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GET YOUR MONEY BACK! Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis. • View topic - Cover-ups anyone?

Cover-ups anyone?

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corporations and lawyers try to bury the truth

Postby advocate » Thu Jul 21, 2005 6:51 pm

Investor advocate in website battle
Doug Watt
(July 21, 2005) Investor advocate and regulatory crusader Robert Kyle's website has been shut down by his American service provider.

The move follows legal threats from a Canadian law firm regarding some of the content on the site, Kyle has been told.

It's believed MacPherson, Leslie & Tyerman want all court documents related to legal claims involving advisor Brian Mallard and former employee Kent Shirley removed from the site since the matter is still before the courts.

Kyle did take down those particular documents and has set them up on a separate server. Still, the U.S. provider, United Online Web Servers, refuses to restore the main site, which has been down since last Friday.

"I think this is a freedom of speech issue," Kyle says. "And if we have Internet service providers being threatened by people who just don't like what is already circulating in the public domain, that's no justification for not publishing it. I think this material needs to be public."

United has not provided a written explanation to Kyle for closing his site. And it is under no obligation to do so. The company's service agreement says that United reserves the right to discontinue service for any reason.

Kyle's site contained hundreds of news articles, documents and court cases all related to self-regulatory organizations and the Canadian securities industry. "It took me seven years to build it, I can't do it overnight."

In addition, Kyle is worried about how this case will affect other investor sites. "If they can squelch all of this just by threatening the web hosts, then we're not going to have a voice in this country."

Kyle, a former derivatives trader, has been engaged in a long-running fight with Canadian regulators after his firm was shut down in 1998. He refused to cooperate with the IDA's investigation, challenging the brokerage industry association's regulatory powers. To date, his numerous legal efforts have been unsuccessful.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com
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Postby Guest » Wed Jul 06, 2005 10:25 pm

the latest coverup by those with something to hide is the shutdown of Robert Kyle's top research site in Canada for the investment and regulatory industry at www.regulators.itgo.com

it may come back on line, but as of today, there is no doubt that persons of unknown origin have tampered with it rendering it unavailable

freedom of speech is being threatened by a few select investment firms with a great deal of money ........a great ability to hire legal muscle...............and a great deal to hide................
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Postby admin » Tue Jun 28, 2005 10:21 pm

Advocate Ken Kivenko speaks to broker coverups
For investors who have legitimate complaints against their dealers/brokers, the IDA’s MR076 Notice to its Members offers limited comfort. It protects the ability of regulators to investigate cases of misconduct, but impairs other investors who have suffered at the hands of those same firms. The IDA does not condemn confidentiality - as long as it is immune from its effects. Fund dealers and brokerage firms can still concoct confidentiality provisions that prevent customers from sharing information with one another.

"After five years, I'm beaten into submission," one such investor told me this week. "I'm not allowed to disparage the bank at all. We're living in fear of the might of the bank closing down on us and suing for everything we've got." Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Thus by keeping settlements secret, other investors with the firm are in the dark even though the malfeasance and the resultant settlement may also be applicable to them and may still be occurring.
“The "financial euthanasia" of Canadian retirees is as important an election issue as health care, Gag orders would never be tolerated in the health care system -- the public has a right to know about the spread of SARS or other diseases. Investors should receive similar warnings of financial industry practices that threaten investors' financial well-being” –Investor advocate Joe Killoran Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Financial services firms aren’t the only one wanting to keep information confidential. Here’s the language from the current standard letter received by industry-sponsored OBSI www.obsi.ca clients.

“..Neither you nor [name of FSP] will surrender any legal rights by participating in OBSI’s process. It is critical to the success of this process that both you and [name of FSP] are able to deal with OBSI in a complete and open manner without the risk that you may prejudice your legal rights. Thus by signing this letter, you and [name of FSP] agree that OBSI’s correspondence and discussions with you as part of this process, and OBSI’s files, are confidential. You and [name of FSP] agree that in the event of any subsequent legal or other proceedings neither of you will use that correspondence or information. In addition, neither you nor [name of FSP] will seek to compel OBSI to produce its files and records, or seek to compel the Ombudsman or any other OBSI staff member or advisor to give evidence or testify in any such proceeding….”

