Securities law "exemptions". A license to steal?

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Re: break the law and win. Apply for exemptive relief.

Postby admin » Sat Sep 05, 2009 10:35 pm

in an interesting twist I see the "this is not an offering to sell" warning on a recent advertised investment including a new item. In addition to this normal text, it also went on to say "The Units are being offered pursuant to exemptions under applicable securities law".
Very unusual to see the "exemption" warning. I have never seen it before today.

It is on an ad for retirement residence investments from MasterpiecePhase Two Projects Inc. Advertised in the Calgary Herald sat sept 5, 2009. Page D5.

Would this be a new way of letting the securities commission off the hook for never before having given the public any notice when they might be getting sold an exempt investment?

Would it be an attempt by the commission to move toward better practices?

Would it require an admission to all previous investors that they were lulled into a false sense of security by the commission for not putting these warnings on, and for not giving the public any notice?

Would investors who purchased something bad, that did not have that warning on it deserve their money back, or an action against the commission?

The verbage "pursuant to exemptions under applicable securities law" is also not very clear. Do you think investors will understand that to mean that this investment "did not meet" provincial securities laws, and they had to buy a "pass" to "get around" our laws before they could be sold?

I will leave most of these questions to the lawyers, but it appears to me that while the securities commission is perhaps taking a baby step in placing this warning on an investment offering, they are still visibly serving investment firms over and ahead of serving the public investor. Their salaries come from that angle and their interests seem bent on a lack of transparency just yet.
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Postby admin » Mon Aug 11, 2008 9:22 pm

cheers guys, I just read saturday and mondays globe and mail front page stories in the business section about asset backed commercial paper.

They are now starting to figure out that some of the causes of the tainted paper ending up in average investors hands were "legal exemptions" granted by our very own securities commissions to help these pigs fly.

(In english........when an investment dealer has a pig of an investment, and needs help to make it sell off his shelves, a legal exemption can often grease the way. It makes things which are normally not in the public interest, and normally something to be frowned upon...........suddenly .....pretty........for the firm with the crappy investment to sell off)

Legal exemptions were granted so that this tainted paper did not need a prospectus for exemptions were granted to CIBC to sell exemptions were used to allow salesmen of this product to misrepresent their clients and call themselves "investment advisors".

All of these exemptions were granted by our own "crown corporations", the provincial securities commissions.............none of these commissions will allow public input or public notice of the thousands of exemptions granted each year.................and I now find out that these securities commission, which are crown corporations are indeed paid by the very firms they purport to police!!! (Alberta Auditor general report on the ASC)

I suspect that one day these crown corporations will cost each provincial government billions of dollars in compensation payments if and when the public fnds out what extent these legal free passes have been given out to vendors of investment products and how those exemptions have affected investor's wealth.
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Postby admin » Mon Aug 11, 2008 7:50 am

Playing the blame game
In the aftermath of the ABCP fiasco, investigators are looking for answers. What went wrong and who is to blame? So far, the regulatory agencies under fire seem to only be pointing fingers at one another. Janet McFarland, Boyd Erman, Karen Howlett and Tara Perkins report

From Monday's Globe and Mail

August 11, 2008 at 4:00 AM EDT

In the two years before the asset-backed commercial paper market collapsed, the investment was undergoing a transformation, morphing not only into a much riskier product but one that would start to look less out of place on the shelf among a broker's range of products on offer to ordinary clients.

Regulators failed to notice the change in structure and seemed completely unaware that the asset class had even found a new market with retail investors.

Susan Wolburgh Jenah, who heads the Investment Industry Regulatory Organization of Canada (IIROC), said she and her staff had no idea last year that any individuals even held ABCP. To their minds, it was still a sophisticated product with large institutional buyers as target customers. It took disaster to strike before they knew what was really happening.

"Back in August, I had no clue," Ms. Wolburgh Jenah says. "I didn't know there were retail investors, or how many retail investors. Nobody here knew, either ... It took us a long time to start getting answers to those questions."

(advocate comment: it should be noted here that this same Susan Wolburgh Jenah, personally signed many such exemptive orders when she was employed as vice-chair at the OSC previously, effectively being the sole authority which allowed these products permission to be sold to consumers without meeting the laws in her province)

Yet IIROC, the regulator for the brokerage industry, now joins the Ontario Securities Commission and its other provincial counterparts in trying to find their own conclusions to how it happened. They are soon expected to reveal a proposal to curtail the sale of ABCP to retail investors.

