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GET YOUR MONEY BACK! Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - GET YOUR MONEY BACK!

GET YOUR MONEY BACK!

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Re: GET YOUR MONEY BACK!

Postby admin » Thu Mar 23, 2017 9:45 am

Screen Shot 2013-03-16 at 7.22.36 PM.png


This letter is a draft which an investor victim may wish to consider giving to their bank or investment dealer..(I would suggest obtaining legal help to write and send this)..IF you have determined that the bank or dealer has used non-lawful titles as a form of false pretence to deceive you into a false trust. (see 1.5 min YouTube video at end of this post to help determine if this is the case)

The use of false titles is considered to be misrepresentation and is illegal under most Securities Acts in Canada and the US. It is also contrary to the laws and rules of the Competition Act of Canada and criminal codes.

None of these rules or laws have been enforced in Canada, to my knowledge, which raises much larger questions for another time, but for the matter of getting your money back I suggest a strong poker face, and a some proof or finding of fraud may get your bank/dealers attention.

I have seen clients attempts this only to be faced with ferocious financial industry lying, delaying and denying, so be prepared that getting money out of a bank is not easy, even when you have been deceived or defrauded, but you can be the judge of what lengths you are willing to go to in order to obtain justice and redress. Privately filed criminal charges may also be a last resort if all else fails.

Send any questions or suggestions about this issue/letter to visualinvestigations@shaw.ca

Letter:

“Dear ABC Bank,

I would like to ask ABC Bank if it is true that most ’advisors’ of ABC Bank, and in specific, the ‘advisors’ that ABC Bank allowed to give me financial advice on my investment accounts are/were then legally registered or licensed in the category of “advisor” as they represented to me and in ABC Bank advertising?

Or, are they legally registered as “dealing representatives”, which is further clarified as ‘salesperson’ under that registration category, with the Canadian Securities Administrators?

I feel that if this question can be answered by you, I will be saved the trouble of having to retain legal counsel and ABC Bank may be saved the trouble of having to do similar.

Failing a prompt response to this question I feel that ABC Bank may leave me with no other alternative than to continue my search for “fair, honest and good faith” services and answers to my question through legal counsel.


I once again, thank you for making my account “whole”, returning me to a financial position as if I had never stepped foot into a ABC Bank ‘advisor’ relationship, to prevent much ado over not very much money. This is more a matter of principle than a matter of the dollar value of my account. I would like my initial investment value returned to me, with a nominal and reasonable amount of interest for the years that I feel I have wasted due to the misrepresentation from the concealment of your "dealing representatives” (Salespersons) titles.

Thank you for your prompt attention to this concern, which will allow me to put this matter to rest.  

Signed


Source to search you own so-called ‘advisor’ in order to determine of you have been deceived:

https://youtu.be/zIjt0qRsJKg

Screen Shot 2017-03-23 at 10.45.07 AM.png


Misrepresentation is found in the following laws: (as well as any other Provincial Securities Act)
Ontario Securities Act Section 44,
Alberta Securities Act Section 100,
BC Securities Act Section 34,
Manitoba Securities Act Sections 74 and 74.1
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Re: GET YOUR MONEY BACK!

Postby admin » Wed Jul 02, 2014 9:46 am

upsidedownworld.jpg
Back and forth between family of senior abused by investment system:

"One of the things brought up at the MFDA Hearing regarding my dad was of course the inappropriateness of the DSC fees with my dad being in his 80's.

Legal counsel from the MFDA also went into questioning this 10% free units which I am not sure I fully understand so correct me if I am wrong. The advisor sells on a DSC basis and gets a 5% commission up front and thereafter a 0.5% trailer. But if each year he moves the allowable 10% to an FEL his trailer is now 1%. Am I getting the game they play correct?"

(CORRECT!! The game from start to finish is a shell game to move the customer towards things which pay the salesperson more, and move them away from things that pay less…..)

OSC Fair Dealing Model appendix F titled "Compensation Bias" has some very candid comments about the DSC option, namely that in no case it is an advantage to the consumer, and in all cases an advantage to the seller and dealer…….something to that effect. If you are interested in the exact verbiage, see pages 12 to 15 with this quote on 15 "Under none of the scenarios, including the relatively extreme case of a 5% front-end load for Fund A and a market return of 18%, does the investor benefit from investing in Fund C rather than Fund A. However, while Fund C grew by $118 million from December 31, 1999 to August 31, 2002, Fund A decreased in size during that period by $90 million. The beneficiary of higher sales of Fund C is the dealer, who receives a trailer fee of 0.5% instead of 0.3%." https://drive.google.com/file/d/0BzE_LM ... sp=sharing


(the lawyer for the OSC told me that he felt the DSC was essentially a "bribe" to salespeople to get them to push certain mutual funds:)
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Re: GET YOUR MONEY BACK!

Postby admin » Sat Feb 15, 2014 10:54 am

fair, honest good faith rule.jpeg


about six official places where Misrepresentation is prohibited (relating to the misrepresentation of "advisor")
(sadly, those professionals and regulators who are paid to protect the public are turning a blind eye to all of these......the financial pressure from the industry who pays all salaries is more than they can stand up against.......)


--Competition Act of Canada
Marginal note: Misrepresentations to public
PART VII.1
DECEPTIVE MARKETING PRACTICES Reviewable Matters
1 74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,
1 (a) makes a representation to the public that is false or misleading in a material respect; 2 http://laws-lois.justice.gc.ca/eng/acts ... ns#s-74.01

===========

--What is a false pretence under the Criminal Code?
Under Section 361., (1), a false pretence is a representation of a matter of fact either present or past, made by words or otherwise, that is known by the person who makes it to be false and that is made with a fraudulent intent to induce the person to whom it is made to act on it. Subsection (2) states that exaggerated commendation or depreciation of the quality of anything is not a false pretence unless it is carried to such an extent that it amounts to a fraudulent misrepresentation of fact. For the purposes of subsection (2), it is a question of fact whether commendation or depreciation amounts to a fraudulent misrepresentation of fact.
Under the Criminal Code, every one who commits an offence under paragraph (1)(a) (a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding ten years,
******

=============

IIROC Rule 3100 - Definitions "Misrepresentation", i), ii)
"misrepresentation" means:
i) an untrue statement of fact; or
ii) an omission to state a fact that is required to be stated or that is necessary to make a statement not
misleading in light of the circumstances in which it was made.
=================

From the BCSC Securities Act (link 1) comes this;
Persons who must be registered
34 A person must not
(a) trade in a security or exchange contract,
(b) act as an adviser,
(c) act as an investment fund manager, or
(8) Misleading Trade Name
No Dealer Member or Approved Person shall use any business or trade or style name that is deceptive, misleading or likely to deceive or mislead the public.
13
(d) act as an underwriter,
unless the person is registered in accordance with the regulations and in the category prescribed for the purpose of the activity.

==============

A misrepresentation is defined by the Securities Act as “an untrue statement of a material fact or an omission to state a material fact that is required to be stated or necessary to prevent a statement ... from being false or misleading in the circumstances in which it was made.”7



===========================================


Fraud section 380 of the Criminal Code of Canada
380. Fraud

380. (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,

========

media quotes about violations of the public by so-called-professionals.

The quotes following, are from respected experts and refer to industry misrepresentation, deceit, false pretense or outright fraud:
1. “.........financial advisors, wealth managers, senior financial planners, financial analysts, and investment managers are just a short list of titles that salespeople like to adopt, in an effort to steer clear of the “salesperson” stigma........”

From “Understanding Misleading Financial Advisor Titles – Your Right to Know” Bryon C. Binkholder
2. "Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying. " Edward Waitzer article, Financial Post · Tuesday, Feb. 15, 2011) (Mr. Waitzer is a Bay Street Lawyer and former Securities Commission chair, and this quote ( by another person) appeared in his article.
viewtopic.php?f=1&t=173&p=3438&hilit=waitzer&sid=315213c6fd740f3160d45ff7965fd5de#p3438

3. “The greatest risk the average investor runs is the risk of being misled into thinking that the broker is acting in the best interest of the client, as opposed to acting in the firm’s interest,” Professor Laby said. New York Times (Arthur Laby, a professor at Rutgers School of Law-Camden, and a former assistant general counsel at the S.E.C.) http://www.nytimes.com/2012/07/07/your- ... html?_r=1&
4. This misrepresentation allows persons with a “phony title” to financially violate trusting and vulnerable Canadian investors (and similar across the USA)...............here is one comment from Quebec Superior Court Justice The Honorable Jean-Pierre Senécal, J.S.C., Quebec Superior Court , District of Montreal
The Honorable Jean-Pierre Senécal, J.S.C.

¶ 263 The defendant attributed to Migirdic fake titles, i.e. "vice-president" and "vice-president and director", in addition to letting him use the title "specialist in retirement investments". Those titles were false representations that misled the plaintiffs, hid reality from them, disinformed them, comforted them in their confidence in Migirdic, reduced their distrust, and contributed to Migirdic's fraud. The defendant committed a fault in terms of its obligation to inform and advise, in addition to misleading the plaintiffs.

Further and link to full court documents here: [url]http://www.investoradvocates.ca/viewtopic.php? f=1&t=10&p=3454&hilit=markarian#p3454
5[/url].

Screen Shot 2012-11-29 at 11.26.36 AM.png
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Re: GET YOUR MONEY BACK!

Postby admin » Fri Jan 24, 2014 11:13 am

Some images, links and steps to perhaps better explain how the broker "bait and switch" works and how you might use the info to get your money back when your investment dealers plays it on you:

Screen Shot 2013-12-28 at 1.52.31 PM.png
click to enlarge image, click twice to zoom in

First, you might start by searching out the name and license of your "advisor", and comparing it to what "title" they have represented themselves to you with. It is against the Securities Act in many provinces (section 34 BCSC) to misrepresent their title, and it also offends several self regulatory rules against title "inflation" (puffery:).
Finally to misrepresent ones title to lure customers also offends all industry codes of conduct, codes of honesty, fairness and so on. It is a bad thing. [url] http://www.securities-administrators.ca ... spx?id=850
[/url]

Screen Shot 2014-01-24 at 10.48.02 AM.png
click to enlarge image, click twice to zoom in

Second is the "are they registered" question which is mostly a ruse. Of course they are registered.....unless they work for a firm you should not be dealing with anyway. However, the more important question is HOW are they registered and what license category are they registered as. (think fraudulent misrepresentation remember..........) http://www.securities-administrators.ca/investortools.aspx?id=1128

Screen Shot 2014-01-24 at 10.45.27 AM.png
click to enlarge image, click twice to zoom in

This (above) gets you to beginning to understand the "What each registration category means" question. Here you will see that for example a "dealing representative" is not really licensed as an "advisor", as they may have implied to you, but that this license is considered to be a "salesperson", by the Canadian Securities Administrators. Oddly, the CSA has just recently removed the "historical" licenses for those who were in the business prior to 2009, as this would have required them to show that ALL persons (99.99% of registrants in Canada) who were selling investments to the retail public, were at that time officially licensed in a category titled "salesperson". This title was deleted by the CSA in 13 provinces and territories and replaced with the more confusing title of "dealing representative". Cynics like myself point out that at no time have salespersons called themselves by their title of "salesperson" even when the law requires it, and virtually none today use the title "dealing representative". One exception to this might be for "exempt market" dealers. For the Securities Commission to help hide these misrepresentations from the public opens them up to (and rightly so) allegations that they are willfully blind in order to earn salaries over $700,000 in some provinces. http://www.securities-administrators.ca/uploadedFiles/General/pdfs/UnderstandingRegistration_EN.pdf

Screen Shot 2012-10-25 at 8.59.14 PM.png
click to enlarge image, click twice to zoom in

Then, if one truly wishes to understand the hidden tricks o the industry, you can read this (above) document by the CSA about "perhaps" looking into the "possibility" of a standard which would require "advisors" (yes, those folks who do not have an advisor license:) to give their unsuspecting customers "advice" that would be in the customer's best interests. (hmmm, imagine requiring someone posing as an investment professional with some of the most trusted financial institutions in the world, being forced to act in a professional and trustworthy manner:) http://www.osc.gov.on.ca/documents/en/Securities-Category3/csa_20131217_33-316_status-rpt-33-403.pdf


If you wish to skip over all this homework, or perhaps you live in the USA where they do this bait and switch with slightly different staff (securities regulators) then view this video for the first five minutes....... you will get the concept. http://www.youtube.com/watch?v=KH6XMXlfdBw&list=UUy8dpTRZHEz-0JBa_l0w7AQ&feature=share&index=2
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Re: GET YOUR MONEY BACK!

