IDA spends it's credibility, changes its name to IIROC

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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Tue Feb 15, 2011 4:46 pm

Feb 15th
to: Investment Industry Regualtory Organization of Canadan IIROC

Enclosed in order:

1) some enforcement matters relating to an investment person in Alberta
2) An article from Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011, suggesting that it is "fraud" to allow the misrepresentation that appears to be allowed by your agency (s)
3) An article from Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011, which appears to be written by another investment protection agency, seemingly in contrast to industry rules and supporting the misrepresentation or "fraud" against the public
4) Alberta Securities Commission Important definitions of the ASC’s Different Market Registrant Licenses from the ASC web site

It seems as if there may be a different answer to the difficult question of what is allowed and what is not, depending upon who is speaking. I write to you to see if you can clarify, on behalf of the public, the apparent misrepresentation of allowing persons licensed or registered in the category of "salesperson" (pre 2009) or "dealing representative" (post 2009) to call themselves anything and everything they wish to including such official license categories as "advisor", or non-official but equally misleading names such as "vice president", "wealth manager", "retirement advisor", "estate planner".

I realize in advance the difficulty that your organization may face in being truthful in this matter, but I urge you to please look past your immediate self interest, and look to the public interest instead. Millions of Canadians, friends and relatives of yourself, including your children, perhaps your children's children are at risk of being misrepresented by people who pose as professionals, without meeting the qualifications of having to act as professionals. This mistake should not be born on your head as well should it?

I thank you in advance for your reply with clarity so the public can be made aware in as simple and understandable terms as possible.

Larry Elford
lelford@shaw.ca

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enclosure #1

"Financial professionals and salespersons in Canada are allowed to call
themselves advisors, irrespective of their professional designation."

IIROC’s In the Matter of Dale Richard Wells – Penalty below that was released last week on February 11, 2011.

This timely IIROC Enforcement Notice Decision released last week suggests to me that not all / that some IIROC “Registered Representatives” are not registered—licensed in Alberta as “advisers / advisors”.

Does this IIROC Enforcement Notice decision last week definitively refute your statement in your FP Comment column today,
that “salespersons in Canada are allowed to call themselves advisors”?




Enforcement Notice
Decision
Please distribute internally to: Legal and Compliance
Contact:
Warren Funt
Vice President, Western Canada
604 331-4750
wfunt@iiroc.ca

Elsa Renzella
Director, Enforcement Litigation
416 943-5877
erenzella@iiroc.ca
11-0062
February 11, 2011



IN THE MATTER OF Dale Richard Wells – Penalty

Following a disciplinary hearing held on September 2, 2010, in Calgary, Alberta, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that Dale Richard Wells conducted his business in a manner contrary to IIROC Rules by providing advice in securities when he was not properly registered to conduct business of that nature.

Specifically, the hearing panel found Mr. Wells committed the following breach of the IIROC Rules:

During the period February 2006 to July 2008, he acted as an advisor, within the meaning of the Alberta Securities Act, without being registered as such, contrary to IIROC Dealer Member Rule 29.1.

The Hearing Panel’s decision and reasons on the merits can be found at:

http://docs.iiroc.ca/DisplayDocument.as ... anguage=en

Following a penalty hearing held on February 1, 2011, the Hearing Panel imposed:

a $10,000 fine on Mr. Wells

and required him to pay Staff’s costs of $13,000. The Hearing Panel will issue its written reasons on the penalty on a later date, which will be made available atwww.iiroc.ca.

IIROC formally initiated the investigation into Mr. Wells’ conduct in March 2008. The violations occurred when he was a Registered Representative with the Lloydminster, Alberta Branch of First Financial Securities Inc., an IIROC-regulated firm. Mr. Wells continues to be employed as a Registered Representative with First Financial Securities Inc.

The Notice of Hearing is available at:

http://docs.iiroc.ca/DisplayDocument.as ... anguage=en

IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS), IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

IIROC carries out its regulatory responsibility through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.



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enclosure # (2)







Make advisors work for investors

Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011
In January 2004, the Ontario Securities Commission released a concept paper advocating a "fair dealing model." The paper acknowledged that the regulatory regime -- regulating dealers and their representatives through the products they sell -- was based on the outdated assumption that transaction execution is the primary reason people seek financial services. Recognizing that most customers are seeking advice, the concept paper proposed changing the regulatory framework to focus on the advisory relationship.

Financial professionals and salespersons in Canada are allowed to call themselves advisors, irrespective of their professional designation. Few, however, are compensated directly for their advice. Instead, they are paid commissions to sell specific products. Addressing the conflicts of interest that result from commission-based compensation, the paper proposed that retail clients should be entitled to rely on objective advice that is in their best interest and, when there are conflicts of interest, they should be clearly disclosed so that the client can understand the conflicts and how they may affect the advice given.

In September 2004, the proposal was swept into a broader project of the Canadian Securities Administrators (CSA) and rebranded as the "client relationship model." Last month, the Investment Industry Regulatory Organization of Canada (IIROC) published its proposed reforms to establish requirements for the client relationship model. They specifically avoid imposing a duty on firms and their representatives to act in the best interest of clients, focussing instead on improving compliance with the existing "suitability" standard and improving disclosure with respect to conflicts of interest and performance reporting. IIROC noted that part of what influenced its thinking was an effort to harmonize with existing and proposed CSA standards (and other standards applicable to firms not under its jurisdiction).

To understand the difference between a "suitability" and "best-interest" standard, think of a student seeking advice at an electronics store about her need for a laptop. The salesperson recommends a highly priced unit with an expensive extended warranty -- all designed to generate the highest commission. The laptop is suitable--it will satisfy the student's needs. It clearly isn't the best solution and a disclosure obligation isn't likely to stand in the way of a motivated salesperson. If the salesperson had been bound by a "best-interest" standard, he would recommend a simpler, more reliable and affordable unit.

In the U.S., brokers and investment advisors are subject to different standards when providing investment advice. Many investors are unaware of these differences or their legal implications or find them confusing. In the wake of the global financial crisis, the Dodd-Frank Act required the Securities and Exchange Commission (SEC) to evaluate the effectiveness of existing legal or regulatory standards of care for providing personalized investment advice to retail customers. Five months later and with the benefit of over 3,500 comment letters as well as a survey conducted by the CFA Institute (which already requires both a suitability and best-interest standard of its members in order to use the Chartered Financial Analyst professional designation) SEC staff released its analysis and recommendations. It has proposed a uniform standard of conduct for all brokers, dealers and investment advisors providing personalized investment advice about securities to retail customers to act in the best interest of the customer.

The SEC staff study acknowledges that working through the details of such a standard so as to ensure it is practicable and cost effective will be complex. It does not propose a strict fiduciary duty, nor does it suggest rules to try to eliminate conflicts.

The U.K. Financial Services Authority (FSA) recently banned commissions for advised sales of retail investments and released proposals which would require advisors to explain why a product is better than a cheaper alternative. This and other more intrusive proposals are based on the FSA's realization that there are "fundamental reasons why financial services markets do not always work well for consumers."

The contrast in the direction, speed and intensity of regulatory reform between Canada and other major developed markets raises a number of questions and suggestions. Why did the OSC start down the path of a "best-interest" standard in 2004 and, while others (including the U.K., Europe and Australia) have caught up, we appear to have fallen back to where we started -- disclosure requirements and a relatively static "suitability" standard? To what extent is this a function of a fragmented regulatory framework suffering from bureaucratic inertia (and an industry suffering from regulatory fatigue)? What accountability mechanisms are required to motivate a more focussed and intense effort?

Why is it that Canadian regulators have shied away from proposing a "best-interest" standard? As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying." Many argue that it's the buyer's responsibility to do due diligence and shop around for the best price. But should caveat emptor apply when buyers think they are hiring a professional to do the shopping?

There may be light at the end of this tunnel. Hopefully, the robust regulatory reform efforts underway elsewhere will inform and impose some discipline on our own. The OSC has a new chair. It recently established a highly credible Investor Advisory Panel, which has added this issue to its list of initiatives. FAIR Canada, the Hennick Centre for Business and Law, and the Toronto CFA Society are convening a second annual symposium on the subject next week. Finance Minister Jim Flaherty has demonstrated genuine interest in investor protection -- most recently supporting a national strategy to strengthen financial literacy.

Canada takes justifiable pride in its financial institutions and infrastructure. In doing so we can ill afford to gloss over the nature of customer relationships or be perceived to lag other markets in our efforts to ensure fair dealing in financial markets.

- Edward Waitzer is a professor and director of the Hennick Centre for Business and Law at York University and a former chair of the Ontario Securities Commission.

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enclosure #3



INVESTING TODAY – SPECIAL SECTION

BUILDING TRUST

Searching for the right advisor
Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011
Over the course of a lifetime, the average Canadian makes some big expenditures -- such as housing, their children's education and eventually their retirement. The latter is especially important as government programs are inadequate for most Canadians and life spans have extended considerably.

But Canadians are too busy with job and family responsibilities and family life and lack the specialized expertise to manage their financial affairs as diligently as they need to be managed.

That is why most people need a trusted advisor to guide them through their financial decisions at every stage of their life.

A complex job requires professional commitment

Investment advice is a full-time job. This is not just because of the bewildering array of financial products and services, the incessant volatility of financial market asset prices, turbulence of the economy, expanding opportunities in a dynamic global marketplace and the importance of preserving capital given recent experience of unprecedented swings in financial markets and economic activity.

Financial management is a complex and full-time job because those assets selected to meet the return and risk objectives of the investor constantly change in value and risk, requiring corresponding portfolio adjustments to monitor the targeted risk-return investment objectives.

As well, investment objectives themselves change as investors move through their life-cycle, such as the shift from the goal of portfolio growth to income security as one approaches or enters retirement.

Where then do you find the right advisor? If the investor wants an advisor that can provide advice on the full array of financial products, including individual stocks and bonds, ETFs, mutual funds and privately managed funds, the starting point is to open an account with an IIROC-registered firm and an investment advisor employed by that firm.

