Too big to prosecute, our bankers

[admin]

The federal government strengthened bank accountability by including some good measures
Bill C-8 (passed in June 2001). However, some key gaps were left that made it difficult
to ensure banks and other financial institutions serve all Canadians fairly and well and
use our money responsibly, and Bill C-37 (passed in 2007) did little to close these
gaps.

The banks recorded $16 billion in losses and writedowns in 2008 because of their own
risky and irresponsible lending, and all the federal government has done is offer them
subsidies of up to $200 billion, without requiring the banks to do anything return in
terms of better service or prices for customers, and more responsible lending and
investing.

As a result of the subsidies, and interest rate and fee increases imposed by the banks
this year, the banks have just recorded almost $21 billion in annual profits, and given
their executives millions in bonuses.

I'm writing to urge you and the federal government to make the changes needed to ensure
our big banks meet our needs, lend and invest our money responsibly, and remain
Canadian-owned and controlled.

The following key changes must be made to ensure better Canadian big banks:

1. Facilitate the creation of a Financial Consumer Organization (FCO) to help consumers
(as recommended by the Task Force on the Future of the Canadian Financial Services
Sector and a House and Senate committee in 1998), and an Individual Investor
Organization (IIO), by requiring banks and other financial institutions to enclose an
FCO information pamphlet in their mailings to customers, and an IIO information pamphlet
in their mailings to shareholders, with both pamphlets inviting people to join the
watchdog groups at a nominal annual membership fee.

2. Require banks and trust companies to provide detailed information on loans,
investments and services to customers, as required in the U.S (to track whether banks
are fairly meeting the needs of individuals and businesses on a community-by-community
level and, as in the U.S., require corrective action if banks are not meeting customer
needs).

3. Empower the Competition Bureau and Financial Consumer Agency of Canada (FCAC) to
conduct an audit of profits from service charges and credit card interest rates, and
reduction in competition community-by-community across Canada, and savings from closing
branches and firing tellers, over the past 15 years, and require banks to cut charges
and open branches if past profits were excessive;

4. Prohibit any future service charge or credit card interest rate increases if the bank
can't prove the increase is justified;

5. Require banks and trust companies to disclose the profit/loss record for any branch
proposed to be closed, to allow for a full review of the reasons for the closure;

6. Require banks and trust companies to prove that they have a fair, responsible and
very good service, lending and investment record every year for the past 10 years as a
mandatory condition for any financial institution bidding on federal government
contracts;

7. Require the Financial Consumer Agency of Canada Commissioner to disclose the name of
the financial institution and the terms of settlement whenever the Commissioner finds
that an institution has violated the law (currently, the Commissioner can only disclose
the name of the institution if the Commissioner prosecutes the institution), and change
the complaint process so that consumers can complain directly to the Ombudsman for
Banking Services at any time without having to go first to their bank's ombudsman;

8. Give customers access to the money they deposit by cheque as soon as the cheque
clears, and;

9. Given that each of the big banks makes billions of dollars each year, increase the
maximum penalty for violating the Bank Act from the too-low amount of $200,000 to the
more effective penalty of $50 million.

Canadians have made it clear in every poll conducted over the past 15 years that they
need, and want, better banks. Please close these gaps by passing a law to ensure that
all financial institutions in Canada serve all Canadians fairly and well, and can be
held accountable for poor lending, investment or service records.

And please do not let Canada's banks take over any other financial institution, or merge
together, before you have set up the Financial Consumer Organization and the Individual
Investor Organization, and the strict bank lending, investment and service disclosure
and evaluation system outlined above.

Please let me know what steps you are taking to introduce bills to close these bank
accountability loopholes, to pledging in your party's election platform to close these
loopholes.

My vote in the next federal election will very much depend on your response. I look
forward to hearing from you.

Sincerely,

(put your name, postal address and email address here)

*********

PLEASE SEND a copy of your letter to <dwatch@web.net>

PLEASE PASS THIS MESSAGE ON to anyone interested in bank accountability and/or corporate
responsibility in Canada

AND PLEASE DONATE NOW to bank accountability at:
http://www.dwatch.ca/camp/support.html

[admin]

Jim Middlemiss, Financial Post · Wednesday, Aug. 11, 2010

Canadian Imperial Bank of Commerce breached Canadian accounting standards by failing to properly disclose its exposure to
subprime mortgages, says expert testimony filed in Canada's biggest lawsuit to stem from the credit crisis.

Gordon Richardson, the KPMG professor of accounting at the Rotman School of Management in Toronto and a PhD, writes in his 65- page review of the bank's subprime disclosure that "CIBC failed to comply with GAAP disclosure requirements ... and the information provided to pertaining credit risk was, prior to December 6, 2007, wholly misleading to the market in general and to class members who invested in CIBC."

The lawsuit covers the period of May 31, 2007 to Feb. 28, 2008, a tumultuous period in the capital markets when credit started freezing up and investment firms scrambled to understand their exposure to subprime investments.
Mr. Richardson said, "CIBC substantially overstated its income for the last three quarters of fiscal 2007 and the first quarter of 2008 and income for these periods should be restated in order to comply with GAAP." The overstatement resulted from "indefensible assumptions" related to its hedge fund exposure.