Postby admin » Thu Jan 09, 2014 10:21 am

Keywords, suitability, KYC, KYP CSA

This notice dated jan 9th, 2014 from the Canadian Securities Administrators speaks loudly to a regulatory regime which is captured and loyal to the industry, while wilfully blind to industry harms to the public. By way of example, while reading thousands of words in this release, applicable to the interests and treatment of investment customers, nowhere is it found any discussion of fees, costs or expenses as being one criteria in the "suitability" requirement.

For an industry which relies heavily on pushing the most expensive, most harmful to the customer, product, the ability to capture and corrupt the regulators into such wilfully blind enabling, is evidence of a failed regulatory regime. Please read if it might pertain to your own case, and pay particular attention to the areas that discuss "suitability" requirements.

While the CSA image below speaks proudly of PROTECTING INVESTORS, sadly the claim does not bear weight.

=================================================================================================
Screen Shot 2014-01-09 at 10.07.49 AM.png




Find the release at one securities commission site here http://www.bcsc.bc.ca/uploadedFiles/sec ... y3/31-336_[CSA_Staff_Notice].pdf


Highlighted sections of interest to failing to protect the public:

"KYC, KYP and suitability obligations are extensions of each registrant’s general duty to deal fairly, honestly and in good faith with its clients. In Quebec, this duty is framed as the registrant’s duty to deal fairly, honestly, loyally and in good faith with its clients." (page 2)

"Adequate documentation of the suitability process (including KYC) is critical to ensuring that a registrant is meeting its securities law obligations." (page 2)
(This is rare. I have yet to see an "advisor" who can adequately document the choice to sell the highest paying (commission wise) product, and of course this must be the hidden or obfuscated portion. Combined with up to 90% of certain products sold in this manner, it provides an opportunity to hold the seller to the proper standards.)

CSA Staff Notice 33-315 Suitability Obligations and Know-Your-Product (page 3)

CSA staff reminds EMDs that it is a breach of their obligations, including their fair dealing obligations to prefer an issuer, seller or their own interests over an investor’s interests. (page 18) USE THIS IF YOUR SELLER HAS SOLD YOU THE HIGHEST COMMISSION CHOICE OF PRODUCT

IIROC’s suitability requirement is set out in IIROC Rule 1300.1, which requires dealer members to use due diligence to ensure that recommendations to clients regarding the purchase, sale, exchange, or holding or any security is suitable for the client based on factors including investment objectives, time horizon, risk tolerance and the account’s current investment portfolio composition and risk level. IIROC Notice 12-0109 expands the suitability obligation and requires dealer members to ensure that the order type, trading strategy and method of financing the trade recommended are also suitable for the client. (page 18) (HAVE YOU EVER MET THE CLIENT WHOSE OBJECTIVES INCLUDE PAYING THE HIGHEST COMMISSION OR FEE POSSIBLE? MOST SALESPEOPLE GO THIS WAY IN VIOLATION OF THEIR DUTY TO THE CLIENT)

25 pages of information related to suitability. 100 mentions of the word "suitability", and virtually nothing to speak to, or interfere with the industry practice of maximizing revenue, or the conflict between maximizing investment performance to the client, and maximizing revenue for the dealer. All discussion walks around this explanation, buries it is "subjective" terms, which cannot be nailed down. All discussion relies on principles of each registrant’s general duty to deal fairly, honestly and in good faith with its clients, which of course is up to the discretion of the industry itself to enforce or ignore.

This clients can be abused on a "cost" basis, which coincidentally is where the money for themselves comes from, with impunity.

I feel that for any regulator to be so cleverly vague about the issue of investment fees and costs, where they relate so heavily to any discussion of "suitability" is to show that they are deliberately trying to obfuscate. It speaks to a lack of professionalism by the regulatory bodies involved.

Screen Shot 2014-01-09 at 10.48.10 AM.png


http://www.bcsc.bc.ca/uploadedFiles/sec ... y3/31-336_[CSA_Staff_Notice].pdf
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Re: GET YOUR MONEY BACK!

Postby admin » Wed Jan 01, 2014 10:42 pm

Screen Shot 2014-01-01 at 10.41.21 PM.png


From IIROC files http://www.iiroc.ca/Documents/2013/0a10 ... 437d-a3cc- 24f21e3ad5bd_en.pdf


In this case most of the clients were at or approaching retirement age. They were often high net worth individuals but were in the low range of investment knowledge. One IIROC Hearing Panel17 described the duty as follows:
"People who work in the investment industry have occasion to control other people’s money. The most fundamental expectation is that they do so honestly." (quote from the enclosed IIROC document)

==============

Advocate comment: Although the industry does have some well written codes and promises, the troubling thing is that the industry relies on the industry to enforce them, and as a result, the client is left unprotected, while the industry makes off with the money, 99 times out of one hundred.

The industry standards that promise, "honesty, fairness and good faith" are but one case in point. They (the IIROC registered investment dealers) promise it to the public, they just do not have to deliver it, unless there is that one-in-one-thousand, client who has the emotional and financial strength to take the dealer to court. Then, and only then will those three items be brought into play by a judge, and that is only a one-off chance, since the dealer will bring in "experts" to spin the judge in several directions, all of which lead to confusion and not conviction.

End result, is that the odds get into the "lottery-level" that an investment customer will actually obtain delivery of the "promise" of "honesty, fairness and good faith". Sorry for the pessimism. Just the messenger.
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Re: GET YOUR MONEY BACK!

Postby admin » Sat Dec 28, 2013 2:15 pm

Here is another trick the investment dealer will pull over on you when you complain about them:

Screen Shot 2013-12-28 at 2.10.35 PM.png

Non-discretionary Accounts

August 06, 2007

HIDING BEHIND LABELS----THE "NON-DISCRETIONARY" ACCOUNT DEFENSE
HOW DO YOU PROVE YOUR BROKER CONTROLLED THE ACCOUNT EVEN THOUGH IT IS LABELED NON-DISCRETIONARY?

by Lawrence C. Melton, lmelton@dhayeslaw.com

THE HAYES LAW FIRM, http://www.dhayeslaw.com, 1-866-332-3567 (toll free)

There are two general types of investments accounts: non-discretionary and discretionary. A non-discretionary account requires the broker to obtain authorization before it makes any investment decisions. A discretionary account allows an investment broker to make account transactions without the client’s prior approval. The problem is twofold: (1) brokers often treat non-discretionary accounts as if they were discretionary, and (2) brokers do not adequately explain the difference between the two accounts to the customer.

Suppose you, the average investor, open an account with a brokerage firm. Chances are you will do so without knowing whether the account is discretionary or non-discretionary. Down the road, the broker messes up, defrauds you, and makes grossly unsuitable investments. You want to take legal action, but you are uncertain. What will be the broker’s defense? He will say the account was non-discretionary and deny responsibility. In other words, he will blame you. He will say you were in control of the account, not him. No doubt, this is news to you. After all, the broker acted like he was in control. There was implicit understanding that he was in control. The only basis the broker has for saying that he was not in control is the non-discretionary status of the account.

How do you overcome this defense? How do you prove that the broker was in control, even though the account was non-discretionary? Answer: You have to prove the broker “assumed” or “usurped” control of your account.

A broker is not insulated from a charge of unsuitable trading merely because the customer did not vest the broker with formal written discretionary authority. Rather, where it can be shown that the customer-broker relationship is such that the broker in fact manages the trading in the account, control will be found. (In re Thomas McKinnon Secs., CCH Fed Secur L Rep ¶ 99104 (1996, SDNY)).

Typically, this occurs when the customer evinces such trust and confidence in his or her broker that the customer invariably follows the broker's advice and recommendations. (See Newburger, Loeb & Co. v. Gross, 563 F.2d 1057 (2nd Cir. 1977); Mihara v. Dean Witter & Co., 619 F.2d 814 (9th Cir. 1980)).

The question is whether the customer has sufficient understanding and financial acumen to evaluate the broker's recommendations and reject them when the customer thinks it inappropriate. (See Newburger, Loeb & Co. v. Gross, 563 F.2d 1057 (2nd Cir. 1977); Carras v. Burns, 516 F.2d 251 (4th Cir. 1975); Newburger, Loeb & Co. v. Gross, 563 F.2d 1057 (2nd Cir. 1977)).

Where the customer is relatively naive and unsophisticated, and the customer routinely follows the broker's advice, control will generally be found. (Mihara v. Dean Witter & Co., 619 F.2d 814 (9th Cir. 1980); Hecht v. Harris, Upham & Co., 283 F.Supp. 417 (9th Cir. 1980)).

While an otherwise intelligent customer will not be allowed to hide behind a mask of ignorance, the customer's sophistication and success in one area of life will not necessarily mean that he or she will be found sophisticated enough to understand all the risks of a particular investment or trading strategy, so as to protect the broker from a finding that the broker controlled an account. Clark v. John Lamula Investors, Inc., 583 F.2d 594 (2nd Cir. 1978); Cruse v. Equitable Sec. of New York, Inc. 678 F.Supp.1023 (SDNY 1987).

Whether or not a broker controls the trading in his or her customer's account is a question of fact. Control may exist as a result of an express written agreement between the broker and the customer, or may be inferred from their particular relationship. (Fey v Walston & Co. 493 F2d 1036, CCH Fed Secur L Rep ¶94437, 18 FR Serv 2d 835 (7th Cir. 1974); Newburger, Loeb & Co. v Gross (1977, CA2 NY) 563 F2d 1057, CCH Fed Secur L Rep ¶96148, 1977-2 CCH Trade Cases ¶61604, 24 FR Serv 2d 42 (2nd Cir. 1977), cert denied 434 US 1035, 54 L Ed 2d 782, 98 S Ct 769, appeal after remand (CA2 NY) 611 F2d 423, 28 FR Serv 2d 602).

To determine whether a broker exercised de facto control over trading in a non-discretionary account, courts look to several factors. Zaretsky v. E.F. Hutton & Co., 509 F.Supp. 68 (SDNY 1981); In re Thomas McKinnon Secs., CCH Fed Secur L Rep 99104 (SDNY 1996).

Of critical importance are the personal characteristics of the customer, such as his or her age, education, general intelligence, and business and investment experience. Control is likely to be found where the customer is particularly old, young, lacking in education, or was inexperienced in the stock market or lacked financial sophistication. Hecht v. Harris, Upham & Co., 283 F.Supp. 417 (9th Cir. 1980) (finding control when customer was particularly old); Kravitz v Pressman, Frohlich & Frost, Inc., 447 F.Supp.203 (Mass. Dist. Ct. 1978) (finding control when customer was particularly young); Leib v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (E.D. Mich. 1978) (finding control when customer lacks education); Carras v. Burns, 516 F.2d. 251 (4th Cir. 1975) (finding control when customer lacks education or is inexperienced in the stock market or is lacking financial sophistication).

Another factor closely examined by the courts is the relationship between the broker and customer, whether it was an arm's length business relationship or a combination of business and friendship.

Also significant are the reliance placed on the broker by the customer. Fey v. Walston & Co., 493 F.2d 1036 (7th Cir. 1974); Petrites v. J.C. Bradford & Co., 646 F.2d 1033 (Fla. 5th DCA); Marshak v. Blyth Eastman Dillon & Co., 413 F.Supp. 377 (ND Okla 1975).[flash=] If a broker has acted as an investment adviser, and particularly if the customer has almost invariably followed the broker's advice, the fact finder may consider this as evidence that the relationship is discretionary and that the broker owes a fiduciary duty to the customer[/flash]. Patsos v. First Albany Corp., 433 Mass. 323, 741 N.E.2d 841 (Mass. 2001).

A course of dealing in which a broker executes trades without client's prior approval suggests that the account is discretionary for purposes of broker's fiduciary duties; similarly, if a broker has acted as an investment adviser and client has frequently relied on that advice, there is a strong indication that the account is discretionary. In re Murphy, 297 B.R. 332, 41 Bankr. Ct. Dec. (CRR) 226 (Bankr. D. Mass. 2003).