The business activities of the IIROC-registered firm are subject to rules and oversight by the self-regulatory organization, the Investment Industry Regulatory Organization of Canada (IIROC).

An IIROC-registered broker meets high proficiency standards, duty of care to his or her client, rules governing the investment process and conduct of all client dealings, requirements for putting the client first in all transactions and ensuring best available price for purchased securities.

Moreover, IIROC-registered brokers are subject to high standards of supervision, regulatory oversight and audit. The IIROC-registered firm also meets rules and procedures for the safekeeping of client assets. It is no coincidence that the scandals that have beset the financial sector in recent years have occurred among firms outside the IIROC regulatory framework.

A good advisor must be more than someone able to give advice. The client must have confidence and trust in his or her advisor to forge a productive and successful working relationship.

The advisor, therefore, should have a good investment track-record, and provide clear financial statements to make all portfolio transactions, asset positions and performance understandable. The advisor must communicate frequently in terms comprehensible to the client, execute decisions in a thorough and diligent manner -- and charge reasonable fees for service. Further, an effective relationship is bolstered by the personal chemistry between the client and advisor.

The client should feel comfortable and open in dealing with his or her advisor and provide the personal financial information needed to make the appropriate investment decisions in line with portfolio objectives.

But all this comes back to the fundamental question. How does an individual find the right IIROC-registered Investment Advisor? Investors find advisors in many ways, through referrals from friends and family, from attending seminars hosted by an advisor, from advertisements in the media and from direct enquiries at IIROC registered firms.

Whatever the approach, it is important the client reserve judgment on his or her initial choice of advisor to ensure the right fit in terms of communication, quality of service and cost, and personal relationship. Investors should be prepared to shop around if they are less than satisfied with their initial choice. One wouldn't make any major decision without checking it out thoroughly. Choosing an investment advisor is one of the most important decisions you can make, and the potential benefits last a lifetime. A good advisor is well worth the time and effort of a thorough search.

-Ian Russell is president and CEO of the Investment Industry Association of Canada.

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enclosure #4

Province of Alberta Securities Commission

http://www.albertasecurities.com/Inside ... tions.aspx
Important definitions of the ASC’s Different Market Registrant Licenses
Adviser
a person or company engaging in or holding out the person or company as engaging in the business of advising others with respect to investing in or the buying or selling of securities or exchange contracts (Examples: Portfolio Managers, Investment Counsel and Securities Advisers)

Dealer
a person or company that trades in securities or exchange contracts as principal or agent (Examples: Investment Dealers, Mutual Fund Dealers and Scholarship Plan Dealers)

Investment Counsel
an adviser who shall not instruct any trades in securities, or exchange contracts on behalf of any client without advising the client of the specific trade being proposed, and obtaining the approval of the client for that specific trade

Investment Dealer
a firm that is registered to trade, buy or sell all types of securities. The Investment Dealers Association (IDA) registers these firms on behalf of the ASC.

Investment Fund Manager (or “Fund Manager”)
a person or company who has the power to direct and exercises the responsibility of directing the affairs of an investment fund

Mutual Fund Dealer
a firm that is registered to trade, buy or sell mutual funds

Portfolio Manager
an adviser registered for the purpose of managing the investment portfolio of the adviser’s clients through discretionary authority granted by the clients
Registrant
a person or company registered or required to be registered under Alberta Securities Act or the regulations

Salesperson
an individual who is employed by a dealer for the purpose of making trades in securities or exchange contracts on behalf of that dealer



Securities Adviser
an adviser who provides advice to a non-specific client, for example a newsletter or magazine
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Sun Dec 12, 2010 10:37 am

IIROC review shows big gaps in controlling “ new products” - no lessons learned

http://docs.iiroc.ca/DisplayDocument.aspx? DocumentID=F17D558137DF404A8FD920ED7834021E&Language=en

From March to May of 2010, IIROC conducted targeted regulatory examinations at a representative sample of Dealer Members who distribute structured products. Specifically, the review tested for adequate written policies, procedures, and underlying operational controls on “new products” introduced for sale to retail and institutional clients. The objective of this New Product Due Diligence review was to determine whether, and how, Dealer Members have incorporated the IIROC Guidance Note into their business practice. The disappointing results are summarized below :

1. The review found that two of the fourteen Dealer Members tested did not have written policies. Of those with written policies, many of the policies were deficient in some material aspect. Some had no meaningful written procedures to accomplish the intent of their policies. The deficiencies included a lack of clear definitions; insufficient internal review; an inadequate analytical framework to consider whether a “new product” should be offered; a lack of consideration of possible conflict of interest scenarios; the absence of consideration of proficiency, training and marketing issues; no process to monitor and review customer complaints, or for monitoring compliance with any restrictions on the sale of new products.

2. Some Dealer Members did not have a sufficient evidentiary record of controls supporting a “new product” due diligence process. ( deficiencies observed include inadequate controls underlying written policies; a lack of controls to capture sources of new products; no standardized process requiring a written new product proposal for internal review; and the absence of Product Due Diligence Committees.)

Dealer Members must be able to establish that they have a system of internal controls and supervision in support of investment suitability advice and recommendations for both retail and institutional clients, where applicable, with respect to “new products”.

[ IIROC issued Guidance Note 09 – 0087 Best Practices for Product Due Diligence on March 25, 2009. ] Investor advocates are disturbed by the findings. IIROC has not yet imposed any fines or sanctions as a result of the observed non-compliances.

Read also Crawling out from under IIROC by Mike MacDonald http://unbiasedportfolio.blogspot.com/2 ... iiroc.html , a more critical view of the findings.
from Ken at www.canadianfundwatch.com
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Sun Oct 31, 2010 4:33 pm

Holy flypaper Batman!! We seem to be stuck with salaried industry puppets, and media folk who act more like TV infomercial hosts.
see below commentary on a recent BNN "infomercial" for the investment dealers self regulatory organization:


http://watch.bnn.ca/the-close/september ... clip362219

Susan Wolbergh Jenah, head of the Investment dealers organization called IIROC was interviewed on BNN lately. The link to the video is above.

My thoughts as I listened to the video are below in case you would like to see an alternate side to what I believe to be a totally conflicted, captured organization. I believe they are an industry funded group of "yes" men and women who help the industry to professionally abuse and cause financial damage to the public. My comments below.
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Before we even get one minute 30 seconds into her interview on BNN:

She refers to registrants with IIROC, as “advisor’s”, and then she refers to them as “salespersons” in the first two minutes of her interview.

This “duality” of terms speaks volumes about how even the $700,000 paid, top person at the investment dealers organization, simply DOES NOT even understand her job.

(Unless of course her job is to be a highly paid “Yes” man for the industry that is paying her)

How are customers supposed to know if they are dealing with a commission seller of product, or a trusted advisor if the head person does not even know enough to clearly define the difference?
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At about 3:45 of the interview she describes what info is included about "advisors" on her new web site for consumers. Noticeably absent is "whether or not the person even owes a duty of care to place the interests of the client first". You would think a professional organization would take that matter into account...........unless they were deliberately misleading us or trying to misrepresent consumers.

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From about the 4:20 mark Howard Green asks the great question about product pushing and conflicts of interest...........Susan's answer seems to indicate that it is up to the client to try and determine if product is being pushed on you.......which seriously fails to professionally address an underlying question about her organization........"why does this organization not have professional standards of duty to the customer, or fiduciary standards of care for the consumer? Why does it ask the consumer to figure out if they are being "sold" bad advice or products? This is indicative of a "kindergarden" level of regulatory oversight by her organization, buy that I mean that a kindergarden level of student could do a more comprehensive job of protecting consumers. I believe this speaks volumes again, to a case that IIROC is a tainted and corrupted organizational "puppet" of the financial industry. Buyer beware.

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There is a name for this kind of violation of trust, where a powerful, or knowledgable, or expert organization or person, has an ability to sway, influence or "advise" on the actions of weaker persons coming to them for help.
(see CLIENTELISM and potentials for abuse at Transparency International anti corruption guide http://www.transparency.org/publication ... uage_guide )

For IIROC to be loosey goosey about the important foundational matters such as protecting against this abuse of the "imbalance of power and expertise" between customer and "advice giver/product seller" is again strongly indicative of a kindergarden level of organizational integrity and ethics.

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At about 5:40, Susan Jenah says pretty much that it is a “trust me” game for the customer to “decide” whether or not they have a good feeling about the person claiming to advise them.............no professional standards, no specified duties of care............just “trust us” if you dare??
This woman’s naivete is incredible. Previous to his I could not even imagine how much professional ignorance or incompetence that one could buy for $700,000, but Susan is clearing things up a great deal.
(see http://www.realecontv.com/videos/bankin ... e-job.html
Or
http://www.bbc.co.uk/news/business-11642430

For up to date, real world examples of how this industry is worth of “trust me”.
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6:10, Howard Green buys into (and helps her to sell) the concept of “advice, and advisors) rather than letting the public be aware of the commission product sales natured role of the industry. In this regard, Mr. Green is acting as a bit of a shill for the industry, rather like the “interview guy” in a paid commercial program.

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At 6:40 Susan talks about “the hard information” about your advisor.......which is rather feeble since her organization does not require her registrants to even disclose how they are licensed, how they are compensated, and if they owe “any” duty of care to the customer. Nothing better than “how do you feel” about your.......relationship. Hilarious that she would put this on the record.

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At 10:15 Susan talks about “disciplinary history” reported by her web site.......without full disclosure that this would refer to actions “by” an association of investment dealers “against” investment dealers. Fine, if not for the fact that the foxes are acting as judge, jury etc, for foxes. Not exactly fair nor professional, and their track record bears this out.

(something like only 2% of IDA (old version name) decisions went against the big banks who do 95% of all industry business......judgements a tad skewed by this cozy association towards protecting favored members, prosecuting those not favored, and mostly ignoring the public interest, serving the industry interest. Same old game.)

