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MFDA Not Protecting

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Re: MFDA Not Protecting

Postby admin » Sun Nov 29, 2009 10:11 am

The MFDA's argument that the BCSC shouldn't hold a review turned on two key points: the MFDA's decision wasn't really a decision under the act and that PIPFS wasn't directly affected by the decision. Indeed, pages and pages of testimony are given over to what is a decision. "The MFDA submits that the definition of "decision" from Section 1 of the Act needs to be incorporated into the interpretation of Section 28," said the counsel to the executive director of the BCSC in its submission. That argument didn't impress counsel. "With respect, importing the definition of "decision" from Section 1 into Section 28 is nonsensical; it clearly contradicts a plain reading of Section 28 and the intent of the legislature...."

[quote][/quote]

Hats off to BCSC for acting
Barry Critchley, Financial Post
Published: Friday, November 27, 2009

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Kudos to the British Columbia Securities Commission for acting. Self-regulatory organizations, such as the Mutual Funds Dealers Association, are expected to act properly, and if they don't, their overseers will intervene to ensure that they act in the public interest.

"The system of securities regulation we have in Canada depends on the roles played by regulatory organizations like the MFDA. It is essential that those organizations operate, and are seen to operate, in a manner that leaves no room to question the integrity of their governance, procedures and practices. It is equally essential that any allegations that could raise those questions be dealt with thoroughly and openly," said the BCSC this week when releasing its reasons for deciding to hold a review of the MFDA's decision to amend some of its by-laws.

One MFDA member, Partners in Planning Financial Services, had requested a review of some of the key decisions reached at a special meeting of MFDA members that was held on Oct. 2. At that meeting, members approved an increase in the number of directors and an increase in the term for each director. At the meeting there was a 75% increase in the number of proxies that were voted. PIPFS argued the MFDA improperly pressured members to provide proxies for the October special meeting through the participation of compliance staff in the proxy-solicitation process. PIPFS also had concerns that the MFDA board was unlawfully constituted because two directors, one of whom is Robert Wright, the MFDA's chairman and a former chairman of the Ontario Securities Commission, had exceeded their term limits.

None of those matters specifically concerned the BCSC. It was focused on the big picture. "We have formed no opinion on whether the public directors who had reached their term limits were nevertheless entitled to act as directors, whether any of the conflicts of interest alleged by Partners existed, or whether any aspects of the MFDA's proxy solicitation process was improper. However, the answers to these issues may well bear on the integrity of the MFDA's governance practices, and could ultimately affect the credibility of the MFDA as an institution."

What seemed to sway the BCSC was that PIPFS's application "raises sufficient public-interest concerns that the Commission ought to hear it under section 27(1)."

In the lead-up to the BCSC's decision, all of the parties -- PIPFS, the MFDA and the executive director of the BCSC -- filed a series of documents. Those documents are available the BCSC's website.

The MFDA's argument that the BCSC shouldn't hold a review turned on two key points: the MFDA's decision wasn't really a decision under the act and that PIPFS wasn't directly affected by the decision. Indeed, pages and pages of testimony are given over to what is a decision. "The MFDA submits that the definition of "decision" from Section 1 of the Act needs to be incorporated into the interpretation of Section 28," said the counsel to the executive director of the BCSC in its submission. That argument didn't impress counsel. "With respect, importing the definition of "decision" from Section 1 into Section 28 is nonsensical; it clearly contradicts a plain reading of Section 28 and the intent of the legislature...."

A BCSC spokesman said the commission "is working with the parties on the procedures to prepare for the hearings When the hearing dates are set, we will publish them."

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Re: MFDA Not Protecting

Postby admin » Tue Nov 17, 2009 9:34 am

BCSC to probe MFDA
Barry Critchley, Financial Post

Tuesday, November 17, 2009

Given the decision by the B. C Securities Commission to hold a review, there is now no place for Larry Waite, chief executive of the Mutual Fund Dealers Association of Canada, the self-regulatory body that oversees the distribution of the industry, to hide.

Waite, a veteran regulator, has been notably silent for more than a month following a special meeting of the MFDA held in early October. At that meeting, the members endorsed two motions expanding the number of board members and extending their term to eight years. Approving those motions represented a complete about-face from what the same members voted down at the annual meeting last December. There were two unusual features about the October vote: More members voted and more voted by proxy compared with the December 2008 session.

This column called Waite a number of times for an explanation of those two features and to ask whether MFDA staff played any role in getting the vote out. There was no response.

But one MFDA member, Calgary based Partners in Planning Financial Services Ltd. (PIPFS), wasn't prepared to take no for an answer. PIPFS wrote to the BCSC asking it to conduct a review of the MFDA's decision. (The letter was also addressed to Waite.) We know that because the BCSC put the front page of that letter on its website. (But the BCSC hasn't published the rest of the 12-page letter.) Those efforts have paid off: The BCSC will hold a hearing. That process kicks off today when the parties will have a hearing.

But PIPFS wanted the BCSC (which, on behalf of the Canadian Securities Administrators, is the supervising commission for the MFDA) to look into a review of the MFDA decision to amend its bylaw No. 1 and "to hold a hearing to consider the MFDA's conduct in drafting and obtaining member approval of the proposed amendments."

While it's not known what was in the letter, it's possible to speculate because prior to the October special meeting, PIPFS was concerned about the composition of MFDA's board in light of the December 2008 decision to vote down motions dealing with term limits for MFDA directors. PIPFS hired outside counsel to provide it with a legal opinion on whether "those public directors ... who were elected at the annual general meeting of the MFDA held Dec. 9, 2005 and had served as public directors since 2003, lawfully remained in office following the expiry of three years from the date of their last election."

PIPFS contacted Gowling Lafleur Henderson LLP, which provided a six-page opinion. (Copies of that legal opinion were included in filings made to the MFDA regarding the October 2009 meeting. PIPFS made other comments to that review.)