Past evidence of following broker's advice will establish control. If a broker has acted as an investment adviser, and particularly if the customer has almost invariably followed the broker's advice, the fact finder may consider this as evidence that the relationship is discretionary and that the broker owes a fiduciary duty to the customer. Patsos v. First Albany Corp., 433 Mass. 323, 741 N.E.2d 841 (Mass. 2001).

As noted by the Second Circuit, a broader duty may be recognized in a non-discretionary account in the following circumstances:

(1) if the broker has engaged in unauthorized transactions or has otherwise effectively taken over the handling of an account even though it is labeled as a self-directed account;

(2) if the client is prevented by "impaired faculties" or extreme lack of sophistication from understanding the basics of trading and thus simply lacks the capacity to handle such an account;

(3) if the broker "has a closer than arm's length relationship" with the client;

(4) if the broker violates legal or industry requirements concerning risk disclosure when opening an account; or

(5) if the broker offers advice on a specific transaction that was "unsound, reckless, ill-formed, or otherwise defective."

Stewert v. J.P. Morgan Chase & Co., 2004 WL 1823902, 2004 U.S. LEXIS 16114 (NYSD 2004) (citing Kwiatkowski v. Bear Stearns & Co., 306 F.3d 1293, 1302-03, 1307-08 (2d Cir. 2002)).

If you can establish the above elements, the broker will not be able to hide behind the non-discretionary account defense.

THE HAYES LAW FIRM, http://www.dhayeslaw.com, 1-866-332-3567 (toll free)

http://www.aboutbrokerfraud.com/nondisc ... _accounts/

Search for the name COSGROVE on this same web site (http://www.investoradvocates.ca) to see what this dealer "defence" looks like.
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Re: GET YOUR MONEY BACK!

Postby admin » Sat Dec 28, 2013 1:56 pm

Screen Shot 2013-12-28 at 1.47.06 PM.png

If your financial product salesperson has represented to you that he/she is an "advisor", then it is incumbent upon them to act like it, as a principle of common law.

The following link is to a pdf document describing what the "best interest" standard looks like as of 2013 in Australia. It could be used as a guide for your legal counsel to argue whether or not you actually received what you were promised.

https://drive.google.com/file/d/0BzE_LM ... sp=sharing

=================


If you seek to determine if your "advisor" has a real "advisor" license, or if there might be fraudulent misrepresentation involved as well, you can visit the CSA website and search to see if their license says "advisor" or "advising" representative. http://www.securities-administrators.ca ... spx?id=850

The search page looks like this image: (be sure and click on "historical search" if you would like to see if they were once registered as simple "salesperson". Salesperson is the previous registration name for the category today called "dealing representative". The CSA erased all reference to "salesperson" in Sept 2009, to better "protect the public"........:)

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Re: GET YOUR MONEY BACK!

Postby admin » Fri Dec 27, 2013 10:47 pm

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"communicate clearly, both verbally and in writing, with clients to ensure that you are, and can prove that you were transparent with them and encouraged them to make choices that are in their best interests."

Communicate with clients to ensure you are transparent and have encouraged them to make choices that are in their best interests By Ellen Bessner | December 16, 2013 06:00

Are advisors merely salespeople who view their clients as "fee machines," as many have claimed? Clients with this view will always be weary of their advisors. From a litigator's point of view, what leads to lawsuits is client mistrust and suspicion, even if the money lost in the account was as a result of market fluctuations and not because of any breach by the advisor.

All eyes are then on the advisor when a client loses money, alleging that there's an inherent conflict of interest in the manner in which advisors are compensated. A suggested solution is to outlaw commissions and trailer fees and insist on fee for service. But what about Mr. and Mrs. Smith, who have a relatively small account and buy and hold for the long term? If the regulators mandate fee-based accounts, the Smiths may be worse off. Furthermore, isn't it generally better for clients to have more choices rather than less? If the client is engaged in the process and the advisor is transparent with solutions, alternatives and the costs associated, isn't that best for the client?

However, the view at the moment is that there should be mandated standards, reflected in more regulation, mandatory documents to deliver to the clients and more forms to sign. Is this a solution to the problem when clients have no patience for paperwork and often don't even rip open the envelopes when they receive mail from their dealers? Will clients find they are being better serviced with less options, more mail to open and more forms to sign?
There is no shortage of lawyers, highly experienced compliance officers, regulators, dealers and advisors weighing in on the issue with the brightest minds expressing supportable, strong opinions; but there is no "right" answer; so, until then, advisors need to ask themselves these questions:
Do your clients trust you?
What do you do to establish and maintain that trust?
Is it true that if clients believe that you have their best interest at heart they are less likely to sue you, even if they think something has gone wrong?
If clients' expectations have been managed, do you think they will be less likely to sue?
If you are transparent about the sum of fees charged to clients, do you think clients will be less likely to sue?

I believe the answer to all of these questions is Yes. So, what do you do to ensure that you act, and the client understands that you are acting, in their best interests, their expectations are managed and you are transparent with fees? Clear, concise communication with a supporting paper trail is the answer.
Glen Gowland, head of Bank of Nova Scotia's private client group, got it right when he said: "I do not apologize for charging for advice. But a client should know what they're paying for, they should be able to understand how much they are paying for that, and then be able to measure, "Did I get good value for what I paid?"

So, you need to ensure that you leave the acronyms at the office and communicate clearly, both verbally and in writing, with clients to ensure that you are, and can prove that you were transparent with them and encouraged them to make choices that are in their best interests. That's the roadmap to building your business with trust.

http://www.investmentexecutive.com/-/gr ... with-trust

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Advocate comments:
Re the author's statement:
"communicate clearly, both verbally and in writing, with clients to ensure that you are, and can prove that you were transparent with them and encouraged them to make choices that are in their best interests".

This is perhaps the easiest manner of getting ones money back from an investment "advisor". Firstly, because, contrary to this author's comments about "advisors", 99.9% of persons today who refer to themselves by the title "advisor" are not legally licensed as "advisor", but are rather simple sales representatives of the investment dealer. As such, they have no fiduciary duty to the customer, and can sell anything that can even loosely be called "suitable". This subjective term is abused in a myriad of ways by the investment industry. (search the actual license of your "advisor" here: http://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850

So, any customer, who has been abused by these, "salespeople who view their clients as "fee machines,...." need only prove two things. First that their "advisor" was no such thing, and carried no such license, and second, that they failed the written requirement to ""communicate clearly, both verbally and in writing, with clients to ensure that you are, and can prove that you were transparent with them and encouraged them to make choices that are in their best interests".

Most typical investment product salespeople will not be able to meet either of these criteria. Professionals will have no difficulty with either. Thanks to Ms. Bessner for this article. Further posts in this topic, have videos and further information of her work, which I feel are helpful to those clients seeking to prove investment victimization by non-professionals, posing as professionals.
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Re: GET YOUR MONEY BACK!

Postby admin » Tue Dec 17, 2013 11:14 am

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a release today from CSA about "best interest" treatment for investment customers

Executive summary in red:

One the one hand…….
Those stakeholders that support the introduction of a statutory best interest standard felt that the current regulatory framework for advisors does not adequately protect investors. Many also felt that targeted regulatory responses are also required in several specific areas, including titles, proficiency, suitability and conflicted compensation practices. Several took the view that recent international regulatory developments have left Canadian standards at a lower level than those in leading jurisdictions.

One the other hand……
Those stakeholders that do not support the introduction of a best interest standard explained how the current regulatory framework, coupled with recent Canadian regulatory reforms, provided a robust, flexible and principled regulatory foundation that affords strong investor protection and that addresses the investor protection concerns identified in the Consultation Paper. Most of these commenters also suggested that although there was no evidence of actual harm to investors under the current framework, if there were such evidence, the appropriate regulatory response would be targeted.

and this…….

Many commenters strongly believe that the potential for negative impact on investors and capital markets from unintended consequences of a statutory best interest standard is significant. (negative impact on investors if we are forced to consider their best interests………:) (Larry's comment)


And finally this conclusion……..

4. More work is needed…..



(decades have been spent by regulators, in protecting the industry that pays them, from accountability to the public and duty to public protection. What we see is a simple "facade" of public protection……)


study found here

http://www.osc.gov.on.ca/documents/en/S ... 33-403.pdf


cheers and best

Larry Elford

December 17, 2013

Introduction
The purpose of this Notice is to:
 summarize the consultation work conducted to date in respect of the best interest consultation
initiative, and
 identify the key themes that emerged from the best interest consultation process.
In October 2012, the Canadian Securities Administrators (CSA or we) published CSA Consultation Paper 33-403: The Standard of Conduct for Advisers and Dealers: Exploring the Appropriateness of Introducing a Statutory Best Interest Duty When Advice is Provided to Retail Clients (the Consultation Paper). We received numerous comment letters on the Consultation Paper and conducted three consultation sessions in June and July 2013.

Through this consultation process, we identified four key themes:
1) There was significant disagreement about (a) whether the current regulatory framework for
advisors1 adequately protects investors and (b) what regulatory response is required.
2) A best interest standard must be clear.
3) The potential negative impact on investors and capital markets must be carefully assessed.
4) More work is needed.

Background
Consultation Paper

On October 25, 2012, the CSA published the Consultation Paper.2 The Consultation Paper: summarized the background of the fiduciary duty debate,
 described what a fiduciary duty is and when it arises at common law,
 discussed the current standard of conduct for registrants in Canada (including both statutory
and common law requirements),
1 References to “advisor” in this Notice mean, unless otherwise specified, advisers and/or dealers (and their representatives) that provide securities advice to clients.
2 Available online at http://www.osc.gov.on.ca/documents/en/S ... fiduciary- duty.pdf.
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 reviewed what the United States, the United Kingdom, Australia and the European Union are doing in this area,
 identified the five key investor protection concerns with the current standard of conduct applicable to advisors in Canada,
 described one possible articulation of a statutory best interest standard for advisors, and
 reviewed the potential benefits and competing considerations of imposing a statutory best
interest standard.

The Consultation Paper posed a variety of questions and requested comments from all interested stakeholders on the issues raised in the Consultation Paper. The CSA received 93 comment letters from a range of stakeholders, including investors, investor advocates, advisors, industry advocates, academics, law firms and professional associations. The list of commenters and copies of the comment letters are available online at http://www.osc.gov.on.ca/en/38075.htm.

Consultation Sessions
In addition, the CSA held three consultation sessions hosted by the Ontario Securities Commission (OSC) to further explore and discuss the issues identified in the Consultation Paper and the themes that emerged from the comment letters:
 The first consultation session was held on June 18, 2013 (Investor Roundtable). The Investor Roundtable was a three-hour discussion attended by approximately 30 stakeholders from the investor community.3 The discussion at the Investor Roundtable was focused on several key issues:
o what problem needs to be solved,
o shifting the suitability standard to a best interest standard,
o mitigating information and financial literacy asymmetry,
o impact on legal certainty of relationship,
o potential negative impact on advisory services for investors,
o potential shift by investors and advisors to alternative investments, o role of recent reforms, and
o other policy solutions that need to be considered.
 The second consultation session was held on June 25, 2013 (the Industry Roundtable). The Industry Roundtable was a three-hour discussion attended by approximately 55 stakeholders from the industry community.4 The discussion at the Industry Roundtable was focused on several key issues:
o whether the current standard of conduct offers the most principled foundation, o the effectiveness of disclosure for conflicts,
o shifting the suitability standard to a best interest standard,
o mitigating information and financial literacy asymmetry,
o impact on legal certainty of relationship,
o potential negative impact on advisory services for investors,
3 The transcript of the Investor Roundtable is available online at http://www.osc.gov.on.ca/documents/en/Securities- Category3/oth_20130618_33-403_transcript-roundtable.pdf.
4 The transcript of the Industry Roundtable is available online at http://www.osc.gov.on.ca/documents/en/Securities- Category3/oth_20130625_33-403_transcript-roundtable.pdf.
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o costs of introducing a best interest standard, and o the impact on capital raising.
 The third consultation session was a panel discussion held on July 23, 2013 (the Panel Roundtable). There were approximately 110 attendees at this two-hour session.5 The panel was moderated by James E. A. Turner (Vice-Chair, OSC) and consisted of:
o Connie Craddock (OSC Investor Advisory Panel),
o Jim Kershaw (SVP and Regional Manager, TD Wealth Private Investment Advice), o Anita Anand (Professor and Academic Director, University of Toronto), and
o John Fabello (Partner, Torys).
The intent of the Panel Roundtable was to build on the progress made at the Investor Roundtable and the Industry Roundtable and to move the dialogue forward by focusing on two fundamental issues:
o Should dealers (and their representatives) be subject to a best interest standard when providing advice to retail clients? What would the consequences be of introducing such a standard?
o What other policy options could securities regulators consider in addition, or as alternatives, to a statutory best interest standard?
We also had informal meetings with a variety of stakeholders to both explain the Consultation Paper and solicit feedback on the issues raised in it.
We thank those who have contributed to our consultation process to date by responding to our request for comments and/or by participating in the consultation sessions. We have gathered a great deal of information from this process and will be using it to inform our approach going forward.
Themes from the Consultation