---------------------------------

IDA was a total shame. IIROC is wearing the same shoes. BNN seems to be helping.


larry elford, former CFP, CIM, FCSI, Associate Portfolio Manager, retired.
lelford@shaw.ca

--youtube channel about professional investment abuses:
http://www.youtube.com/user/investoradv ... ature=mhum

--xtranormal cartoons about investment industry abusers:   
http://www.xtranormal.com/profile/3166153/
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Sat Aug 28, 2010 9:07 pm

here is a client complaint, rather well done, pointing out how his experience with IIROC is that they work for and protect the industry (which is true in my experience) and have little to no regard for repetitional bankruptcy or for the public. Men and women whose integrity is bought and paid for is my conclusion.

CRÉATIONS SYLVIO GAGNON 277 Meilleur Pvt Ottawa, Ontario Canada K1L 0A2

Email: sylviogagnon@rogers.com Web site: http://www.sylviogagnon.com Studio: 613 . 235 . 6415 Mobile: 613 . 290 . 6372
19 August 2010
IIROC, Carmen Crépin, VP Québec 5 Place Ville Marie, Bureau 1550, Montréal (Québec) H3B 2G2

Dear Ms Crépin,
WITHOUT PREJUDICE
Subject : Complaint 0818 Aug/09 - Raymond James and Marc Jémus
Thank you for your letter dated 13 May 2010. Unfortunately, my response was delayed because of the sale of our home and the difficulty coping with the relocation to a new environment. However, I did have telephone conversations with both you and Nicolas d’Astous on May 25th and 26th about this matter. At that time, I explained to you that Mr. d’Astous was wrong on several counts regarding the investigation of my complaint. You told me that you would review the matter with Mr. d’Astous but you did not advise me of the results of this review. This letter is a reminder of your promise to respond to me. It is also my official written response for the record.

First of all, I deplore the fact that it took 3-4 years for IIROC to start the investigation of this complaint. My first complaint letters to the regulators date back to 2006 and included the IDA, IIROC’s predecessor but IDA did not respond. According to my records, my first contact with IIROC came 3 years later when Nicholas D’Astous, at the request of Connie Craddock and Carmen Crépin, called me on Aug 12th, 2009 to initiate a possible investigation.

As I told you on the phone, I am extremely disappointed to discover that a IIROC Senior Investigator has not been able to decipher the insidious wrong doings of a notorious common fraudster like Marc Jémus. Jémus must be laughing all the way to his favourite off-shore bank. He fooled everyone including you and myself. He duped the Banks, the Regulators, the Superintendent of Bankruptcy, the RCMP, the Courts of Law and even Revenue Canada. He must have connections in high places to be able to walk away unpunished from repetitive financial crimes.
I agreed to meet with Mr. d’Astous in Montreal but before making the trip I purposely asked him if I was wasting my time and money on this case. He assured me not. IIROC is a serious organization, it employs a highly qualified staff with experience and a high sense of ethics.

I bought in and I trusted Mr. d’Astous’ word. My wife and I spent 4 hours explaining to him and Yannick Béland the problems we encountered with Marc Jémus. The meeting was video-taped but the copy was not made available to us. Much of the information focused on B2B Trust, Desjardins, Raymond James, Marc Jémus, Mark McDermid, Richard Martel, Amira Mamhikoff, Marc Marcotte, and other less significant players. However, in your conclusion letter, you state that within this group, you only have jurisdiction over Marc Jémus and Raymond James. Anybody else is irrelevant. Then, tell me why Mr. d’Astous was so eager to obtain all this personal and confidential information from me if he could/would not use it? You will agree that a complainant can only feel aversion toward a breach of trust such as this one.
In addition, I gave Mr. d’Astous access to all my files through two (2) DVD disks. One disk contained all the emails sent and received; the other all the letters sent and received plus telephone conversation notes. I could not be more open, truthful and cooperative. The following table demonstrates the amount of effort I have put into this project.

Alas ! Mr. d’Astous and I do not live on the same planet. To read on page 2 of the report that there is not enough proof to conclude that Raymond James committed a fault and that there is not one proof that the recommendation made to us by Jémus breached the rules of IIROC is ludicrous. My complaint is very specific: I blame Raymond James for not supervising Marc Jémus and I also blame Jémus for orchestrating this fraud. The IIROC investigation did not address either of my concerns, as I will demonstrate below.

After reading the conclusions of the IIROC investigation report, I feel like I am the evil one, and, that I should apologize publicly for all the wrong I have supposedly done. Now, Ms Crépin, don’t feel bad...everyone else has made me feel this way - the AMF, MFDA, IDA. OSC, OBSI, Law Society of Upper Canada, Raymond James, B2B Trust, Desjardins, and finally Marc Jémus himself. Their modus operandi is to blame the victim for being so stupid as to agree to these transactions. The idea is to wear out the victim by using delay tactics and intimidation. It is common knowledge that in all your investigations undertakings you submissively serve your masters (bankers and brokers) at the detriment of the small investor.
In other words - you are in conflict of interest and you obviously will not bite the hand that feeds you. Please try to be objective and fair and think about the devastating consequences that a biased decision by a regulating agency can have. Must I say more?

Regarding my complaint and the conclusions of your investigation stated in your letter, I wish to make the following specific observations:

1. There were two (2) transactions handled by Jémus who was a registered member of Raymond James who in turn is a member of IIROC. In round figures, one transaction was for $68,600, the other for $8,000. The report has completely ignored the latter. Why have you omitted the $8,241.29 cheque I endorsed and labeled “Pension Positive in trust for investment as a 2nd mortgage on 691 St-Louis, Gatineau” and gave to Jémus by hand ? Instead of proceeding with the mortgage investment Jémus misappropriated the funds and deposited the cheque in his personal bank account. I gave IIROC copies of all the necessary documentation to investigate this transaction and we discussed the whole matter when I met d’Astous in Montreal. As far as I know, misappropriation of funds is still a serious criminal offense in Canada. I would think that IIROC would have a rule against such a dishonest activity. Why don’t you take a stand and make your position clear ?

2. Page 1, para 2 of your letter states that Jémus advised us to lend a private loan of $68,600 to Marcel Chartrand. This is not true. The fact is that Jémus advised us that there may be “possible second mortgage investment opportunities coming up and that he would advise us at the opportune time”. There was no mention of a loan to Chartrand, nor the amount, nor the asset to be mortgaged. These were to be determined later after reviewing a specific proposal from Jémus. Unfortunately, we were not given this opportunity because Jémus, at that time, was in “Ponzi mode” and he needed money to fend off angry creditors. Therefore, in collusion with lawyer Marc Marcotte and figurehead Financial Planner Mark McDermid, Jémus concealed and processed the papers without our authority. In order to transfer funds from Raymond James to B2B Trust, Jémus, in collusion with McDermid, Mamhikoff and Marte1, forged the documentation and opened a bank account at Optifonds (Desjardins) in the name of Monique Gagnon without her authority. THE SIGNATURES ON THIS DOCUMENT (OPEN A NEW ACCOUNT form) ARE FAKE SIGNATURES. You can verify and confirm this with the AMF and the MFDA as I did myself.

3. Page 1, para 3 of your letter states that our account was under the responsibility of Mark McDermid. This is completely false. MARC JÉMUS WAS OUR REPRESENTATIVE - NOT MCDERMID. We have never met Mark McDermid and we do not know him. You are consciously making this unfair statement. It is completely irresponsible coming from the part of a senior investigator at IIROC whose mandate is to protect the investor from fraud.

Form 30034-4-(07-2000) TRANSFER AUTHORIZATION FOR REGISTERED INVESTMENTS is a forged document that shows Mark McDermid is our Financial Planner. (see copy attached) McDermid has admitted that he never met us, let alone represent us. Monique Gagnon’s identity and signature were stolen by Jémus to process this document and transfer the funds to B2B Trust through an authorized agent acceptable to B2B Trust, i.e. Optifonds, Dealer #9220 – McDermid, Agent #1711). I maintain that Raymond James was asleep at the switch and let this transaction go through without raising the flag to warn us. The control system at Raymond James and B2B Trust failed to detect this unauthorized breach of security. I hold Raymond James partly responsible for this error and they must be accountable.

4. Also mentioned previously, Marc Jémus is a notorious common fraudster well known in the Ottawa-Gatineau region. His name has been prolific in the media for several years. He has been under investigation by the Regulators, the RCMP and other law enforcing bodies but I must say, never accused and found guilty..... yet. The Crown Prosecutor is soon expected to make a decision to press criminal charges against him. Personally, I have an appointment with him in Gatineau Québec Small Claims Court on September 13th ,2010. This will be the third time that I bring Jémus to court to claim the $8,000 he misappropriated in 2004. Twice before he has evaded paying his debt by invoking the law on Bankruptcy. Hopefully, he may not be so lucky this time. Note that the next day, September 14th , Jémus will be in court to request the discharge of his debts from his personal bankruptcy. All of the 150 victims of this fraud will strongly oppose this request
through our lawyer Me Claude Gervais.

5. Note that Raymond James was the investment firm and Jémus was the registered member
approved by IIROC during all the ill-fated transactions I had with Jémus. I relied on his association with Raymond James, a reputable investment firm, and every time I had dealings with Jémus I trusted that Raymond James would firmly stand behind Jémus. I had no reason to not rely on the Raymond James reputation and Jémus’ past honesty which he had manifested towards me for many years. In their correspondence with new clients and that included me, Raymond James takes great pride in saying that they are responsible for their members as if they were employees of Raymond James. ( “...Raymond James assume de façon irrevocable toute responsabilité à votre endroit et continuera d’être responsable des actes et omissions de votre conseiller en placement ...” statement dated 30 September 2003, signed by Ken A. Shields, President and CEO) and sent to all clients of Raymond James ).