And Gowlings said: "It is our opinion that once a public director has served two successive terms of up to 3 years each, he or she has ceased to be eligible, or qualified, to serve as a public director. Accordingly the public directors who were re-elected for a second term at the 2005 annual general meeting ceased to be eligible, or qualified, to serve as public directors on Dec. 9 2008.... From that date forward (Dec. 9, 2008) they have no legal status to act as public directors of the MFDA," stated the opinion.

Reached yesterday, PIPFS said that "as the matter is now the subject of a BCSC hearing," it had no comment outside the hearing process.

Attempts to reach MFDA before press time were unsuccessful.

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Re: MFDA Not Protecting

Postby admin » Tue Nov 17, 2009 9:33 am

Larry Waite, where are you?

Barry Critchley, Financial Post
Friday, October 09, 2009
Where's Larry Waite? The chief executive of the 145-member organization that regulates the distribution side of the industry is missing in action at the same time a group of members of the Mutual Fund Dealers Association of Canada -- the self-regulatory body set up more than a decade back -- is upset with possible interference by MFDA staffers prior to last Friday's special meeting.

This columnist has made three calls to Waite and received one voice mail in return. Waite was called for an explanation on two matters -- the sharp increase in voter turnout and the sharp increase in proxy voting compared with last December's annual meeting, when the same matters were on the agenda as last Friday's meeting, and the role MFDA staff may have played in getting the vote out. (At the December meeting, the proposed bylaw changes -- essentially more directors with longer terms -- were defeated. This time the proposals were endorsed. The proxies played a decisive role.)

The meeting was told of phone calls and emails members received about their proxies from MFDA staff, a practice that would presumably be unauthorized and inappropriate. The concern of some members is obvious: The MFDA has a ton of potential regulatory power.

In its 2008 annual report, the MFDA said it opened 381 enforcement cases in 23 categories over the 12 months ended June 30, 2008. (In the previous 12-month period, it opened 361 cases.) At that level, each member is, on average, subject to almost three enforcement actions a year. Of the 381 cases, 109 escalated to investigation, 24 escalated to litigation while 20 became notices of hearing. The MFDA assessed $2-million in fines and collected $525,500.

Fidelity's new math If nothing else, it is a stunning piece of arithmetic: The pro-forma management expense ratio for every mutual fund sold by Fidelity in Canada will be lower if unitholders approve a new arrangement for funding certain operating expenses.

On Oct. 27, the funds' unitholders will gather to vote on a plan "to replace the method in which certain operating expenses are charged to each fund with a fixed-rate administration charge."

That fee will be set as a fixed annual percentage of the net asset value of each series of each fund and will be paid by each fund to Fidelity.

If the administration fee structure is adopted, the MERs "for each series of units or shares of the funds will become more predictable and transparent, and more easily calculated in future years," said the circular to unitholders.

Fidelity is offering three different administration fees: one where the fund's assets are less than $100-million, another when the assets are between $10-million and $1-billion, and another where the assets are more than $1-billion. As the assets rise over those three levels, the admin fee will fall by 10 basis points. Each fund will continue to pay its own brokerage commissions plus some other costs.

To proceed, each fund (the firm has almost 120) needs a quorum of at least two unitholders and a simple majority of the votes that are cast.

However, Fidelity Investments has the discretion "to postpone or elect not to proceed with the introduction of the Administration fee should it so determine."

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Re: MFDA Not Protecting

Postby admin » Tue Nov 17, 2009 9:33 am

Why the big turnout at MFDA vote?


Barry Critchley, Financial Post
Wednesday, October 07, 2009
The Mutual Fund Dealers Association of Canada, the self-regulatory organization that oversees the distribution side of that industry, has received enough support from its members to approve changes to its governance structure. Last Friday, the members met for more than three hours at a special session and approved a number of changes, including an expansion in the number of directors, who will now be able to have a maximum of four terms each of two years.

But before the decisions, which overturn some similar matters rejected by the members last December, become the law of the land, the Canadian Securities Administrators is required to give the go-ahead. The B.C. Securities Commission is the lead regulator on this matter. And some of those who opposed the changes intend to press their case, despite the obvious risk.

"Members are asking whether the BCSC will create a safe zone where people can come forward and say, 'This is what happened,' " said one member.

Aside from the merits of their arguments -- the board is already big enough and directors shouldn't be able to stay for eight years given any organization's need for fresh blood and voices -- the dissidents plan to focus on key matters, including whether MFDA's board was properly constituted over the past nine months and the conflicts of interest experienced by some directors on term limits during the bylaw rewriting. Some of the CSA members have received a sneak preview: The meeting was told that seven regulators were listening to the proceedings. "They never said a word," said an attendee.

And the dissidents plan to focus on some matters that arose out of the session. For instance:

-The sharp increase in voter turnout. Last Friday 118 members voted -- a 50% increase from last year. "I would have thought that last December's [turnout] was more normal," said one dissident, noting the MFDA had 145 members at June 30.

-The sharp increase in proxy voting. At the meeting, 57 members voted by proxy. "They really beat the bushes to get people out and collected proxies in support of management's position," said one attendee, who contrasted the meeting's cut and thrust with the views of those who voted by proxy. "The people who voted by proxy weren't hearing the arguments presented [at the meeting]. They had only heard the one side that they had been presented by management," said one member.

The significance of all of this? At the meeting, some members said they had received solicitation enquiries from MFDA staff to deliver their proxies. "This is not a management-shareholder kind of relationship. This is a regulator-regulatee relationship. There is a fair bit of intimidation in getting a phone call from a person who works for an organization which may have an audit going on of you, or be in a position to further, to discontinue or not, or initiate an investigation [into your firm,]" said one member. "People stood up at the meeting and said, 'This happened to me'. People also provided emails that they had received from staff [inquiring whether they had returned their proxy.]"

This dissident said the discussion on whether to count the proxy votes "was never really resolved at the meeting."

Larry Waite, MFDA's chief executive, told the meeting that no staff were authorized to solicit proxies. Calls to MFDA seeking an explanation for the high voter turnout were not returned.