At the same time, a federal Parliamentary committee has launched hearings, talking to federal banking regulators and provincial securities regulators as well as numerous angry investors to understand what went wrong with ABCP and what should be done to prevent it from recurring in the future.

In the process, the saga's history will be written and lessons offered on how it can be avoided in the future. What's clear from an investigation by The Globe and Mail, however, is that the regulators must share the blame and, in fact, may have inadvertently made matters worse.

"My impression is that all of these different agencies are treating this like a hot potato, trying to pass it to the next agency and saying that they themselves are blameless," says John McCallum, the senior Liberal on the finance committee in Ottawa.

"With hindsight, there are probably many things that could or should have been done to avoid this crisis."

Opening the door

Regulators can be accused of more than benign neglect in this story: They helped to open the door for ABCP to become a retail product, thanks to a quiet rule change in late 2005. That's when six provinces, including Ontario, removed a long-standing threshold limiting the ABCP market to investors who could afford at least $50,000 of paper - a standard that was intended to keep relatively unsophisticated investors out of the sector. All of a sudden, small investors were able to buy commercial paper created by so-called "third-party companies" like Coventree Inc., which specialized in the ABCP market and ultimately was destroyed by its collapse.

By last August, industry sources say, many of the least-sophisticated buyers caught in the ABCP crisis had holdings below the former $50,000 minimum investment limit.

James Turner, vice-chairman of the OSC, said the change was made because regulators felt the $50,000 threshold was so low that it was not a meaningful restriction for many investors anyway. The OSC felt the new requirement to have a high credit rating would be a better protection and with so many ABCP trusts receiving high ratings by DBRS Ltd., the flood gates were opened.

"That was a much more appropriate exemption than just [requiring] units of $50,000," Mr. Turner said. The rationale for the change was never publicly discussed in 2005. The rule change was part of a move by provincial securities regulators to have uniform rules across the country. But to do so, Ontario and five other provinces lowered their standard to match the other provinces that never had a minimum investment level. The threshold was also lifted in Alberta, Manitoba, Quebec, Nova Scotia and Prince Edward Island.

In essence, the regulators decided to treat commercial paper issued by special purpose trusts as if it were similar to more-traditional commercial paper notes issued by blue chip, publicly traded Canadian companies. Investors were supposed to rely on the rating of an unregulated agency. But what no one appeared to focus on at the time was that DBRS was the only agency that rated these notes. Both Moody's Investors Service Inc. and Standard & Poor's Corp. refused to rate them.

"I know it sounds like all the regulators are ducking responsibility," Mr. Turner said. "But in terms of what would have prevented this from happening, it was a whole bunch of different factors. If the subprime problem in the U.S. had never happened, then we probably wouldn't be here."

Indeed, the ABCP problem was not entirely foreseeable. But there was a pattern that should have merited closer monitoring.

The OSC was aware by 1999, for example, that there was a rampant trend emerging for simple debt instruments to evolve into far more risky derivative-backed products. In a report that year, a high-level task force set up by the commission recommended that investors be given more information about products that were backed by derivatives.

"The types of debt instruments sold by these issuers have evolved over the years and ... certain risk and other disclosure is required for investor protection," the report recommended.

ABCP was exempted from the recommendations because it was not seen as a similar derivative-backed product in that era. But within a few years, it too had evolved from plain vanilla commercial paper sold by creditworthy companies into the same sort of complex derivative instrument the committee was trying to address in its report.

As it turned out, much of the non-bank paper that froze up during the credit crisis last summer was the most complex and derivative-based product that existed.

Ms. Wolburgh Jenah, who was previously a vice-chairwoman at the OSC and worked on the derivatives task force, says in hindsight the task force demonstrated that many exemptions in securities law need to be regularly re-examined as markets and products change from their original conception.

She said when ABCP was created as an "exempt" product, no one was thinking it would be backed by complicated derivatives such as credit default swaps. Regulators, she says, have to watch how products "morph" along the way.

"Did anybody think about these products when they created that exemption? Are you kidding?
These didn't exist back then." Following a flurry of opposition, some of it coming from the Canadian Bankers Association which argued the OSC did not have jurisdiction to regulate bank debt products, the task force's recommendations on debt-like derivatives were not implemented.

Never again

Purdy Crawford, head of the committee to restructure
the frozen ABCP market, in a presentation to investors
in Vancouver last April.
On Bay Street, there is already speculation that new independent ABCP originators similar to Coventree will emerge fairly soon to fill a gaping hole left in the market.