Likewise, on 14 September 2004, Marc Jémus wrote to Monique Gagnon bragging about his newly found virtues with Raymond James and the impeccable service he would bring to us. ( see copy of letter attached ) On the contrary, he duped us and caused the loss of Monique’s life time savings for her retirement and Raymond James failed to warn us of the impending disaster. It is a shame that Raymond James will not face up to this responsibility and IIROC will not enforce their own rules to protect the small investors.

 Page 2, para 1 of your letter states that: “.....nous sommes d’avis que Raymond James n’a pas fait preuve de négligence dans le traitement de votre compte.” My translation follows: “....in our opinion Raymond James has not acted negligently in the handling of your account.” I repeat: I always said that Raymond James was negligent in the supervision of Marc Jémus himself, not the supervision of my account.

I would like IIROC to ask the following questions to Raymond James and relate their answers to me. I did ask these questions to Peter Matter – VP at Raymond James but his responses were non-answers. I suspect that Raymond James is not telling the whole truth and they should be asked again the following questions:

 Why did Raymond James hire Marc Jémus after he had been fired for misconduct at Optifonds (Desjardins) ? His bad habits: lying and no copies to the client.

 Why did Raymond James hire Marc Jémus after he left employment at I-Forum and Norshield, two investment firms that defrauded investors of millions of $.

 Did Raymond James verify his credentials/references before hiring him ? Who
with ?

 Why did Raymond James allow Jémus to deal in products in which he had a
personal interest/benefit ?

 Why did Raymond James authorize Jémus to practice when they knew or ought
to have known that Jémus was a rogue member who had been conducting
fraudulent transactions since 2000 ?  Why did Raymond James terminate Jémus on March 2005 after only a few
months of employment ? Why was this not disclosed to clients?  Why did not Raymond James immediately warn us that this financial predator was loose and on the prowl ?

 Lastly but most importantly, why did Raymond James guarantee both Monique
Gagnon’s and Marc Jémus’ signatures on Mar 22, 2005 after they had fired Jémus on March 17, 2005 ? (see copy attached) This document is not valid for the simple reason that Raymond James garanteed the signature of Marc Jémus on a document requesting the transfer of accounts from Talvest to Raymond James knowing that Jemus had previously been fired by Raymond James.
In conclusion, I request that you revisit this investigation and bring to it the necessary corrective action. I have stated in previous paragraphs several false statements that are prejudicial against us. We request that the investigation report be corrected to reflect the facts and the reality. The investment and financial world is full of half truths that try to dissimulate the horror stories experienced daily by small investors in Canada. I also invite you to join me in advising the media and educating the public to help reduce the incidence of financial fraud in this country.

Do not hesitate to contact me if you require additional information. Yours truly,
Sylvio Gagnon Attachments (3)

P.S. As I sign this letter, I learn from our lawyers and I am happy to report that our class action has been approved by Judge Michel Déziel. This quick approval is a good indication that our arguments presented in court were solid and credible. If we need to go to trial I look forward to testify more specifically on my case. I expect the other victims will do likewise.
cc: Larry Waite; Connie Craddock; Dave Wilson; Shaun Devlin; André Marin; Jean St- Gelais; David Gallant; Eric Jacob; Maxime Boutin; James Callom ; Me Sabine Adam; Me Claude Gervais; Me Robert Racicot; Kim Lachapelle; Media; Stan Buell
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Mon Feb 01, 2010 3:11 pm

Hello Dylan. I am just seeking written clarification on three or more questions to do with a retail, bank owned investment representative. The type of person who is licensed to sell stocks, bonds and mutual funds. The registration and license category used to be that of "salesperson" at the provincial securities commission until Sept 29, 2009, and now I understand that it has changed to "dealing representative".

Would you be so kind as to give me IIROC rules and regs on what a person in this category is allowed to call themseves, what they are licensed as, anything they have to do or say or represent to the public or to customers as to their title, their role and their duty of care for the customer. Also, can you inform me if there is anything they are NOT allowed to represent themselves as, titles such as "advisor" ,"estate planner", "vice president", "partner", "senior advisor"., etc etc that I have seen advertised by some?

Thank you very much for providing clarity with respect to IIROC rules and regulations on this matter.

best regards

larry elford
On 29-Jan-10, at 2:08 PM, Dylan Rae wrote:

Hi Mr. Elford,

Could you kindly provide me with a contact number so I can have the appropriate person here contact you directly?

Regards,

Dylan

Dylan Rae | Public Affairs Specialist, Public Affairs Department | Investment Industry Regulatory Organization of Canada | PH: 416 943 5846 | Fax: 416 364 0753 | drae@iiroc.ca




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-----Original Message-----
From: larry elford [mailto:lelford@shaw.ca]
Sent: January 16, 2010 12:15 AM
To: Dylan Rae
Subject: IIROC rules against "title inflation", a question for you Dylan

Hello Dylan, Larry Elford here in Alberta.

I was wondering if you could help me find the answer to an investment
industry question or point me to the rules and regs to search.

I am trying to answer a question of what an investment person can or
cannot represent him or herself as.

With license, roles, titles galore, are there any guidelines or rules
about what can be represented and what cannot?

thanks much for any help you can be.

Larry Elford
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Sat Nov 28, 2009 12:01 pm

From our files: ―...Warren Funt, the IDA's vice-president for Western Canada, says any criminal
matters are passed on to the police.‖When a criminal offence occurs, we refer the matter. We do
so even though in certain circumstances we would be surprised if police acted." Funt adds that
there are two types of forgery issues-— one that involves fraud and another that is simply a case
of a dealer filling in a missed signature for his or her client — and that the two are dealt with
differently. "A forgery is not always a forgery," he says. "It's not that simple in most
circumstances." ..‖. http://www.investorvoice.ca/PI/3115.htm July31, 2007 [The IDA has since
merged with TSX RS and is now known as IIROC]
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Wed Jun 17, 2009 10:45 am

Mike Macdonald
Thursday, June 11, 2009

WHY I FEAR F.A.I.R.!



F.A.I.R. OR NOT FAIR?

I WOULD GRADE THEM
FAIR AT BEST!

The Canadian Foundation for the Advancement of Investor Rights (F.A.I.R.) was launched in September of 2008. Undoubtedly you have been as overwhelmed with their good work as I have!

Ermanno Pascutto, the Executive Director, has raised the funds ($3.7 million) necessary to launch the Foundation from IIROC; and of course IIROC is a merged entity created by Investment Dealers Association (IDA) and the Market Regulatory Services organization (MRS). We are delighted to see that such distinguished investor advocates are willing to back this venture!

For those of you without a sarcasm detector, the Investment Dealer Association and MRS are two of the very good reasons we need an advocate for the investing public. Both are “self regulatory bodies”, which in the investment industry seems to mean they help ensure the big players run the industry without having to worry about real regulatory bodies constantly demanding they do what is right for investors!

The goals of an organization often provide some insight into how they will carry themselves in the process of assisting you and me. As an investor advocacy group I would expect that the foundation would

n “provide clear policies for immediate implementation”,
n “demand action on outstanding issues”, and
n “fight to ensure investors are treated fairly”!

In fact F.A.I.R.’s primary goals include such hard hitting items as:
o “making reports”,
o “proactively identifying trends”, and
when bad stuff happens to investors they will
o “encourage action”!

So, you just lost your pension money in the market, discovered the advice you received was suitable for either an 18 year old with $40.00 to invest or a gazillionnaire looking for losses! You are mad, frustrated and most importantly broke!

n Your Advisor referred you to his boss, the Investment Dealer, who said tough luck buddy.

n You complain to the ombudsman for the dealer (if they even have one) but again, tough luck! !

n You can go to the Ombudsman for Banking Services and Investment (OBSI), again good luck!

n The IIROC folks appear to have no interest in the matter and the local paper agrees you got shafted but it is so common it’s not even news.

n So you head to the F.A.I.R. folks and say THIS IS NOT RIGHT!

So what can we expect? Based upon the goals of the foundation it may look like this:

Yes, we have identified that a trend that appears to be emerging is that you and your fellow investors are getting shafted on suitability. As a matter of fact we are preparing a report as we speak outlining this trend and also encouraging the IIROC to review their files and see if they are seeing a similar trend. If so we can assure you we will suggest they take some action at an appropriate time to make things somehow better. We want to be careful of course not to do anything drastic that might imply our “one time” funding (nudge, nudge, wink, wink) was being utilized to serve the one sided needs of the powerless investor at the expense of the well funded industry big boys!

What do we need? A great response to an investor would be something like this:

You are right, you have been shafted along with hundreds of others who have called and emailed us with their concerns.

We are preparing a press release naming the major offending firms and demanding a meeting with the Presidents within the week.

If it does not happen we are launching a media blitz and a letter/email campaign to all MPP’s and MP’s.

We are also going to be sending registered letters to the independent members of the Board of the firms who are the greatest offenders based upon our data.

We have begun to raise funds to support a class action suit against the major brokerage firms and mutual fund firms for return of hidden fees and lack of disclosure of fees in plain English/French.

The advisors have been knowingly selling funds without ensuring the investor is aware of and understands all the fees and risks and alternative investments they should be aware of!

In short we are going to be the worst nightmare for the IIROC and every other SRO who has let the investor down!

Okay, maybe I am looking for more than any foundation sponsored by the industry can offer. My point is that no group who accepts funds from an industry SRO can truly reflect the average investor.

n We need an Eliot Spitzer (the lawyer not the politician) who can hold large dollar penalties over the heads of these firms. Money talks and no investment firm is going to voluntarily give up easy money just to do what is right!

MY POINT: The situation is a crisis for small investors and a bump in the profit trail for major investment firms. Until the issues of the average investor can threaten the bonus of the big bosses NOTHING will EVER change!


Let me by very clear, F.A.I.R. are great people and I do not in any way doubt the integrity of the Directors of the Foundation. However, they set a dangerous precedent because they are toothless watchdogs; but they give politicians and the investment firms the ability to point and say “the interests of small investors are being met” by this august body of advocates.