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Re: MFDA Not Protecting

Postby admin » Fri May 15, 2009 11:59 am

Bankrupt Farm Mutual fined over $2.5 million for sale of inappropriate securities

Big deal. A hearing panel of the Mutual Fund Dealers Association has terminated the membership of Farm Mutual Financial Services Inc. and has fined the company more than $2.5 million for the sale of certain securities to unaccredited and inappropriate investors. Farm Mutual was a non-attendee. The MFDA found that between June 2003 and April 2007, Farm Mutual Financial Services approved and allowed the sale of debentures issued by FactorCorp Financial Inc. to approximately 680 clients without having conducted reasonable due diligence on the product and without having made reasonable inquiries to determine whether the product was suitable for sale to its clients. In May 2007, FactorCorp suspended redemptions, and two months later, the Ontario Securities Commission issued a temporary Cease Trade Order against the company. At the time, roughly $49 million of Farm Mutual clients’ debentures remained outstanding and unredeemed. Over a year ago, in March 2008, FactorCorp went into bankruptcy. The MFDA also found that Farm Mutual failed to develop guidelines or investor profiles to identify clients for whom the debentures might have been a suitable investment. Unfortunately, other than writing up reports nothing meaningful was done about it so investors now must try to recover via a class action lawsuit.

A review of the transactions revealed that only 22 of the 680 clients of the Respondent who purchased had a risk tolerance of “high” recorded on their Know Your Client information at the time of their initial purchases. Fifty-two clients had no risk tolerance information recorded. In addition, only 44 of the 680 clients met the necessary thresholds to qualify for the accredited investor exemption. The remaining 636 clients should not have been sold the debentures, according to the MFDA. Since Farm Mutual is bankrupt, the MFDA said it would not be filing a proof of claim in the bankrupt estate, which would compete with the distribution of funds by the trustee in bankruptcy to any other creditors. Not exactly world class investor protection, eh? Source: M. Harman, IE, April 30, 2009

source www.canadianfundwatch.com
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Re: MFDA Not Protecting

Postby admin » Sat Feb 21, 2009 6:17 pm

Feb 2, 2009

To: Aamir Mirza, LL.B.
Senior Legal & Policy Counsel
The Mutual Fund Dealers Association of Canada
Email: amirza@mfda.ca tel 416 945-5128

From: Investor Advocates.ca

Re: Mutual fund dealers misleading the public, and encouraging
unsuitable, higher commission mutual fund trades.

Dear Aamir,

I have failed to grasp your logic from previous correspondence, as to
how poor sales practices are either allowed or accepted by the MFDA.
I understand your role is in conflict, namely you are responsible to
our mutual fund dealers alone, but you are also purporting to be a
regulatory body to protect the public. My problem is that I can
clearly see your support and loyalty to the industry, however I am not
getting a clear picture as to how you protect the public.

Two questions for the MFDA.

Question # 1, Misrepresentation refers to the MFDA requirement not to
mislead, misinform or misrepresent oneself or ones role as an
investment industry employee.

For example, MFDA Rule 1.2.1(e) generally prohibits Approved Persons
from using any business name (or title) or designation that deceives
or misleads, or could reasonably be expected to deceive or mislead, a
client or any other person as to the proficiency or qualifications of
the Approved Person. In addition, business titles that deceive or
mislead clients or the public as to the Approved Person's category of
registration are also prohibited.

How then, do you justify and allow investment persons who are
registered, licensed, and compensated in the license category of
"salesperson", to inform, advertise, and generally represent
themselves to the public as being trusted, professional, "advisors"?
(advisor being a totally different license and registration category,
different duty of care, different motivation and compensation)

Question #2, Suitability refers to the MFDA requirement that
investment industry persons should ensure that each and every trade
meet suitability requirements:

From MFDA MEMBER REGULATION NOTICE MR-0069 regarding “suitability”. To the extent that there is subjectivity in the analysis, the expectation
of MFDA staff is that the Member and AP take the most conservative
approach and act in the best interests of the client:

How do you explain (or allow) mutual fund salespersons to place mutual
funds product sales into the highest revenue generating mutual fund
class (DSC), when equal and identical mutual fund classes are more
cost effective to the client, and therefore more suitable for the
client?" This practice is forbidden by US regulators, yet accepted or
ignored by yours. Why?

I believe that actions or infractions against the public, such as the
above, are a contributing factor in bringing about the conditions of a
“perfect storm” in our financial markets. I ask that you please
explain your part in condoning these actions or in failing to police
them.

I post this inquiry in a public forum and I ask that concerned
investors please write a letter to the MFDA and IIROC (IDA) regulatory
agencies, and ask them to answer these questions. Copied also to
media in case the public might be interested in the response. (some
MFDA answers are posted in "salesperson or advisor" topic on http://www.investoradvocates.ca

/Users/larryelford/Pictures/iPhoto Library/Originals/2009/16-Feb-09_5/Picture 13.png


Larry Elford , Executive director of investoradvocates.ca
lelford@shaw.ca
Lethbridge, Alberta
Attachments
Picture 13.png
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Re: MFDA Not Protecting

Postby admin » Sun Feb 01, 2009 11:33 am

two questions for the MFDA.

Question # 1 refers to the MFDA requirement not to mislead, misinform or misrepresent oneself or ones role as an investment industry employee.
MFDA Rule 1.2.1(e) generally prohibits Approved Persons from using any business name (or title) or designation that deceives or misleads, or could reasonably be expected to deceive or mislead, a client or any other person as to the proficiency or qualifications of the Approved Person. In addition, business titles that deceive or mislead clients or the public as to the Approved Person's category of registration are also prohibited

The question for the MFDA regarding misrepresentation is this: "How to you justify and allow investment persons who are registered, licensed, and compensated in the license category of "salesperson", to inform, advertise, and generally represent themselves to the public as being trusted, professional, "advisors". (advisor being a totally different license and registration category, different duty of care, different motivation and compensation)

Question #2 refers to the MFDA requirement that investment industry persons should ensure that each and every trade meet suitability requirements:
From MFDA MEMBER REGULATION NOTICE MR-0069 regarding suitability.
To the extent that there is subjectivity in the analysis, the expectation of MFDA staff is that the Member and AP take the most conservative approach and act in the best interests of the client.