Based on our consultations to date, the following are the four key themes that have emerged:

 There was significant disagreement about (a) whether the current regulatory framework for advisors adequately protects investors and (b) what regulatory response is required.

o Those stakeholders that support the introduction of a statutory best interest standard felt that the current regulatory framework for advisors does not adequately protect investors. Many also felt that targeted regulatory responses are also required in several specific areas, including titles, proficiency, suitability and conflicted compensation practices. Several took the view that recent international regulatory developments have left Canadian standards at a lower level than those in leading jurisdictions.

o Those stakeholders that do not support the introduction of a best interest standard explained how the current regulatory framework, coupled with recent Canadian regulatory reforms, provided a robust, flexible and principled regulatory foundation that affords strong investor protection and that addresses the investor protection concerns identified in the Consultation Paper. Most of these commenters also suggested that although there was no evidence of actual harm to investors under the current framework, if there were such evidence, the appropriate regulatory response would be targeted

5 The transcript of the Panel Roundtable is available online at http://www.osc.gov.on.ca/documents/en/Securities- Category3/oth_20130723_33-403_transcript-roundtable.pdf.
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solutions to these problems, not a statutory best interest standard. Regarding the relevance of international regulatory developments, we heard that the regulatory context is different, that those jurisdictions had different experiences and regulatory starting points, and that it is too early to definitely determine their impact in any event.

 A best interest standard must be clear.