Simply put; the best intentions of the F.A.I.R. Foundation is no match for the fire power of the investment firms. In real life David gets pounded to a pulp by Goliath!

Reality sucks, eh!

Sois mike
Posted by sois mike at 1:01 PM
Labels: WHY I FEAR F.A.I.R.
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Re: IDA spends it's credibility, changes its name to IIROC

Postby admin » Mon Dec 15, 2008 11:57 pm

Surprise!! The IIROC, IDA or Industry sponsored self police agency has caught another minnow to show us how effective they are. Stop the presses. We are safe in their care.

see the following release in the Investment Executive magazine, the industry trade mag:

Panel finds four instances of inadequate supervision


Monday, December 15, 2008
By IE Staff

A hearing panel of the Investment Dealers Association of Canada has sanctioned a Vancouver man for failing to adequately supervise options trading activities.

Following a disciplinary hearing held on Sept. 10-13, 2007 and Sept. 18-21, 2007 in Calgary, the panel found that Peter Deruyter Van Hee, as the Designated Registered Options Principal of Union Securities Ltd., failed to adequately supervise the account management and trading ................................................etc.,etc., etc

(advocate comments continued................another example of the private industry watchdogs sniffing out the smallest, least powerful players in the game for punishment, while those largest market participants go without a glance.
With over 90% of Canadian business done by the large players, and 90% of the funding for IIROC coming from those players, it is obvious as to why only some 2% of "actions" go against those big funding players. It is so nice to be able to police ones own actions................)
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Postby admin » Mon Sep 15, 2008 1:18 pm

BETWEEN THE LINES
Get a grip
Why does most securities enforcement
and regulation rest on conflicted SROs
and ad hoc committees?

Al Rosen
From the September 29, 2008 issue of Canadian Business magazine
Just when it seems that securities enforcement in Canada and the U.S. couldn’t be on more divergent paths, something comes along to change your mind — but not in a good way.

While self-regulatory organizations (SROs) exist in many professions, like medicine and law, they are perhaps most notorious in the securities and investment industry, where the financial stakes and conflicts of interest are high. Given the likelihood of abuse in the self-regulatory system, it should surprise nobody that there are regular and numerous head-scratching incidents to make investors wonder who is really protecting them. So why do Canadian legislators continue to rest the bulk of securities enforcement and regulation on the shoulders of conflicted SROs and ad hoc committees?

Perhaps the two biggest issues to solidify the contrast between Canadian and U.S. securities regulation this year have been the ABCP saga and the increasingly dangerous morass of IFRS.

With the first issue, asset-backed commercial paper, individual and institutional investors alike thought they were getting safe investments for parking short-term money. Instead, they got risky exposure to poor investments, had to seek out loans while their money was frozen, and could still face serious losses over the short term.

The moment the ABCP crisis erupted in August 2007, control was seized not by the Canadian government, and not even by a known SRO, but rather by a makeshift alliance of lawyers, institutional investors and various other parties. While the funds remained frozen, vital information was withheld, delay after delay surfaced, highly inventive legal manoeuvres took place and, over a year later, many institutional investors have been bullied into accepting unnecessary losses. While there are many parties that need to share the blame, it is clear that our government oversight failed miserably.

Contrast that with a very similar situation in the U.S. There the offending investments are auction-rate securities, the market for which started freezing up in late February. Within six months, regulatory investigations had been completed, and state and federal regulators were prepared to press charges against the biggest issuers of the securities. Not surprisingly, multibillion-dollar offers to buy back the funds from clients quickly surfaced.

It’s amazing the benefits that an active government can bring to securities markets. Unfortunately, Canadians can only stand by and watch in jealousy.

Turning to IFRS, the new International Financial Reporting Standards coming to Canada, our governments have shown equaldisinterest in overseeing an SRO that is selling investors down the river because of clear financial conflicts of interest. In Canada, IFRS was rubber-stamped by the accounting standard-setters who are financially controlled by the auditors who, in turn, disavow any duty of care to investors. While the Canadian Securities Administrators asked for public comment on the new standards, they also telegraphed their clear prejudice by attaching what amounts to a highly misleading letter of recommendation from the conflicted auditors.

In the July 21 issue, this column explained how numerous responses from various government ministries essentially passed the buck when it came to questioning the adequacy of IFRS for investor needs. Despite the fact that our legislators never intended to let our auditors hand over control of accounting standards to a foreign entity, that is what happened.

The mere thought of adopting IFRS in the U.S. prompted the House Financial Services Committee to grill Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke on the perceived wisdom of adopting IFRS, given its widely reported shortcomings. And that is just the first of many government hurdles that will need to be cleared before the U.S. even considers the mandatory use of IFRS.

The lesson seems clear: it’s time to dump the SROs when it comes to overseeing securities enforcement and accounting standards. The financial stakes are too high, and the conflicts of interest in self-regulation are too great to ignore.

Al Rosen is a forensic accountant and principal of Rosen & Associates in Toronto. He writes frequently for Canadian Business magazine.
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Postby admin » Sun Jul 27, 2008 7:28 pm

From: Stan Buell
To: George Bentley, Expert Panel
Cc: Ken Kivenko (ON) ; Art Field (N.P.S.C.F.) ; Marie Smith (U.S.C.O.) ; Dan Braniff (CFRS) ; Hon. Marjory LeBreton ; Hon James Flaherty
Sent: Thursday, July 24, 2008 9:14 AM
Subject: Regulatory nonsense - Investment industry exploits the law


Expert Panel

While we have already made a formal submission, inevitably it is impossible to cover all the issues in a brief submission. The latest legal test for the regulatory regime results in another failure for the regulators. A copy of the Report on Business article indicating the court's decision that the IDA can not discipline former members is appended.

It is time for the Canadian Government to revisit regulation regarding the financial services industry and create a regulator that is not designed solely to mislead the public by providing ineffective regulators.

While the industry/regulators misleads Canadians with headline grabbing fines, the fact is only a small percentage of regulatory fines was ever collected.

It is hard to believe that intelligent people would accept that a regulator is unable to discipline a member when the member resigns.

The SROs are redundant with regard to regulation and investor protection.

The perpetrators can make a fortune by breaching the rules and then simply resign from the SRO to escape punishment?

This makes the SROs absolutely useless. They are unable to get victims money back so the victims are left to using the courts. But if they can not discipline perpetrators, what use are they?

They can be used by industry to mislead the public seems to be the only reason for their existence.

When will the Canadian Government awake to the fact that millions of Canadians are losing billions of dollars each year due to investment industry fraud and wrongdoing?

When will the Canadian Government wake up and provide some funding to the few who are speaking out for investors and trying to precipitate change? The regulatory regime is costing hundreds of millions of dollars each year and is still ineffective from preventing fiascos like Bre-X, Nortel, Portus, Crocus, mutual fund market timing, Livent, ABCP fiasco, amongst many others. They also fail to get victims money back leaving victims with civil action as the only option. The recent reduction in limitation periods does nothing to help victims who need time to deal with such a life-altering issue, and yet the regulators allowed this legislation to slip quietly by without a word on behalf of investors even though the OSC had taken the initiative to gain an exemption from the limitation period reduction.

Why do the industry/regulators regularly gain exemption from the law? This is just another indication that the current regulatory regime is failing Canadians.

Surely the ABCP crisis should convince Canadians that the industry is not only taking advantage of small investors but also pension funds and institutional investors.

Who pays in the end? The small investor. Not the high paid managers who create fiascos and escape with golden parachutes.

I sincerely hope that the Expert Panel will realize that a National Regulator based upon the current provincial models will not protect investors.

It is painfully obvious that a National Authority to protect investors and enforce rules and regulations is required.

The SROs established to regulate members is a farce. That is so because they are created by industry, and staffed by industry people to serve the industry. Their claim to provide investor protection is stuff of nonsense.

Stan Buell, President
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
website: www.sipa.ca
e-mail: stanbuell@rogers.com
tel: 905-471-2911
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Postby admin » Tue Jul 22, 2008 8:38 am

Submission to the Expert Panel on Securities Regulation
Laureen Snider
Professor of Sociology
Queen’s University
Kingston, Ontario
K7L 3N6
Phone: 613-533-6000, local 75091
Email: sniderl@queensu.ca
Fax: 613-533-2871

Preferred Language of Communication: English
Permission to Post Comments on Web Site: Yes
July 13, 2008

This document outlines, first, the characteristics of effective regulation overall; second the essential ingredients for financial services and securities regulation.

The regulatory agency has become an essential tool of governance today. In a wide variety of sectors, governments attempt to direct and control the activities of business through different statutory regimes, via agencies using strategies ranging from friendly advice to criminal charges. The targets of regulation, the companies in each sector, respond to government regulation in a variety of ways, from total engagement/compliance to overt or covert resistance and defiance. Overall levels of compliance vary, first, with the history and internal organization of a particular business, its sector, size, profitability and geographic location; second with the characteristics of the regulatory agency, specifically its size, history and resources; and third, with the nature and strength of 3rd parties invested in the regulatory process – for example, NGOs, trade and professional associations, pressure, interest and protest groups (Braithwaite & Drahos, 2000; Gunningham et al, 2003; Gunningham & Johnstone, 1999; Shapiro, 1984; Hutter & Jones, 2006; Hall & Johnstone, 2005; Noble, 1985, 1986; Simpson & Grabosky, 1995; Haines, 2003; Parker, 2002; Purcell et al, 2000; Shover et al, 1986 Simpson, 2002; Vaughan, 1998; Sanchez, 1998; Post, 1998).

Because the Panel has no mandate to tackle the internal organization of companies, fixing the regulatory process and institutionalizing 3rd party involvement must be its primary foci. It has become increasingly obvious that incorporating non-governmental third parties, parties that do not represent the interests of either business/industry or government, is an essential component of effective, efficient regulation. Third parties have already been incorporated into many other regulatory sectors: environmental groups are represented as stakeholders in the Canadian Environmental Protection Act, patient groups are intermediaries between hospitals and medical associations, unions between employers and government in occupational health and safety regulation. Comparable regulatory systems elsewhere (see Pamela Reeve’s Submission on the Financial Services Consumer Panel in the United Kingdom) have successfully incorporated the most logical third party, the retail investor, into financial regulation. Canada is one of the few Anglo-American, common-law systems of financial regulation still reliant on an outdated bipartite model of regulation.

