the OSC IAC has spent considerable time on this issue we strongly recommend consultation with them before finalizing any changes. Ditto for SIPA www.sipa.ca.
RECOMMENDATIONS
Some specific points we wish to make:
1. We would like to see the industry adopt ISO 10002 as the standard
2. We believe finding wrongdoers on the IDA website archives should be made easier and more user-friendly to search
3. We would like to see a bi-audit of compliance with the revised Rule.
4. A review of the recent Navigator assessment of OBSI clearly indicates that they should be increasing the scope of their operations even suggesting that should address systemic issues. In order to identify oneself as an Ombudsman, OBSI must fulfill the prime requisite of accessibility -we see no evidence of this behavior in your case. OBSI holds a unique, important and privileged position in Canada and we expect that effective governance would require it err on the side of the financial consumer in a case where there is any doubt as to access. We would like confirmation that the IDA (its member firms) as a sponsor and financer of OBSI will require prompt adoption of the 24 improvements recommended by Navigator. We view OBSI as an integral part of an integrated complaint process.
5. We believe better enforcement of client signatures on NAAF’s is required as this often forms the basis for complaint decisions and restitution recommendations. KYC’s should as a matter of Rule be provided to clients.
6. We recommend an industry-standard NAAF that is client- friendly and compliant with plain language principles. There will be less complaints if the relationship starts off on the right foot.
7. email should be an accepted form of communication with client consent
8. We would ask that the IDA publicly disclose in its Annual reports the amount of fines actually collected and the reasons for non-collection. We believe this would highlight the point that the current fining and sanctioning process does not modify behavior in the same way that fining firms instead would.
9. Policy language, definitions and timelines should be harmonized with the MFDA proposals
10. We recommend that the special needs of seniors, the handicapped and immigrants be a consideration in the Rule.
We certainly agree that Confidentiality restrictions, if any, in a settlement agreement must not restrict a client from initiating a complaint or continuing with any pending complaint in progress or participating in any further proceedings. We of course continue to be skeptical and highly critical of Confidentiality Agreements in general because they leave countless other investors exposed to similar wrongdoing. We would recommend some positive language confirming that the IDA will as a matter of routine, turn over complaint cases to law enforcement as appropriate and statistically summarize this activity in its Annual Report.
The proposed rule requires that a Member firm appoint a Designated Complaints Officer (DCO) with the knowledge, experience, and authority to manage the complaint handling process and to act as a liaison with the IDA. The DCO should be someone trained in dispute resolution. While Member firms may choose to name the Chief Compliance Officer or an individual acting in a supervisory capacity over the complaints process for the DCO position, specific training should be mandatory .We would also suggest that the DCO be the process owner for the entire dispute resolution system including IT and privacy related issues. Without clear accountability the process will break down. We add parenthetically that a more positive label might be DRO-Designated Resolution Officer. The role, if any, of corporate Ombudsman should be clarified.
We’re not at all sure that there will be additional costs associated with Members handing/sending out the IDA approved complaint handling process brochure at time of account opening, complaint acknowledgement and substantive response. They already must, but too often do not, hand out the OBSI brochure when required. Such processes are fundamental to being in the business. We strongly believe that the benefits associated with greater client awareness of the complaint handling process are significantly greater than these additional costs, if indeed there are any.
OTHER FACTORS
A number of financial advisers are licensed to sell stocks, bonds, segregated funds and mutual funds. When a complaint arises it is important for clients to have a single point of complaint .We therefore suggest that clients, at their option, could request that the IDA [or the MFDA] be the central point of filing for regulatory issues and that OBSI be mandated to do the same for restitution issues. This is consistent with the principle that the investments are part of an integrated portfolio and such issues as suitability can only be determined by a holistic approach.
We note that one of the objectives is to promote the protection of investors, just and equitable principles of trade and high standards of operations, business conduct and ethics. We would prefer this was rephrased to include best practices and the highest ethical standards to reflect the fiduciary obligations of firms and the role of the IDA as an authorized SRO. We note that the IDA as an entity has positioned itself as owing no Duty of Care to individual investors.
