Civil or Criminal Actions against companies or regulators

[admin]

Firm sued over fees: A $19-million lawsuit has been filed against Richardson Partners Financial
and Clarke A. Steele, one of the firm's investment advisors, by a group of clients, many of whom
are elderly. The 40-page statement of claim alleges "Steele and Richardsons acted in a high-
handed, arrogant, dismissive, insulting, cavalier purposefully difficult, irresponsible and
indifferent manner towards the plaintiffs," a collection of 23 people, one estate and nine personal
holding companies. The statement lists seven securities owned where Richardsons and/ or Steele
were earning service and or trailer commissions in addition to the radius fee The statement also
details $6.04-million of plaintiff holdings on which the defendants acted either as an
"undisclosed agent or underwriter." The average age of the people is more than 70. (One is 94.)
None of the allegations has been proven in court and Richardsons and/or Steele has yet to file a
statement of defence. http://www.financialpost.com/opinion/st ... d7ff-4f7a-
bc80-7b006a8cb2a1

[admin]

SEC Sued by Madoff Investors for Missing Ponzi Scheme (Update3)
By Erik Larson

Oct. 14 (Bloomberg) -- Two of Bernard Madoff’s victims sued the U.S. Securities Exchange Commission for failing to uncover the con man’s $65 billion Ponzi scheme, in a case that could trigger a wave of lawsuits if it isn’t dismissed.

The government’s “sovereign immunity” from lawsuits should be waived under a law that permits cases against the U.S. if its workers were negligent, according to a complaint filed in Manhattan federal court seeking the return of $2.4 million.

Through a “pattern of incompetence,” the SEC missed at least six opportunities to uncover Madoff’s fraud even after receiving detailed tips from an expert explaining how Madoff’s high returns and mysterious investment strategy were proof of the world’s biggest Ponzi scheme, according to the complaint.

“Had the SEC carried out its functions with even a minimum of reasonable due care, many, if not most, of Madoff’s victims would have been spared the financial ruin they face today,” the two New York investors said in their 63-page complaint.

The lawsuit was filed by Phyllis Molchatsky, a disabled retiree and single mother who lost $1.7 million, and Steven Schneider, a doctor who lost almost $753,000. The SEC earlier denied the investors’ administrative claims, clearing the way for them to file today’s suit under the Federal Tort Claims Act.

“Based on our initial understanding of the matter, we believe there is no merit to the complaint,” SEC spokesman John Heine said today in a statement.

Acted ‘Unreasonably’

The investors are represented by Howard Elisofon, a lawyer with Herrick, Feinstein LLP in New York. The firm filed seven additional administrative claims with the SEC, which could lead to a new round of lawsuits if they’re denied.

“I don’t think the suit is likely to win,” Professor Peter Henning of Wayne State University Law School said in a phone interview. “They have to show the SEC was negligent, that it acted unreasonably.” As a law enforcement agency, it’s up to the SEC to decide where to commit its resources, he said.

Henning said the lawsuit, if it succeeded, would expose the government to thousands of lawsuits and “massive liabilities” in the Madoff case and any other fraud that the SEC failed to stop.

“That’s why courts are generally reluctant to let these cases go very far,” Henning said.

Difficult to Succeed

Professor Paul Figley of American University’s Washington College of Law also said the lawsuit isn’t likely to succeed.

“There have been a lot of tort suits that have been filed against the government over the years that have succeeded, but none that had to do with the government failing to catch and prosecute a criminal,” Figley said.

Many lawsuits filed under the statute fail because of a provision that protects the U.S. when the disputed acts are so- called discretionary functions, the professors said. The investors say that won’t protect the SEC in this case.

“The conduct was clearly not discretionary,” Elisofon said in a phone interview. “This isn’t about the SEC failing to undertake an inquiry or failing to implement a policy. This is about the SEC investigating and examining Madoff and failing to follow its own policies and procedures.”

Discretion Involved

Elisofon compared the SEC’s actions to those of a driver for the U.S. Postal Service who would be sued if he injured a citizen through reckless driving.

“There’s discretion involved in how he drives the vehicle,” Elisofon said. “But if he drives it negligently, and he injures citizens, they have a right to sue under this act.”

The complaint against the SEC follows earlier suits by victims against banks and other third parties that did business with Madoff, accusing them of failing to conduct due diligence when placing investor money with Madoff, or with firms that directed money to the con man.

“Plaintiffs relied on the SEC to protect them and, instead, time after time, the SEC’s agents looked the other way, allowing an obvious danger to grow exponentially, until massive injuries to the plaintiffs and other Madoff investors became inevitable,” according to the complaint.

The SEC, already faulted by Congress for missing the scheme, has been busy trying to restore faith in its abilities after an internal report released last month outlined its failures in the Madoff matter.

SEC Plan

According to a draft five-year strategic plan released Oct. 8, the agency will seek to improve training and tackle “structural issues” that hurt communication in its Office of Compliance Inspections and Examinations.

The plan followed SEC Inspector General H. David Kotz’s Sept. 29 report that said the agency missed at least six opportunities to spot Madoff’s fraud because it assigned inexperienced employees to inquiries and failed to pursue leads.

The SEC’s own investigators said the agency was unwise when choosing cases and that it rewards its workers based on “quantity” rather than “quality.”