Decades of study by scholars in a number of disciplines have documented the “added value” of structurally incorporating third parties into regulatory systems (Ayres and Braithwaite 1992; Braithwaite and Grabosky 1993; Clinard and Yeager 1980; Coleman 1987; Condon 1998; Daniels and Macintosh 1991; Daniels and Morck 1996; Grabosky 1995; Gunningham and Johnstone 1999; Parker 2006; 2002). From the pioneering work of Australian sociologists/criminologists John Braithwaite and Peter Grabosky – see their studies in Corporate Crime: Contemporary Debates (eds. L. Snider & F. Pearce, University of Toronto Press, 1995) - to U.S political scientist Malcolm Sparrow, Canadian regulatory gurus such as Bruce Doern (School of Policy Studies, Carleton University), Stefan Wood (Osgoode Hall Law School, Toronto), and Joan Brockman (School of Criminology, Simon Fraser University), there is near-universal consensus – an unheard of phenomenon in the contentious the academic world. In the words of Peter Grabosky:
"Overt enforcement of law is but one element in a web of constraint, some of whose strands are barely discernible, and many of which are non-governmental." (1995)

When integrated into the regulatory equation third parties play a vital role in mitigating the phenomenon of “capture”, a well-documented and virtually inescapable fact of regulatory life (Ayres and Braithwaite 1992; Snider 1993; Coleman 1987; Parker 2002). In the literature “capture” refers to the tendency of the regulatory agency to adopt the position, and identify with the interests of the regulated. It occurs over time, when regulators and the regulated come to know each other too well. Thus each party can anticipate the position of the other and incorporate it into the regulatory agenda. This creates an overly cautious regulatory system, one that loses track of the larger public interest the agency was established to represent.

Inserting third party interests into the system short-circuits “capture”, introduces new voices, different stakeholders, and brings the larger public interest back in. However to be effective, third parties must be “embedded”, that is, they must be in a position to “observe regulatory decision-making processes, monitor regulatory treatment and disposition of complaints, or force the hand of regulators." (Sparrow, 2000). Logistically this means they must have the power to take issues to a higher authority such as an independent civilian oversight board, and/or to the public through media, if they feel the interests of the stakeholders they represent or the larger public interest are in jeopardy.

Even more crucially, they must be funded: there is presently no funding available for third-party non-governmental oversight of securities regulation and enforcement (i.e. by consumer/retail investors or representative groups). Thus far this essential public role has fallen, by default, to hard working, hard pressed voluntary groups such as the Small Investor Protection Association run by Stan Buell and InvestorVoice.ca run by Rob Kyle (both established in 1998).

The role of third parties is particularly significant in a regulatory environment where there have been problems with weak enforcement. Securities regulation is Canada is certainly one such entity (Nicholls 2006; Sibold 2005; Andrews 2006; Snider 1993, 2005, 2006a, 2006b, 2008). The history of Bill C-13, the failure of the RCMP’s Integrated Market Enforcement Teams (IMET), and the fragmented nature of stock market regulation in Canada – the only developed country without a federal securities regulatory body (Phelps et al. 2003) – have critically weakened investor confidence in Canada’s markets. Again we see near-universal consensus among the experts, in this instance on the lenience, uncertainty, expense and delay that characterize Canadian stock market regulation. As Cory and Pilkington (2007) conclude: "It is clear from publicly available sources and from our consultations as a whole, that credible and well-informed individuals sincerely believe that there have been and continue to be, serious defects in Canada's securities enforcement systems."

Introducing and institutionalizing third party involvement in securities regulation is not an attack on regulatory officials. Properly conceptualized and developed, third parties reinforce regulatory power. They help regulators do the job they are obligated by statute to do. Indeed, no group is more cognisant of the problems of securities regulation in Canada today than regulators – they confront the dilemmas of investor confidence, the difficulties of securing compliance and the paucity of enforcement mechanisms on a daily basis. In a recent interview study (Snider 2008), enforcement staff had no problem describing the difficulties they face. A few sample quotes:
- ‘There is no meaningful deterrence’ (Interview, February 2006).
- “We work hard on creating culture of compliance, [but] they develop culture of non-compliance” (Interview, March 2006).
- “Culture of compliance? How about a culture of defiance!” (Interview, May 2006).

In democratic states today, regulation is generally cyclical. Each new corporate crisis tends to generate a new round of regulations, laws and sanctions – in securities regulation, for example, the post-2002 accounting scandals associated with Enron and Hollinger Inc which produced Sarbanes-Oxley in the United States, Bill C-13 and IMET in Canada. In other sectors the same phenomenon has occurred – Bill C-45 following the Westray Mining Disaster in 1993, new environmental regulations after the the Exxon Valdez oil spill. Unfortunately this has resulted, in many business sectors, in a profusion of complicated, sometimes obsolete, often contradictory regulations that benefit primarily the corporate Bar. This makes the goal of this Expert Panel, to secure maximum compliance at minimum cost, a daunting task indeed. Incorporating non-governmental third parties into financial regulation is the best way to ensure that citizen interests are represented. Indeed it is an essential component in securing an effective, publicly-responsive, cost-efficient regulatory system.


References:
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Braithwaite, J. (1989). Crime, Shame and Reintegration. Cambridge: Cambridge University Press.
Braithwaite, J. & P. Drahos (2000) Global Business Regulation. Cambridge: Cambridge University Press.
Braithwaite, John and Grabosky, Peter (1993). Business Regulation and Australia’s Future. Sydney: Australian Institute of Criminology.
Clinard Marshall and Peter Yeager, (1980) Corporate Crime. New York: Free Press.
Coleman, John (1987) “Towards an Integrated theory of White-Collar Crime”, American Journal of Sociology 93: 406-39.
Condon, Mary (1998) Making Disclosure: Ideas and Interests in Ontario Securities Regulation. Toronto: University of Toronto Press.
Cory, and Pilkington, (2007). "Critical Issues in Enforcement", Commissioned Paper for the Allen Commission.
Daniels R. and J. Macintosh (1991) “Toward a Distinctive Canadian Corporate Law Regime”. Osgoode Hall Law Journal, 29:863.
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Gunningham, N. & Johnstone, R. (1999) Regulating Workplace Safety: System and Sanctions. Oxford: Oxford University Press.
Gunningham, N., R. Kagan , D. Thornton (2003) Shades of Green: Business, Regulation and Environment. Stanford: Stanford University Press.
Haines, F. (2003) “Regulatory Reform in Light of Regulatory Character: Assessing Industrial Safety Change in the Aftermath of the Kader Toy Factory Fire in Bangkok, Thailand.” Social & Legal Studies 12 (4): 461-87.
Hall, A. & R. Johnstone (2005), “Exploring the Re-Criminalizing of OHS Breaches in the Context of Industrial Death”, forthcoming.
Hutter, B. & C. Jones (2006), “Business Risk Management Practices: The Influence of State Regulatory Agencies and Non-State Sources”. Paper presented at Law & Society Annual Meetings. Baltimore, July 6-9, 2006.
Nicholls C. (2006) The Characteristics of Canada’s Capital Markets and the Illustrative Case of Canada’s Legislative Regulatory Response to Sarbanes-Oxley. Canada: Task Force to Modernize Securities Legislation in Canada, June 15.
Noble, C. (1985). “Class, State and Social Reform in America: The Case of the Occupational Safety and Health Act of 1970”, Research in Political Economy 8: 145-62.
Noble, C. (1986). Liberalism at Work: The Rise and Fall of OSHA. Philadelphia: Temple University Press.
Parker, Christine (2006) “The ‘Compliance ‘Trap: The Moral Message in Responsive Regulatory Enforcement”, Law & Society Review, 40(3).
Parker, Christine (2002). The Open Corporation: Effective Self Regulation and Corporate Citizenship. Cambridge: Cambridge University Press.
Post, J. ed. (1998). Research in Corporate Social Performance & Policy, v15. Stamford, Conn: JAI Press: 45-88.
Purcell, K., Clarke, L., & L. Renzulli, (2000) “Menus of Choice: The Social Embeddedness of Decisions”, in M. Cohen, ed., Risk in the Modern Age. London: Macmillan: 62-82.
Pearce, F. & L. Snider (1995). Corporate Crime in Canada: Contemporary Debates. Toronto: University of Toronto Press.
Phelps, M., H. McKay, T. Allen, P. Brunet, W. Dobson, E. Harris, M. Tims, (2003) It’s Time: Report of the Committee to Review the Structure of Securities Regulation in Canada. Canada: Department of Finance, December.
Sanchez, C. (1998), “The Impact of Environmental Regulation on the Adoption of Innovation: How Electric Utilities Responded to Clean Air Act Amendments of 1990”, in J. Post, ed. Research in Corporate Social Performance & Policy, v15. Stamford, Conn: JAI Press: 45-88.
Shapiro, S. (1984). Wayward Capitalists: Target of the Securities and Exchange Commission. New Haven: Yal University Press.
Shover, N., Clelland, D. & Lynxwiler, J. (1986). Enforcement or Negotiation: Constructing a Regulatory Bureaucracy. Albany, NY: SUNY Press.
Sibold, S. (2005) “Addressing the Burden of Regulation in Canada -The Case for Proportionate Regulation.” Submission to The IDA Taskforce to Modernize Securities Legislation in Canada (October 24).
Simpson, S. 1989. “Corporate America”, Social Forces 65: 493-563.
Simpson, S. (2002). Corporate Crime, Law and Social Control. Cambridge: Cambridge University Press.
Simpson, S. & Grabosky, P. (1995) “Bad Policy from Bad Science”, International Journal of Sociology of Law.
Sparrow, Malcolm (2000). Regulatory Craft. New York: Vintage.
Snider, Laureen (1993). Bad Business: Corporate Crime in Canada. Toronto: Nelson.
Snider, Laureen (2006a) “This Time We Really Mean It! Cracking Down on Stockmarket Fraud”, in H. Pontell & G. Geis, eds., International Handbook of White-Collar Crime. London: Springer/ Kluwer Scientific Publishers: 627-48.
Snider, Laureen (2006b). “Relocating Law: Making Corporate Crime Disappear”, in E.
Comack, ed., Locating Law, 2nd edition. Halifax: Fernwood: 128-53.
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Corporate Governance”, in J. O’Brien, ed., Governing the Corporation: Regulation and
Corporate Governance in an Age of Scandal and Global Markets. London: J. Wiley:
2005: 163-85.
Snider, Laureen (2008) “Accommodating Power: The “Common Sense” of Regulators”, Social and Legal Studies 18(2), forthcoming.
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LAUREEN SNIDER
DEPARTMENT OF SOCIOLOGY
QUEEN’S UNIVERSITY
KINGSTON, ONTARIO
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Postby admin » Tue Jul 22, 2008 8:16 am