o There was broad agreement that a best interest standard, if adopted, should be as clear as possible and include sufficient guidance to ensure all advisors understand how to comply with the standard. Many questioned whether certain restricted business models and certain compensation practices could continue under a statutory best interest standard.
 The potential negative impact on investors and capital markets must be carefully assessed.
o Many commenters strongly believe that the potential for negative impact on investors and capital markets from unintended consequences of a statutory best interest standard is significant. The main concern was that a best interest standard could result in advice that is more expensive, less accessible and too conservative.
 More work is needed.
o Many commenters suggested further work that should be completed before moving
forward with a statutory best interest standard or other regulatory response.
Below, we discuss each of these key themes in detail. The themes underscore that the issues surrounding a best interest standard are complex, and some aspects of the issues are interrelated to the issues surrounding the separate CSA consultation on mutual fund fees initiated on December 13, 2012 (Mutual Fund Fees Consultation).
1. There was significant disagreement about (a) whether the current regulatory framework for advisors adequately protects investors and (b) what regulatory response is required
Summary
Those stakeholders that support the introduction of a statutory best interest standard felt that the current regulatory framework for advisors does not adequately protect investors. Many also felt that targeted regulatory responses are also required in several specific areas, including titles, proficiency, suitability and conflicted compensation practices. Several took the view that recent international regulatory developments have left Canadian standards at a lower level than those in leading jurisdictions.
Those stakeholders that do not support the introduction of a best interest standard explained how the current regulatory framework, coupled with recent Canadian regulatory reforms, provided a robust, flexible and principled regulatory foundation that affords strong investor protection and that addresses the investor protection concerns identified in the Consultation Paper. Most of these commenters also suggested that although there was no evidence of actual harm to investors under the current framework, if there were such evidence, the appropriate regulatory response would be targeted solutions to these problems, not a statutory best interest standard. Regarding the relevance of international regulatory developments, we heard that the regulatory context is different, that those jurisdictions had different experiences and regulatory starting points, and that it is too early to definitely determine their impact in any event.
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The discussion below on this key theme is divided into the following areas:
 Supporters of a statutory best interest standard
 Opponents of a statutory best interest standard
 Appropriate influence of international developments
Supporters of a statutory best interest standard
Those commenters that support a best interest standard identified a variety of reasons why the current regulatory framework for advisors does not adequately protect Canadian investors, as follows:
 the existing regulatory requirements and industry practices are based on a regulatory foundation that cannot provide adequate protection for consumers of financial services in Canada. Fundamentally, they see the current regulatory foundation as inappropriate for the advisor-client relationship because it does not explicitly require that advisors put the interests of their clients ahead of their own and therefore does not align advisors’ interests with those of their clients;
 due to continued low financial literacy among Canadian investors, coupled with the ever- increasing complexity of financial products, information and financial literacy asymmetry is becoming more pronounced. This leads to investors that place increasingly more reliance on their financial advisor;
 most investors receiving non-discretionary advice already assume that their advisor is required to act in their client’s best interest when, at least in the common law jurisdictions, this is usually not the case for advisors that provide non-discretionary advice. We heard that part of this expectation gap may be driven by investor confusion caused by the lack of general understanding of various designations, titles and roles in the investment industry. We also heard that industry marketing and advertising (which often explicitly or implicitly states that clients receive ongoing, personalized financial advice) contribute to this expectation gap;
 the suitability standard is a low one that simply involves the advisor recommending products that match the general needs of the client, not necessarily the product that is in the client’s best interest. We heard that in practice, this means that the suitability analysis is vague and complex, involving a multi-factor analysis conducted by the advisor that is tied to whether the product (which may be connected to the advisor) is suitable to the client, not necessarily whether it offers the fairest price/cost for the investor based upon the complexity of the product and/or service being offered. Specific concerns in this regard related to costs of the products (and disclosure of such costs) and compensation bias affecting the recommendation, with the advisor recommending the products with the highest advisor compensation instead of products that he or she felt were objectively superior. Further, some commenters felt that a flaw with the suitability standard is that it is based on a product-transaction model rather than an ongoing- advice model and allows advisors to recommend leverage (or borrowing to invest) in order to increase assets under management, which inappropriately increases risk for most investors. The ultimate impact of this regime on investors is poor investor outcomes, including sub-optimal returns and/or inappropriate risk exposure;
 in an environment where most investors lack even basic financial literacy, the effectiveness of disclosure (which is the common industry practice) as an antidote for conflicts of interest, confusion about advisor remuneration, and other similar issues, is ineffective and leads to increased agency (monitoring) costs for investors. In addition, without a thorough
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understanding of such disclosure, these commenters argued, it is unlikely that truly informed consent can be granted by investors. Many commenters shared the view that some conflicts such as embedded compensation cannot be managed (they are inherently opaque, complex and difficult for consumers to understand) and should be avoided or prohibited and that this is critical for investor protection. Others proposed that all material conflicts of interest should be avoided altogether;
 advisor titles are confusing and even misleading (e.g., that inflate proficiency, scope of products reviewed and/or level of service provided), which results in investors being unable to differentiate between different financial service providers and the different advice options available to them;
 proficiency requirements for certain kinds of dealers are too low (e.g., brokers and bank staff are trained enough to know about in-house funds and products to sell them but not really whether they are beneficial for clients);
 in the absence of a statutory best interest duty, the current framework is uncertain and does not offer effective investor restitution in the event of investor harm caused by advisor misconduct;
 investors have a low level of trust and confidence in the financial services industry as a whole; and
 commenters from a variety of backgrounds touched on the importance of financial advice as part of a financial plan and expressed a concern that, because of the current regulatory framework, most Canadians are not receiving holistic advice but instead are receiving overly narrow, transaction-based advice on securities products.
These commenters felt that a statutory best interest standard is a highly desirable and feasible regulatory response to the concerns set out above and should be adopted promptly. In support of this view, they suggested that the introduction of a best interest standard would result in the following outcomes:
 it would require advisors to advance the best interests of their clients to the exclusion of all other competing interests that may exist;
 it would result in better financial outcomes for investors because it would (i) result in more objective recommendations, since a best interest duty, by addressing issues relating to conflicted remuneration, will reduce bias in recommendations, and (ii) explicitly require advisors to consider the investment costs in determining whether the investment is in the best interest of the client;
 it would ensure that conflicts are avoided and thereby eliminate much of the need for conflicts disclosure, which in their view is not effective for investors and which may cause unintended negative consequences (e.g., investors generally do not discount advice from biased advisors as much as they should; disclosure can increase the bias in advice);
 it would result in less investor confusion about the role of the advisor and ensure the most efficient allocation of responsibilities between the advisor and the client given the level of financial literacy of consumers, the degree of knowledge, specialized skills and abilities that the advisor needs to possess, and the complexity of financial products
 it would require regulators to consider whether embedded commissions (and other compensation practices) are compatible with a best interest standard. If embedded commissions were prohibited as a result of a best interest standard, investors would be encouraged to look more critically at what they are getting for what they pay. This would
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improve competition and economic forces would spur innovation in the delivery of cost-
effective advice that meets a best interest standard;
 it would help establish better means of restitution by removing the uncertainty about whether
the standard applies and improving the chances of the client securing some restitution. The greater impact, however, may be that existence of the legislated duty and greater chance of success in court will influence the behaviour and standards of advisors and their firms, both reducing the losses and encouraging out of court settlements.
 it would support investor education initiatives which, although helpful, cannot be expected to address the significant power imbalance between advisor and client
 it would align the CSA’s approach with the expectations of the International Organization of Securities Commission (IOSCO) and the G20 in how financial intermediaries should deal with their clients; and
 it would enhance the professionalism of the financial services industry and enhance public trust and confidence in the industry, thereby assisting the financial advice industry in its ambition to be recognized as a profession.
Although most of these commenters stated that a statutory best interest standard is necessary, most of them also took the view that it is not sufficient by itself. We heard that targeted reforms will likely also be necessary. Some of the key targeted reforms identified by commenters included (collectively, the Other Policy Options):
 Raising advisor proficiency and designations, especially for certain kinds of dealing representatives;
 Regulating advisor titles to ensure they are accurate and not misleading;
 Creating two categories of advisor similar to the U.K. model: one category (“adviser”) would offer independent, holistic advice free of any conflicts and be subject to a best interest standard and another category (“salesperson”) would offer restricted and/or conflicted advice that would be subject to the current regulatory requirement for advisors;
 Improving suitability (including allowing certain restricted dealers (e.g., mutual fund dealers) to offer a broader range of products);
 Improving the rules on conflicts of interest, including conflicted compensation models;
 Expanding financial literacy education programs to ensure investors understand, among other
things, the standard of conduct owed to them by their advisor;
 Ensuring sound management control mechanisms at advisory firms to ensure regulatory requirements are met;
 Requiring investment policy statements in certain circumstances;
 Prohibiting or standardizing embedded commissions so that they are neutral to the type of
product being distributed;
 Improving investor restitution by considering alternative (or additional) dispute resolution options;
 Examining the services provided by discount brokerages to determine if they could continue under a best interest standard and/or assessing whether certain services should be subject to a best interest standard; and
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 Increasing enforcement, and compliance reviews, of the current regulatory framework. Opponents of a best interest standard
Those commenters that do not support a best interest standard identified a variety of reasons why the current regulatory framework for advisors in fact does adequately protect Canadian investors, as follows:
 the current regulatory framework represents a robust, flexible and principled foundation that offers a high level of investor protection by:
o addressing in what situations a fiduciary duty will appropriately be found to exist between an advisor and his or her client.
o providing extensive investor protections through detailed rules and regulations of securities commissions and self-regulatory organizations (SROs), including:
 a requirement to deal fairly, honestly and in good faith with clients;
 suitability obligations (including recent SRO enhancements);
 a requirement to observe high standards of ethics and conduct in the transaction
of business with clients;
 proper disclosure and handling of conflicts of interest (including recent SRO
enhancements), including avoidance in certain circumstances;
 prohibited sales practices;
 dispute resolution requirements;
 supervision of activity in client accounts;
 background checks of advisors (such as police, credit, employment, education
and proficiency course completion) before licensing;
 industry-specific education requirements;
 compensation disclosure;
 cost disclosure and performance reporting (including the recent CRM2 reforms);
 referral arrangement disclosure;
 product disclosure (including management report on fund performance and Fund
Facts reforms);
 plain language requirements; and
 insurance and bonding;
 existing comprehensive securities legislation and recent CSA and SRO initiatives, including the new SRO conflict of interest rules, the Client Relationship Model reforms to cost disclosure and performance reporting (i.e., CRM2), the management report of fund performance, the Fund Facts disclosure document, the relationship disclosure reforms, the SRO enhancements to suitability, and the CSA-sponsored investor education initiatives (collectively, the Recent Canadian Reforms) address the investor protection concerns (or will address these concerns, once fully implemented) expressed in the Consultation Paper;
 the Consultation Paper neither captured the perceived failure in the current regulatory regime nor presented any evidence demonstrating any actual investor harm with the current standard of conduct for advisors;
 financial literacy and information asymmetry will vary dramatically depending on the advisor and the client and is one of the reasons why clients engage advisors in the first place;
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 an expectation gap does not exist in practice as most advisors already assume an obligation to provide advice in their clients’ best interest;
 it is misleading to compare a best interest standard to the suitability standard in isolation from the related duty of care and duty to act fairly, honestly and in good faith. Moreover, many commenters pointed to the recent SRO enhancements to their suitability requirements, which include more frequent triggering events and reference to the client’s portfolio in certain circumstances. Many were of the view that the duty to act fairly, honestly and in good faith would not allow an advisor to recommend a product that resulted in higher fees to the client. Some stated that a suitable product must, by definition, be a product in the client’s best interest. Others stated that identifying the “best” or “better” products is subjective and contentious and would be difficult to enforce. Several commenters are of the view that cost is already a consideration, but that it is only one consideration as a high cost investment may also have a better long-term performance. Many commenters were also not convinced that a gap exists between suitable investments and investments in the client’s best interest apart from the issue of cost and they believe that further study is required to determine what gap exists, if any; and
 since several of the Recent Canadian Reforms, including the SRO reforms relating to conflicts of interest (which now requires addressing conflicts of interest in a fair, equitable and transparent manner, and considering the best interests of the client), are not yet fully implemented, it is premature to conclude that the rules applicable to management of conflicts of interest are less effective than intended.
Finally, many industry commenters took the position that even if certain investor protection concerns remained (or emerged) after full implementation of the Recent Canadian Reforms, the appropriate regulatory response should be targeted in nature (some of the targeted reforms above were also suggested by certain industry commenters, such as improvements to title regulation, proficiency enhancements, and new investor education initiatives) rather than undertaking a foundational shift of the entire regime which may or may not address the concerns and may lead to negative unintended consequences for investors and capital markets (see discussion below under Key Theme #3). Their reasons against introducing a best interest standard as a solution to these concerns included the following:
 they did not see what investor protection issues a best interest standard would address that the current framework could not address, as the current regulatory framework either already imposes a best interest standard for advice to retail clients or imposes a standard that is functionally equivalent to a best interest standard. Certainty, advisors that provide discretionary advice to clients (or that have clients that are vulnerable and place significant trust and reliance on their advice) are subject to a best interest (or fiduciary) duty at common law. For all other advisors, the requirement to deal fairly, honestly and in good faith with investors along with rules around suitability, know your product, relationship disclosure, referral arrangement disclosure, continuous product disclosure, complaint handling, plain language requirements, conflict disclosure, compensation disclosure constitutes a standard that is functionally equivalent to a best interest standard;
 a best interest standard will exacerbate concerns around financial literacy and information asymmetry since investors will have less incentive to educate themselves on investments and place more reliance on their advisor. These commenters also feared that this will lead to
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increased investor apathy, with investors waiving their own responsibilities in favour of any advice they are given, and will place all of the responsibility on their advisor, even in non- discretionary relationships;
 the Recent Canadian Reforms demonstrate that Canada’s regulatory framework is successfully evolving further in the direction of achieving “best interest” requirements without the need to specifically impose a vague statutory best interest standard. Although concerns may remain or emerge, these commenters expressed the view that the current regime is robust enough to address any such concerns;
 among Québec’s 11 commenters, several are of the view that investors are adequately protected by Québec’s current requirements. They argue that Québec’s courts must keep the flexibility that the current regime provides, which allows them to factor in the specific circumstances of each case. Commenters pointed out that amending the current regime could have the effect of lowering investors’ sense of responsibility and could create an obligation focused on the ends (i.e., the returns of the investments) rather than on the means (i.e., the process used by the advisor to arrive at a recommendation) of advisory services. They are of the view that Québec’s current regime is (or almost is) a functional equivalent of the common law fiduciary duty, though civil law and common law remain two different regimes. Nevertheless, one Québec commenter is of the view that a statutory, uniform and flexible best interest standard should be adopted by all CSA regulators and SROs; and
 in common law jurisdictions, a best interest standard will create legal uncertainty because courts will no longer be able to rely on existing jurisprudence relating to the content of the suitability obligation or fiduciary duty. They will have to develop new law on the meaning of “best interest” as defined by the CSA.
Appropriate influence of international developments
Many commenters felt that jurisdictions such as the United Kingdom and Australia have made important strides in investor protection and, in the case of Australia, in introducing a best interest standard. They claimed that the investor protection concerns identified by regulators in these jurisdictions mirror the investor protection concerns with the current regulatory framework in Canada. These commenters suggested that Canada is lagging behind in this area, leaving Canadian standards at a lower level than those in leading jurisdictions, and should adopt a best interest standard to afford investors with similar protection as is provided in those other jurisdictions.
Others questioned the comparison between Canada and other international jurisdictions in the standard of conduct context. They pointed out that:
 the policy responses in other jurisdictions were designed to deal with market failures and deficiencies that arose in those jurisdictions. Since Canada does not exhibit these same issues and has its own statutory framework that includes a duty to deal fairly, honestly and in good faith with clients that may not have existed in some of the other jurisdictions, any move toward adopting similar reforms in Canada would be unnecessary and misguided.
 when the implementation and contextual considerations are closely examined, it is difficult to conclude that international initiatives point to Canada lagging other jurisdictions in providing a robust framework for investor protection or falling down on considering the investor’s best
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interest. Some also said that the rationale for introducing tighter market regulation in some of the jurisdictions highlighted in the Consultation Paper is related to:
o evidence of market failure or systemic mis-selling in these jurisdictions that does not exist in Canada, a further indication that the current rules are highly effective and appropriate to the Canadian market; and
o at least in Australia, mandated employee savings programs that create a large pool of clients for advisors which does not exist in Canada (where the industry operates in a competitive environment); and
 the CSA should take advantage of the fact that the international reforms in the U.K. and Australia are now in force and that we should carefully review the impact on these reforms in those jurisdictions before deciding whether to pursue similar reforms in Canada. Some also suggested deferring any decision in Canada until the U.S. approach is finalized.
2. A best interest standard must be clear Summary
There was broad agreement that a best interest standard, if adopted, should be as clear as possible and include sufficient guidance to ensure all advisors understand how to comply with the standard. Many questioned whether certain restricted business models and certain compensation practices could continue under a statutory best interest standard.
The discussion below on this key theme is divided into the following areas:
 Moving from ‘suitable’ investments to investments in the client’s best interest
 Responding to potential conflicts of interest in the client’s best interest
Moving from ‘suitable’ investments to investments in the client’s best interest
We received significant feedback that introducing a requirement for advisors to recommend securities that are in the client’s best interest (rather than investments that are suitable) is unclear and problematic. These commenters identified several areas of concern, including:
 it would be impossible to establish objective standards or guidance to determine whether one investment is “better” than another in every way. The review of trades against such a standard would not be practical and would depend on the extent of supervision expected by regulators.
 the risk that product cost would be a determinative factor in this best interest advice analysis. According to these commenters, cost is only one factor that advisors should consider when providing product-based advice (other factors include performance, reputation of fund manager, investment strategy, track record, product reputation and stability). Their concern is that cheaper investment options would be pursued by advisors purely because they are cheaper at the time of acquisition, rather than focusing on the likelihood of reaching higher risk-adjusted returns over the client’s time horizon. The commenters believe this implication to be simplistic and lacking in context as the least expensive option is not necessarily the “best” option for a client.
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 that this standard may be interpreted by investors as providing perfect advice or guaranteeing positive investment returns. We heard that if a best interest standard is implemented, it would need to be clear to investors, regulators and the courts that the duty to act in a client’s best interest should not mean that advisors would have to give “perfect” advice, provide “perfect” service, or provide a guaranteed positive investment outcome.
 whether the know-your-product (KYP) obligation under a best interest standard would require firms to be knowledgeable about the entire universe of securities products and the feasibility of such an expectation.
 how this requirement would apply to those dealers (i.e., mutual fund dealers, exempt market dealers and scholarship plan dealers) that are restricted in what they can offer their clients or for those that focus on specific sector or product specialties as a business decision. Some also questioned whether these business models could continue to exist at all and suggested that the current proficiency requirements were not sufficient enough to expect these advisors to be proficient in other kinds of products. See additional discussion below under Key Theme #3.
Other commenters believed it should be fairly straightforward to determine when advice would be in the client’s best interest. One commenter suggested that the criteria should include such factors as: (a) suitability (risk of loss, volatility, etc.); (b) diversification within current asset holdings; and (c) whether the client is able to hold the investment for any anticipated or requisite illiquid period. This commenter suggested that other important criteria would include the following: conflicts of interest must be eliminated or disclosed; decisions must be based on the whole portfolio rather than by security; and execution must always be in the client’s best interest and not based on soft dollars or on a commission’s basis.
Responding to potential conflicts of interest in the client’s best interest
We also received significant feedback on the implications of a best interest standard for how conflicts of interest must be responded to. Commenters identified a number of areas where there was potentially a conflict of interest but where they felt it was unclear how a best interest standard would apply to
certain common practices today, including whether:
 commission-based accounts would be banned (or restricted) in favour of fee-based accounts, which may not be accessible to low and medium-income investors and may not be the best option for clients that undertake frequent trading.
 advisors acting as principal (which currently allows for liquidity through market making, principal trading, and bond trading from inventory) would be banned or restricted.
 advisors selling proprietary products (which currently allows advisors to recommend underwritten offerings, proprietary products and affiliated issuer products) would be banned or restricted. This is particularly relevant for those dealers that focus on certain types of securities, such as mutual fund dealers, scholarship plan dealers and exempt market dealers as well as those advisors that are part of a large integrated distribution model.
In contrast, many commenters from the investor community felt strongly that conflicts of interest were often not addressed and that when they were, disclosure was industry’s preferred response. They felt that a best interest standard should, in most cases, require avoidance of any conflicts of interest, especially conflicts of interest involving advisor compensation. They felt that this was the clearest way to address conflicts in the context of advisory services.
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3. The potential negative impact on investors and capital markets must be carefully assessed Summary
Many commenters strongly believe that the potential for negative impact on investors and capital markets from unintended consequences of a statutory best interest standard is significant. The main concern was that a best interest standard could result in advice that is more expensive, less accessible and too conservative.
The discussion below on this key theme is divided into the following areas:
 Increase in costs
 Negative impact on choice, access and affordability
 Impact on different business models and registration categories
 Legal uncertainty
 Compensation model
 Potential for regulatory arbitrage with other non-securities products
 Application of duty on retail clients
Increase in costs
Many commenters believe that the introduction of the best interest standard will significantly increase costs for industry due to the increase in:
 litigation/complaints,
 compliance obligations,
 errors and omission insurance premiums,
 technology costs to build systems to comply with this standard,
 costs to educate individual representatives,
 costs to reassess products on firms’ shelves, and
 supervision and back office procedures.
In contrast, other commenters stated that a best interest standard would not lead to increased industry costs by pointing to the following:
 if they already act in their client’s best interest (as many advisory firms claim), then there should be minimal impact on cost of introducing this standard. So only advisors not acting in their client’s best interest would incur material costs.
 when the interests of both the client and the advisor are aligned, this may result in fewer compliance and legal issues, thus reducing these costs and ensuring that retail clients do not need to resort to litigation, which is a path to redress that many clients cannot or will not pursue.
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Negative impact on choice, access and affordability
Many commenters felt that the introduction of a best interest standard would have a negative impact on choice, access and affordability of advisory services for middle and low income Canadians for the following reasons:
 the increased costs for industry associated with implementing a best interest standard would be passed along to clients, making those services too expensive for many Canadians.
 it may cause a shift away from commission-based accounts, which for smaller investors, or those with more limited trading activity, are less expensive than fee-based accounts that often require minimum assets or a minimum fee.
 smaller profit margins for advisors may result in advisors increasing their minimum assets/account size (some suggested minimums of anywhere from $100,000 to $350,000), making advice less accessible.
 although large, integrated financial organizations will be better able to adjust to and/or absorb these costs, small and mid-market advisory firms will be less able to withstand these costs increases and will lead to their increased competitive disadvantage and their further decline.
 it may motivate firms to de-prioritize customers with small accounts.
 it may motivate firms to narrow the range of products available on their platform as the liability associated with choosing the “wrong” product for a client may drive firms to offer lower risk products that are viewed as having less liability risk. This would have the effect of lowering client returns since higher risk investments create the potential for higher returns.
 Canadians would receive less financial advice overall which would likely diminish Canadians’ overall personal saving and investing.
 there is some preliminary evidence that the U.K. may be experiencing an “advice gap” where, because of the increased costs of advice as a result of its recent reforms, low-income U.K. investors who, before the reforms, were receiving advice are no longer receiving advice after the reforms.
In contrast, other commenters disagreed that a statutory best interest standard would lead to a negative
impact on choice, access and affordability of advisory services for the following reasons:
 the financial services industry is extremely entrepreneurial and innovative and has shown it will find profitable ways to deliver advisory services under any regulatory regime imposed by the CSA,
 although initially some clients may potentially lose access or experience increased costs from the advice channels they have previously utilized, they believe these would be a temporary effects,
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 new business models will be encouraged, new choices will emerge, and innovation and competition will drive down consumer cost, and
 claims of increased costs to investors ignore the agency (monitoring) costs that clients are incurring today as a result of the suitability standard. In particular, a best interest standard will result in lower investor agency costs of monitoring the advisor since the new standard will require that the advisor put the client’s interests first.
Impact on different business models and registration categories
Some commenters expressed concerns that a statutory best interest duty has the potential to be interpreted as requiring the dealer to offer all types of securities. For many, this would call into question how dealers that are only allowed to deal in one type of security (e.g., mutual fund dealers, exempt market dealers and scholarship plan dealers) can comply with this standard. As a result, commenters have questioned if the introduction of this standard will lead to an elimination of the traditional retail dealer, and if we will have a situation where the industry goes to two extremes: discount brokerages on one end of the scale (where a best interest standard may not apply) and portfolio managers on the other end (where a fiduciary duty already applies).
In this vein, some commenters pointed out that unless the best interest standard was “business model neutral” and carefully qualified to take into account all business models, these more narrow business models may not be feasible. These commenters point out that reforms in Australia and the U.K. allow restricted advice and scaled advice, respectively, to be provided. Some commenters preferred the Australian approach where even the so-called “scaled” advice has to consider the best interest of a client.
Some commenters did not support qualifying the best interest standard because they felt such qualification has the potential of causing more confusion as to the level of service and investment advice being received. These commenters felt that any standard short of a full fiduciary duty applied uniformly will continue to perpetuate unequal investor protection. Further, these commenters felt that if there were a lower tier of duty for certain dealers and therefore the duty would not be applied equally across the continuum for providing advice, the investor protection concerns outlined in the Consultation Paper would not be addressed. Other commenters took the view that instead of having different standards and rules for advisors depending upon the advisor’s registration category and rather than drafting a standard with numerous carve outs (which adds complexity and dilutes its perceived benefits to investors), the CSA’s investor protection goals can be more easily achieved through targeted policy initiatives.
Legal uncertainty
Several commenters felt that there is no uncertainty when a fiduciary duty is applied at common law to a given advisor-client relationship. In fact, most of these commenters felt that a statutory best interest standard would increase (not decrease) legal uncertainty because:
 the courts’ appropriate discretion to apply its principled and fact-based analysis of whether or not a fiduciary relationship exists would be replaced with a “one-size-fits-all” duty that would apply to every retail client, regardless of their vulnerability or sophistication or whether they grant discretionary authority to the advisor;
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 it may take several years for courts to conclusively define what a best interest standard means in respect of all aspects of the advisor-client relationship and along the way courts may interpret the standard differently;
 the CSA will not have control over how courts handle the application of a common law fiduciary duty or how it will impact the securities industry as a whole;
 unlike the common law, a statute does not have the flexibility to consider specific fact situations and that this will cause practical implementation problems;
 the equitable remedies available to the courts (such as those for a breach of fiduciary duty) would be inappropriate in circumstances where a fiduciary duty is imposed by regulation but would not have been imposed under common law. The application of equitable remedies could be misused by retail investors, especially sophisticated retail investors;
 the courts in Québec may be uncertain with how to interpret a statutory best interest standard in light of its current regulatory framework that already references a best interest duty and a duty of loyalty; and
 it would be impossible to ensure that a common principle would be adopted across all jurisdictions, and be applicable to all competing products in any particular jurisdiction. Creating a single compliance and supervisory oversight framework for those products with national distribution would be problematic, with the likely result that Canadians would find themselves being treated differently on a regional basis, with investors in smaller provinces at the greatest risk for reduced choice and access.
Other commenters disagreed. They felt that a statutory best interest standard would clarify that a fiduciary duty was always owed at common law and therefore clients in non-managed accounts would not need to be concerned whether the relationship with their advisor demonstrated the relevant interrelated factors sufficient to result in a fiduciary relationship. They believe that a statutory best interest standard would have a positive impact on advisor-client litigation because the parties would be clear at the outset that the advisor’s fundamental duty is to put the client’s interests ahead of their own.
Compensation model
Several commenters were concerned that if a best interest standard required the elimination of commission-based accounts and trailing commissions, for example, this would have a variety of negative impacts on Canadian investors. In particular, these commenters were concerned that:
 middle-class and less affluent investors would be most disadvantaged by a shift away from use of commission-based brokerage accounts, especially for those who trade infrequently and/or maintain small accounts;
 this will lead to a decreased choice in affordable investment products;
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 investors in the US face higher costs and less transparency in the marketplace since embedded fee compensation model have disappeared from the United States mutual fund market and has been replaced primarily by a fee-for-service model;
 the embedded fee model represents the most popular, efficient and lowest-cost option for investors; and
 this may create an “advice gap” since investors may stop seeking advice as clients are generally unwilling to pay directly for advice, which preliminary evidence suggests may be happening in U.K. as a result of its recent reforms in this area.
Several commenters urged the CSA to consider alternatives to banning certain compensation arrangements so that advisors could receive compensation in respect of product sales but which would be neutral to the type of product being distributed. This would presumably eliminate the concern that products offering higher compensation would attract advisors to sell those products over other equivalent products with a lower compensation structure.
Some commenters submitted that permitted fee structures and compensation methods would need to be fully consistent with the duty of care established by a best interest standard. Most of these commenters stated that certain conflicts of interest, especially those related to embedded commissions, should be avoided altogether. These commenters expressed difficulty in understanding how advisors could meet a best interest duty to their clients while accepting payments from a third party.
Finally, there was broad acknowledgement that the issues around embedded compensation in the mutual fund context are explored in more detail in the Mutual Fund Fees Consultation and that CSA staff working on both projects should coordinate their analysis in this respect.
Potential for regulatory arbitrage with other non-securities products
Many commenters expressed the concern that a statutory best interest that applies only to securities products and related advice could create an opportunity for regulatory arbitrage for those advisors that are also licensed to offer non-securities products such as insurance products, which fall within a different regulatory framework. For example, these advisors would be subject to a best interest standard when selling mutual fund products but another standard when discussing segregated fund products. Commenters are concerned that this could potentially create product sales arbitrage opportunities. Some commenters felt that without a common standard of conduct that applied to all financial products, the CSA should not attempt to strengthen the standard only in the securities context. Others felt that despite the CSA’s ability to regulate only the securities context and the potential for regulatory arbitrage, such concerns should not discourage the CSA from introducing a best interest standard.
Application of duty on retail clients
The best interest standard described in the Consultation Paper only applies when advisors provide advice to retail clients. Some commenters felt that all clients should have the benefit of a statutory best interest standard. In addition, commenters stated that it would not be appropriate to try to define a retail client with metrics such as income or financial assets as these are not reliable indicators of investment knowledge. Other commenters expressed that the application of the standard ought to be based on the nature of the relationship and not the type of client as sophisticated clients and those not vulnerable or
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dependent on advisors do not require this standard. In addition, it was pointed out that there are permitted clients that may not be sophisticated clients such as pension committees or charitable organizations that would benefit from a best interest standard.
Some commenters suggested that contractual adjustments could be allowed by some investors such as sophisticated institutional investors or certain sophisticated retail clients to opt out of a best interest standard. However, other commenters were critical of this approach and stated that if the registrant had an ability to modify the standard by contract, there would be the potential for abuse and misuse of the advisor's position, which negates a key rationale for the standard in the first place and that too often, such contractual variations would become the rule in the industry, rather than the exception.
4. More work is needed
Summary
Many commenters suggested further work that should be completed before moving forward with a statutory best interest standard or other regulatory response.
The discussion below on this key theme is divided into the following areas:
 Ensure the investor protection concerns are well defined
 Consider adopting the Québec model
 Conduct impact analysis
 Assess the international reforms
 Conduct further legal analysis
 Consider the Other Policy Options
 Coordinate with other financial-product regulators
The following sets out the main areas where further work was suggested by commenters. Several commenters from the investor community felt that the CSA should proceed as soon as possible rather than delay this initiative with further study or research.
Ensure the investor protection concerns are well defined.
As discussed above, many commenters not supportive of a best interest standard stated that there was not sufficient evidence of one or more problems or that a best interest standard would solve these problems. Many industry commenters suggested allowing the Recent Canadian Reforms to become fully implemented before evaluating whether any investor protection concerns with the regulatory framework remain. Many commenters from the investor community disagreed, arguing that the concerns are sufficiently defined and evidenced.
Consider adopting the Québec model.
Several commenters suggested conducting further research to compare the effect on investors and advisors of the standard of conduct for advisors in Québec versus the common law jurisdictions in Canada. Depending on the result of this comparison, the CSA should consider whether this model could be adopted by the common law jurisdictions in Canada.
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Conduct impact analysis.
Many commenters stated that the CSA should conduct a robust Canadian cost-benefit analysis (CBA) before moving forward. Suggested areas of focus for the CBA should include the consideration of the transition from commission-based accounts to fee-based accounts, the effects of pricing low balance accounts out of the market and the resulting effects on middle class investors. Many commenters from the investor community disagreed, arguing that a best interest standard will not lend itself to traditional cost-benefit analysis.
Assess the international reforms.
Many commenters suggested that the CSA take the opportunity to allow the reforms in the U.K. and Australia to fully implement and analyze their regulatory impact before deciding whether to introduce similar reforms in Canada. Many also suggested conducting a detailed assessment of the initiatives within their jurisdictional context, including the current regulatory framework, retirement savings policy, and the market failures identified by those regulators.
Conduct further legal analysis.
Some suggested that the CSA conduct further legal analysis of what a fiduciary duty will mean for the sale of investment products. The analysis should include a survey of the principles from case law, the application to the investment industry of those principles, and a prospective understanding of the implications of a fiduciary duty. Consideration should also be given to the practical reality of how long it might take for case law to settle on an agreed understanding of the scope of a statutory best interest standard.
Consider the Other Policy Options.
As discussed above, commenters identified a variety of Other Policy Options in addition, or as an alternative, to a statutory best interest standard that the CSA should consider before deciding on its policy direction.
Coordinate with other financial-product regulators.
Many commenters highlighted the risk of regulatory arbitrage (i.e., the risk of advisors and/or clients seeking out non-securities products) with the introduction of a best interest standard or any other regulatory response that differs significantly in the regulatory approach of non-securities financial products. Commenters have requested that we make every effort to coordinate with other financial product regulators to ensure they is a consistent approach to the regulation of financial products for Canadian retail investors.
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Conclusion
A number of the key messages from industry participants and investors set out above are similar to those that have emerged from the Mutual Fund Fees Consultation. We refer you to CSA Staff Notice 81-323 – Status Report on Consultation under CSA Discussion Paper and Request for Comments 81- 407 Mutual Fund Fees, published concurrently with this Notice, for an overview of the key themes provided by stakeholders in response to that separate consultation.
The similarity of the feedback received from stakeholders demonstrates a connection between the two consultation initiatives and suggests a need for CSA staff to coordinate their policy considerations on these initiatives going forward.
Accordingly, in collaboration with the Mutual Fund Fees Consultation initiative, CSA staff continue to consider and discuss the information gathered through our consultation process with a view to determining next steps. We anticipate communicating in the coming months what, if any, regulatory actions and/or research we intend to pursue.