While big banks are still selling their own brands of ABCP, which never froze up like the independent paper, the demand for new versions of Coventree comes because there are many small lenders who need a place to sell assets such as loans. With independent creators like Coventree gone, there is no way to do that.

The more complicated ABCP - the paper backed by derivatives - is less likely to return any time soon. In whatever form ABCP returns, the question now is: What will be different next time? There's no doubt market discipline will play a key role in the future. Investors have been burned and will demand improvements: clearer disclosure, better-quality assets, clearer guarantees from banks pledging to support the paper, and better credit ratings.

But for retail investors in particular, a critical part of the solution will also lie in the work of regulators which are now considering new rules to restrict the retail market.

The Canadian Securities Administrators (CSA), an umbrella group representing all the provincial securities commissions, is weighing new restrictions for retail investors buying ABCP, in essence narrowing the wide-open market that was created with the 2005 rule change.

Mr. Turner says one possible solution would be imposing the so-called "accredited investor" rule for ABCP. That would mean ABCP could only be sold to individual investors if they meet criteria (such as having up to $5-million in total assets) designed to limit a product's sale to those people with a greater level of financial sophistication.

Despite the work under way to tighten up the sale of ABCP, however, the OSC is making no admissions that it was a mistake to have removed the $50,000 threshold in 2005.

When asked whether the decision was wrong in hindsight, OSC vice-chairman Larry Ritchie repeatedly stressed that it was the role of the brokerage firms to determine whether ABCP was suitable for each client.

"The more complicated a product, the more there is an obligation for the people selling and recommending it to fully understand what it is," he said.

The final response to the ABCP crisis, however, may prove the most frustrating for some investors. While IIROC has launched some investigations of how ABCP was sold to retail investors, no individual or firm has so far faced any disciplinary action for improperly selling ABCP to people for whom it was an unsuitable investment.

And it is unclear whether anything will emerge. Ms. Wolburgh Jenah warns it may be difficult to pursue cases once retail investors are repaid their funds.

"One of the practical issues we have is that, historically, when people get their money back, sometimes they lose interest in pursuing the complaint. You want to go to a hearing and have a witness say, 'This is what the broker told me or this is what happened to me.' It's hard when you don't have that."



Canadian Securities Administrators will soon propose new rules requiring more disclosure of details about ABCP products for investors, and is mulling an accredited investor rule that would make their purchase impossible for many investors. As well, the committee is also planning to seek new powers giving securities commissions the ability to regulate credit rating agencies.

IIROC has conducted its own "compliance sweep" to consider whether new rules or standards are needed for ABCP sales. A key issue to be addressed is the product review process that goes on within brokerage firms to assess whether new or evolving investments such as ABCP are being adequately reviewed before being sold to retail clients.Brokerages such as Canaccord say the industry itself will have to be diligent to rely on more than ratings before selling a product to retail investors. "If you can't get the level of disclosure that you may need," says Canaccord CEO Mark Maybank, "you may not be able to sell that product."

Purdy Crawford, chairman of the Pan-Canadian Investors Committee for the Third-Party ABCP, says he would like to see more co-operation between the Office of the Superintendent of Financial Institutions and IIROC, which could combine their expertise in reviewing financial products, and such areas as capital and liquidity requirements. "These meetings probably need to happen at a more senior level."
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Postby admin » Sat Aug 02, 2008 4:49 pm

You are not going to believe this one. The Ontario Securities Commission (OSC) gave CIBC and CIBC World Markets Exemptive Relief from NI 45-106 S. 235, which allowed it to sell all types of commercial paper, including Non Bank ABCP, even if there were approved credit rating agencies providing credit ratings that were below their minimum standard. The Exemptive Relief Decision specifically sets out that the CIBC and CIBC World Markets do not need to file a prospectus for commercial paper, if it gets at least one approved credit rating agency providing a credit rating for the commercial paper that is above its minimum standard in NI 45-106 S. 235. The Exemptive Relief is for three years starting on October 23, 2006.

Barrick Gold's Q2 2008 Quarterly Report released on July 31, 2008 discloses that it sold its entire Ironstone Trust ABCP position of face amount $66 million for $49 million of cash. This is a cash settlement of $0.75 per $1.00 face amount, paid in cash without conditions. It is clear that Barrick Gold sold its ABCP and not the expected long term notes from the CCAA Restructuring Plan. Barrick Gold says it sold its ABCP to a third party, which is believed to be CIBC based on the attached Globe and Mail article, "Flaherty wades into Barrick's CIBC feud," dated May 6, 2008.