A second expert witness report from a noted securities valuation firm in the United States pegs CIBC investor losses at a maximum of $6.6-billion.
The filings are made in preparation for the mammoth class-action suit, which is expected to come before the Ontario Superior Court for certification in March 2011.
CIBC spokesman Rob Mc-Leod said, "CIBC denies these allegations and plans to vigorously defend this action. CIBC is confident that, at all times, its conduct was appropriate and that its disclosure met applicable requirements." The bank is expected to file its response by the end of August.

Joel Rochon, who is representing Thornhill, Ont., investor Howard Green in the lawsuit, which was filed on July 22, 2008, declined to comment on the expert testimony reports.
The lawsuit claims CIBC misrepresented the bank's exposure to subprime investments and failed to implement appropriate risk-
CIBC should restate earnings: expert Page 1 of 2
http://www.nationalpost.com/todays-pape ... rt/33833... 11/08/2010
management controls related to billions of dollars in investments in collateralized debt obligations and U.S. subprime mortgages. A similar investor lawsuit in the United States covering CIBC disclosures between May 2007 to May 2008 was dismissed in March.
Judge William Pauley of the Manhattan Federal Court wrote, "CIBC, like so many other institutions, could not have been expected to anticipate the crisis with the accuracy [the] plaintiff enjoys in hindsight."

However, the laws between the two countries differ and CIBC is being sued in Canada under a new section of the Ontario Securities Act, which makes it easier for investors to sue corporations for misrepresentations. An investor class action against Imax Corp. over disclosure about the status of theatre construction was certified by an Ontario judge in February.
Mr. Richardson's extensive report examined CIBC's exposure to various tranches of subprime residential mortgage-backed securities and collateralized debt obligations tied to subprime mortgages, including its hedged and unhedged position.

He makes some damning conclusions.

"In a nutshell, investors needed to be told by no later than April 30, 2007 that CIBC's maximum exposure to credit risk was $11.4- billion. Instead CIBC misled its shareholders by remaining silent and by misstating and minimizing its exposure." He writes that it wasn't until Dec. 6, 2007 that the bank "stunned the investment community" and revealed the $11.4-billion exposure.
He said based on the TABX and ABX indexes, which tracked the value of credit default swaps tied to subprime mortgage bonds, the bank should have realized that its main $3.5-billion hedge with counterparty ACA Financial was in trouble. "CIBC had to have known that its hedge of $3.5-billion with ACA had collapsed by April 30, 2007 and by no later than July 2007."
He said that should have resulted in fair value writedowns of $769-million, $2.38-billion and $3.82-billion for the second and third quarters of fiscal 2007 versus the $273-million and $747-million hit the bank declared.

He examined two other hedges involving XL Capital and FGIC Corp. and concluded that "CIBC should have recorded cumulative U.S. subprime fair value writedowns between $6.54-billion and $6.95-billion by the end of the first [fiscal] quarter of 2008, rather than the $4.14-billion cumulative U.S. subprime write own it did take.... "

While the CIBC suit is one of the few pieces of subprime litigation in Canada, in the United States there have been more than 400 lawsuits filed in federal courts related to the credit crisis, according to NERA Economic consulting, which tracks such suits.
Elaine Buckberg, a senior vice-president at NERA in New York, said her firm has identified 74 cases relating to collateral debt obligations, 10 of which were filed in 2010 and the others filed between 2007 and 2009.

Overall, U.S. credit crisis lawsuits have resulted in US$2.1-billion in settlements involving a number of parties. Mortgage lender Countrywide Financial Corp. agreed to pay US$600-million to shareholders who accused it of misleading investors about its lending practices. Mortgage loan originator New Century Financial settled with investors for $125-million. Merrill Lynch settled its subprime litigation for $475-million. Charles Schwab paid out $225-million over allegations of misrepresentation related to one of its mutual funds.

It isn't the first investor class action CIBC has been at the centre of. In 2005, it settled a claim by Enron Corp. shareholders for US$2.4-billion.

[admin]

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The dangers of taking investment advice from your bank
By Ian Rose and Andy Verity
BBC Two, Money Watch

http://www.bbc.co.uk/news/business-10604367

Sue Murton lost £17,000 after investing her life-savings in a fund recommended by her bank
Interest rates for savers are at their lowest levels in history, so many people are turning to investment funds to get their money to work harder.

The problem is they are taking advice from their High Street banks and, in some instances, they are not getting advice that is suitable for them.

Sue Murton, from Aldeburgh, is among hundreds of customers who have complained to the Financial Services Ombudsman, after receiving poor advice from in-branch advisers which led to them losing large chunks of their life savings.

Sue wanted to boost returns from her savings because, like millions of others, she was receiving poor interest rates that meant her money was shrinking against inflation.

Risky investing

Sue was looking for a "cautious-to-medium" risk investment and was advised by Barclays to put £50,000 into a so-called "Balanced Fund", believing it to be matched to her relative unwillingness to take big risks - a key requirement for correct financial advice.

However, within months, she had lost £17,000.

"It's certainly not given me the nice comfy, cosy retirement that I was hoping for. I'm furious and I'm bitter," Sue says.

Continue reading the main story
“
Start Quote

The sales people involved were maximising their sales by selling existing investments and moving them… simply to increase the commission”

Richard Davis
Independent financial adviser
"The fund was a newly launched fund with 60% in stocks and shares, which are notoriously volatile," says Richard Davis, an independent financial adviser, who is campaigning for compensation for dozens of Barclays customers.