Madoff, 71, is serving a 150-year sentence for running the fraud. His family members and his biggest investors have been sued for as much as $15 billion by the bankruptcy liquidator for New York-based Bernard L. Madoff Investment Securities LLC.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

Last Updated: October 14, 2009 15:46 EDT

[admin]

SEC sued for gross negligence: Two of Bernard Madoff's victims have sued the U.S. Securities
Exchange Commission for failing to uncover the con man's $65 billion Ponzi scheme, in a case
that could trigger a wave of lawsuits if it isn't dismissed. The government's "sovereign
immunity" from lawsuits should be waived under a law that permits cases against the U.S. if its
workers were negligent, according to a complaint filed in Manhattan federal court seeking the
return of $2.4 million. Through a "pattern of incompetence," the SEC missed at least six
opportunities to uncover Madoff's fraud even after receiving detailed tips from an expert
explaining how Madoff's high returns and mysterious investment strategy were proof of the
world's biggest Ponzi scheme, according to the complaint. Can anyone think of a case where a
CSA regulator failed to do its job –let us know.

from www.canadianfundwatch.com

[admin]

Are our Canadian securities regulators immune from being charged for breach of trust?
i.e. Breach of trust by public officer – Section 122. Criminal Code

SEC Sued by Madoff Investors for Missing Ponzi Scheme (Update3)
By Erik Larson

Oct. 14 (Bloomberg) -- Two of Bernard Madoff’s victims sued the U.S. Securities Exchange Commission for failing to uncover the con man’s $65 billion Ponzi scheme, in a case that could trigger a wave of lawsuits if it isn’t dismissed.

The government’s “sovereign immunity” from lawsuits should be waived under a law that permits cases against the U.S. if its workers were negligent, according to a complaint filed in Manhattan federal court seeking the return of $2.4 million.

Through a “pattern of incompetence,” the SEC missed at least six opportunities to uncover Madoff’s fraud even after receiving detailed tips from an expert explaining how Madoff’s high returns and mysterious investment strategy were proof of the world’s biggest Ponzi scheme, according to the complaint.

“Had the SEC carried out its functions with even a minimum of reasonable due care, many, if not most, of Madoff’s victims would have been spared the financial ruin they face today,” the two New York investors said in their 63-page complaint.

The lawsuit was filed by Phyllis Molchatsky, a disabled retiree and single mother who lost $1.7 million, and Steven Schneider, a doctor who lost almost $753,000. The SEC earlier denied the investors’ administrative claims, clearing the way for them to file today’s suit under the Federal Tort Claims Act.

“Based on our initial understanding of the matter, we believe there is no merit to the complaint,” SEC spokesman John Heine said today in a statement.

Acted ‘Unreasonably’

The investors are represented by Howard Elisofon, a lawyer with Herrick, Feinstein LLP in New York. The firm filed seven additional administrative claims with the SEC, which could lead to a new round of lawsuits if they’re denied.

“I don’t think the suit is likely to win,” Professor Peter Henning of Wayne State University Law School said in a phone interview. “They have to show the SEC was negligent, that it acted unreasonably.” As a law enforcement agency, it’s up to the SEC to decide where to commit its resources, he said.

Henning said the lawsuit, if it succeeded, would expose the government to thousands of lawsuits and “massive liabilities” in the Madoff case and any other fraud that the SEC failed to stop.

“That’s why courts are generally reluctant to let these cases go very far,” Henning said.

Difficult to Succeed

Professor Paul Figley of American University’s Washington College of Law also said the lawsuit isn’t likely to succeed.

“There have been a lot of tort suits that have been filed against the government over the years that have succeeded, but none that had to do with the government failing to catch and prosecute a criminal,” Figley said.

Many lawsuits filed under the statute fail because of a provision that protects the U.S. when the disputed acts are so- called discretionary functions, the professors said. The investors say that won’t protect the SEC in this case.

“The conduct was clearly not discretionary,” Elisofon said in a phone interview. “This isn’t about the SEC failing to undertake an inquiry or failing to implement a policy. This is about the SEC investigating and examining Madoff and failing to follow its own policies and procedures.”

Discretion Involved

Elisofon compared the SEC’s actions to those of a driver for the U.S. Postal Service who would be sued if he injured a citizen through reckless driving.

“There’s discretion involved in how he drives the vehicle,” Elisofon said. “But if he drives it negligently, and he injures citizens, they have a right to sue under this act.”

The complaint against the SEC follows earlier suits by victims against banks and other third parties that did business with Madoff, accusing them of failing to conduct due diligence when placing investor money with Madoff, or with firms that directed money to the con man.

“Plaintiffs relied on the SEC to protect them and, instead, time after time, the SEC’s agents looked the other way, allowing an obvious danger to grow exponentially, until massive injuries to the plaintiffs and other Madoff investors became inevitable,” according to the complaint.

The SEC, already faulted by Congress for missing the scheme, has been busy trying to restore faith in its abilities after an internal report released last month outlined its failures in the Madoff matter.

SEC Plan

According to a draft five-year strategic plan released Oct. 8, the agency will seek to improve training and tackle “structural issues” that hurt communication in its Office of Compliance Inspections and Examinations.

The plan followed SEC Inspector General H. David Kotz’s Sept. 29 report that said the agency missed at least six opportunities to spot Madoff’s fraud because it assigned inexperienced employees to inquiries and failed to pursue leads.

The SEC’s own investigators said the agency was unwise when choosing cases and that it rewards its workers based on “quantity” rather than “quality.”

