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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!

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Postby admin » Mon Dec 12, 2005 9:30 am

Getting redress: the ombudsman option

MONEY 301 | It's becoming more popular than arbitration, says Ellen Roseman
Dec. 11, 2005. 01:00 AM
ELLEN ROSEMAN

TORONTO STAR

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You've lost money on your investments. You think the losses are a result of bad advice. But your adviser's firm ignores your complaints.

How can you get restitution without going through the time and expense of a court challenge? You have two options.

The Investment Dealers Association of Canada has a process for resolving disputes. Both parties hire an independent arbitrator to listen to their facts and arguments.

But there are drawbacks to arbitration — such as costs, jurisdiction and the binding nature of rulings.

Costs range between $3,000 to $4,000 for a typical dispute, the IDA says. They include filing fees, the arbitrator's hourly rate and room rentals.

You have a better chance of success if you hire a lawyer to represent you — which many people do — and line up a few investment experts.

Obviously, this will cost you more money. And you may not get all your costs back, even if you win the case.

As for jurisdiction, you're eligible for arbitration only if the amount you claim is less than $100,000. That's pretty small as investment losses go.

Finally, the arbitrator's decision is binding. This means you give up your right to pursue the matter further in court if you're not satisfied.

Only a few investors opt for arbitration. The number of Canadian cases peaked at 70 in 2002, dropping to just over 30 last year and nine up to Sept. 30 this year.

Another alternative is to go to the Ombudsman for Banking Services and Investments (OBSI). This is an informal mediation process.

You don't have to hire lawyers or investment experts, testify at hearings or cover any of the costs.

You can claim for amounts in dispute up to $350,000 — a limit far more generous than the IDA's $100,000.

And you don't give up your right to pursue legal action if you're unhappy.

The OBSI accepts complaints for clients of any firm that belongs to one of four industry groups: Investment Dealers Association, Mutual Fund Dealers Association, Investment Funds Institute of Canada or Canadian Bankers Association.

You first have to try to get your complaint resolved by the investment firm. Once you know that won't happen, you can submit your claim to the OBSI.

While the final recommendation is not binding, member firms have accepted the OBSI's decisions in the past.

David Agnew took over as ombudsman and chief executive this summer, replacing Michael Lauber. He made sure to give me the latest statistics (for the year ended Nov. 1).

The OBSI made a recommendation for compensation to clients in 49 per cent of cases, he said. This is considerably higher than in the past.

Only 15 per cent of completed investigations resulted in money being paid back to clients in 2004. The rate was only 13 per cent in 2003.

The change arises from the ombudsman's expanded mandate.

Set up in 1996 to handle complaints by banks' small business customers, the ombudsman moved to include individual bank customers in 1997.

Only in 2002 did it start hearing complaints about independent investment and mutual fund dealers and mutual fund managers.

Today, the OBSI is dealing with more and more stories about investments going sour. And it's still catching up with a backlog of complaints from the "tech wreck" in 2001 to 2002.

Investment dealers and fund dealers don't have their own internal ombudsman, as banks do. Their compliance departments often try to fend off unhappy investors, rather than placate them.

This means investment complaints escalated to the OBSI are more likely to favour the customer than are banking complaints, Agnew explains.

Of course, the compensation may be less than what investors think they deserve.

"I've heard of many cases being settled after the OBSI has turned them thumbs down," says critic Ken Kivenko, a member of the Small Investor Protection Association.

"Unofficially, I've heard the balance get 15 to 40 cents on the dollar. OBSI refuses to publish the full statistics or do surveys of client satisfaction."

Agnew says the highest recommendation was for about $300,000 in compensation.

The OBSI's proceedings are confidential. Clients have to agree not to disclose results to the media. Even in its annual reports, the OBSI gives only a few case studies — without any names to identify who's involved.

Agnew gave us details of three complaints, none of which have been published before.

In the first case, an investor estimated his losses at $85,706. The OBSI recommended compensation of $52,353 (including $5,993 for interest owing).

In the second case, an investor claimed losses of $80,000 in a margin account and $12,000 in his wife's RRSP account.

"We have reviewed over 200 pages of handwritten notes that you have provided to us, detailing your savings and investment history dating back to September 1998," the OBSI said in its 13-page report.

It recommended the investor be paid $46,116 for the margin account and $13,649 for the RRSP account ($59,765 in total).

But in the third case, the OBSI couldn't substantiate an investor's claim to have lost $50,000.

"Our review and analysis has not revealed unsuitable investments, investment performance out of line with that of the broad market, nor evidence of discretionary trading," it said.

Since the investor was meeting his adviser on a regular basis, the OBSI concluded there was ample opportunity to make informed investment decisions.

For information about the OBSI, call 1-888-451-4519, or in Toronto, 416-287-2877.

Next week: How to avoid getting embroiled in a dispute with an investment adviser.


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Ellen Roseman's column appears Wednesday, Saturday and Sunday. You can reach her by writing Business c/o Toronto Star, 1 Yonge St., Toronto M5E 1E6; by phone at 416-945-8687; by fax at 416-865-3630; or at eroseman@thestar.ca by email.
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Getting your money back from a bad advisory experience

Postby admin » Mon Dec 12, 2005 9:29 am

this forum topic will document some of the methods (and the troubles) that investors in Canada have in getting fair and open due process to their investment complaints.

Feel free to add your experiences to it or take something away that might help you.

cheers
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