"The other 40% was in junk bonds and exotic financial instruments, all of which you would not expect to find in the portfolio of someone entering retirement."

Sue Murton's claim for adequate compensation was resisted by Barclays, despite two rulings in her favour by the Financial Ombudsman.

After the BBC got in touch with Barclays, and the Ombudsman made his final decision in Sue's favour, Barclays finally paid her a compensation cheque for the full amount of money she lost.

"Outrageous" tactics

In the Financial Service Ombudsman's most recent report, Barclays Bank attracted more complaints about its investment business than any other bank brand on the High Street.

In some cases, it has accepted the validity of the complaints, but it is resisting compensation claims from others.

Heather Spicer, aged 83, says she was pressured into taking a financial advice session by staff at Barclays in Colchester.


Barclays had more complaints than any other bank
Heather felt harassed after being asked repeatedly by Barclays branch staff if she wanted financial advice, prompted by the large sum she was keeping on deposit which she inherited after her husband died.

"This is the money I had put aside for myself when I would need it. For care, hospital. All that sort of thing," she says.

Barclays staff advised her to put more than £100,000 into what was described as a "cautious" fund, where it quickly lost £40,000.

"Heather's case, frankly, was outrageous," Mr Davis says. "She was churned out of investments that she'd held for many years.

"To move her into a riskier investment environment was simply unconscionable.

"It began to become clear that the sales people involved were maximising their sales by selling existing investments and moving them… without due justification, but simply to increase the commission available to them," he adds.

Heather Spicer threatened Barclays with a complaint to the Ombudsman and the bank eventually paid her compensation.

Industry standards

Consumer group Which? has highlighted inadequacies in the financial advice given at High Street bank branches.

In a recent mystery shopping exercise to test whether the banks were giving good or bad financial advice, it conducted visits to 37 branches and was given the correct advice in only four of them.

Which? told Money Watch that the standard of advice in banks and building societies on the High Street was not up to scratch and customers should stay clear of them.

The British Bankers Association told Money Watch that financial advisers could only work with the information customers gave them.

Barclays says its advisers are not incentivised to sell any particular products and it has extensive controls in place to ensure a high standard of service.

How to beat tough times: Money Watch, BBC Two, 2000, Wednesday 21 July.
http://www.bbc.co.uk/news/business-10604367

(advocate comments........all truth goes through three stages, first it is ridiculed, second it is violently attacked, and third it becomes self evident.......Canada still views its own banking industry as being "above examination" while stealing the larger part of the wealth of the country with it's oligopoly powers. Britain, Australia, USA and others are miles and years ahead of Canada. Financial abuse and molestation by money pros here in Canada is standard industry practice.)

[admin]

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FRIDAY, SEPTEMBER 11, 2009

Corruption in Canadian Brokerage and Banks
The CTF received this letter from Larry Elford and received his permission to reprint. His assertions are beyond our ability to corroborate, but his insights and comments seemed worth passing on. (visit the Canadian Taxpayers Federation)


If I could speak with my prime minister, here is what I would like to say.

In 2004 I resigned my career of twenty years inside the brokerage industry, mostly working with major bank owned brokerage firms. I resigned because of my failure to have an impact on raising the matter of ethical failures. Failures which I witnessed each and every day within my industry. Ethical failure I found to be standard industry practice, despite codes of ethics, codes of conduct and rules to the contrary. Virtually none of the rules are enforced when they interfere with revenue.
My efforts to support change fell on deaf ears and I failed to bring anything like “best practices” into my own industry. I failed. I left.

I took on personal project to inform and educate the public about financial abuse by people claiming “trusted financial advisor” status. I was dealing in crimes and abuses which earned millions of dollars within every investment office that I knew of.

In 2005, after a fund company employee took his own life, in circumstances of management retaliation so brutal they can only be described as “corporate and legal torture”, I decided that I needed to inform yourself and others of the magnitude of the crimes against Canadians, the ease with which they were perpetrated and the lack of enforcement in Canada. I failed to gain your attention to the matter, and I failed to interest your Parliament in addressing these types of crimes.

At that time I was then dealing with an example where financial abuse of customers had placed over $800 million into the pockets of the investment firm. This case is on file with the standing committee on finance. It failed to raise an eyebrow within your government.

In 2007 or 2008, the market for toxic ABCP investments imploded, catching everyone with their pants down. It left $32 billion missing in action from our Canadian economy. The supposed authorities who now claim to investigate this matter, were in fact well documented participants in the legal tricks that allowed this $32 billion to disappear in the first place.* I ask how you can preside over a system which lets conflicted regulators aid financiers and then allows the same conflicted regulators to investigate the damage done?



I testified in Ottawa to a standing committee on finance on these matters, and yet I still have failed to properly engage those at the top. No change. No response. I failed.

I add up the crimes against Canadians, against our economy, and I conclude that clever, cunning white collar fraudsters are putting more money in their pockets each year in Canada, than the economic damage done by each and every other crime in the entire country, combined.

Here is where you have failed as leader. Failed to set aside political self preservation in favor of the public interest. Failed to protect Canadians from abuses by rich and powerful parties. Failed to protect our economy from infection by financial pandemic.

