Securities law "exemptions". A license to steal?

[admin]

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 http://www.osc.gov.on.ca 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"

[admin]

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(b) Repealed: 1999, c. 9, s. 199 (2).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



PART XII


EXEMPTIONS FROM REGISTRATION REQUIREMENTS

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

[admin]

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
clients:
· 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?
http://www.oscbulletin.carswell.com/bb/ ... 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.

[admin]

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.

[admin]

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.


( advocate..........is 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.)

[admin]

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.

www.osc.gov.on.ca

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.

[admin]

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.

[admin]

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),

but

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.

[admin]

FREE RIDER PASSPORT
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
http://www.osc.gov.on.ca/Regulation/Ord ... _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:

IN THE MATTER OF
NATIONAL INSTRUMENT 81-105
MUTUAL FUND SALES PRACTICES
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ASSANTE CORPORATION

MRRS DECISION DOCUMENT
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;

http://www.osc.gov.on.ca/Regulation/Ord ... ssante.jsp

[admin]

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.

http://www.osc.gov.on.ca/Regulation/Ord ... ndex.jsp#c

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


http://www.osc.gov.on.ca/Regulation/Ord ... 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:)

[admin]

while researching a story in Saskatoon I have found myself pointed to a number of legal "passports" being handed out by our trusted securities commissions.

I find that they grant exemptions to the law almost daily, to allow investment firms to operate more "easily".
I also find a relationship with the industry of an almost incestuous nature, when compared to the way that securities commissions treat abused investors or the public interest.

If you would care to look for yourself how easy and how many "passports" around the law that are granted to members of the investment industry go to the OSC web site, at http://www.osc.gov.on.ca and look under the heading "orders, ruings and decisions", then click on any year and any letter of the alphabet to find out how many things have gone on that the public may not know of.

I would have to say that they harm clients by a factor that outnumber decisions that help clients by one thousand to one.