Standard and Poor's and Moody's, two international credit rating agencies, both published the attached major research reports explaining why they were unable to provide top credit ratings for the Canadian Non Bank ABCP due to the deficient Canadian-style liquidity agreements or bank quarantees. The OSC, CIBC and CIBC World Markets, and all the Non Bank ABCP sponsors, whose ABCP was sold by CIBC and CIBC World Markets, would have known about the attached Standard and Poor's and Moody's credit rating reports. The existence of the attached Standard and Poor's and Moody's credit rating reports, and the tendency of these two international agencies to have lower credit ratings for all types of Canadian commercial paper than DBRS generally, are the likely motivation for CIBC and CIBC World Markets to seek the MRRS Exemptive Relief from the minimum credit rating standards in provincial securities regulations.

On August 1, 2008, DBRS received its first lawsuit on Non Bank ABCP from Silver Standards Resources Inc., which owns $57.7 million of the frozen Non Bank ABCP. Silver Standards claims in this B.C .Supreme Court filed suit that DBRS failed to take reasonable care in rating the paper, and was negligent in failing to identify or property assess the risks. Silver Standards bought its Non Bank ABCP through HSBC Securities.

It goes without saying that it is ridiculous, and I am prepared to say corrupt, that Paul Moore and Harold Hands, OSC Commissioners at the time, would grant such an MRRS Exemptive Relief Decision to CIBC and CIBC World Markets. Neither Harold Hands, nor Paul Moore, has any investment expertise and yet they grant such important exemptive relief that exposed Canadians to billions of dollars of harm!

Diane Urquhart
Independent Analyst
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Postby admin » Sat Mar 08, 2008 11:43 pm

How to exempt yourself from the law………and win!
Lately the Mike Ferguson (RCMP officer tried three times) case and the motorcycle riding Sikh man who wished to be exempt from the law on wearing a helmet, were in the news. Most people I suspect are not well informed on how to obtain an exemption to the law. None, in fact can imagine asking the police for an exemption to, lets say, drive from Lethbridge to Calgary at 200 kilometers per hour, no matter how important your trip is.

What I found amazing, however, is that any bank, investment dealer or investment sponsor, is able to approach our provincial securities commission and apply for an exemption to the law. Want to sell house brand funds to all your clients and earn between twelve to twenty six times (source Ontario Securities Commission Fair Dealing Model) more in fee income? Apply for an exemption to the laws that protect your customers from such predatory practices. Need to give commission kickbacks to get clients to move towards certain products? Get an exemption from the laws against commission rebating. Have a poorly selling income trust or other new investment issue? Apply for exemptive relief from the law so that the firm can use (or abuse) client’s mutual fund assets, and dump the offensive product into their funds without their knowledge. Want to change the title of thousands of licensed “salespersons” and make them instantly appear as “advisors”? Apply for an exemption to the laws against misuse of registration and license. Viola! Solve nearly any little problem with some paperwork and an application to the securities regulator.

These have all been done, and according to the largest database in Canada on the topic, done thousands of times in recent years. I had no idea that something like this was even possible. I suspect that clients are even less well informed.

How, you ask? Because another law governs investments, called the Securities Act. Unfortunately the police are not always informed of criminal violations in this other area. I have seen forgery brushed aside as “not always forgery”, fraud dismissed, breach of trust ignored. The police are assuming, perhaps incorrectly, that your provincial securities commission has matters in hand. Or they (the police) are never even notified.

The site that contains the most comprehensive data on exemptions to the law is found at: ... _index.jsp or you can just go to the OSC (Ontario Securities Commission) site and look at the section on “orders, rulings and decisions”. It includes exemptions passed in Alberta.

All of these exemptions were granted without public input. No involvement of a judge, no public notice, and no consumer representation in the decision making process. If you browse, you just may find an investment you own that was sold to you without this disclosure. You may be entitled to know why.

The various Securities Commissions refuse to answer how some of these exemptions are in the public interest. They feel they do not have to tell you. Some have been badly abused to hurt the interests of consumers. In Alberta, our provincial commission, a crown corporation, which is responsible to the legislature, recently spent over $1 million dollars on legal fees to try and avoid public audit by the Alberta government auditor. It was discovered that they had something to hide. Yet these (and other) practices continue to this day.