The question for the MFDA regarding suitability is this: "How do you explain (or allow) mutual fund salespersons to place mutual funds product sales into the highest revenue generating mutual fund class (DSC), when equal and identical mutual fund classes are more cost effective to the client, and therefore more suitable for the client?"

Please write a letter to your MFDA and IIROC (IDA) regulatory agency, and ask them to answer these questions. Copy your local media in case the public might be interested in the response.

(see also "salesperson or advisor" forum for correspondence with MFDA on this second question)
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Postby admin » Sat Mar 15, 2008 5:28 pm

“Devlin said the MFDA has never, to date, "taken formal disciplinary proceedings in complaint-handling matters." Source: Barry Critchley, Good luck to you, Mr. Hockin, [chairman, Ottawa's Single Securities Regulator Panel] http://www.nationalpost.com/scripts/sto ... ?id=353615 Financial Post, March 5, 2008 pg FP2 What a lead in to story below

MFDA goes for OBSI’s throat-protecting Bay Street from Main Street

“…It is our view that the appropriate response to the discovery of a Systemic Issue is for OBSI to refer the matter to the appropriate regulatory or law enforcement agency as such organizations are in the best position to determine an appropriate regulatory response…We understand that the Joint Forum of Financial Market Regulators acknowledged that OBSI should be able to review Systemic Issues. The concerns set out above would be mitigated if the proposed Terms of Reference were to include a limited definition of “Systemic Issue”. In our view, Systemic Issues should be defined as matters of a routine and administrative nature such as overcharge errors and interest rate calculation errors…” Source: MFDA submission to OBSI Re changes to Terms of Reference http://www.obsi.ca//images/document/up-5MFDA.pdf

Is the MFDA in dreamland? The Joint Forum of Financial Market Regulators and Finance Canada, in discussions with the Financial Services OmbudsNetwork, have agreed upon Guidelines that set out principles for third party dispute resolution systems for consumers in banking services, investments and insurance. The Guidelines require that the Terms of Reference of the OmbudService should include the authority to identify and investigate systemic or widespread issues an OmbudService may find in the course of its work arising from complaints regarding an individual firm or
more broadly in a sector.

While OBSI is a industry –sponsored and 100% funded ombuds service with limited authority its board has at least endorsed the change in its Terms of Reference based on a leading independent international consultant’s recommendations. Industry representatives sit on its board .The MFDA publicly states that it’s not in the business of obtaining restitution for victims of financial assault. They can’t even collect most of the wrist slap fines they impose. Why on earth is an SRO taking this position when it knows the industry complaint system is seriously flawed, investors are frustrated and that OBSI has earned some measure of respect from complainants. The MFDA itself is under fire for its recent handling of the infamous Ian Thow scandal, a systemic abuse case if there ever was one. Is the MFDA saying that OBSI should turn a blind eye when they see a systemic issue that is harming multiple retail investors? The narrow systemic issue definition they propose is unworthy of the leadership of the MFDA –shame. The MFDA well knows it’s not interest rate errors that are dominant complaints –it’s unsuitable investments, unauthorized trades, excessive fees and undue leveraging. They know that the historical regulatory response to restitution has been inaction. Could this be a turf war with the hapless investor once again caught in the middle? Frankly, it’s impossible to distinguish the MFDA’s comments from those of industry lobbyist IFIC –how sad.

“..Industry ombudsman services are in a unique position in the financial system. No one else has their information, no one else has their perspectives of the consumer issues prevalent in the sector, no one else understands the consumer experience as they do and no one else has their familiarity with common (and best) practice across the sector. No other body is in as good a position to be simultaneously trusted and respected by each of the three sets of stakeholders.
As old fashioned as it may sound, that simultaneous trust and respect cannot exist unless the ombudsman service is clearly seen to be using their unique position to stand for and do what is right within its own remit…We come down on the side of greater proactivity. An industry ombudsman service is a resource of great potential value to each of the three stakeholders and it would be a great waste if this resource were not put to good use for the community. ,, ” - Independent Review Report : OBSI , Sept. , 2007
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Postby admin » Wed Dec 26, 2007 10:13 pm

----- Original Message -----
From: "Jim MacDonald" <jamesmacdonald@rogers.com>
To: <bcritchley@nationalpost.com>
Sent: Wednesday, December 26, 2007 5:15 PM

Subject: Re: "MFDA no match for Berkshire"
Barry: liked your article but disagree with your conclusion. This is not the Canadian way. Canadians have been hoodwinked into thinking that an SRO like the MFDA can be trusted to have integrity in the discharge of its assigned regulatory duties.

The CSA were naïve and continue to be so in thinking that a "Boys Club" can be entrusted with disciplining one of the "boys." It will never happen.

This is just another example of an SRO choosing to protect its members over the protection of Canadians. Faced with a conflict, the industry will always protect the industry.

The conclusion should be that in the field of financial management where the industry personally benefits at the direct expense of the customers it serves, the regulatory function should never have been delegated to the industry.

The immediate corrective action is for the CSA to revoke all of its delegation to the SROs and to assume these statutory duties itself.

Canadians will continue to get screwed by the industry until this is corrected...and we don't need to wait until the outcome of the single regulator debate to correct this matter.