The very best you have done is to hire one securities commission head, to begin work on a new national securities commission. Hired from one of the very securities commissions who participated in the legal “tricks” that allowed each of these crisis to infect Canada. Perhaps will allow them to infect Canada for years to come. Even Richard Nixon was known to say, “you cannot trust the people who made the mess, to clean it up.”

You have failed to understand that allowing the foxes to guard the henhouse is an example of “worst practices”. You have failed to give us anything that looks like “best practices”. You are failing on giving us a modern, honest, unconflicted securities regulation. The industry makes more money on dirty, dishonest, and conflicted.

We deserve better. We deserve a leader who understands this and does not fail to act, when our entire economy, our financial future, and the financial health of Canadians is at daily risk from financial predators.

With respect for your position, you have failed us and you have failed the position.
Each and every Canadian, with exception of fraud artists and banksters, are now paying the price. Fraud artists and banksters are toasting what a great country Canada is to commit white collar crime.

Larry Elford
Executive director of http://www.investoradvocates.ca
(former CFP, CIM, FCSI, Associate Portfolio Manager, retired)
Lethbridge AB

[admin]

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Ask yourself if our financial institutions should be allowed to become "too big to prosecute?"

Are they there already? Most times I see crimes, frauds or abuses over some figure in the mid millions, it becomes an "impossibility" or at very least "improbable" that our RCMP IMET (or anyone) can find the moral courage to prosecute, much less find the time or talent to investigate.

You may disagree, but with crimes, abuses or frauds in the high millions or even billions, we are talking about a free ride for our biggest institutions. Do some of your own research on topics such as "trusted criminals" and you will find university level courses in the USA that study, research and write on this very subject. Here in Canada we still practice the old British system where we give some of our greatest crooks the order of Canada. Our banks have such a grip on the Canadian population that they have spun the PR so well that we think and act like they should be "above examination" in Canada. They are constantly above the law. Very British indeed.

Time for a change of thinking Canada. We are 100 years behind and winning the race for last place in fighting financial criminals in our midst.

[admin]

February 5, 2010
RBC knew of Jones account oddity, memo shows
By CBC News
The Royal Bank of Canada knew disgraced Montreal financial adviser Earl Jones was using his personal account for business and passing it off as an in-trust account, The Fifth Estate has learned.

The Royal Bank of Canada knew disgraced Montreal financial adviser Earl Jones was using his personal account for business and passing it off as an in-trust account, The Fifth Estate has learned.

But the bank denies there were any indications that Jones was using his account inappropriately.

According to a confidential internal memo obtained by The Fifth Estate, Jones was warned "he could get himself in trouble because this is just a personal account in his name alone, the in trust does not mean anything ?"

The memo was dated Nov. 7, 2001. But the matter was dropped and Canada's largest bank allowed Jones to keep doing business as usual.

Jones had a personal account with the Royal Bank but told his clients it was an "in-trust" account. The only problem the bank had was that Jones was operating his business through the account, and it asked him to open a commercial account in 2008.

Wayne Bossert, executive vice-president of RBC, said Earl Jones did what many entrepreneurs do ? start small, using personal accounts to operate their business.

Asked whether it was wrong for the bank to let his clients believe Jones was putting their money into a trust account, Bossert said: "Jones illegally used our letterhead, our logo, in other ways of applying legitimacy to his fraud."

"We had no knowledge of that. What we understood of Mr. Jones is he was an administrator of trusts and estates. A very legitimate business and a legitimate business for him to be in."

Bossert denied that any alarm bells went off before 2008.

"We saw no signals that there was any abuse, any suspicious transactions through the account. There was nothing to signal that this person was anything other than a legitimate successful businessman."

Last month, Jones pleaded guilty to two counts of fraud totalling roughly $50 million. The charges covered his 27-year career as a financial adviser on Montreal's West Island. Authorities have confirmed that Jones bilked 158 clients out of $50.3 million.

Neil Stein, a lawyer representing most of the victims, said Jones would commingle everything into one bank account, called "Earl Jones in trust" that he would use "as his own piggy bank."

"When you're opening up an account in trust for somebody, it's clear, or it should be clear to the bank and everybody, that that account is not being opened for your personal benefit, but rather for and on behalf of some other person or entity."

Stein said he wants to know why the Royal Bank never questioned how Jones was using his account.

"More than red flags should have gone off, from what I've seen," he said.

"There are obvious instances when you see cash being withdrawn from a trust account, when you see credit card bills being paid from a trust account, when you see a debit card being issued on a trust account. That shouldn't happen. "

[admin]

IndependentInvestor Newsletter 082C of 31 01 2010

Today's quote: In Canada, there is what I call brutal bank dominance of the market. What the 1987 Big Bang did...So today, if you have an account that is under $350,000, and you want to talk to the bank, you talk to a machine. That was a fundamental mistake in Canada. Peter Brown, founder, Cannacord Financial

http://independentinvestor.info

[admin]

"This works out to something like 0.5 cents on the dollar. This is a pittance. It's nothing "- Michael Miles, 60, the Victoria, B.C.-based chairman of the Retail ABCP Owners Committee commenting on the modest $138.8 million in fines negotiated with 7 firms involved with the $32 billion non-bank ABCP scandal