Madoff, 71, is serving a 150-year sentence for running the fraud. His family members and his biggest investors have been sued for as much as $15 billion by the bankruptcy liquidator for New York-based Bernard L. Madoff Investment Securities LLC.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

[admin]

from lawyerswekly.ca aug 21/09


As stocks fall lawsuits rise
By Christopher Guly
Ottawa
August 21 2009 issue

The recent market meltdown that has left holdings in many investment portfolios down or depleted has also led to “an unprecedented” number of investors wanting to sue their investment advisors, according to Toronto lawyer Hugh Lissaman, who has never witnessed such a litigious atmosphere during his 16 years practising in the area of stockbroker-investment dealer litigation.

On any given week, Lissaman receives at least six phone calls from potential clients who’ve lost money in the market.

Usually, they don’t want to commence legal action against their advisors — but some feel they have no choice, explains Lissaman, who, nine years ago, established a solo practice that now deals mainly with this type of plaintiff work.

After reviewing a would-be client’s brokerage statements, he decides whether any dips are the result of a decline in the market or caused by alleged broker negligence, where there may be a cause of action.

“If someone is looking to the brokerage firm for some resolutions or mediation down the road or to a pre-trial judge or judge, the question I put is: ‘I lost money on the market too. What makes your case a negligence case?’ ” offers Lissaman, who was counsel for the defendant in the precedent-setting Ontario case, Blackburn v. Midland Walwyn Capital Inc., [2003] O.J. No. 621 (S.C.J.), which addressed such legal issues as the duty of firms to warn clients about rogue stockbrokers who have recently had their employment terminated.

Yet sometimes the signs are quite obvious that something untoward has occurred.

For instance, a 78-year-old woman, who had lost money in 14 mutual funds, contacted Lissaman for help. He, in turn, passed her portfolio to veteran securities industry compliance expert Douglas Fox, the founder and principal of Toronto-based Risk Management Services Inc., for review.

Fox determined that of the 14 mutual funds she held, 12 were considered “high-risk” and the remainder “medium-risk,” according to industry analysts.

“That lady had no business being in those mutual funds,” says Lissaman. “She was relying on her portfolio to pay her monthly expenses and was given bad advice and inappropriate investing for her situation. She would have a case.”

He estimates that there are only a handful of independent Toronto lawyers who focus on representing plaintiffs in stockbroker negligence cases. (Lawyers attached to large firms might be in a conflict situation because they act for the institutions possibly targeted for a suit, he adds.)

Once Lissaman decides that a client has a case, he sends a complaint letter to the institution or individual who provided the investment advice, outlining problems with the portfolio. If the matter is not resolved in that fashion, he files a statement of claim and a court file is opened.

To properly prosecute the case, Lissaman hires forensic experts, such as Fox, to determine the suitability and risk level of a client’s investments and, if there was leveraging where money was borrowed to purchase bonds or stocks without the client’s knowledge, to explain to the court how that amplifies the risk attached to an investment.

To calculate damages in these cases, Lissaman turns to Peter Weinstein, a partner with Stern Cohen LLP and head of the Toronto-based accounting firm’s specialist practice, Stern Cohen Valuations Inc.

A chartered accountant who also holds certification as a chartered business valuator and specialist designation as an investigative and forensic accountant, Weinstein quantifies any damages that might have been incurred as a result of a bad investment.

He will look at the capital put into an account and what was taken out. If a stock had significant appreciation, the loss should be viewed in relation to the funds invested, “rather than only from its peak value,” says Weinstein.

As well, he will identify what the investment income or losses should have been if the capital was appropriately invested — according to the investor’s objectives — in equity, bonds or a combination of the two.

Weinstein compares the investment with the appropriate index.

For instance, for the three-year period that ended May 31, 2009, returns (assuming dividends and interest were reinvested):
- on bonds were 18 percent on the DEX Universe Bond Index;
- on Canadian equities were four percent on the S&P/TSX (Toronto Stock Exchange) composite index; and
- on U.S. equities were 23 percent on the S&P 500 index and 18 per cent as per the Dow Jones Industrial Average.

“There will be situations where a client would have incurred some losses, but they may be different than the ones they should have incurred,” explains Weinstein, who adds that management fees and expenses should be deducted from what would have been earned. If money was withdrawn from an investment account, that too has to be reflected in the calculation of any losses.

“My recommendation to lawyers is to consider all of this early on in the process because litigation is expensive and it’s helpful for lawyers to know the extent of the losses before they spend a lot of time and incur a lot of costs,” says Weinstein.

Beyond preparing damages reports for lawyers, he’s also appeared in court as an expert witness, as he did in the Ontario Superior Court of Justice case, Davidson v. Noram Capital Management Inc., [2005] O.J. No. 4964.

Based on his calculations, which included reasonably anticipated rates of return, the eight plaintiffs (most of them seniors) lost nearly $1.3 million. In his decision, Justice Peter Cumming awarded them almost $1.2 million for financial losses and prejudgment interest.

Weinstein expects that when the dust settles from last year’s market plunge, there will be more cases of investors suing their advisors.
Already, the Investment Industry Regulatory Organization of Canada (IIROC) reports that complaints filed this year with brokerage firms are up 35 percent — and have increased by 90 percent since 2007.

But resolving lawsuits could take time.

Weinstein says he’s still working on cases that date back to 2001 — as is Lissaman, who also expects the number of investor plaintiffs to grow.

“There are problem brokers out there, but I have to look at each client complaint that comes in and assess what’s gone on in the portfolio,” he explains.

“Sometimes it’s a case where the money just got parked and was never looked at again. It doesn’t necessarily mean the broker was bad, but perhaps just inattentive.