Jim.
Best wishes.
Jim MacDonald MBA
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Postby admin » Mon Dec 24, 2007 8:54 am

Subject: Questions on the Berkshire Affair
( advocate comment.......Here is an e-mail that was sent to Shaun Devlin at the MFDA regarding it's decision on the Ian Thow affair. Shaun, for those who do not know, worked previously at Assante during the time of it's buildup towards a selloff of it's shares.....using as part of the buildup, an exemption to the law against commission rebating, to allow Assante to help move $8 bil of client assets to their house brand funds. Assante's motive, they earn "nine to sixteen times more money" from having the client invest in a house brand fund that having the client own a third party independant product. Client effect.......they pay more money for a less proven fund. MFDA motive? Duck and cover your industry pals as they abuse client interests? )


Shaun
We at the Fund OBSERVER have received over 600 angry emails in the last week
re the MFDA drcision on Berkshire:
Perhaps you could answer some of the questions being posed by our readers:

Was Mr. Thow a Canadian citizen?
Did he have valid Canadian work papers?
Was he required to post a Fidelity Bond?
Do we know why he left IG in 1998?
Do we know why BERKSHIRE fired Thow in June 2005 ?[ the reasons could
provide invaluable clues ,if in fact he was actually fired]
Can claims be made against Berkshire's D&O insurance as he was an Officer of
the Company?
What was the maximum fine that could have been applied ?
What exactly were the terms of the rejected Oct. 22 Hearing panel? [this
should be publicly disclosed]
What was the greatest sanction that could have been applied and why were
absolutely no sanctions applied?
Given that some $30 million was alleged to have been stolen and $6 million
confirmed, why was he allowed to leave Canada?
Did the firm advise clients of OBSI's free dispute resolution service?[
there is only 1 complaint filed with OBSI in 2006]
Do we know if his assets have been seized , the dollar value and how the
money has been distributed?
Why is restitution not part of the settlement as was the case with IG
Financial Services in 2004 for their involvement in
the market timing scandal?
Why did it take so long for the MFDA to come to a conclusion given the
overwhelming evidence in the case , the least of which is evidence of a
serious client complaint that existed as early as Sept. 2004 ?

why has the MFDA not cited Berkshire for allowing systematic
"churning' -Thow clearly caused clients to redeem mutual funds and some of
the proceeds were invested in bogus investments. [ the redemptions must have
been of such a scale over a number of clients that compliance ought to have
intervened]

To which agency have you referred the case for criminal action [Victoria
Police Fraud squad, Vancouver IMET?] and when?
Do we know the status of their criminal investigation?
Is there a warrant out for Thow's deportation and arrest?
How does the firm explain their intentional disinterst and inaction given
Mr. Thow's readily apparent oppulent spending and life style? Indeed, how
does the MFDA pacific regional Council ezplain their blindness given Thow's
outrageous activities were well publicized in the local press over an
extended period?

How is it possible the Hearing Panel accepted that Berkshire's failure to
conduct reasonable supervisory investigations in response to two complaint
reports was not the result of a systemic failure on its part or intentional
misconduct given the overwhelming evidence to the contrary?[The BCSC has
described Thow's activities as "one of the most callous and audacious frauds
this province has seen".{ audacious defined as recklessly bold ,
unmitigated call }

Why was Berkshire not required to acquire compliance software that would
have detected the high level of fund redemptions in accounts for which Thow
was accountable?

Are the $50,000 in costs charged to Berkshire a calculated amount based on
level of effort and actual cost incurred ?[At a nominal $300/hr this would
suggest that the investigation took only 166 hours or about 4 weeks at 40
hrs/week by a single person.]

The MFDA News Release refers abused investors to OBSI- is the MFDA aware
that complaints will not be entertained by OBSI after 6 months from the
rejection of claim by Berkshire?

The MFDA News Release refers abused investors to OBSI- given that the MFDA
has publicly accepted that Berkshire's failure to conduct reasonable
supervisory investigations in response to the two reports was not the result
of a systemic failure on its part and that it was unaware of Thow's
fraudulent activities , what chance will complainants have?



The MFDA News Release suggests civil action as a possible route to
restitution- why did the NR not disclose the BC statute of limitation period
to file restitution claims?

What is the MFDA assessment of the detererence value of the settlement?
Will any MFDA rules change as a result of this fiasco?

There are at least 2 dozen other questions we could ask? We are trying to be
constructively critical and we hope you accept our interrogatory in that
spirit.We are not expecting a formal response but instead rely on your
integrity and personal reputation that the questions are answered and that
the MFDA does the right thing in this case and in the future.


We wish you a very Merry Christmas and the very best wishes for 2008.

Ken Kivenko
Kenmar Associates
Last edited by admin on Wed Dec 26, 2007 10:18 pm, edited 2 times in total.
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Postby admin » Mon Sep 17, 2007 10:27 pm

Progress on Thow case is glacial: Why Is The Fund Dealers Association Investigation Taking So Long?
That’s the title of an insightful article by the Post’s Barry Critchley. We quote: “Like other regulators, it [the MFDA] focuses on the low-hanging fruit. It's a non-player when it comes to the big stuff”. Critchley points out that the Ian Thow case has been dragging. More than 2 years ago, the MFDA www.mfda.ca launched an investigation into Berkshire Investment Group, the financial-planning firm that employed Thow, a SVP based in its Victoria office who allegedly bilked clients out of more than $30-million.

We continue with this quote:“ …The conversation was frustrating for other reasons: For instance:
· The MFDA's enforcement branch is not involved with providing any input into the regulatory clearances Manulife needs to be able to complete its purchase of Berkshire. It's possible the MFDA could complete its work after Manulife has purchased Berkshire. (Manulife may want some idea of its risk.) The official said he would provide the name of the MFDA person who is required to sign off on the Manulife purchase. By the close of business yesterday, that name hadn't been provided. Bureaucracy is wonderful.
· On whether the MFDA is waiting for the BCSC to make its decision before reaching its conclusion, the official pointed out that the BCSC is investigating Thow, while the MFDA is investigating Berkshire.
· The MFDA is itself a victim. "It's a high-priority matter for us. We are moving it forward. One of the constraints for us is that we can't comment on the process as it is underway," he said. "We are not the only people that control how fast the process unfolds. We are dealing with numerous other parties in terms of the information gathering," including Thow's and Berkshire personnel. ”
According to the article, Berkshire has a long history of not co-operating. It has refused to supply documents to OBSI and to a court hearing in B.C. The MFDA has concluded only 2 disciplinary actions in British Columbia, the province with 12,000 mutual-fund salepersons. Neither of the disciplinary actions was the product of a contested hearing. Investor protection? - give me a break. Source: B. Critchley, Progress on Thow case is glacial, Financial Post, Aug. 30, 2007 To follow Thow’s money trail read http://www.canada.com/victoriatimescolo ... 48c&k=3522 Accountant unravels Thow's money trail June 8, 2007


from www.canadianfundwatch.com
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Postby admin » Thu Aug 30, 2007 9:19 am

Progress on Thow case is glacial
Why Is The Fund Dealers Association Investigation Taking So Long?