INVESTMENT AND FINANCIAL QUESTIONS FOR CANADA, FROM CONCERNED CANADIANS

Topic: Captured regulators, failed practices, predatory behavior by professionals, self serving by those who self police

Will Canada's new financial regulatory system be comprised entirely of industry players, i.e., those who profit from the work they regulate, or will the public interest be fairly represented in future?

Will industry players be required to define clearly what duty of care is owed to the public? Are financial service providers required to act in the best interests of the client, or are they merely taking advantage of the client, as a salesperson might?

Why is it that a member of the financial services industry can approach, apply and receive legal exemption to our securities laws, from our provincial securities commissions, while members of the public who may be hurt by these same legal exemptions are told they cannot deal directly with this same crown corporation? The public is dealt second tier financial protection by each provincial securities commission.

Will exemptions to our securities laws continue to be granted to financial players without public input or public notice, even to those investment holders who may be adversely affected by circumventing our laws?

Who will undertake investigations into thousands of legal exemptions granted by the thousands to benefit industry players, often to the detriment of the public interest? (see www.osc.gov.on.ca site on “orders, rulings and decisions”) http://www.osc.gov.on.ca/Regulation/Ord ... _index.jsp

Will self regulatory agencies continue to be allowed to deceive the public into thinking that these industry sponsored agents (like Investment Dealers Associations, Mutual Fund Dealers Associations etc) are focused on protection of the public interest?

Will this new single securities regulator continue to delegate public complaints of fraud, investment abuse etc, directly to the industry self-regulatory agencies, even if statutory authority resides with the commission?

How is it that over 90% of the “advisors” who market financial products in Canada are actually licensed by the securities commissions in the category of “salesperson”. (see OSC registration categories on osc.gov.on.ca web site to find out how your representative is licensed) Why are they allowed to misrepresent their roles to the public? http://www.osc.gov.on.ca/Dealers/Regist ... _index.jsp

Why is it that self-regulatory agents (some registered in Ottawa as trade and lobby groups) of the industry were allowed open door access and involvement into RCMP investigations into complaints against the very industry they work for and represent? Is this not a case of financial desperado's being allowed to participate in their own investigations in Canada.

Why are criminal acts such as fraud and forgery not always referred to independent police agencies, but rather left to the self-regulators to deal quietly with or not deal with at all? http://www.investorvoice.ca/Cases/Inves ... _index.htm


Why, during the last decade or two, were 80% of all mutual funds allowed to be sold to the public, using the highest cost choice to the customer (DSC or deferred sales charge option), if the majority of these investments were supposedly sold under the advice of a “trusted professional advisor”?
Are they not professionally obligated to advise of the lowest cost alternative to the client when two identical mutual funds are available?

(source, Investment Funds Institute of Canada IFIC)

Why were over 90% of all mutual fund sales in 2007, made in products like “wrap” accounts, which include proprietary funds, (house brand funds), if the client interest is truly “first” as many financial players purport. Studies by the OSC conclude that profits to the industry are between twelve and twenty six times higher when the public is sold the house brand fund rather than an independent fund. (OSC Fair Dealing Model, Appendix F, pages 10,11, compensation bias) (source, Investment Funds Institute of Canada IFIC) https://portal.ific.ca/Desktop/English/ ... /24306.asp

When over 90% of financial services business in Canada is done by one of five or six large banks, why is it that the record of enforcement or other decisions against this same group (by self regulatory bodies) numbers less than 2% against these five or six large players? Over 98% of actions are against bit players or individuals who make up less than 10% of the market? viewtopic.php?t=41&postdays=0&postorder=asc&start=30 see forum post mar 10, 2008

Why is it that it takes a 1600 hour course and up to nine months in some provinces to become licensed as a hairstylist, while a financial salesman can complete a home study course and be ready for licensing in 30 to 90 days?

Why can this same 90 day financial graduate then misrepresent his license category and call him or herself an “advisor” without meeting the provincial Securities Act requirements of an “advisor”?

These questions and others are put forward in the interests of public protection from financial predators and those who police themselves, serve themselves whilst maintaining a pretense of protecting the public.

We feel that these and countless other indiscretions in the Canadian financial system are fundamentally wrong and abusive to the public interest as well as the profession. We feel that Canada's current system of financial regulation is an example of self-regulation and self-serving at its very worst. These "worst practices" allow financial fraudsters to abuse and violate the public trust regularly and without penalty in Canada. (see, Canadians suffer from “One Million Frauds”, Globe and Mail Oct 3, 2007 with only one person convicted until the end of 2007 (Canadian Business editorial Aug 13/27 2007). It also may help explain why ex RCMP IMET commercial crime experts say that Canada is a “A Good Country for Crooks”, (Canadian Business Cover story, Sept 24, 2007)
We seek to affect positive change for the benefit of the public interest.


We represent over 1000 financial industry employees, experts and others, many who must remain anonymous or risk retaliation and termination from this industry. www.investoradvocates.ca
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Banking interests wish to preserve ability to self police

Postby admin » Tue Jul 15, 2008 6:22 pm

Now it appears that the banking sector has finally figured out that the game of policing themselves is nearing an end. Consumers are starting to catch on to the con and might not accept it much longer.

Their solution? To admit wrong and try to set things right? Nope. To turn sail and claim that they now support a single securities regulator.

Do they do this with the public interest in mind? Not in my opinion. I fully expect that they will ride this new wind all the way towards a single regulator, which they will pay for and control to exactly the same extent that they now pay for and control each and every provincial and territorial securities regulator.

It will be exactly the same con game of "we police ourselves" that they have run for decades now. The same game that has allowed billions to be transferred from a trusting and vulnerable public into their hands. The new game will just have one self serving referee instead of thirteen.

What will we have improved?

see press release below from earlier today

Canadian Bankers Association - Time for a Canadian Securities Commission; Passport system of regulation falls short

For Immediate Release
July 15, 2008

Toronto, ON - In its submission to the Expert Panel on Securities Regulation, the Canadian Bankers Association (CBA) today called for the federal government to create a single securities regulator, a Canadian Securities Commission, to enhance Canada's competitive advantage internationally.

"We agree with the federal government that it's time to take a fresh look at securities reform in the broader context of enhancing Canada's ability to compete internationally," said Nancy Hughes Anthony, President and CEO of the Canadian Bankers Association. "A single Canadian Securities Commission that would enhance efficiency, increase confidence in the markets and allow regulators to respond more quickly to market events would improve the productivity of the Canadian economy and our international competitiveness as a result."

In its submission, the CBA notes that Canada can no longer afford to maintain the current system of 13 securities regulators with 13 sets of regulations if it wishes to remain competitive and attract global investment dollars.

"The current impasse on securities reform is simply unacceptable when you consider the key role efficient capital markets play in promoting economic development," said Ms. Hughes Anthony.

According to data from the International Monetary Fund, if Canada were regulated and viewed internationally as a single market, it would rank after the U.S., the U.K, Japan, France and China. But broken down as individual provinces, which is what our current regulatory system does, Ontario's market is smaller than Italy, Alberta's is smaller than the Netherlands, Quebec's is comparable in size to Denmark and B.C. is the equivalent to that of Ireland.

Passport system failing

Moreover, the passport model of securities regulation now in place outside Ontario is not delivering the benefits that a single regulator would, either for Canadians who are seeking opportunities to build their financial future, or for entrepreneurs and businesses seeking capital to grow and create jobs.

"The existing passport model of securities regulation simply doesn't deliver, especially for small- and medium-sized businesses (SMEs) and individual investors, particularly in Quebec and smaller provinces," said Ms. Hughes Anthony. "Over 90 per cent of capital market transactions take place in more than one province or territory so it makes sense that our regulatory structure should reflect this economic reality."

In addition, the CBA's analysis of public company data found that retail investors outside B.C., Alberta and Ontario are limited in their ability to participate in initial public offerings (IPOs). In the year before the passport system was implemented, retail investors in the remaining provinces were able to participate in between 67 per cent and 77 per cent of IPOs. Over the four years of the passport system, retail investors outside of the main jurisdictions, particularly in Quebec and the smaller provinces, have had less and less access to IPOs. However, under a single regulator, retail investors across Canada would have open access to these securities.

The fragmented system in Canada also has a negative impact on Canadian firms' attempts to raise capital by imposing unnecessary costs, and this burden falls disproportionately on SMEs since there are clear economies of scale in developing and filing securities offerings.

Enhancing Canadian Competitiveness

A single securities regulator would make it easier to allow for additional positive reforms including:

Making it easier to move towards a principles-based approach to regulation instead of the current system of prescriptive rules - a move that would lead to a more competitive and flexible regulatory system.

Allowing Canadians more efficient and cost-effective access to foreign securities for their investment portfolios by removing some of the hurdles towards creating mutual recognition agreements that would allow for free trade in securities.