“Other times, the broker did some really proactive trading with a purpose to make him money at the expense of the client. Those cases come up as well, but not as often.”

However, he is concerned that with the investment industry having lost a lot of money when the markets took a nosedive, some advisors may “look to make up that lost ground by once again investing people in some things they shouldn’t be investing in.”

Lissaman recently represented a single mother of three children of modest means who had won a $2-million lottery and had a broker invest the money.

“He abused that trust and her ignorance, and totally mismanaged her portfolio,” says Lissaman. “It started about six years ago, but only recently has the extent of the mismanagement come to fruition.”

The woman lost a lot — but not all — of her winnings. In July, an IIROC hearing panel permanently banned Julius Caesar Phillip Vitug, the broker, from working as an investment dealer, fined him $350,000 and ordered him to pay $80,000 in costs. “He acted deceitfully” and showed “no remorse for his actions,” said the panel, which found that between about April 2003 and August 2005, Vitug “engaged in business conduct or practice, which is unbecoming or detrimental to the public interest in that he had an undisclosed financial interest.”

Lissaman says that while people are “very upset” about losing investments, they must be prepared to pay some of the costs involved in taking legal action against their advisors. Hiring outside experts to help assess the suitability of a case could cost as much as $1,000. And even if there’s a contingency arrangement with a lawyer, the client will have to cover other disbursements, such as court transcripts, “because the law firm cannot be their bank,” says Lissaman, who sometimes won’t send someone a bill if, after reviewing their investment documents, believes there isn’t a case for litigation.

******

[admin]

Wall Street Journal
AUGUST 3, 2009
U.K. Probes Structured-Finance Products
Concern Is That Some Bankers Knowingly Sold Complex Assets Based on Flawed Valuations


BY DOMINIC ELLIOTT AND MATT TURNER

LONDON -- The U.K.'s Serious Fraud Office is investigating sales of structured products such as credit-default swaps and collateralized debt obligations, amid concern some bankers may have knowingly sold complex assets based on flawed valuations before the global financial crisis struck two years ago.

"Some of them are incredibly complicated and they are sold by very, very clever people," Richard Alderman, the director of the Serious Fraud Office, said. "The question is not just were they mis-sold, because that gives rise to a number of regulatory issues, but was there actually fraud. Or in other words, did those selling them ...

[admin]

PENSIONS SUE MANULIFE
Class actions allege inadequate risk strategy

Jim Middlemiss, Financial Post

Friday, July 31, 2009

Manulife Financial Corp. and four of its current and former executives have been hit with two class-action lawsuits by pension funds in Quebec and Ontario involving representations made about the risk-management strategies surrounding its guaranteed financial products.

The Ontario suit alleges the company "consistently misrepresented, either explicitly or implicitly, that MFC's risk management processes were adequate" and claimed that in early 2004, the company "decided to minimize its risk management in order to increase its short-term profitability."

"Without adequate risk management, MFC effectively made an undisclosed wager that the markets would continue to rise."

The suit further alleges that "MFC failed to utilize effective and appropriate risk management and failed to disclose that failure." That led to an "inflated" stock price, which "declined severely" when "the truth began to emerge."

The cases come three weeks after the Toronto-based financial giant was sued in a shareholder class-action suit in the United States that alleged it made false and misleading statements over its failure to hedge exposure to stock markets. The cases follow the announcement six weeks ago that Manulife is under investigation by the Ontario Securities Commission over its disclosure practices related to those products.

David Paterson, Manulife's spokesman, declined to comment on the lawsuits, but said, "We believe that our disclosures satisfy all applicable requirements and we are cooperating with the OSC."

The Ironworkers Ontario Pension Fund, which extracted a multi-million-dollar settlement in a class-action lawsuit against Research In Motion Ltd. and its two top executives over option backdating, has filled a $500-million lawsuit in Ontario.

Comite syndical national de retraite Batirente inc. has filed suit in Quebec.

It manages more than $700-million on behalf of its 25,000 members and has filed suit in Quebec Superior Court seeking a minimum of $10,000 in damages, although that number will soar as the litigation proceeds and more documents are filed, legal experts say.

Also named in the lawsuits are: former CEO Dominic D'Alessandro; Gail Cook-Bennett, chairwoman of Manulife's board; Arthur Sawchuk, former chairman of the board; and Peter Rubenovitch, who was chief financial officer from 1998 to June of this year.

The lawsuits claim that between Jan. 26, 2004, and March 26, 2009, Manulife made negligent misrepresentations about its risk-management practices involving its segregated funds and variable annuities.

Those products guarantee a minimum payment or return to investors and are usually backed by hedging strategies. However, last year's market turmoil resulted in substantial losses to the portfolio of investments supporting Manulife's guaranteed investment products, and the company had to raise billions of dollars to boost its capital levels. Its stock price plummeted, fueling the class-action suits.

The Ontario suit alleges that "MFC decided to substantially reduce or eliminate its risk management with regard to some or all of its guaranteed products," but failed to properly disclose that to investors.

The lawsuits claim Manulife "misrepresented that it had prudent and appropriate risk management practices and procedures" and "failed to make full and timely disclosure of [its] failure to properly hedge its exposure to market fluctuations in certain of its products."

The lawsuits also take issue with Manulife's disclosure in its corporate documents during that five-year period, arguing that investment-return risk was not properly mitigated by using reinsurance as claimed.

The pension funds disagree with Manulife's claims in its disclosure documents filed with regulators that the products were "diversified," arguing they had the opposite effect and were actually "highly correlated" once the markets tanked.