Barry Critchley
Financial Post



Thursday, August 30, 2007
Mutual fund investors, rest easy: The Mutual Fund Dealers Association -- the national self-regulatory organization for the industry's distribution side, the body set up in June, 1998, at the initiative of the Canadian Securities Administrators --is on the job, 100% of the time.

At least that's the impression the $20-million organization, which "regulates the operations, standards of practice and business conduct of its members and their representatives with a man-date to enhance investor protection and strengthen public confidence in the mutual-fund industry," would like us to believe.

The reality, of course, is something else: Like other regulators, it focuses on the low-hanging fruit. It's a non-player when it comes to the big stuff.

More than two years ago, the MFDA launched an investigation into Berkshire Investment Group, the financial-planning firm that employed Ian Thow, a senior vice-president based in its Victoria office who allegedly bilked clients out of more than $30-million.

(Prior to Berkshire, Thow worked at Investors Group. Thow abruptly resigned in 1998, "for personal reasons.") More than 18 months back, Michael Lee-Chin, the founder of AIC, the parent of Berkshire, said, "We are hopeful we can come to a resolution as quickly as possible."

Berkshire is in the process of being acquired by Manulife. That deal, the price of which was not disclosed when the announcement was made on June 26, is set to close tomorrow. Calls made to both Manulife and Berkshire were not returned.

In July, 2006, the B.C. Securities Commission started a hearing into Thow over allegations including fraud, registrant misconduct, misrepresentation and trading without registration. That hearing -- a hearing that Thow, who moved to the United States more than two years back, chose not attend -- continued this year. The sessions wrapped up last month. BCSC said it will give its deliberations in October.

The MFDA has also been beavering away, and it, too, hasn't reached a conclusion.

But based on conversations with senior enforcement people, including those directly involved with this investigation, one wonders if a conclusion will ever be reached.

"We are still involved in the gathering and analysis of information, but we are drawing close to the end of that process," said an MFDA official.

The irony: A similar comment was made by another enforcement official many months ago. "I can't give you a hard date [as to when the investigation and analysis will end] but we are closer to the end now [than the start]."

What's the delay?

MFDA would like us to believe that outsiders can't appreciate the scope of the work to be done. "It is a very large case, a very complex case, a complex set of facts and a complex set of issues," said the official, who refused to detail the various elements in its investigation. Complex work is a term normally applied to putting people on the moon or dealing with problems with the space shuttle.

But the official insisted the work is complex and that the investigation and analysis "is not taking longer than normal. It is taking the amount of time that it takes to process a case of this size and complexity," said the official, in an attempt to defend how inertia and lack of decisiveness have been elevated to an art form. "You can imagine it's not quite as simple as it seems," he said. (Since November, 2002, the MFDA has concluded only two disciplinary actions in British Columbia, the province with 12,000 mutual-fund salesman. Neither of the disciplinary actions was the product of a contested hearing.)

---

The conversation was frustrating for other reasons: For instance:

▌The MFDA's enforcement branch is not involved with providing any input into the regulatory clearances Manulife needs to be able to complete its purchase of Berkshire. It's possible the MFDA could complete its work after Manulife has purchased Berkshire. (Manulife may want some idea of its risk.) The official said he would provide the name of the MFDA person who is required to sign off on the Manulife purchase. By the close of business yesterday, that name hadn't been provided. Bureaucracy is wonderful.

▌On whether the MFDA is waiting for the BCSC to make its decision before reaching its conclusion, the official pointed out that the BCSC is investigating Thow, while the MFDA is investigating Berkshire.

▌The MFDA is itself a victim. "It's a high-priority matter for us. We are moving it forward. One of the constraints for us is that we can't comment on the process as it is underway," he said. "We are not the only people that control how fast the process unfolds. We are dealing with numerous other parties in terms of the information gathering," including Thow's and Berkshire personnel.

▌On whether the MFDA is getting snowed by Berkshire, the official said it wasn't -- all of which raises the question:

What is causing the delay and why doesn't the MFDA encourage Berkshire to be more forthcoming, given that it has the power to suspend Berkshire's licence?

Certainly Berkshire has a long history of not co-operating. It has refused to supply documents to the Ombudsman for Banking Services and Investments, the independent body that investigates complaints from individuals and small businesses about products and services provided by bank financial groups, and to a court hearing in B.C.

"Berkshire's failure to comply with the rules of court and various court orders made during the course of this application is not acceptable," noted the judge.

---

The pace of the MFDA's work has upset many of Thow's former clients. They say the matter is straightforward: Thow got their business as a senior Berkshire executive running the firm's Victoria office; and it is up to Berkshire to supervise all its employees.

bcritchley@nationalpost.com

© National Post 2007
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Postby admin » Sat Jun 16, 2007 9:02 am

MFDA on the ball?

“..Earlier this year, [B.C.] Judge Richard Goepel chastised the firm [Berkshire Securities branch in Victoria, a affiliate of AIC Funds] for its stonewalling tactics [in the Ian Thow case; Mr. Thow was only licensed to sell mutual funds]: “ Berkshire’s failure to comply with the rules of court and various court orders made during the course of this application is not acceptable,” he remarked. Boosting the stakes is the spectre of regulatory action against Berkshire. The securities commission decided that the Mutual Fund Dealers Association - the self- regulatory body for mutual fund purveyors like Berkshire - should review the firm’s conduct in this affair. Based on the association’s record to date, I wouldn’t be terribly concerned.