The International Monetary Fund, the Organization for Economic Co-operation and Development and Canada's own Competition Policy Review Panel have all recognized the benefits of a single regulator for Canada since it would eliminate inefficiencies and reduce costs for market participants.

Moreover, Canada is out of step with other countries around the globe which are moving ahead with securities reform. Of the approximately 100 countries that are represented on the International Organization of Securities Commissions, Canada is the only country without a national securities regulator.

The CBA's submission to the Expert Panel on Securities Regulation can be found at the following link: /en/content/reports/080715%20-%20Enhancing%20Canadian%20Competitiveness_FINAL.pdf <https://ccn-rcc.parl.gc.ca/exchweb/bin/redir.asp?URL=http://www.cba.ca/en/content/reports/080715%2520-%2520Enhancing%2520Canadian%2520Competitiveness_FINAL.pdf> . The CBA research on the impact that multiple regulators have on the cost of raising capital for small businesses can be found here: /en/section.asp?fl=4&sl=269&tl=278&docid= <https://ccn-rcc.parl.gc.ca/exchweb/bin/redir.asp?URL=http://www.cba.ca/en/section.asp?fl=4%26sl=269%26tl=278%26docid=>

The Canadian Bankers Association works on behalf of 51 domestic chartered banks, foreign bank subsidiaries and foreign bank branches operating in Canada and their 257,000 employees to advocate for efficient and effective public policies governing banks and to promote an understanding of the banking industry and its importance to Canadians and the Canadian economy.

- 30 -

For more information:
Melanie Minos, Canadian Bankers Association
Tel: (416) 362-6093, ext. 220
Cell: (416) 587-7733
E-mail: mminos@cba.ca
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Postby admin » Sun Jul 13, 2008 10:02 am

NEW YORK TIMES


--------------------------------------------------------------------------------

July 13, 2008
Fair Game
The Fannie and Freddie Fallout
By GRETCHEN MORGENSON
IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.

This wasn’t the way the “ownership society” was supposed to work.

Investors weren’t supposed to watch their financial stocks plummet more than 70 percent in less than a year.
And taxpayers weren’t supposed to be left holding defaulted mortgages and abandoned homes
while executives who presided over balance sheet implosions walked away with millions.
Over the course of this 18-month financial crisis, we have lurched from land mine to land mine. Last week’s was all about Fannie Mae and Freddie Mac, the giant government-sponsored enterprises set up to provide affordable housing across the nation. By issuing debt, these shareholder-owned companies guarantee or own more than $5 trillion in home mortgages. Got that? $5 trillion.

Because the federal government established the companies, investors view them as backed, at least implicitly, by taxpayers. And that implied guarantee is what drove Fannie and Freddie’s business models.

The advantages the companies gained from this unique arrangement were huge. They had to keep less cash on hand than traditional lenders, for example. They also made more money on their mortgages than lenders because they paid less to borrow money in the bond market. These profits enriched Fannie and Freddie shareholders over the years and bestowed significant wealth on the companies’ executives.

Now it looks as if the bill for that largess is coming due. Of course, it will be borne by the usual bagholders: United States taxpayers. You and me.

For years, anyone warning that Fannie and Freddie should beef up their financial positions was ridiculed or run over by the lobbying machines these companies kept oiled and close at hand. So their lucrative arrangement remained the same: business as usual, with all its riches, was the goal. After all, wasting money by inflating their cash cushions would just crimp their style.

Suddenly, Fannie and Freddie’s relatively anemic capital supply is a concern. Last week, Fannie’s stock plummeted to $10.25, down 74 percent in 2008. Freddie’s shares also dived, closing at $7.75, a loss of 77 percent this year.

Even as investors were stampeding out of these stocks, the claque in Washington rushed to reassure them. Both Ben S. Bernanke, the Federal Reserve Board chairman, and Henry M. Paulson Jr., the Treasury secretary, said the mortgage giants’ regulators confirmed that the companies were “adequately capitalized.”

THAT was supposed to signal that the companies wouldn’t have to raise capital immediately because regulators had the problem firmly in hand. But investors have good reason to be skeptical. In the first half of 2007, both Mr. Bernanke and Mr. Paulson sang a similar tune when they opined that problems in the mortgage market were “contained” to subprime loans.

Talk of adequate capital also brings to mind comments made last March, when Bear Stearns was on the ropes, by Christopher Cox, the chairman of the Securities and Exchange Commission. He tried to calm investors by telling them that Bear Stearns passed financial muster. Days later, the firm was toe-tagged.

Which brings us to the main problem: credibility. Wall Street and our senior regulators seem to be running out of that precious commodity almost as quickly as cash.

It wasn’t as if this problem came out of left field. Fears that Fannie and Freddie were getting too big have been a recurring theme in recent years. And Congress has had ample opportunity to create a new regulator that would be vigilant about ensuring the safety and soundness of both companies.

But even after both companies were found to have accounted for their results improperly, Freddie Mac in 2003 and Fannie Mae in 2004, Congress failed to act. As a result, Fannie and Freddie were allowed to become high-growth companies and stock market darlings.

“These companies would have been fine had they been forced to be the cyclical utilities they were intended to be,” said Josh Rosner, an analyst at Graham-Fisher, an independent research firm in New York. “They would be healthy and able to help the markets in this time of illiquidity.”

Instead, they are in trouble and their woes are infecting the entire stock market.

The surprise is not that Fannie and Freddie grew too large for the taxpayers’ good. That was to be expected among companies run by executives whose pay is based on profit growth.

Rather it is that Congress and the various financial regulators, especially the Fed and the Office of Federal Housing Enterprise Oversight, did little to keep the companies from getting out of control.

MAYBE the loans held or backed by Fannie and Freddie will turn out to be better performers than those held by other lenders. That would mean fewer losses than investors seem to be anticipating now and would still the cries for fresh capital.

But if their losses follow the patterns seen at other lenders, some sort of regulatory takeover may occur. That would mean a lot of pain for a lot of folks — especially both companies’ stockholders and the broader community of people depending on a secure, smoothly functioning mortgage market.

“The real outrage is that none of this had to happen,” said William A. Fleckenstein, co-author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” and president of Fleckenstein Capital in Issaquah, Wash. “We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.”

“It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,” he adds. “Until people recognize why we are in this mess, I don’t see how we get out of this thing.”

A week ago, Bridgewater Associates, a research firm, estimated that losses from the credit crisis we’re now mired in might amount to $1.6 trillion when all is said and done.

We’ll have to wait years to see if this is accurate. But whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate.
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Self Regulation allows desperate interests to self police

Postby admin » Sat Jul 12, 2008 8:55 am

I will post a few similar but unrelated news items about self regulation here. They are intended to illustrate what history has taught us about self regulation. Effectively, self regulation allows some of the smartest, richest, and often most desperate business people to regulate and police themselves. Instead of serving the public interests, self regulation usually ends up by being morphed over time to serve the interests of those business people who are the most desperate to succeed.

I suggest that financial services is now almost totally captured and morphed into a system which offers little to no protection from predatory financial practices in Canada.

Transport Canada is another example to watch for in the coming years. Do you know that the bureaucracy at Transport is beginning to allow air operators to "inspect" themselves? Wait ten years and see what kinds of horrors that might produce.

Below is an article found recently about the food inspection industry. Thanks fo reading along.

Whistleblower was right about threat to our food

Letter


Friday, July 11, 2008


The A section of Wednesday's newspaper carried an article about a Canadian Food Inspection Agency biologist who had been fired. The reason: After 20 years of reliable service, he had raised an alarm about potential problems if food inspection and labelling were turned over to industry.

How unbelievable that this government agency would consider it appropriate to allow manufacturers and suppliers to safeguard our food supply when we are bombarded with stories of unsafe foods. Self-regulation doesn't work.

Perhaps this man, Luc Pomerleau, should have taken the information not to his union but to the news media, which might have given it more serious attention.

As it is, food inspectors have been reduced in numbers over the years, and it is significant that this idea would germinate as a cost-cutting measure.

What about our health?

Ruth Sherwood
Retired dietitian
North Vancouver



Biologist fired for circulating document
Plans for food inspections found on computer

Kathryn May, Canwest News Service

Wednesday, July 09, 2008

OTTAWA - Confidential documents unsecurely posted on the Canadian Food Inspection Agency's computer network laid out sensitive plans to turn over food inspections and labelling to industry and led to the firing of the scientist who stumbled upon them.

Luc Pomerleau, a biologist with a 20-year "unblemished record" in government, said he was fired last week for "gross misconduct" and breaching security because he sent the documents to his union. Mr. Pomerleau, who is a union steward, was also deemed "unreliable," which means he no longer has the security clearance to do his job or work again in the public service.

The documents appear to involve a reorganizing of food inspection that will shift more of the onus for food safety to the suppliers that manufacture and distribute food and other products. It's a direction the agency has been heading for years and the union has long voiced concerns about the impact of such a shift on jobs and the food safety of Canadians.

The changes are part of the government's strategic review, which requires departments to find savings worth 5% of their operating budgets to be reallocated to priorities of the Harper government. The document, marked confidential, is a letter from Treasury Board secretary Wayne Wouters to CFIA president Carole Swan, explaining that the government approved the proposed cuts, but warned some have "communication risks" so will have to be deferred until a communication plan is ready.

CFIA spokesman J. P. St-Amand, citing privacy reasons, wouldn't comment on the firing except to say "due process was followed," including an investigation into how the documents landed in the hands of a "third party."

In an interview, Mr. Pomerleau said he stumbled on the document on the server in a directory that could be accessed by any of the agency's 6,500 employees. He said he assumed the document couldn't still be confidential or it wouldn't have been scanned and left there for anyone to find. He said the document was marked with a small "confidential" stamp in the right hand corner.

"If the document wasn't there and the people in charge of the document had taken care of it properly, I wouldn't have seen it," he said.
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