As a consumer you will get more notice if your neighbor plans to build his garage close to your property, than you will get if your financial firm chooses to dump certain investment products on you using a legal exemption. Because of hidden legal games such as this, Canada is damaging its reputation by allowing the manufacture and sale to the public of known “tainted” or bad products. Former Bank of Canada governor David Dodge was quoted as saying that Canada has a “WILD WEST” reputation globally on investments. Legal exemptions and self-regulation are two root causes. They are part of a flawed foundation upon which our system is built. Some folks think they have been gouged by electrical industry de-regulation. Just try and imagine what goes on behind the curtains in the financial industry where they are allowed to self-regulate?

This is just part of many reasons why Canadians suffer from “One Million Frauds”, (Globe and Mail Oct 3, 2007) with only one person convicted until the end of 2007 (Canadian Business editorial Aug 13/27 2007). It also may help explain why ex RCMP IMET commercial crime experts say that Canada is a “A Good Country for Crooks”, (Canadian Business Sept 24, 2007)

The United States is coming to grips with sub prime mortgages, mortgage fraud, Enron, WorldCom, Tyco, etc., which are repeatedly costing the United States more than the entire 1929 market crash and resulting depression. Similar investments, frauds, crimes, and damages are here in Canada. The difference is that in Canada we have effectively no enforcement. No notice to the public. A “see no evil” approach which isw not designed to protect the consumer in Canada, but designed to protect the industry players. What possible agency would there be to bring enforcement action, when our own securities commission assists industry players to skirt the law? This may be the ultimate example of foxes guarding the henhouse. It is the perfect example of self-regulation being used as “self serving”.

Please ask your local MLA to show all of us where I may be wrong on these matters by bringing about a Provincial Inquiry, to see if these claims have merit? I can assure you that a Public Inquiry will turn up issues that are costing consumers billions.
Larry Elford (Former CFP CIM FCSI Associate Portfolio Manager, retired)
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Postby admin » Thu Feb 21, 2008 7:11 pm

The Berkshire group has received exemptive relief to enable them to more easily switch client's independant mutual funds over to in house funds, now that Manulife has an interest in doing this.

The rationale is that moving client assets over to the house brand fund increases profit to the house by between 12 and twenty six times (according to OSC reports, Fair Dealing Model, appendix F, compensation bias).

Although it may do nothing for the client and may in fact hurt the client, that has never stopped the securities commissions from approval of these exemptions, and in fact, the client's interests never seem to factor into it in any way.

See section on "orders, rulings and decisions" for some of the thousands of exemptions that have been granted. All have been stamped by each and every commission in Canada (prior to the new passport system) which begs the question of what will be new about the passport.

To give free passes around the law, wihtout public protection, public input, nor public notice is something that could only happen in Canada, and could only happen with a system of regulations that revolve around worst practices in the world. "Only in Canada eh? Pity"
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Postby admin » Mon Jan 14, 2008 10:05 pm

how to be legally registered as a salesperson, "misrepresent" the job that 80% of the salespersons do to customers, and get away with the misrepresentation:
Ontario Securities Act

In order to trade, you are require to be registered unless you meet the exemption requirements.

The rules are as follows:

Registration for trading

25. (1) No person or company shall,

(a) trade in a security or act as an underwriter unless the person or company is registered as a dealer, or is registered as a salesperson or as a partner or as an officer of a registered dealer and is acting on behalf of the dealer; or

(b) Repealed: 1999, c. 9, s. 199 (2).

(c) act as an adviser unless the person or company is registered as an adviser, or is registered as a representative or as a partner or as an officer of a registered adviser and is acting on behalf of the adviser, and the registration has been made in accordance with Ontario securities law and the person or company has received written notice of the registration from the Director and, where the registration is subject to terms and conditions, the person or company complies with such terms and conditions. R.S.O. 1990, c. S.5, s. 25 (1); 1994, c. 11, s. 359; 1999, c. 9, s. 199.

The exemptions are as follows:



Exemptions of advisers

34. Registration as an adviser is not required to be obtained by,

(a) a bank listed in Schedule I or II to the Bank Act (Canada), or the Federal Business Development Bank incorporated under the Federal Business Development Bank Act (Canada), or a trust corporation registered under the Loan and Trust Corporations Act, or a credit union or league to which the Credit Unions and Caisses Populaires Act, 1994 applies, or an insurance company licensed under the Insurance Act;

(b) a lawyer, accountant, engineer or teacher;

(c) a registered dealer, or any partner, officer or employee thereof; and

(d) a publisher of or any writer for any newspaper, news magazine or business or financial publication of general and regular paid circulation distributed only to subscribers thereto for value or to purchasers thereof, who gives advice as an adviser only through such publication and has no interest either directly or indirectly in any of the securities upon which the advice is given and receives no commission or other consideration for giving the advice, where the performance of the service as an adviser is solely incidental to their principal business or occupation, or