Small penalties paid for $32 Billion non-bank ABCP fiasco
Seven financial services firms have agreed to pay a modest $138.8 million in penalties and costs in connection with the investigations into the non-bank asset-backed commercial paper (ABCP) market. Settlements were reached behind closed doors between the Autorité des marchés financiers (AMF), the Ontario Securities Commission (OSC) and the Investment Industry Regulatory Organization of Canada (IIROC) and seven institutions involved in the Canadian third party ABCP market. The Canadian $32 billion ABCP market ground to a halt in August 2007 amid fears that the assets behind the notes included U.S. subprime mortgages and other high-risk loans. Thousands of Canadians suffered, some brutally, from the aftershock. National Bank Financial Inc.’s settlement totals $75 million, including an administrative penalty of $70 million, $4 million to fund an investor education campaign, and $1 million in investigation costs. The OSC reached 2 settlements: one with CIBC and CIBC World Markets Inc. and the other with HSBC Bank Canada. IIROC reached 3 settlements, with Scotia Capital Inc., Canaccord Financial Ltd. and Credential Securities Inc. The AMF reached two settlements, one with National Bank Financial, and the other with Laurentian Bank Securities Inc. The administrative penalties and investigation costs ( not identified) to be paid by the firms is as follows:
• National Bank Financial Inc. (TSX:NA), $75 million
• Scotia Capital Inc. (TSX:BNS), $29.27 million [ includes $320K costs]
• CIBC and CIBC World Markets Inc. (TSX:CM), $22 million
• HSBC Bank Canada, $6 million
• Laurentian Bank Securities Inc. (TSX:LB), $3.2 million
• Canaccord Financial Ltd. (TSX:CCI), $3.1 million
• Credential Securities Inc., $0.2 million
“With regard to financial penalties imposed, a fair and appropriate use for the sanction monies will be determined in accordance with applicable laws, court orders and in the public interest,” the regulators said in a joint release. The settlements work out to just $430 per million dollars of grief unleashed on investors . The penalties amount to less than the fees advisors, lawyers and accountants took home* to restructure the toxic ABCP into long-term notes, most of which still aren't tradable. None of the regulators assisted retail investors in their 2-year successful battle for recovery of assets with the huge institutions. * According to documents filed in connection with the proposed $32-billion restructuring, lawyers for the investors committee, their financial advisors JP Morgan and others had been paid or submitted invoices for $199.1-million as of Dec. 8, 2008.The lion's share of that money - $87-million – went to JPMorgan, the New York financial advisor contracted by the investor committee to figure out how to convert the $32-billion of frozen paper into long- term notes.


http://www.financialpost.com/story-prin ... id=2371360

[admin]

"Canadian Banks the World's Strongest Because they are Allowed To Financially Abuse Canadians" (advocate)



ABCP investors blast settlement, regulators
Mark Noble / December 22, 2009
Advisor.ca


While the majority of retail asset backed commercial paper investors got 100% of their principal investment back, many believe the firms that sold ABCP have received little more than a slap on the wrist in their settlement with securities regulators.

Members of the ABCP Retail Owners Committee argue the $138.8 million in penalties were far too small in comparison to the scope of the ABCP market, which was estimated at $32 billion.

"The first thing that hit me is that they only have to pay $138 million out of 32 billion dollars, which as a settlement represents roughly .04 cents on the dollar," says Layne Arthur, an Alberta-based investor who had the proceeds from the sale of his family farm locked up in what he thought was a safe investment. "Everybody involved in this settlement got immunity. They do not lose their right to practice at any of the banks or in the investment community at large."

Arthur fought for 18 months to get his money back.

"Everybody is walking around with smiles pretending this is all behind them. I think this is still a case of fraud. I would like to see a criminal investigation as to who knew what," Arthur says. "Luckily, I was one of the guys with less than a million dollars invested, so I got paid out. I just got my last cheque a month ago. I've wasted a whole year on this thing, and it was so frustrating. The lingering problem is this is going to happen again. People will be able to put together some fraudulent garbage and pass it off as a savings program."

The ABCP Retail Owners Committee says it has been unable to get criminal action taken against firms.

"Our representative's appeals for assistance from the RCMP's Integrated Market Enforcement Team were referred to the self regulatory bodies. 'Small folks' like ourselves were simply left to 'duke it out' with some of the largest financial organizations in the country," a release from the committee says.

Arthur expressed frustration at being passed around by enforcement agencies when the committee lodged its complaint.

"The system is broken. You cannot have the fox guarding the hen house. You need a totally independent police force that we can go to. I think there are 32 different arms of investigators at different levels, and all of them just referred us to the next outfit," he says.

Independent financial analyst and well-known investor advocate, Diane Urquhart, worked closely with the group in getting their money back. She says this last chapter in the ABCP proceedings highlights serious deficiencies in Canada's capital markets and banking structure.

"I am pleased to see that the securities regulators have finally brought seven securities dealers into settlement agreements as penalty for their sale of toxic ABCP into the public markets," she says. "The public announcement of these securities regulatory settlements demonstrates to the world that the Canadian banks were significant players in the international structured credit crisis, albeit indirectly through their wholly owned investment banks."

Urquhart believes the restructuring process allowed banks to skirt their responsibilities since they were not required to buy the ABCP back from investors.