On June 19, Manulife disclosed that the OSC had issued a preliminary enforcement notice against it, which concluded the company failed to meet its continuous disclosure obligations. Manulife is now responding to the OSC's accusations.

The lawsuits were filed by Siskinds and Cavalluzzo Hayes in Ontario and by Siskinds Desmeules in Quebec. The action must still be certified as a class lawsuit, which will take months, and the courts must decide which jurisdiction should take control of the case.

jmiddlemiss@nationalpost.com

MANULIFE FINANCIAL

Ticker MFC/TSX
Close $26.29, up 82¢
Volume 6,817,308
Avg. 6-month vol. 9,796,390
Rank in FP500 3

[admin]

Fund fees face legal scrutiny
<http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090426/REG/30426
9987/1003>

April 26, 2009
Two legal cases that will be decided by courts this year may
significantly affect the mutual fund and investment advisory industries.
Financial planners and advisers should be aware of the cases and consider
the likely impact on the industry if the plaintiffs win.
Both cases involve the level of fees charged to mutual funds
by their advisory firms. The U.S. Supreme Court has agreed to hear one case,
that of Jerry Jones et al. v. Harris Associates LP. In the other, Gallus et
al. v. Ameriprise Financial Inc., the 8th U.S. Circuit Court of Appeals
overturned a district court decision in favor of Minneapolis-based
Ameriprise and sent the case back to the district court "for further
proceedings not inconsistent with the views set forth in this opinion."
In the Jones v. Harris case, the plaintiffs argued that the
adviser's fees were too high and thus violated the fiduciary standards of
the Investment Company Act of 1940.
A district court rejected this argument, ruling in favor of
Chicago's Harris Associates based on a precedent set in a 1982 case stating
that the test should be whether the fees are within the range of what would
have been negotiated at arm's length and that the fees are not so
disproportionately large as to be unreasonable in light of the services
provided.
The plaintiffs appealed, arguing that precedent should not
be followed, because it relies a lot on market prices as the benchmark of
what are reasonable fees. The benchmark is not valid, they argued, because
fees are set incestuously. They further argued that if any market fees are
used, they should be the fees for unaffiliated institutional clients.
The 7th U.S. Circuit Court of Appeals again rejected the
plaintiffs' arguments, ruling:
"A fiduciary must make full disclosure and
play no tricks but is not subject to a cap on compensation. The trustees,
rather than a judge or jury, must determine how much advisory services are
worth."
The decision of the Supreme Court to hear the appeal
suggests that at least some of the justices are ready to revisit the issue.
In the Gallus case, the 8th U.S. Circuit Court of Appeals
ruled that while the 1982 decision provides a useful framework for looking
at advisory fees, in deciding if the Ameriprise's mutual fund fees were
reasonable, the lower court should have compared them with the firm's
institutional fees.
These two cases suggest that the courts are beginning to
recognize that the mutual fund industry has changed greatly since the 1982
decision and that some of the assumptions underlying it may not be valid.
They may be ready to require mutual fund boards, who are
fiduciaries, and the fund companies, also fiduciaries, to negotiate at arm's
length and to negotiate more reasonable fund advisory fees.
If they do so, revenue and profit margins in the mutual fund
industry almost certainly will come under pressure. That could mean more
fund company mergers as firms attempt to offset the lower revenue with
economies of scale.
That in turn may lead to fewer fund choices.
It could also mean fewer client services, separate fees for
some of those services and possibly lower commissions for commission-based
advisers.
Overall, these cases bear watching because their outcomes
could have a substantial impact on the mutual fund industry and its clients.

[admin]

From: JIM MACDONALD
Sent: Wednesday, April 22, 2009 5:00 PM

Subject: 2nd OPINION: Can you sue your advisor? (Part Two)

I do not understand the continually reinforced mythology
about suing an advisor. In virtually all cases,

* the legal contract is between a customer and a company where the
salesperson is employed.
* There is no contract between the customer and the salesperson.
* The company does not allow the salesperson to use that title which
is in the legislation;
o instead the company provided business cards refer to the securities
regulator licensed "salesperson" as an "advisor" or a "VP".

If things went wrong with your car, would you sue the
salesperson or the dealership or the manufacturer of your car?

Is this strategy not a deceptive attempt on the part of the
industry to deflect responsibility totally to the salesperson rather than to
accept responsibility for the creation, manufacturing and marketing of
allegedly fraudulent, toxic products.

When I was in the industry,

* I was repeatedly told to stop asking questions about the practices
of the companies I worked for and the industry and its regulatory structure.

* I was told to stop making suggestions to provide greater
transparency to customers such as with the misleading statements that are
routinely produced by the industry.
* I was told to stop asking detailed questions which exposed the flaws
of the various structured products, income trusts or hedge funds.
* I was told that I was wasting the time of these fine people who were
briefing us on this great sales opportunity and that we all wanted to make
more money - did we not.

When the new issues, for example, imploded predictably
within months, the firms did not stand behind the products;

o instead they shifted responsibility to the salesperson and the
customer.

There is no warranty in this industry like
the car industry.

The moment the toxic products get created
and sold, the industry and all those legal and accounting firms working with
the industry, all get paid their fees and bonuses-even when predictably, the
toxic products implode within months.

Yes you can sue your advisor, but the industry has that
stacked up against you.

