Jones case brings calls for national 'securities crime' unit
Financial analyst Urquhart; 'Only police can administer criminal code'
BY PAUL DELEAN, THE GAZETTEJULY 21, 2009 7:58 AM
At the Holiday Inn in Pointe Claire on Friday, former clients of missing money manager Earl Jones were given advice on how to proceed.
Photograph by: DAVE SIDAWAY, THE GAZETTE, The Gazette
The carnage left by fugitive (and unlicensed) money manager Earl Jones underscores again the need for a specialized federal-provincial "securities crime" unit in Canada to investigate and act on clients' criminal complaints, financial commentator Diane Urquhart says.
It's too much to expect regulatory agencies like Quebec's Autorité des marchés financiers to ferret out suspected fraud, a criminal-code offence, said Urquhart, a former managing director of research for Scotia Capital who now works as an independent financial analyst in Mississauga, Ont. "Only police can administer the criminal code."
The RCMP actually has a capital-markets unit called the Integrated Market Enforcement Team, but Urquhart isn't impressed. "There seems to be a lack of public accountability there, with few securities cases investigated and prosecution taking over 10 years to complete."
The national "securities crime" unit she envisions would designate and involve local police in the investigations.
Although she favours a national securities commission, which Quebec opposes, Urquhart said that's a separate issue. The AMF actually stacks up well nationally in terms of regulatory enforcement, she said. "They got (Vincent) Lacroix (the former head of insolvent mutual-fund company Norbourg) in jail."
While additional police resources might help curtail future financial exploitation, investors also have a role to play.
"You're your first line of defence," said Taylor Train, chief operating officer of the Financial Advisors Association of Canada.
"Folks have to be proactive. They've got to research, verify and question. When you think of investing your money with an individual rather than an organization per se, make sure they're licensed. Do they have the appropriate designations and errors-and-omissions insurance? The consumer's got to take some sort of accountability."
A simple verification with the AMF won't guarantee you aren't dealing with a rogue, but at least you'll know they're one of the 40,000 financial professionals in Quebec accredited to do specific tasks, and you could be eligible for compensation if funds disappear.
Incredibly for somebody entrusted with millions of other people's dollars, Jones had no official credentials.
Being unable to produce his AMF permit should have been a warning sign, if only he'd been asked, said AMF spokesman Sylvain Théberge.
Jones also should also have been challenged on guaranteed returns significantly higher than what banks were offering.
"If it's higher," Urquhart said, "there's risk. And it may not be real at all."
Daniel Thompson, president of Montreal-based investment firm MacDougall, MacDougall & MacTier Inc., said protecting yourself from fraud or criminal activity is never easy, "but there are rules of common sense which apply. Never give your financial adviser power of attorney or the ability to act alone in making withdrawals from your account without proof of adequate supervision or your own written approval. Don't make your financial adviser the sole signing officer of your investment holding company or the sole trustee of your trust. Make sure two independent people are required to authorize disbursements.
"Check your statements carefully and, if in doubt, ask questions."
pdelean@thegazette.canwest.com