"No Canadian banks required a government bailout because they had sold the toxic asset backed commercial paper from their inventories to their customers and because they were not forced to buy this bad paper back like the other banks of the world were required to do," she says. "Also, unlike in other countries, the Canadian bankruptcy courts gave full immunity from lawsuits by the ABCP owners against the Canadian banks and investment bank distributors of this toxic product. So, it was not the Canadian banks that took massive writedowns, but the customers of the Canadian banks and investment banks."

Urquhart believes the penalties that were handed out do little to deter or reform the type of sales practices amongst Canada's investment dealers that led to the ABCP crisis.

"With banks making billions of dollars in profit each year, miniscule monetary penalties such as this one, will not have any deterrence on the sale of toxic investments like ABCP in the future," she says. "Deterrence only comes when the well-paid managers and experts in the banks lose their jobs, lose their right to move to another investment firm or receive jail sentences in the cases of intent to defraud the investing public."

Sent By:

Diane A. Urquhart
Independent Financial Analyst
Mississauga, Ontario

[admin]

Bankers' group wants to continue to protect you

By James Daw
Personal Finance Columnist

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Canada's bankers have woken up. Hearing the cries for a supplement to the Canada Pension Plan or other larger-scale plan, they decided to use some gang-style protection tactics to guard and expand their turf.

Don't let the government suck money into a single, quasi-public, one-size-fits-all plan, their Canadian Bankers Association warns in a report released Friday. Let us continue to protect you.

"Requiring younger people to belong to a new contributory public retirement plan could have the effect of diverting income they need for other purposes such as near-term savings objectives and also may not result in actual increases in overall savings rates."

The report has several ideas for improving private-sector offerings – described in words familiar to careful readers of a 2008 paper by Toronto pension lawyer James Pierlot, A Pension in Every Pot: Better Pensions for More Canadians.

Governments should offer relief from taxes and rules, the banks argue.

Yet they make no mention of the drain on retirement income caused once banks and insurers receive our meagre savings.

Canada has the highest investment fund fees in the world, enough on average to bleed 40 per cent of future retirement income from the most diligent savers.

Most of these funds lag market and pension returns. There's also the occasional bad advice and outright larceny by employees of banks and associated securities dealers.

Yet the banks' solution for stretching dollars in retirement is to keep more of our money. They ask to be able to sell life annuities from their branches.

Jean-Pierre Laporte, another Toronto pension lawyer, called as early as 2006 for an idea the banks dismiss: letting employees and employers take advantage of the efficiencies and lower cost of the CPP.

So, naturally, he dismisses the bankers' suggestion that Canada's retirement savings system is working – and would work better if only the tax incentives were more attractive.

"For anyone to argue our system works is ridiculous," Laporte said after reading the report.

"It only works for employees of government and large enterprises. They don't really tell us why (allowing Canadians to contribute to a large-scale pension like the CPP) would be a bad thing. They are saying the current system works – for us – so don't fix it."

Pierlot agrees with the bankers that Canadians should have more choice of ways to save, including private-sector pensions that could serve multiple workplaces, the self-employed, members of associations and individuals. He proposed this a year ago.

Yet he asks: "If choice is a good thing, why not have the reforms the paper proposes as well as new government options?"

The bankers have put their weight behind other proposals included in Pierlot's paper for the C.D. Howe Institute, which is a good thing.

We should let everyone have as much tax-deferred retirement savings room as government employees, plus top-up room after breaks in employment or fluctuations in income. We should harmonize pension legislation across the country.

But Pierlot chides the bankers for treating statistics on retirement savings as though members of public- and private-sector pension plans are all the same. "The difference between the two sectors matters because one has a problem, the other doesn't," he says.

The bankers suggest things would be so much better for workers who rarely have a pension or save much before age 35 if they had more tax-assisted savings room later in life.

More saving room later in life would help, but it's hard to catch up even if you have the room. So starting early and having investment returns compound over many years is better, if you can do it.

jdaw@thestar.ca

[admin]

to truly see corruption at its very best, look no further than Markarian V CIBC World Markets.

It is a landmark case because it has been tried and completed in full public view, without a settlement and a confidentiality agreement to hide the fraud of the CIBC.

It is found under "cases" at www.investorvoice.ca

reading that should make anyone question the honesty, ethics and codes of conduct of our Canadian banks.

[admin]

Mike Macdonald
Monday, April 27, 2009

The Truth About Canada's Banks & Their Success



A lot has been made about the relative strengths of the Canadian banking system. The newspapers are filled with stories about how the focus on "retail" has lead to lower risk profile for the Canadian banks. You have also been reading recently about the superior risk management focus of the Canadian banks and the superior compliance regime of both the banks and the Canadian regulators.


That's pretty neat stuff for us Canadians; hey we're number one! It was all pretty reasonable to the average bloke who has not worked inside the machinery of a big Canadian financial institution.....but I have and I can assure you it is all CRAP!


The reason Canadian Banks are so successful is quite simple. They have an oligopoly structure that lends itself to high margins through low competition strategies. In short, they make tons of profit by over-charging for virtually all domestic services! Need convincing? The evidence has been sitting staring at us for years so let’s point out a couple of obvious situations to get us started!