(e) such other persons or companies as are designated by the regulations. R.S.O. 1990, c. S.5, s. 34; 1994, c. 11, s. 363
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Postby admin » Tue Jan 08, 2008 9:38 am

This regulatory exemption is viewed as VERY controversial. It also seems to
throw cold water over the SRO's attempts at investor protection. Another POS
issue that new Regs will have to deal with.We can all expect a rise in
investor complaints very soon. With all due respect,I think it reflects
badly on the entire mutual fund industry.And Berkshire in particular has no
track record of adequate supervision and won't win any awards for their
treatment of cinvestor complaints.
One month the MFDA tries to teach Berkshire a lesson; the next they're
rewarded with a regulatory exemption. Makes no sense to us.
Ken K

Email from a reader Just read about the OSC's toxic decision to allow
recently MFDA sanctioned Berkshire to rebate DSC penalty fees so they can
switch the funds they sold them to funds operated by their new parent.
Incroyable !. Our securities commissions have actually designed this DSC
commission rebating practice so that the s/he financial advisor is the one
who actually signs and dispenses their own personal / private operating
company corporation cheque to the client. . AND who's actually required to
audit the practice of previously illegal DSC commission rebating to ensure
· receive a DSC commission rebate cheque?
· receive a cheque with 100% of their deserved DSC commission rebate?
· receive no more than 100% of their deserved DSC commission rebate cheque,
i.e. the financial advisor doesn't use this process to reimburse clients for
market losses?
· report all DSC commission rebate amounts, client names and their SIN
numbers to the Canada Revenue Agency?

Proposed text for next Fund OBSERVER

Is the OSC acting in the public interest by allowing rebating? [ Ans NO!]

For some reason the CSA/OSC have granted regulatory exemption relief to
Berkshire dealers (Berkshire was recently fined $500,000 by the MFDA for
deficient supervision of rogue rep Ian Thow) that allows its reps to pay DSC
commission rebates to clients that switch into funds within the Manulife
family, subject to certain conditions.

The decision gives Berkshire Investment Group Inc. and Berkshire Securities
Inc. relief from the part of the NI81-105 sales practices rule that wisely
prohibits sales reps from paying commission rebates to clients that switch
into proprietary funds, but allows reps to pay rebates for switches between
third-party funds.

The regulators granted relief from the rebate provision provided several "la
la land" unenforced and never audited by securities regulators conditions
are met.
· The cost of the rebate must be borne by the sales rep (a "professional"
advisor?), and not the firm.
· Clients must be advised that any rebate offered in connection with a
switch into Manulife funds will be available to them regardless of whether
the redemption proceeds are re-invested in a Manulife proprietary fund or a
third party fund.
· The rebate must not be conditional upon the purchase of units of a
proprietary fund.
· Reps must not be subject to quotas or incentives to recommend house funds.
· And, God help the trusting client, the amount of the rebate must be
determined by the sales rep and the client.
What the heck has this got to do with providing investment advice? Another
Assante in the making? ... htm#2_1_18
"Payment of commission rebates by the Filers and by their sales
representatives benefit the client so that the client does not incur costs
in switching from one fund to another." Really ! This unholy exemption
practically invites fund churning and other shenanigans and causes undue
tax issues for clients . SAVE us from the regulators. This unholy exemption
practically invites fund churning and other shenanigans and causes undue
tax issues for clients . SAVE us from the regulators.
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Postby admin » Mon Jan 07, 2008 11:48 am

Berkshire reps cleared to pay commission rebates on Manulife funds

Reps granted partial relief from sales practices rule

Sunday, January 6, 2008

By James Langton

Regulators have granted relief to Berkshire dealers recently acquired by Manulife Financial allowing reps to pay commission rebates to clients that switch into funds within the Manulife family, subject to certain conditions.

The decision, reported in the OSC Bulletin, gives Berkshire Investment Group Inc. and Berkshire Securities Inc. relief from the part of the sales practices rule.

The rule prohibits sales reps from paying commission rebates to clients that switch into proprietary funds, but allows reps to pay rebates for switches between third-party funds.

The regulators granted relief from the rebate provision provided several conditions conditions are met.

The cost of the rebate must be borne by the sales rep, and not the firm.

Clients must be advised that any rebate offered in connection with a switch into Manulife funds will be available to them regardless of whether the redemption proceeds are invested in a proprietary fund or a third party fund.