The industry and its regulators have created a massive wall
to protect themselves meaning that you really only have a chance to get
justice if you have at least $1 million for legal fees and ten years of your
life to dedicate to taking this all the way up through the legal appeal
process.
That is why I took the measures I did to get the Markarian
v. CIBC World Markets Inc.
<http://investorvoice.ca/Cases/Investor/Markarian/Markarian_index.htm>
decision translated into English
<http://investorvoice.ca/Cases/Investor/Markarian/Markarian_v_CIBCWorldMarke
tsInc.htm> 01 August 2007 so that English Canada would see one of the few
cases where the victim was so injured and angry that he was not going to
give up even if he had to go to the Supreme Court.

This is the most abusive industry I have ever experienced.
And too many professionals just smile and enjoy protecting their fat
paychecks.

That is why I got out.

James MacDonald MBA

[admin]

Securities class actions rising, report says

125% jump in 2008 over 2007, NERA says


http://www.Nera.Com Andrew Barr, National Post

Securities Class Actions In Canada
Jim Middlemiss, Financial Post

Wednesday, January 28, 2009

Canadian investors are getting more litigious and using securities class-action lawsuits as a means to keep companies in check, according to a new study from NERA Economic Consulting.

A securities class-action suit is where an investor sues a company on behalf of shareholders for inappropriate conduct that often leads to a decline in share price or regulatory action.

The number of securities class-action lawsuits filed in Canada rose 125% last year over 2007, hitting its highest peak ever. Last year was also notable in that there was $890-million in total payments made to settle such suits, the report says.

The nine suits filed last year was double the number of four filed in each of 2005 to 2007 and almost double the high of 2004, when five suits were filed.

"It's the highest we've seen," said Mark Berenblut, senior vice-president at NERA and co-author of the study, believed to be the first to examine such suits in Canada. The report cites cases dating back to 1997 and the filing of the infamous case against Bre-X Minerals Ltd., Canada's first securities class-action suit.

So why the spike in 2008? Mr. Berenblut speculates it's because of changes to securities laws here in Canada that have "opened the door to securities class actions." Four provinces have created civil liability for continuous disclosure, allowing investors to sue for misrepresentations in such things as press releases or quarterly financial statements or when companies fail to make timely disclosure of key information.

Ontario was first to allow such actions, in 2005. In the past two years, Alberta, British Columbia and Quebec have instituted similar measures.

Mr. Berenblut said "there's a rising consciousness. You've seen several [law] firms emerging that are specializing in this area," which is driving securities litigation.

There's likely room to grow, as securities filings are less common in Canada than the United States. Last year, there were 255 securities class actions filed in the United States. The filings here amount to less than 4% of the U. S. total, yet when adjusted for market size, the report found the filing rate here is "growing faster."

NERA, which works with law firms litigating class actions, examined the 42 cases filed since 1997.

The report found the bulk of allegations within the cases focused on improper accounting, misleading earnings guidance, insider trading and product/operational defects, and customer-vendor issues.

The cases involved 13 different economic sectors, with companies in finance (23.8%), non-energy minerals (14.3%), consumer services (9.5%) and telecommunications (9.5%) accounting for 57% of the cases.

The study also found that the vast majority of suits are settled and only a small fraction in Canada or the United States make it to trial. So far in Canada, only one case--involving Danier Leather Inc. -- has resulted in a court verdict and it absolved the company of misrepresentation, which was upheld by the Supreme Court of Canada.

Of the 42 cases examined, 20 have settled, for a total of $3.6-billion.

Such lawsuits have a cross-border nature. The report notes that nine of the settlements involved actions filed in both countries.

For cross-border suits, the total paid out was $2.9-billion, compared with the $17.7-billion claimed -- about 16.3% of the amount sought.

The average cross-border settlement was $322-million versus the $3.5-billion claimed, a 12.6% payout. However, the cross-border suits are largely skewed by two cases against Nortel Networks Corp. , which settled for $1.3-and $1.2-billion. Other large settlements included Biovail Corp. at $141-million, YBM Magnex International Inc. at $110-million and Hollinger International Inc. at $46-million.

For domestic suits, the total settlements amounted to $731-million, compared with $6.51-billion claimed, a payout of 11.2%. The average settlement was $73-million, compared with $651-million claimed, an 18% payout.

The biggest involved Portus Alternative Asset Management, a $611-million settlement, about 38% of the $1.6-billion claimed. Next was Atlas Cold Storage Holdings Inc., at $40-million, followed by Atlas American RSP Fund, which settled for $20-million, close to the $22-million claimed.

Currently, there are about $3-billion in claims outstanding involving 21 actions. The report found one area that Canada lags the United States is in option backdating class actions. There have only been two such suits, both filed in 2008. The first U. S. options backdating class action was filed in 2005 and peaked with 24 in 2006, dropping to nine such suits in 2007 and five in 2008.

"The paucity of Canadian options backdating cases to date may reflect the fact that Canadian regulators have not conducted the kind of large-scale investigations of options granting practices that were undertaken by the United States Securities and Exchange Commission," the report says.

jmiddlemiss@nationalpost.com

(advocate ps, .......and the lawyers have not even clued in to the fact that provincial securities commissions have granted thousands of "exemptions" to securities laws, negatively affecting hundreds of thousands of consumers, without public notice to them. It is like a tainted meat scandal, where the health inspectors helped to get the tainted product sold to the public, while knowing it was bad..............)