High Interest Savings Accounts: For years the Canadian Banks have made a fortune by offering little or no interest on your savings account. In fact the situation got so ridiculous that a foreign bank figured out that they could pay for their whole expansion into Canada by exploiting the fat margins that existed on savings accounts. Thus that annoying ING guy made his appearance and told Canadians the ugly truth! Your banks are not paying you interest you dummies! Of course the banks were not about to fight back over one measly foreign bank offering fair interest rates.


Think about it.....if Royal has ten billion in savings accounts earning 0.25%, they are not about to start paying 2.25% and give up $200 million in profits. They (and all the other banks) just sacrificed a few hundred million in deposits each, that would drift to ING, counting on Canadian apathy to keep most of the money in their accounts! The Canadian banks did not react at all until the credit unions followed ING's lead; at which time they created a high interest saving option that was not as high as ING and the credit unions, but was enough to stem the flow of apathetic money from the big banks!


Credit Cards: Foreign credit card companies also noticed that Canadian rates were very high, even though losses were quite low. In the hyper-competitive card market south of the border, aggressive credit granting and extreme marketing competition pushed card companies into high risk credit granting, expensive rewards programs, and aggressive direct marketing campaigns. No wonder the card interest rates were 19% to cover the losses and expenses. In Canada that was not quite the case. Rates were 19%, but marketing was through the branches to existing customers. Credit standards were still very reasonable and losses were consistently below the U.S. experience.

Even better, the banks owned the card processing firms and could screw both the customers (think 19% rates) and the merchants who had to pay outrageous fees for the privilege of accepting the cards! Again, the Canadian banks took it to the extreme and again foreign banks eventually stepped in. Check your mail box and see how often a U.S. monoline firm (sells only one product) has sent you a pre-approved card at a low teaser rate. Again, the banks are not about to match low rates and sacrifice the profits from tens of billions in outstanding card balances at 19%, or 24%, or 27%. Let Capital One or some other company steal the crumbs from the table, but never give in to the temptation to be competitive!


Need further proof? Canadian banks are paying huge class action fines for illegal foreign exchange fees on the credit cards! Canadian banks are the leading broker and mutual fund firms in Canada.....and Canadians pay the highest mutual fund fees in the world! Ask the small business guy about the cost of banking services in Canada!


So how does that make our banks the best in the world? How do you explain the lower risk profiles and the lack of idiotic leveraging? Simple actually; Canadian banks just were not willing to pull their capital out of Canada and forego the huge domestic profits to chase U.S. sub-prime assets, or expand aggressively into the U.S. capital markets. While foreign banks greedily schemed and took risks to gain any slight advantage in terms of profit, it was a totally foreign concept to the Big Five! Compete for profits? Surely you jest! Stay home; stay fat and happy!


So now you know! The success of the Canadian Banking System rests with us! If we were not suckers who overpay for all our banking services, then the big banks could not have been nearly so clever! Let’s give ourselves a hand! Of course don't forget to thank the government, who through the weakest banking regulations in the free world, continue to let the oligopolies thrive!


Keeping with this fine Canadian tradition; you can apply the same logic to some of the world’s wealthiest civil servants, dairy farmers, and financial planners! Low competition, poor regulations and consumer apathy!

I am Canadian!

sois mike


TheUnbiasedPortfolio.blogspot.com/

[admin]

http://www.investmentexecutive.com/image/En/logo.gif
January 2009
Insight

Consumer complaint process fragmented: Letters to the editor

Advocates say the decision of Royal Bank to leave OBSI does not serve the public interest

Re: “OBSI releases its revised, consumer-friendly mandate,” by James Langton (IE, December 2008).

Complaint handling in financial services has been a mess in Canada for years and is well documented. In Britain and Australia, for example, the office of ombudsman is established in law.

Canadian retail clients depend on the industry-sponsored Ombudsman for Banking Services and Investments. [But] retail clients have found the systems difficult to navigate, complex, slow and biased.

After a number of reports, and at the urging of regulators, a number of initiatives were undertaken. Over the years, OBSI’s processes and services have gradually improved.

In 2007 the Framework for Co-operation was released. This lays out the dispute resolution system in financial services, and was agreed to by the federal Department of Finance, the Joint Forum, OBSI, Canadian Life and Health Insurance OmbudService and General Insurance OmbudService.

It describes the architecture of dispute resolution and says that the ombudservices are an important part of consumer protection working in the public interest.

The framework lays out standards for the ombudservices, including independence, external review, accessibility, etc.

Among the expectations of the regulators are: systemic issues, tolling agreements, consumer assistance, “generous” interpretation of mandate — in short, a strong ombudsman service that is an integral part of the consumer protection framework in financial services.

Also in the framework are accountability provisions between OBSI and the regulators. Independent reviews are required every three years (OBSI had an independent, external review in 2007). A number of the changes OBSI has recently introduced are a direct result of that constructively critical review.

We should note that there is no formal requirement in legislation for a bank to be a member of an independent dispute resolution service.

The law as written provides an absolute bare minimum approach — banks must have a complaints procedure, but there are no rules about what those procedures need to be; and communications requirements are also minimal.

The federal government never required the banks to join the ombudsman service because there was a deal made in 1996 for banking, and again in 2002, for investments.

In exchange for not setting up a government service, the banks would be members of the external ombudsman service.