The rebate must not be conditional upon the purchase of units of a proprietary fund.

Reps must not subject to quotas or incentives to recommend house funds.

As well, the amount of the rebate must be determined by the sales rep and the client.
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Postby admin » Thu Dec 06, 2007 9:31 am

This is getting scary
Mutual funds are becoming dangerous place to invest.[ shorting is also now becoming mainstream due to CSA exemptions]
Wonder if new Fund Facts 2 -pager will reveal these embedded risks
Ken K

Bank-owned funds allowed to make changes

Regulators let their funds invest in certain private placements

Friday, November 30, 2007

By IE Staff

Several bank-owned fund companies have received regulatory relief that allows their funds to invest in private placements they have underwritten, subject to several conditions.

The relief was sought by the fund management arms of CIBC, Royal Bank and Bank of Montreal, including BMO’s Guardian Group of Funds.

Collectively, they sought an exemption to allow their funds to purchase equity securities as part of a private placement, notwithstanding that their affiliates have acted as underwriter of the distribution.

The relief is granted providing that the investment decision is approved by the funds’ investment review committee, the issuer is a reporting issuer and it is subject to several transparency requirements.

( this an example of "dumping" a poor selling product into thier related mutual fund? This would allow them to take advantage of their trusting and vulnerable clients, while serving the interests of thier own underwriting department. Where is the open, honest disclosure to clients of these deals done.)
Last edited by admin on Sat Mar 08, 2008 11:41 pm, edited 1 time in total.
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break the law and win. Apply for exemptive relief.

Postby admin » Thu Dec 06, 2007 9:28 am

Looking at the largest securities commission (OSC) site in Canada, under the topic, Rulings, Orders and Decisions will show a person how easily and often exemptions are granted in order to allow investment firms to go around the law of the day.

These same Securities Commission who allow these exemptions, refuse to allow public input into these applications, refuse to notify the public which firms (or which investments) are being sold while being outside the law. It is as if the Commissions are acting as an agent to help investment firms "put lipstick on the pig" so it can be more easily sold.

It is also seemingly impossible to have these securities commissions provide answers on some of these exemptions. Simple questions such as, "what possible public interest is there is granting this specific exemption" are met with an "above the law" response.

Shame on thirteen provincial and territorial commissions who purport to work for and to protect the Canadian public, while doing little more than recycling investment firm employees, and legal apologists for the industry.

Read on to see how the slipperly slope of exemptions can lead us to billions and billions of damages to Canadians. All legal of course.
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Postby admin » Sun Nov 26, 2006 1:46 pm

visit this site if you wish to see how a Securities Commission promotes it's ability to "help" issuers around the law.

Great marketing piece for Sask Commission. Perhaps not so great for clients.
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Postby admin » Fri Nov 24, 2006 11:04 am

so the readers digest version of what I find so amazing, is that NOT ONLY do our top securities cops, (the 13 Securities Commisisons) delegate matters of the law down to trade and lobby groups (lazy at best, breach of trust criminal violation at worst),


in addition to this, these same thirteen "southern Sherrif's" grant "free rides" (legal exemptions) to the tune of 500 or 600 times a year, so that these same firms (the same ones who run the lobby groups and trade associations) can freely break securities laws intended to protect the public interest.

Great work if you can get it. Plus the top sherrif's get paid over $500,000 while they play this game with the public interest.
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Postby admin » Mon Jun 26, 2006 8:44 am

further to the last post where I hinted at a free ride Passport system being already in place and already failing to protect the public interest.......................

(by the way, if you can obtain a copy of FREE RIDER, by John Lawrence Reynolds, you may never trust the Canadian financial system again. No it is not a consiracy theory book, no it is not fiction and no I am not shitting you when I say this)
but I digress

I checked on the OSC web page at ... _index.jsp

and found out just how many PASSPORT type orders etc, that all thirteen of our securities teams have co-operated on

The number of rulings, orders, exemptions to deadlines, exemptions to securities law, etc, etc etc, amounted to SIXTY FOUR listed under the letter A alone, in the year 2004 alone.