Since it started taking complaints in November 2002, the association has concluded only two disciplinary actions in B. C., and neither was the product of a contested hearing (one was settled, and in the other case, the respondent didn’t show up). I would have thought that, with more than 12,000 licensed mutual fund sales people in B. C., the association could have found more to do. Two years have passed and association officials still aren’t saying when they will wrap up their investigation. If they ever wake from their slumber, it could be interesting: Their rules allow them to assess fines up to $ 5 million per offence…”. Source: D. Baines, Day of reckoning unlikely, Vancouver Sun, May 26, 2007 http://www.canada.com/vancouversun/colu ... b3306d0fc1

source:
canadianfundwatch.com The Fund OBSERVER Mid- June, 2007
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Postby Guest » Mon Oct 31, 2005 8:28 pm

Wall Street's 'Brainwashing Machine' By Paul B. Farrell, MarketWatch
Last Update: 7:30 PM ET Oct 31, 2005

LOS ANGELES (MarketWatch) -- Warning folks: Wall Street's "Fabulous Brainwashing, Mind-Control, Propaganda & Hype Machine" is in full swing. Call it the "Brainwashing Machine" for short. And you're the target. They want your money. As much as they can skim.

Wall Street controls $8.4 trillion of your retirement money through the mutual fund industry. For every 1% they can skim, they stick another $84 billion in their greedy pockets. How do they do it? Very easy. Psychological tricks to manipulate and control your mind: Ten powerful yet deceptively subtle behavioral-finance tools to siphon off your money without triggering a rebellion.

Just a delusion? Am I inventing an Orwellian fantasy, like "1984," written over 50 years ago when a paranoid nation feared a Big Brother government might use mind control to manipulate us with double-think, newspeak and thought-crimes!

Oh how quickly we forget. In 2000, just as the Nasdaq was peaking, a BusinessWeek cover story featured the Wall Street "Hype Machine" exposing an "unprecedented marketing blitz" that was transforming investing into a "high-risk sport." In 2002 more of Wall Street's media-manipulation strategies were exposed in "Irrational Exuberance," "The Fortune Tellers" and others as Americans lost $8 trillion.

Flash forward: Three years ago we learned how important psychology is in Wall Street's plans to control the minds of America's 95 million investors. The 2002 Nobel Prize for Economics went to a psychologist. Daniel Kahneman and other behavioral-finance experts were blowing the cover off Wall Street's historic fiction, the "rational investor." Psychologists prove we're all "irrational investors" and our minds are easy to manipulate using the new psychological technologies of behavioral finance.

Now, along comes futurist Ray Kurzweil's new book, "The Singularity is Near." Unlike Orwell, the pessimist before him, Kurzweil's an optimist. He predicts that by 2045, thanks to rapidly accelerating technologies, we will experience "the singularity," where the human race "breaks the shackles of its genetic legacy and achieves inconceivable heights of intelligence, material progress and longevity."

Optimism's great, but Kurzweil's "happy talk" about the future is weak in the area of morals, ethics and psychology. His optimism cannot erase reality. New "heights of intelligence, material progress and longevity" may get mass-produced for us all. But that will also mean they're available to global terrorists, psychopaths and the "Brainwashing Machine."

I've watched this machine evolve since my days at Morgan Stanley in the 1970s. Wall Street's central goal is to create a dependent investor, not informed, rational investors. Wall Street knows investors are irrational, insecure and vulnerable. Wall Street knows investors are easiest to deceive, manipulate and control if they are like sheep.

So here's my latest progress report, an update on 10 strategic thrusts that make up the Wall Street's "Fabulous Brainwashing, Mind-Control, Propaganda & Hype Machine." Together these weapons are very effective in the war to skim off the maximum amount from your portfolios, without triggering a rebellion:

1. Short-term 'buy button' -- relentless stimulation

What a mind-control tool: Former SEC Chairman Arthur Levitt warned about the misleading negative effects of performance ads. They increase investor anxieties and trigger a need for instant gratification. They encourage optimism and the gambler's instinct, ironically increasing the frequency for short-term errors in judgment.

2. 'Savings button' -- minimize long-term thinking

Psychologists look into your brain, know what makes you buy, sell, save -- information that Wall Street and Madison Avenue use against you. The reverse side of the "buy button" sows doubts about future retirement security. Our daily overdose of ads encourages buying now on credit, increasing debt, resulting in a negative savings rate.

3. Hyperactive trading -- Wall Street and Main Street

Short-term online trading is encouraged and increasing. Today only 30% of stocks are held directly by passive individual investors. Hyperactive full-time portfolio managers have a competitive edge using psychological trading strategies to beat naïve little guys.

4. Broker training -- aggressive closing techniques

Securities are sold not bought. Brokers are trained using aggressive psychological tricks. Inevitably, a broker's so-called advice is self-serving and misleading. Anything goes in closing a sale. Just get the commission.

5. New designer funds -- based on the latest fads

Using psychological tools, the machine can design new funds based on the latest fads that are appealing to gullible investors who can't stop chasing higher returns. Anxious investors want the latest trading gimmicks -- hedge funds, commodities, junk bonds, gold coins -- like teenagers buying the newest techno-toys.

6. Supply 'free' experts to the media

Remember dotcom talking heads like Merrill's Henry Blodgett and Morgan's Mary Meeker. Today, new ones fill the channels, 30 a day, every day, every channel, pushing their brand of snake oil. Wall Street advertisers love it! Talking heads are free advertising, adding to Wall Street's ability to control investors through media content as well as advertising.

7. Invest in lobbyists -- protect secrecy and nondisclosure

Wall Street also controls investors by severely limiting what Wall Street must disclose. Lobbying is one of Wall Street's best "investments." It is the largest donor to politicians. Their lobbyists control Congress and the SEC. They fight reforms and push for laws that benefit them personally. Then they spin propaganda to mislead investors.

8. Disinformation programs -- create a 'we care' illusion

Most Wall Street-sponsored "investor education" programs are self-serving new-business and promotional gimmicks. Wall Street knows these so-called "educational" programs are useless and ineffectual. But they help Wall Street types pretend that they "care."