http://www.osc.gov.on.ca/documents/en/S ... 33-403.pdf
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Re: GET YOUR MONEY BACK!

Postby admin » Wed Dec 04, 2013 2:00 pm

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Financial Advisor Chicanery: Imagine a two-tiered health care system in which some doctors were legally obligated to do what's right for their patients and others, like snake-oil salesmen of yore, could recommend whatever treatments made them the most money, as long as they didn't kill patients outright. Now imagine that the shysters did all they could to blend in with the real doctors. That's effectively the type of system we have today among the people Americans count on to tell them how to invest their life's savings. Registered investment advisors must, by law, put clients' interests first. Many thousands of other "advisors" at places like Morgan Stanley, Merrill Lynch and smaller shops are held to a much lower "suitability" standard. In essence, even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. Some do a great job serving their clients. Others don't. It's up to them. Under the law, as long as they avoid putting an 85-year-old widow into an exotic derivative with a 20-year lockup, they're bulletproof. Few clients know this fiduciary-suitability gap exists. The suitability crowd has worked tirelessly to keep the standard low and the distinctions murky. The cost to the public is incalculable but huge.

Full article is found here: http://www.americanbanker.com/bankthink ... 940-1.html

keywords: Weinberg AmericanBanker editor fiduciary bait and switch suitability
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Re: GET YOUR MONEY BACK!

Postby admin » Tue Dec 03, 2013 8:19 am

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In a wonderful example of "how many lawyers does it take......" comes this OSC policy, dated 2002 referring to requirements for those investment persons who lead the public to believe that they are professional "advisor's", whilst not having the advisor license.

With the active lobbying of 20-30 "stakeholders", and none of public protective or public interest groups, the securities industry is able to use the alchemy of the crowd, to lawyer up the rationale to allow persons who are licensed and acting in commission sales capacities to purport to the public (mislead:) that they are financial professionals of some description. The end result of 1000 regulatory lawyers typing on 1000 computers is to simply fool the public into a false sense of trust in the commission salesperson and to part more easily with their investment money and more of their rightful investment return.........

The regulators are confirmed as being paid 100% by the financial selling industry, and one of the major concerns about this is cases like this, where the regulator acts more like a trade and lobby support group that acting like a protector of the public.

see the document here: https://drive.google.com/file/d/0BzE_LM ... sp=sharing
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Re: GET YOUR MONEY BACK!

Postby admin » Tue Nov 05, 2013 9:15 am

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Investment dealers who refuse to compensate angry clients have been publicly named and their disputes exposed by the Canadian banking system’s ombudsman five times over the past year, most recently on Tuesday.

But the Ombudsman for Banking Services and Investments has no teeth to enforce its recommendations, and some industry players say the public airing of disputes through “naming and shaming” is doing little more than exposing OBSI’s own shortcomings.

“The more they draw on the naming, I’m not even going to say shaming, the less of a deterrent it becomes… There’s really nothing to it,” said John Fabello, a partner at law firm Torys LLP who frequently represents investment dealers in disputes with clients.

Before last year, OBSI had only unleashed its power — likened to a “nuclear deterrent” for its ability to ratchet up pressure on firms to comply with compensation recommendations before being named — one time.

But on Tuesday, the ombudsman extended a string of publicized disputes over the past 12 months. It said De Thomas Financial, a mutual fund dealer based in Thornhill, north of Toronto, should compensate a retired investor identified as Mrs. R. to the tune of $254,323. After looking into her complaint, OBSI said the inexperienced investor was given “unsuitable” advice to borrow money in order to invest.

Related
Toronto investment dealer latest in OBSI’s ‘name and shame’ campaign
OBSI makes good on pledge to 'name and shame' investment dealers that refuse compensation
De Thomas Financial “has chosen not to fulfill its responsibilities to Mrs. R. by providing the compensation she is owed based on the facts of the case,” OBSI said in a statement.

Mr. Fabello took issue with OBSI’s language, given that its recommendations are not binding, and its investigations are not subject to challenges as they would be in an arbitration or civil court. But he said “naming and shaming” firms in this manner is more of a “nuclear dud” than a deterrent because, once it is deployed, there is not a war nor mutually assured destruction.



There is no ammunition left in the ombudsman’s arsenal to motivate a firm to compensate, a reality acknowledged Tuesday by Tyler Fleming, OBSI’s spokesman.

“Once we go public, that incentive is gone,” he said.

As a result of its mandate, the ombudsman did not even find out whether the four firms named between September of last year and March of this year compensated the clients after the public exposure.

“Once OBSI goes public, our work on that case is finished,” Mr. Fleming said.

Tony De Thomasis, president of De Thomas Financial, said the public “naming and shaming” of his firm marked the first time in 25 years in the business that he has dealt with the ombudsman. He said he is “shocked” at the process, which endangers small and medium-sized investment firms.

“In the case at hand, the regulator found no fault,” Mr. De Thomasis said, adding the Mutual Fund Dealers Association closed the case some time ago. What’s more, he said, E&O (errors and omissions) insurance he purchased for his firm and advisors won’t provide coverage based on the compensation recommendation of the ombudsman.

“If we start paying, as a small dealer, where does it end?” Mr. De Thomasis said. “What happens if it happens four of five times? We wouldn’t be in business.”

He said he heard last year that large banks were pulling out of OBSI, but he didn’t pay much attention.

“Now I’m beginning to understand why they moved out,” he said.

Royal Bank of Canada joined Toronto-Dominion Bank in withdrawing from OBSI, though the investment dealers they own are compelled by the industry’s self-regulatory agency to remain.

Susan Copland, a director at the Investment Industry Association of Canada, said the “name and shame” campaign doesn’t appear to have made much of a ripple in the way firms in her association do business.

The tool has been on the books since OBSI began operations more than a decade ago, and large firms continue to use internal resolution mechanisms to resolve many complaints before they reach the stage of the public ombudsman.

“I’d say for our industry, nothing has really changed,” she said.

http://business.financialpost.com/2013/ ... itics-say/
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Re: GET YOUR MONEY BACK!

Postby admin » Tue Nov 05, 2013 9:13 am

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Canadian regulators are taking a hard look at the relationship between investment dealers and their clients. Under consideration are rules that would hold advisors who deal with retail clients to a higher standard, and large-scale changes to fees and incentives. In this three-part series, the Financial Post’s Barbara Shecter looks at the current landscape of advisor-client relations, the debate over potential changes, and the patchwork system of handling disputes when investors lose money.

Ray and Dawn-Marie Brown didn’t finish high school and had never played the markets but, as they moved into retirement a financial advisor suggested — and they agreed — to borrow $200,000 and try to invest their way to a more comfortable life in their golden years.

Five things clients — and advisors — should do to protect themselves

Disputes between advisors and clients will inevitably crop up, but lawyers who work on both sides of such disputes have a list of suggestions that can help avoid trouble, or swing the balance of liability when it does.

Continue reading.
Instead, they have found themselves no richer from their investments and more than $30,000 in debt after borrowing money on a line of credit to get out of the much larger loan they realized they could not repay. Now 74 and 72 years old, the couple had already burned through virtually all the money in their Registered Retirement Income Fund to make interest-only payments on the loan they took out to invest — and the money from the loan had been sunk into a resource-based fund that declined in value.

“We had never invested in anything before. I understand now it was called leveraging,” says Mr. Brown. “The word leveraging was new to me.”

Only after things fell apart did he and his wife learn they should not have signed a document indicating their knowledge about investing was “excellent” and that they were willing to take on high-risk investments.

“We signed something but I don’t know what we signed. It was several pages of small type,” Mr. Brown says.

“Not having experience, I must admit I did not fully understand what he (the advisor) was talking about.”

Related
Getting your money back: The long and winding road
Should all investors be treated as 'completely vulnerable'
Costly advice: Canadian Investor Protection Fund difficult to tap
‘Shocking’ crackdown on advisors threatens smaller players: Tony De Thomasis
Investor advocacy group warns about risks of borrowing to invest
OBSI makes good on pledge to 'name and shame' investment dealers that refuse compensation
Some of the details of the Browns’ story are unique, but others are familiar to lawyers who deal with investor losses and spend their days trying to get to the bottom of complaints.

Harold Geller, a civil litigator who specializes in dispute resolution at Ottawa law firm McBride Bond Christian LLP, says many investors across Canada rely on advisors with no real appreciation for their expertise, and what the recourse is, if any, when things go badly.

Among the problems, Mr. Geller says, is there are a number of titles used by advisors across the country that don’t say much about their qualifications or the standards they must meet when dealing with clients.

While there are designations that take years to earn, such as chartered financial analyst, other titles like wealth manager or advisor can be used by anyone registered to sell mutual funds.

“It’s not an indication of whether you’re protected [as a client] or whether you’re going to get quality advice,” says Mr. Geller, who has acted for advisors and for clients in various disputes. “It’s a minefield for investors, and this should change.”


Matthew Sherwood for National PostRay and Dawn-Marie Brown with Anthony Pichelli, president of Investment Loss Recovery Group, who is helping them to recover some of their lost money.
Lawyers, doctors, and other professionals are subject to much more rigorous training and sanctions if things go wrong, says Mr. Geller.

While achieving some financial advisor designations require years of study and a series of tough exams, others demand far less robust training. But staying in the business requires practitioners to quickly build a book of business and critics say this structure sets the stage for the least experienced advisors to make the most aggressive pitches.

“If a dealer gives you an innovative product pitch, chances are he doesn’t know enough to know the risks… You want an advisor who follows a process,” says Mr. Geller, who was appointed Friday to the Ontario Securities Commission’s Investor Advisory Panel. The nine-member group advises the regulator on investor protection issues and brings forward policy issues for consideration.

Those who criticize the current system are wary of incentives that allow advisors to recommend investment products with high commissions and trailer fees, as long as the investments are “suitable” for the client.

But John Fabello, a partner at Torys LLP who has worked extensively for dealers and advisors, says many of the complaints about investment dealers and their advisors erupt because investors don’t take responsibility for their investments — including their decision to buy stocks and other securities in the first place.


Tim Fraser for National PostSecurities lawyer John Fabello.
“Nobody has to invest in the capital markets,” Mr. Fabello says. “Nobody is out there putting a gun to any investor’s or potential client’s head saying ‘You must invest in the capital markets now.’”



Challenging your investment advisor: Where to start

If an investor loses money and believes an investment dealer or advisor may have done something wrong, the first place to start is usually with the management or compliance department of the investment dealer, or bank ombudsman. If there are still concerns, an investor can seek one or more of the following options:

Complain to the Ombudsman for Banking Services and Investments OBSI investigates cases and can recommend compensation of up to $350,000 to investors for their losses. However, financial institutions are not required to follow the compensation recommendations. OBSI has begun a campaign to “name and shame” firms that do not compensate clients according to the ombudsman’s recommendations.

Seek arbitration through the Investment Industry Regulatory Organization of Canada In successful cases, an IIROC arbitration panel can award up to $500,000 in compensation to an investor, plus interest and legal costs.

Pursue mediation through the Autorité des marches financiers (Quebec only) Participation is voluntary and requires agreement from both the firm and client. The mediator does not have authority to impose a resolution on the parties.

Make a claim through the Canadian Investor Protection Fund CIPF pays up to $1-million in compensation to investors, but only if their investment dealer is regulated by IIROC, and becomes insolvent.

Commence private litigation This option is available for investors with the time (and money) to take their case to civil court to pursue a settlement or trial. Small claims court is a cheaper alternative in most provinces, but claim amounts are limited to between $7,000 and $25,000, according to the Foundation for the Advancement of Investor Rights.