[admin]

Lawsuits against insurers certified
Great-West, London Life facing class action over withdrawn millions

December 04, 2008
James Daw
Business Columnist
TORONTO STAR

Ontario courts have certified two class-action lawsuits alleging London Life Insurance Co. and Great-West Life Assurance Co. unlawfully removed $220 million from accounts reserved for 1.8 million participating policyholders.

A trial is scheduled to begin in September 2009 in London, if no settlement is negotiated first.

The legal dispute erupted after Great-West Life bought London Life's parent company in 1997.

Participating policyholders are disputing Great-West's legal right to withdraw money from accounts reserved for them, after they had paid to participate in their insurer's profits through dividends, bonus additions or other benefits.

The insurers have argued the policyholders would benefit from savings and efficiency gains.

Formal legal notices of the action have been published in 32 newspapers across Canada. In September, the insurers failed to persuade judges of an Ontario appeal court to overturn a certification ruling granted last February.

The representative plaintiffs appointed by the courts are actuaries James Jeffery and D'Alton (Bill) Rudd and businessman John Douglas McKittrick, all of London. But anyone who has held a participating policy in the period since November 1997 stands to benefit, unless they mail a form to opt out.

Legal fees may be no more than a third of any court award or settlement. Other information about the lawsuits is available by telephone at 888-282-7217 or on the Internet at www.parpolicyclassaction.com.

[admin]

FP LEGAL POST

Financial Post

Preventative measures for class action defendants


by Julius Melnitzer

November 10, 2008
Potential class action defendants are demonstrating a growing awareness of preventative medicine. They've grown alert, it seems, to the idea that defeating certification can be achieved not only with offence but with defence. In other words, they've discovered that their chances of winning a certification motion on the grounds that a class action is not the most efficient way to go is considerably enhanced if they have an internal claims resolution process in place.

Take, for example, the Ombudsman for Banking Services and Investment (OBSI), a voluntary complaint processing system that the industry set up in 1996 when the feds were bouncing around the idea of a federal banking ombudsman. OBSI handled 468 complaints in 2007, an all-time high. It recommended compensation in 25% of banking cases and 61% of investment cases. The slow pace of resolution, however, has incurred the wrath of consumer advocates.

RBC, however, pulled its banking complaints out of OBSI this month, while leaving its investment complaints there. It moved its banking complaints to ADR Chambers, which will adjudicate appeals from RBC's internal ombudsman.

One of the reasons for RBC's withdrawal from OBSI is said to be the OBSI board's new terms of reference, which allow it to identify systemic problems and recommend compensation for all customers who are affected, rather than just the complainant. Sort of sounds like the type of claims resolution process a judge might note favourably when considering the most efficient way to deal with class action type complaints, doesn't it?

Plaintiffs counsel, take note.

Julius Melnitzer

[admin]

Anyone who lost money on the ABCP tainted investment crisis and did not recover all of it could and possibly should be investigating class action against your provincial securities commission.

Why?

Because thirteen provincial and territorial securites commissions granted permission to investment firms to knowingly break our securities laws and knowingly sell a tainted investment product to consumers.

Only by holding such persons accountable do we stop the constant abuse and predatory financial practices.

see press release below:

“The person who gave financial firms permission to break our securities laws and sell substandard financial investments to the public.”


“Is now employed at a self-regulatory agency and is pointing the finger at firms who sold these products.”


“She is the same person who signed the very documents granting legal exemption to these security laws.”


My name is Larry Elford. I am not making this up. Read on.
This release contains one Globe and Mail article, plus one comment at the end, and you will have the story.


http://www.theglobeandmail.com/servlet/ ... iness/home


Regulator says brokers failed on ABCP, sets new guidelines
JANET MCFARLAND
Globe and Mail Update
October 17, 2008 at 7:21 PM EDT
Canadian brokerage firms did little to review asset-backed commercial paper products before selling them to retail investors, according to a report by Canada's brokerage industry regulator.
The Investment Industry Regulatory Organization of Canada (IIROC) reported yesterday on a year-long compliance sweep of firms involved in selling non-bank ABCP to Canadian investors, laying out new guidelines to change the way investment firms review products before selling them to clients.
"There was very little understanding, generally speaking, of what this product really was all about," IIROC chief executive officer Susan Wolburgh Jenah said yesterday. She said brokerage firms reported they saw non-bank ABCP as little different from traditional commercial paper, even though IIROC concluded there were major risk differences.
The review concluded 76 per cent of the assets underlying non-bank ABCP were complex financial derivatives like synthetic collateralized debt obligations, whereas bank-sponsored ABCP had only three per cent of those types of derivatives and had 97 per cent traditional commercial paper assets like credit-card receivables. "The name asset-backed commercial paper was a misnomer. They were liability-backed," Ms. Wolburgh Jenah said.
The non-bank ABCP market collapsed in August, 2007, leaving investors holding about $35-billion of frozen notes, including 2,542 individuals with investments totalling $317-million. Many individuals were seniors or other risk-averse investors who reported they were assured ABCP was as safe as a bank GIC or other guaranteed product.
The report said none of the 21 Canadian brokerage firms that sold third-party ABCP to clients had reviewed the product through their internal due diligence process. Under such a process, committees assess whether new products are suitable for a firm to sell to corporate or retail clients.
IIROC said most firms reported they did not do due diligence reviews because they relied on the high credit rating the ABCP notes received from DBRS. Industry participants also reported they felt ABCP was a typical money market instrument that did not require risk assessment.
Bank-owned brokerage firms relied on reviews by their parent banks, the report added, but most of the reviews were done to establish credit and trading limits as part of financial risk control. Only one unidentified bank reviewed the product from a client suitability perspective and decided not to sell it. Toronto-Dominion Bank has previously disclosed it did not sell ABCP to clients.
IIROC said member firms that did not sell ABCP to clients reported they did not believe their clients would understand the product, or that there were simpler alternative products, or that there was little profit on the transactions. Indeed, the report said all dealer members who sold ABCP to retail investors reported the product was viewed as a "loss-leader" service to clients and not a profitable product.
No firms or brokers have been sanctioned by IIROC for selling ABCP to clients for whom it was not a suitable investment under the industry's know-your-client rules. Ms. Wolburgh Jenah said IIROC has not completed its reviews of complaints from clients.