9. Retirement gatekeepers -- keep in dark and manipulate

We know pension and retirement managers control 70% of all funds. So most Wall Street money managers rarely have to deal directly with an individual investor. Instead they focus sales pitches on 401(k), 529 and other corporate plan managers who are often just as naïve and easy to manipulate.

10. Brainwashing geniuses -- on Wall Street's payroll

Using consulting contracts, grants and retainers, Wall Street's "Brainwashing Machine" can lock up the best talent in behavioral finance and investment psychology to work on its side in perfecting the ability to manipulate America's 95 million individual investors. That guarantees Wall Street will achieve its goal of total and absolute domination of the investors' brains.

Orwell's Big Brother? Kurzweil? Even worse! For Wall Street, it is already 2045! The singularity is already here for the manipulators. You must wait. Meanwhile, they keep skimming, you keep losing. You are at a serious disadvantage against an enemy that still believes "greed is good." No wonder Wall Street loves technologies based on the new behavioral-finance psychology.
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Postby admin » Sun Oct 30, 2005 8:35 am

In Canada, fraud cases can drag on
Thursday, October 27, 2005

By Mark Heinzl, The Wall Street Journal

TORONTO -- Canadian authorities say they want to clamp down on corporate crime. They seem to be having a hard time.

Take Livent Inc. In 1998 -- before Enron, WorldCom, Tyco International, Adelphia and other high-profile U.S. accounting scandals unfolded -- the Toronto-based producer of "Phantom of the Opera" and other Broadway shows went into a tailspin. Its U.S.-listed shares became worthless. The company, under new U.S. management, accused founder Garth Drabinsky and other executives of a fraud that disguised the company's financial problems for years.

When might Mr. Drabinsky go on trial? At this point, probably not until early 2007 -- nearly a decade after Livent fell apart.

Mr. Drabinsky has maintained his innocence. Staying in Canada, he has avoided trial on criminal charges brought in 1998 by federal prosecutors in New York, as U.S. authorities deferred to their Canadian counterparts on the case. Some four years after the U.S. charges, Canadian police charged Mr. Drabinsky and other Livent officials with various counts of fraud. Some of those charges were quietly dropped earlier this year; a trial on the remaining counts is slated to begin in March 2007.

The "right to mount a proper defense" can stretch out a "difficult, complex fraud" case, said a spokesman for the attorney general of Ontario.

About two years ago, Canadian authorities vowed to get tougher on alleged corporate wrongdoers. While some recent moves show stiffer resolve, critics say cases are still taking too long, if they are pursued at all, and penalties remain light by U.S. standards.

Action against corporate crime in Canada is "maybe a little bit better, but it's not very noticeable," said Stephen Jarislowsky, a veteran money manager in Montreal who is active in promoting better corporate governance. He said the country's splintered group of 13 securities regulators -- one for each province and territory -- is ineffective and should be consolidated into one national regulator.

Authorities haven't pressed hard enough in several high-profile scandals, he said, including Livent, the Bre-X Minerals gold scam and more recently, alleged fraud at Hollinger International Inc.

The Hollinger case is "a critical test for Canadian authorities as to the resolve for more aggressive enforcement," said Jacob Frenkel, formerly an assistant district attorney in New Orleans and senior counsel in the Securities and Exchange Commission's enforcement division.

Under pressure from U.S. shareholders, the Chicago-based publishing company nearly two years ago forced former top executives Conrad Black and David Radler to step down, amid allegations that they siphoned tens of millions of dollars from the company, often through entities they control in Canada, where they both live. The two face SEC civil charges, and Mr. Radler has pleaded guilty to a mail-fraud charge brought by federal prosecutors in Chicago. He has agreed to serve 29 months in prison.

Mr. Black denies wrongdoing. Prosecutors this month froze $8.9 million of his proceeds from a recent real-estate transaction, a move Mr. Black is challenging. The criminal investigation into Hollinger continues and could lead to more charges.

The Ontario Securities Commission, Canada's largest securities regulator, meanwhile, in March accused Mr. Black, Mr. Radler and others of improperly diverting funds. The two men face fines or securities-trading bans if they are found guilty of the civil charges at a hearing set to start next month. But Canada's Royal Canadian Mounted Police, who oversee criminal investigations, say their involvement in Hollinger is limited to offering to help U.S. officials.

It is typical for one country's law-enforcement officials to take the lead on an international case, said RCMP Superintendent Craig Hannaford, who heads the Toronto branch of the RCMP's corporate-crime operations. He said Canada has a "totally different legal system" compared with the U.S., which has a "robust plea-bargaining system," federal sentencing guidelines and other mechanisms that help put corporate criminals behind bars.

Even Canada's central bank has said the country has an image problem. Bank of Canada governor David Dodge last December said some international finance players see Canada as the "Wild West."

Canadian police haven't charged anyone in the Bre-X case. The Canadian company claimed a giant gold find in the Indonesian jungle. The find was exposed as an elaborate scam in 1997, and several billion dollars of market value evaporated.

The Ontario Securities Commission filed civil charges against Bre-X Chairman John Felderhof for insider trading in connection with his sale of 84 million Canadian dollars, or about US$71 million, in Bre-X stock in the mid-1990s.

Eight years after Bre-X was exposed, Mr. Felderhof's often-delayed trial plods on in Toronto, and after nearly five years a verdict is likely still a year away. Mr. Felderhof, who has made only a brief appearance in court, mainly spends his time at his seaside estate in the Cayman Islands or in Indonesia, his lawyer said.

The RCMP now is "working very hard" on some high-profile corporate cases, Mr. Hannaford said, citing previously reported investigations of accounting issues at Royal Group Technologies Ltd. and Nortel Networks Corp. Both companies said they are cooperating with the investigations.

Canada has moved to strengthen fraud laws, Mr. Hannaford added, citing a recent increase in the maximum prison sentence for fraud to 14 years from 10.

The OSC is seeking a jail term of three to five years for Andrew Rankin, a former RBC Dominion Securities managing director, after an Ontario court judge found him guilty of 10 counts of illegally tipping a friend about takeover deals. It would be an unusually harsh sentence. The longest jail term on record for insider trading in Canada is six months.
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