Complain to the Ontario Securities Commission If an investor thinks their dealer or advisor has done something that breaches securities or even criminal law, complaints can be made to provincial securities regulators such as the OSC, national self-regulatory agencies such as the Mutual Fund Dealers Association or IIROC, or to the RCMP. While some of the regulators extract money through settlements, or after successful hearings, the funds generally do not go directly to investors who have been harmed by the events or behavior.
In many disputes, he says, an advisor has followed the rules and done what the client agreed to, yet faces their wrath when it turns out the client was simply not prepared to lose money.

Mr. Fabello points out that brokers and dealers prevailed in two-thirds of the 27 cases stemming from the stock market meltdowns of 2001 and 2008 that have been tried in civil court.

In six of the nine cases that were decided in favour of the client, he notes, the investor was held partly responsible which reduced the damage award.

“You can’t and shouldn’t be diminishing an investor’s responsibility,” Mr. Fabello says.

The duty of an advisor is to offer advice on “suitable” investments and to sell them honestly and in good faith. But regulators across Canada are taking a hard look at the relationship between advisors and their clients, with a particular focus on fees and incentives, and they are considering raising the standards dealers and advisors must adhere to when dealing with retail clients.

Nearly 50% of Canadians have a financial advisor, up from 42% in 2006, according to the Canadian Securities Administrators. The next steps in the potential regulatory overhaul are to be announced by the end of this year and, less formally, industry players say there is a parallel focus by regulators on specific investment issues affecting seniors.

But before new standards are put in place, investment industry players are pushing back. They suggest higher standards will drive up the cost of doing business, and therefore, of investing — possibly putting it out of reach for many Canadians.

What’s more, they argue, there are more free or inexpensive ways than ever before to seek redress if investors feel things have gone wrong.

On the other side of the debate, investor advocates say the changes under consideration by regulators that would put the “best interest” of the retail investor at the forefront of all investment decisions should be implemented as soon as possible. They argue that existing mechanisms to help investors recover losses are too slow, too expensive, or both.

Anthony Pichelli, a former advisor who has set up the Investment Loss Recovery Group to help people like the Browns try to get some of their money back, says he was told by the Ombudsman for Banking Services and Investments that it would take eight months before an investigator would be assigned to their case. Any resolution would take even longer.

Mr. Pichelli also contacted the Mutual Fund Dealers Association, and was notified once the self-regulatory agency for the industry had looked into the case that no action would be taken.

He says the Browns can’t afford to take their case to civil court, even if they wanted to, unless they can find a lawyer willing to take the case on contingency and get paid only if they recover some money.

Mr. Brown, who is semi-retired, does part-time work landscaping to try to make ends meet, and the couple lives in one of their main assets — an inherited house in King City, a small community north of Toronto.

“I’m looking for an avenue to help my clients – I can’t find it,” says Mr. Pichelli.

“Mr. and Mrs. Brown did not have the capacity to sustain investment losses. Their investment knowledge was so limited that they believed when their fund investment dropped in value, so did their loan.”

Mr. Pichelli argues that the Browns are out more than just the money they borrowed to extricate themselves from the $200,000 loan.

They also spent more than $30,000 paying interest on that loan over the years it was outstanding, and there was a 3%, or $5,000, fee applied when they sold their investments to pay off the loan, he says.

The Browns dealt with an advisor at Quadrus Investment Services Ltd., a mutual fund dealer affiliated with London Life and Great-West Life, insurance and financial services firms.

A spokesperson for Great-West Life declined to comment specifically on the Browns’ case. In an emailed statement, she said the company does not comment on matters being reviewed by the Ombudsman for Banking Services and Investments.
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Re: GET YOUR MONEY BACK!

Postby admin » Tue Nov 05, 2013 9:11 am

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Canadian regulators are taking a hard look at the relationship between investment dealers and their clients. Under consideration are rules that would hold advisors who deal with retail clients to a higher standard, and large-scale changes to fees and incentives. In the second of this three-part series, the Financial Post’s Barbara Shecter looks at the debate sparked by what could be the biggest overhaul of the investment industry in years.

There have always been conflicts between financial advisors and their clients when things go badly and losses are involved, but the relationship could be entering a new phase.

Costly advice: 'Leveraging was new to me'

Ray and Dawn-Marie Brown didn’t finish high school and had never played the markets but, as they moved into retirement a financial advisor suggested — and they agreed — to borrow $200,000 and try to invest their way to a more comfortable life in their golden years.

Instead, they have found themselves no richer from their investments and more than $30,000 in debt after borrowing money on a line of credit to get out of the much larger loan they realized they could not repay. Now 74 and 72 years old, the couple had already burned through virtually all the money in their Registered Retirement Income Fund to make interest-only payments on the loan they took out to invest — and the money from the loan had been sunk into a resource-based fund that declined in value.

“We had never invested in anything before. I understand now it was called leveraging,” says Mr. Brown. “The word leveraging was new to me.”

Continue reading.
Canadian regulators are considering changes that would hold those who sell investment products to retail clients to a higher standard.

Discussions about putting the client’s “best interest” at the forefront of any investment decision are in their early stages. But some industry watchers say the higher standard would address inherent conflicts of interest in the sale of securities and the chronic problems that result from a splintered system where trying to get compensation is a complicated and expensive process.

Others, however, say regulators should stick to enforcing existing and recently adopted rules, and argue that the courts are the best place to settle legitimate disputes between firms and advisors and their clients.

David Di Paolo, a partner at law firm Borden Ladner Gervais LLP, who often represents dealers and advisors in investor loss cases, says regulators appear to be preparing to treat all retail investors as “completely vulnerable.” Their advisors will be held to a standard comparable to that imposed on those who administer funds for children, he says.

“It doesn’t make sense… and the courts [in investor loss cases] have refused to do that,” Mr. Di Paolo says. “It’s a completely different duty to the duty they have to their clients right now.”

The adoption of an across-the-board “best interest” or fiduciary standard could lead to bigger compensation awards to investors, including the commissions or fees earned by the advisors for the subpar work. But it could also result in unwanted consequences, Mr. Di Paolo warns. Among them could be the disappearance of affordable advice that falls between the level offered by discount brokers — none — and portfolio managers who are expressly paid to manage a client’s portfolio once initial parameters are set.

Related
Five things clients — and advisors — should do to protect themselves
Costly advice: 'Leveraging was new to me'
“Industry has to bear the cost” of any added compliance and legal burden from new standards for retail advisors, “or they get out of that model,” Mr. Di Paolo says, adding that this could push the cost of investing with advice out of reach for many Canadians.

“I’m not sure the regulators have thought that much through to those issues,” Mr. Di Paolo says.

But Ken Kivenko, an investor advocate who is also a member of the Ontario Securities Commission Investor Advisory Panel, says changes along the lines of the ones being contemplated now have been called for since the mid-1990s.

Despite some slow strides in the past couple of years, issues such as conflict of interest and a rebalancing of the advisor-client relations are “still not resolved. It’s really sad,” says Mr. Kivenko. “Here we are, 2013, and we’re still talking about it.”


Steve McKinleyKen Kivenko, an investor advocate and member of the Ontario Securities Commission Investor Advisory Panel.
Investor advocates such as Mr. Kivenko say the industry is fighting the changes because, if adopted, they will lead to more litigation, larger potential compensation payouts ordered by the courts, and lower profits for investment advisors and dealers. But as the debate drags on, he hears more stories about investors — particularly seniors — living in reduced circumstances because they received unsuitable advice.

“It is getting harder and harder for the fund industry to argue against the prohibition of embedded sales commissions and a best interests obligation,” Mr. Kivenko says.

As regulators continue to consider clamping down on fees and incentives and holding those who offer investment advice to retail investors to a higher standard, Mr. Kivenko warns there are signs dealers and advisors are looking for ways to shift client assets between investment products to keep ahead of any rule changes.

Challenging your investment advisor: Where to start

If an investor loses money and believes an investment dealer or advisor may have done something wrong, the first place to start is usually with the management or compliance department of the investment dealer, or bank ombudsman. If there are still concerns, an investor can seek one or more of the following options:

Complain to the Ombudsman for Banking Services and Investments OBSI investigates cases and can recommend compensation of up to $350,000 to investors for their losses. However, financial institutions are not required to follow the compensation recommendations. OBSI has begun a campaign to “name and shame” firms that do not compensate clients according to the ombudsman’s recommendations.

Seek arbitration through the Investment Industry Regulatory Organization of Canada In successful cases, an IIROC arbitration panel can award up to $500,000 in compensation to an investor, plus interest and legal costs.

Pursue mediation through the Autorité des marches financiers (Quebec only) Participation is voluntary and requires agreement from both the firm and client. The mediator does not have authority to impose a resolution on the parties.

Make a claim through the Canadian Investor Protection Fund CIPF pays up to $1-million in compensation to investors, but only if their investment dealer is regulated by IIROC, and becomes insolvent.

Commence private litigation This option is available for investors with the time (and money) to take their case to civil court to pursue a settlement or trial. Small claims court is a cheaper alternative in most provinces, but claim amounts are limited to between $7,000 and $25,000, according to the Foundation for the Advancement of Investor Rights.

Complain to the Ontario Securities Commission If an investor thinks their dealer or advisor has done something that breaches securities or even criminal law, complaints can be made to provincial securities regulators such as the OSC, national self-regulatory agencies such as the Mutual Fund Dealers Association or IIROC, or to the RCMP. While some of the regulators extract money through settlements, or after successful hearings, the funds generally do not go directly to investors who have been harmed by the events or behavior.
“We see it as an emerging issue,” he says, citing the movement of client funds from mutual funds to segregated funds. The two securities share certain characteristics, but segregated (or “seg’) funds are sold through insurance firms.

Such product “arbitrage” takes advantage of distinct regulations and separate dispute resolution mechanisms for the investment and insurance industries, says Mr. Kivenko.



Securities commissions and self-regulatory agencies including the Mutual Fund Dealers Association of Canada and Investment Industry Regulatory Organization of Canada regulate mutual fund dealers and advisors in Ontario. Disputes are heard by the Ombudsman for Banking Services and Investments, popular among investor advocates because of healthy historical compensation decisions and willingness to “name and shame” financial institutions that don’t abide by its compensation recommendations.

Insurance companies and credit unions in the province have their own regulator, the Financial Services Commission of Ontario (FSCO), which has established unique criteria for determining whether an investment is right for a particular client. Disputes over insurance products are heard by the OmbudService for Life and Health Insurance.

It is not usual to find an advisor who is dual-licensed to sell both insurance and mutual fund products, which clears the way for “arbitrage,” says Mr. Kivenko.

“The OSC, IIROC, the MFDA, they don’t deal with seg funds,” Mr. Kivenko says. “Even if all the rules [proposed by these agencies] come in, the advisor can just switch hats and say, ‘I was an insurance advisor when I sold that.’”

The perceived attempt by individual investment advisors to adjust to, or skirt, the prospect of new standards isn’t slowing the broader investment industry from mounting a fight against the changes.

Michelle Alexander, director of policy at the Investment Industry Association of Canada, says the industry group is pushing regulators to re-think imposing a new standard and fee structure for advisors, which the industry sees as little more than a response to “untested” global trends. The United States is studying the costs and benefits of imposing a legal fiduciary standard on financial advisors, and the United Kingdom and Australia have both taken aim at making the industry more transparent and eliminating conflicts of interest.

But Ms. Alexander said the IIAC doesn’t see evidence of widespread problems with the current Canadian system, or the resolution of investor disputes through the courts. What’s more, she says, the timing of any new standards or fee regimes is ill-advised because recent rules governing disclosure and the management of conflicts haven’t been fully implemented in Canada.

“Before we make radical changes to the current system, let’s see if these fulfill the intended objectives,” Ms. Alexander said.

John Fabello, a partner at law firm Torys LLP who frequently represents dealers and advisors in disputes with clients, says a new “best interest” standard will add a layer of complication to the system without a demonstrated upside. What’s more, he says, it would confuse the established court process.

“The courts have developed, over decades, the concept of what the standard should be that a dealer owes a client. A spectrum is required because no broker-clients relationship is the same,” Mr. Fabello says. “No system is perfect, but by and large, judges have accepted the spectrum that gives them the flexibility to determine what kind of duty or standard is going to be applied in any particular case.”

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