As to the complaints brochure, we ask that it be clear, actually delivered and written in plain language with clear warnings about limitation time periods and the limits of a complaint to the IDA as regards restitution. In no event should a complaint to the IDA be a reason for OBSI not taking on a case or opening a file.
SUMMATION
In order to prevent complaints we recommend that firms acquire compliance software that could detect small problems before they become big ones. This could be added as an IDA Rule.
Finally, we ask that the IDA itself accept a framework for its handling of investor complaints. This could be ISO 10003, modified NASD or some other recognized standard. Perhaps a firm like Navigator could be contracted to establish a benchmark.
We presume that all responses to this proposal will be publicly posted for review and assessment and that the review process will be transparent. .
Should you have any questions please do not hesitate to call us.
Sincerely,
Ken Kivenko P.Eng
President, Kenmar Associates
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by admin » Sun Nov 04, 2007 10:11 am
This is what we need to work on: the equivalent of the Canadian Food Inspection Agency or Health Canada Protection Branch. Can any of us actually imagine anyone in the current regulatory system issuing an edict like the one below? This can only be accomplished if there is an agency that has a single mandate to protect the financial health of Canadians.
Recall issued for shrimp sold in M&M Meat Shops across the country
Sat Nov 3, 11:48 AM
By The Canadian Press
OTTAWA - Shrimp products sold nationally at M & M Meat Shops are being recalled because of possible drug contamination.
The Canadian Food Inspection Agency and the Port Dover, Ont.-based manufacturer are warning the public not to consume breaded shrimp and coconut shrimp products in 400 gram packages because they may be contaminated with nitrofurans.
Those are drugs banned for use in Canada in food producing animals.
The agency says consuming foods contaminated with them could pose a health risk related to the drug's toxicity.
There have been no reported illnesses associated with the products thus far.
The manufacturer, Henry H. Misner Ltd., is voluntarily recalling the affected products from the marketplace.
James MacDonald MBA
(advocate comment, Jim is right on the money with this solution. Without an agency with the power and the mandate to protect Canadians, and only to protect Canadians, we will never have an investment climate that is not biased toward investment dealers)
Recall issued for shrimp sold in M&M Meat Shops across the country
Sat Nov 3, 11:48 AM
By The Canadian Press
OTTAWA - Shrimp products sold nationally at M & M Meat Shops are being recalled because of possible drug contamination.
The Canadian Food Inspection Agency and the Port Dover, Ont.-based manufacturer are warning the public not to consume breaded shrimp and coconut shrimp products in 400 gram packages because they may be contaminated with nitrofurans.
Those are drugs banned for use in Canada in food producing animals.
The agency says consuming foods contaminated with them could pose a health risk related to the drug's toxicity.
There have been no reported illnesses associated with the products thus far.
The manufacturer, Henry H. Misner Ltd., is voluntarily recalling the affected products from the marketplace.
James MacDonald MBA
(advocate comment, Jim is right on the money with this solution. Without an agency with the power and the mandate to protect Canadians, and only to protect Canadians, we will never have an investment climate that is not biased toward investment dealers)
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- Site Admin
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- Joined: Fri May 06, 2005 9:05 am
- Location: alberta
by admin » Fri Oct 12, 2007 3:13 pm
Re: National Securities INVESTIGATOR
We fully support Dr. Rosen when he states that some regulators denying their responsibilities is "good prompting for the federal government to finally relieve the provinces of their responsibilities for prosecuting securities , and set up a new national securities investigator to handle the task."
Appended copy of his article and our letter to the Editor of the National Post, which was also copied to the Minister of Finance and the Minister of State for Seniors.
If you agree, please feel free to voice your support to both Ministers.
Thanks for your support.