Below is the comment from www.investoradvocates.ca :


(larry elford, from lethbridge alberta, Canada) wrote: Fascinating to see Ms. Wolburgh Jenah point the finger at Canadian Investment firms........."Canadian brokerage firms did little to review asset-backed commercial paper products before selling them to retail investors, according to a report by Canada's brokerage industry regulator"


I have in my hands two "exemptive relief" documents, signed by Ms. Wolburgh Jenah when she was vice chair of the Ontario Securities Commission. These permissions allowed major banks in Canada to sell these products to consumers without meeting our securities laws.


Perhaps it would be time for her to come forward, and explain why she granted these firms permission to break our laws with these products.


(see permissions to break our laws signed by Susan Wolbergh Jenah at:
http://www.osc.gov.on.ca/Regulation/Ord ... tdbank.jsp
and
http://www.osc.gov.on.ca/Regulation/Ord ... ntreal.jsp
and this one to CIBC signed by Paul Moore and Harold Hands of the OSC
http://www.osc.gov.on.ca/Regulation/Ord ... 1_cibc.jsp

By checking the OSC web page under orders, rulings and decisions, one can find several thousand permissions to break our laws granted by her or her colleagues at the securities commissions. A commission of inquiry is requested by investment professionals at investoradvocates.ca who find our financial laws a cruel joke at best, and criminal breach of trust at worst.

[admin]

Livent Co-Founders Liable For US$36M
Appeal Court Rules

Shannon Kari, Financial Post

Tuesday, July 29, 2008

The Ontario Court of Appeal has ruled that a US$36-million class-action judgment in the United States is enforceable against Garth Drabinsky and Myron Gottlieb.

The ruling upheld a lower court decision in Ontario and rejected arguments by the Livent Inc. co-founders that they could not properly defend the lawsuit in the United States because they are facing criminal charges in both countries.

"It cannot be that individuals such as the appellants can avoid civil liability for their misdeeds simply because they also face criminal charges in both jurisdictions. Such a result would be contrary to the principles of order and fairness," wrote Justice Susan Lang on behalf of a unanimous three-judge panel.

The decision is the fourth time a court in Canada or the United States has ruled against Mr. Drabinsky and Mr. Gottlieb in relation to the class-action lawsuit. David Roe buck, a lawyer representing Mr. Drabinksy, said he has instructions to seek leave to appeal the ruling to the Supreme Court of Canada.

The Supreme Court grants leave in only a very small percentage of cases. If it declines to hear the appeal, "the next step is enforcement of the judgment," said Jasmine Akbarali, a Toronto-based lawyer for the plaintiffs in the class-action lawsuit.

A court in New York state originally imposed the US$36-million civil judgment in 2004, which was upheld on appeal.

The class-action proceeding alleged there were misrepresentations in a 1997 registration statement with the U. S Securities and Exchange Commission concerning the distribution of unsecured notes. The statement was signed by Mr. Drabinsky and Mr. Gottlieb.

A year later, after the two co-founders were ousted from Livent by new management, the theatre company released restated results, which reduced its net income by US$85-million. It filed for bankruptcy protection and the unsecured notes were worthless, the Court of Appeal noted in its ruling.

Mr. Drabinsky and Mr. Gottlieb were charged with fraud in the United States in 1999 but they could not be extradited once they were charged in 2002 by Canadian authorities based on the same alleged criminal conduct.

The defence in the U. S. civil suit was that the Livent executives had "reasonable grounds" to believe the financial statements were true.

Mr. Drabinsky and Mr. Gottlieb claimed protection under the U. S. Fifth Amendment and refused to answer questions for the civil suit.

They argued that they were effectively prevented from testifying in the U. S. civil suit, because the evidence would have been used against them in the ongoing Canadian criminal proceeding. This argument was rejected by the Ontario Court of Appeal, which found that any U. S. testimony would likely have been excluded in Canada.

The ongoing Ontario Superior Court trial of Mr. Drabinsky and Mr. Gottlieb, who are each charged with three fraud-related counts, resumes on Aug. 12.

skari@nationalpost.com

[admin]

I just discovered a class action against provincial regulators and "bureaucrats" within the government and regulatory system regarding the matter of BSE or mad cow disease.

I makes me wonder if class action firms will one day recognize or analyze the failures and the well documented "worst practices" that are standard within our current Canadian financial services industry as well as those who police themselves as self-regulators in this industry.

The damages continue to add up, are estimated at $30 to $60 billion per year from bad practices and unresolved conflicts of interest.

Thankfully it is well enough documented that the case is not going away soon. I just hope that someone takes a look.

If anyone needs a starting spot, begin with several thousand legal exemptions granted to financial firms without public notice or public input. You, yourself probably own an investment or two that has been negatively affected by obtaining an exemption to our laws.
Drop us a note and I will help you get pointed in the right direction.