If I mathematically extrapolate how many fall under the entire alphabet, for the last ten or so years I come up with a zillion. They may or may not all be Passport approval situations, but enough of them are to ensure that we are being misled by provincial commissions and or ministers when they say a passport system is a new solution. It is not new, and it is not a solution. Unless we want to continue to have our top securities police in each province still able to sleep on the job and be paid for it.

below is the actual exemption that all canadians deserve a royal commission on:


WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of of British Columbia, Alberta, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Nunavut, the Yukon, and Northwest Territories (the "Original Jurisdictions") and Saskatchewan and Quebec (collectively with the Original Jurisdictions, the "Jurisdictions") have received an application from Assante Corporation (the "Filer") on behalf of itself and its current and future affiliated distributors and their respective representatives from time to time for a decision under section 9.1 of National Instrument 81-105 Mutual Fund Sales Practices ("NI 81-105") that the prohibitions on certain rebates contained in section 7.1 of NI 81-105 shall not apply to rebates paid by representatives to clients who are switching from third party products to mutual funds managed by, or by an affiliate of, the Filer; ... ssante.jsp
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Postby admin » Mon Jun 26, 2006 8:40 am

The OSC MRRS Exemption Decision enabling the CIBC and Royal Bank mutual funds to purchase Teranet Income Fund IPO units is found at the following OSC website addresses. This decision is dated June 6, 2006, but its posted date is June 9, 2006, the same date for the posting of the final prospectus and its receipt by the OSC. This MRRS decision explicitly permits the CIBC and Royal Bank mutual funds to purchase Teranet Income Fund IPO units without requiring any public disclosure of this for 97 days after the end of the IPO distribution, which would be 97 days from about June 15th. The number of shares permitted are any fixed number that is submitted by the CIBC and Royal Bank mutual funds, of which the IPO syndicate allocated number must be purchased within five days of June 9, 2006. The remaining amount of this fixed number of units, not filled in the IPO distribution, may be filled if the underwriting syndicate exercises its Greenshoe overallotment option for up to 10.5 million units within 30 days.

There does not appear to be any restrictions on the CIBC and Royal Bank mutual funds' purchase of Teranet Income Fund units in the secondary market. It is worth noting that the Ontario Government is free to have its approximately 15 million Teranet Income Fund Units sold in an orderly manner in the secondary market by its unnamed designee after 90 days. This MRRS decision would appear to enable the CIBC and Royal Bank mutual funds to be the buyers of the Ontario Government-owned Teranet Income Fund shares in the secondary market after the 90 days, with the requirement for public disclosure on their IPO and IPO overallotment purchases not being required until 7 days later.

I note below the clauses in this MRRS decision that I find interesting. ... ndex.jsp#c

June 9, 2006 CIBC Asset Management Inc., CIBC Global Asset Management Inc. and RBC Asset Management Inc. - MRRS Decision ... casset.jsp

10. Pursuant to an underwriting agreement the Issuer and the Underwriters will enter into in respect of the Offering prior to the Issuer filing the final prospectus for the Offering, the Issuer will agree to sell to the Underwriters, and the Underwriters will agree to purchase, as principals, all of the Units offered under the Offering.

15. The first quarterly meeting of the Independent Committee of the Dealer Managed Funds of RBC Asset Management Inc., immediately following the end of the 60-day period following the completion of the Distribution (the 60-Day Period) (the Distribution and the 60-Day Period together, the Prohibition Period), is scheduled to be held on September 15, 2006.

XI. The Dealer Manager files a certified report on SEDAR (the SEDAR Report) in respect of each Dealer Managed Fund, no later than 97 days after the end of the Distribution

XIII. The Dealer Manager:
(a) expresses an interest to purchase on behalf of Dealer Managed Funds and Managed Accounts a fixed number of Units (the Fixed Number) to an Underwriter other than its Related Underwriter;

(b) agrees to purchase the Fixed Number or such lesser amount as has been allocated to the Dealer Manager no more than five business days after the final prospectus has been filed;

(c) does not place an order with an underwriter of the Offering to purchase an additional number of Units under the Offering prior to the completion of the Distribution, provided that if the Dealer Manager was allocated less than the Fixed Number at the time, the final prospectus was filed for the purposes of the Closing, the Dealer Manager may place an additional order for such number of additional Units equal to the difference between the Fixed Number and the number of Units allotted to the Dealer Manager at the time of the final prospectus in the event the Underwriters exercise the Over-Allotment Option;

Diane Urquhart

Independent Consulting Analyst

Telephone: (905) 822-7618

(advocate comment: if you are a bank who is underwriting a share sale, and if said share sale is not "going" very well, you can always apply for exemptive relief from the waiting period that ordinarily prevents you from dumping unsold shares onto your bank mutual fund clients accounts......POOF!....your problem is solved using bank mutual fund customer's money) They will never know what hit them:)
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