There was never a question of [banks] not being part of OBSI, at least not until the Royal Bank of Canada decided that it didn’t want to be subject to the revised OBSI Terms of Reference and the new rules on complaint-handling and systemic issues.

Royal Bank withdrawal [from OBSI] is bad for financial consumers for the following reasons:
> they could be subject to biased decisions and short-changed on restitution due to lack of independence;

> Royal Bank has turned its back on the agreement between the banking industry and government on independent dispute resolution;

> financial consumers face a two-tier system, in which some get the benefit of a truly independent, industry-wide service subject to the regulator’s framework, while Royal Bank customers have to use a private, for-profit firm hired by the bank.

The Royal Bank system is not in the public interest and will cause many difficulties, especially for seniors, unsophisticated clients, retirees and pensioners.

Ken Kivenko

Chairman, Advisory committee

Small Investor Protection Association

[admin]

RBC in hot water over Olympus United Funds collapse
The case is Balanced Return Fund v. Royal Bank, 09-cv-695, U.S. District Court,
Southern District of New York (Manhattan
Royal Bank of Canada was sued by investors in Olympus United Funds who claim they
lost more than US$90-million in the funds' collapse. According to a complaint filed Jan.
23 in U.S. District Court in Manhattan Royal Bank, "secretly managed" the funds, The
funds' parent company Norshield Financial Group filed for receivership in June 2005
amid probes by securities regulators. In its dealings and relationships with Norshield,
Royal Bank of Canada assumed control of investments, exercised discretion in key areas
and thus became liable for my clients' losses," Lee Squitieri, a lawyer for the investors,
said in an interview. Royal Bank officials allegedly overstated the funds' assets, breached
their fiduciary duties to investors, committed fraud and misrepresented material facts, the
investors said in the complaint. They seek unspecified damages.” Royal Bank of Canada
believes the lawsuit is without merit and will vigorously defend against the claims,"
Jackie Braden, a spokeswoman for the bank, said in a Jan. 26 statement. Among the
investors suing are Balanced Return Fund Ltd., Mendota Capital and Commax Investors
Services Ltd. Source: C.Cotts, RBC sued over failed hedge funds, National Post, Jan. 27,
2009 pg FP5

[admin]

Tony Fell tears strip off banks
Barry Critchley, Financial Post

Wednesday, January 28, 2009

For a person who hasn't drawn a paycheque for more than a year, Tony Fell, former chief executive at RBC Capital Markets, sure works hard. At Monday's annual dinner of the Toronto Board of Trade, Fell gave his views on the global credit crisis. And he didn't hold back.

After castigating economists at central banks and at the IMF as well as those in the financial business for their failure to "pick up on this credit bubble," Fell weighed in on the lack-of-leadership roles played by all other market participants as well as the need to find a new order given that "the grand experiment of deregulation of financial markets and financial institutions which started with President Ronald Reagan's appointment of Alan Greenspan in 1987, is over."

He argued the "crisis clearly highlights a massive failure of corporate governance," specifically the failure of boards to oversee management and the failure of management to oversee the business. In short, where were the directors and why do so few of them "resign over matters of principle," he wondered. "Hard-hitting directors [must be] prepared to stand up and be counted."

The too-big-to-fail argument shouldn't apply, he argued, because "capitalism is the freedom to do outstandingly well and ... also the freedom to go bankrupt and that has to be demonstrated from time to time. There has to be at least some discipline in the marketplace."

He believes banks have become too big, too international and too complex. The result: Banks have become "too big to manage".

Now the big global banks should be broken up into smaller, more focused and more manageable institutions." Citigroup has started down that path.

The argument that Canadian banks should be globally competitive doesn't hold much sway with Fell. "It's all egos run amok," he said, noting Citigroup, Deutsche and UBS aren't role models. "What's wrong with being the 25th-or 50th-largest bank in the world and growing your business organically by offering good service? Canadian banks are plenty big enough to compete where they want to compete."

And he is no great fan of financial engineering and innovation -- a "disastrous" problem area. "The financial industry should get out of complex structured products," he declared, adding if a "security has more than two bells and one whistle, just say no." He railed against credit rating agencies -- whose model is "broken" --and said central banks should "target, and rein in, overheated and speculative industry and market bubbles even if it causes a slowdown or a recession."

Fell believes a "back-to-basics" model for the financial business is required:

running a more conservative business,
reining in growth expectations,
reducing leverage with much less financial innovation and engineering,
more focus on client business,
more organic growth and fewer grandstanding acquisitions.
In short, the world's biggest financial institutions should downsize and scrap their plans to rule the world.
While that approach leads to lower profitability "at least, over time, you will be in business."

But he is not optimistic even if he hopes the lessons of the past 18 months are "indelibly ingrained" on central banks, regulators, boards and corporate management so that the financial business will again become "an industry of choice" for investors.

If not, then "twenty years from now, this crisis will be ancient history and long forgotten, and the young people running the businesses at that time will set out to do the same thing all over again."

bcritchley@nationalpost.com

(advocate comments........good words, well said. I still maintain that Tony and his style of ruling the financial world was "the" model that he now criticizes. He was the top dog at the top firm for as long (longer) as I have followed the shenanigans of this industry. If he was as professional and ethical back then, as he claims to be now, we would have far less damage than we do today. Get rich anyway you can, and then get ethics?)