Stan Buell, President
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
website: www.sipa.ca
e-mail: stanbuell@rogers.com
tel: 905-471-2911
Fighting for Justice
Dear Editor National Post
Re: "We need a national securities regulator" by Al Rosen - published October 10, 2007
Dr. Rosen is absolutely right when he says we need a NATIONAL SECURITIES INVESTIGATOR to replace the
provincial regulators.
For years small investors have had their savings stolen by an investment industry run rampant while the provincial
regulators have failed to protect investors.
Masive frauds like Bre-X, corporate skulduggery like Livent & Nortel, skimming with mutual funds, scamming investors
with business income trusts and principal protected notes, widespread forgery of documents to mislead regulators, all
have resulted in small investors being abused and losing their savings intended for retirement security.
Now the Asset Backed Commercial Paper fiasco has exposed that even sophisticated investors are subject to risks
beyond normal market risk because regulators provide exemptions and allow unregulated investment products to be sold.
Small investors do not have the benefit of action like the "Montreal Proposal" to mitigate their risk of loss but must rely
upon our legal system to attempt to get justice.
However when the Ontario Bar Association states publicly that "the civil system is not designed to provide justice" it
becomes tragically apparent that not only small but also large investors face an investment environment in Canada that
truly is Caveat Emptor.
We fully support Dr. Rosen when he states that some regulators denying their responsibilities is "good prompting for
the federal government to finally relieve the provinces of their responsibilities for prosecuting securities , and set
up a new national securities investigator to handle the task."
We urge Minister Flaherty to take action to revise Canada's failed regulatory system and implement a national securities
investigator as proposed by Dr. Rosen.
Yours truly
Stan Buell, President
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
website: www.sipa.ca
e-mail: stanbuell@rogers.com
tel: 905-471-2911
Fighting for Justice
We fully support Dr. Rosen when he states that some regulators denying their responsibilities is "good prompting for the federal government to finally relieve the provinces of their responsibilities for prosecuting securities , and set up a new national securities investigator to handle the task."
Appended copy of his article and our letter to the Editor of the National Post, which was also copied to the Minister of Finance and the Minister of State for Seniors.
If you agree, please feel free to voice your support to both Ministers.
Thanks for your support.
Stan Buell, President
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
website: www.sipa.ca
e-mail: stanbuell@rogers.com
tel: 905-471-2911
Fighting for Justice
Dear Editor National Post
Re: "We need a national securities regulator" by Al Rosen - published October 10, 2007
Dr. Rosen is absolutely right when he says we need a NATIONAL SECURITIES INVESTIGATOR to replace the
provincial regulators.
For years small investors have had their savings stolen by an investment industry run rampant while the provincial
regulators have failed to protect investors.
Masive frauds like Bre-X, corporate skulduggery like Livent & Nortel, skimming with mutual funds, scamming investors
with business income trusts and principal protected notes, widespread forgery of documents to mislead regulators, all
have resulted in small investors being abused and losing their savings intended for retirement security.
Now the Asset Backed Commercial Paper fiasco has exposed that even sophisticated investors are subject to risks
beyond normal market risk because regulators provide exemptions and allow unregulated investment products to be sold.
Small investors do not have the benefit of action like the "Montreal Proposal" to mitigate their risk of loss but must rely
upon our legal system to attempt to get justice.
However when the Ontario Bar Association states publicly that "the civil system is not designed to provide justice" it
becomes tragically apparent that not only small but also large investors face an investment environment in Canada that
truly is Caveat Emptor.
We fully support Dr. Rosen when he states that some regulators denying their responsibilities is "good prompting for
the federal government to finally relieve the provinces of their responsibilities for prosecuting securities , and set
up a new national securities investigator to handle the task."
We urge Minister Flaherty to take action to revise Canada's failed regulatory system and implement a national securities
investigator as proposed by Dr. Rosen.
Yours truly
Stan Buell, President
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
website: www.sipa.ca
e-mail: stanbuell@rogers.com
tel: 905-471-2911
Fighting for Justice
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