Ironically, a bigger threat to investors is the new Ontario Limitations Act which requires investors to file for legal action within 2 years of discovery. This actually encourages financial services firms to drag out the complaint process and make low -ball offers. You won’t have to worry about the gag order-there may be no settlement at all. Seniors, retirees and small investors are truly disadvantaged by this Act making the signing of oppressive “ boilerplate provisions ” now much more likely.

Since the primary role of regulators is protect investors and act in the Public interest, how about the following ?:

Ban confidentiality Agreements unless desired by the investor
If a outright ban is not practicable, define industry –standard language for such agreements approved by regulators
If a outright ban is not practicable, include a maximum hush period of 1 year
Bound the penalties for an investor breach to the amount of restitution and define the remedies available to investors for a firm’s breach
Publish periodic statistical summaries of the hushed cases with trends and commentary so other investors can learn what type of cases are being settled
As Louis Brandeis said: Sunlight is the best disinfectant. The financial services industry needs to Walk the Talk. It’s time to respect and honor investor protection.
Ken Kivenko P.Eng.
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Postby admin » Tue Jun 28, 2005 10:18 pm

Jon Chereau Covers Investment Industry "Cover-ups"
Grievances never see the light of day
Banks, brokerages use confidentiality pacts to great effect

Jonathan Chevreau
Financial Post
June 25, 2004

CREDIT: Yvonne Berg, CanWest News Service
Stan Buell, founded the Small Investor Protection Association after settling a dispute with a big bank several years ago: "The [financial] industry covers up this huge problem of investors losing due to industry wrongdoing."
Quietly, behind the scenes, investors who lost money the last few years are receiving settlements from Canadian financial institutions.
But you won't hear about them in the press because one of the stipulations made is to adhere to the terms of so-called "gag orders."
In return for financial compensation, these investors are put in a position where they would violate legal contracts if they tell the world specifics of their arrangements.
Several large banks or their brokerage arms are involved, including several cases once prominent in the press.
Some got nowhere going to industry ombudspersons, associations or regulators. Legal action and the threat of airing their grievances publicly seems to have been what motivated institutions to settle.
As they pay their hush money, high-priced lawyers add disclaimers that such settlement agreements do not constitute admission of wrongdoing by the firms -- though it's hard to draw any other conclusion.
"After five years, I'm beaten into submission," one such investor told me this week. "I'm not allowed to disparage the bank at all. We're living in fear of the might of the bank closing down on us and suing for everything we've got."
Even with the promise of anonymity, this source would not divulge the terms of the settlement. "We are not being made whole. It's just a cessation of hostilities."
But I was given a sample of the legalese in the gag order. He/she "will not disclose terms and conditions of the settlement offer to any third party except financial advisors or lawyers, except as required by law and excepting any communication with securities regulatory or other enforcement authorities and self regulatory organizations."
In other words, plenty of professional people know about these cases -- just not the press and the general public.
A confidentiality agreement for another case which reached the Ontario Supreme Court reads in part: "is not to be, and will not be disseminated or disclosed to anyone, whether individual, corporation or other entity, public or private ... the Undersigned covenant & agree that they will only state to any third party that they can not speak about the Action."
The only exceptions are for disclosures made to lawyers or accountants for tax purposes.
The agreement makes explicit reference to the payment made to the investor: "In consideration of the within settlement, this Release, and the payment of the said consideration, the Releasors shall not make a claim or take proceedings against any other person or corporation ...."
Investment Dealers Association vice-president of enforcement Alex Popovic says the latter agreement contravenes Member Regulation Notice 076, issued May 22, 2001.
That notice clearly states agreements "shall not contain language which would prevent the client from disclosing to securities regulatory authorities, self-regulatory organizations or other enforcement authorities the facts or terms of the settlement."
Popovic appends his personal view that "anything that chills a client from coming forward is not in keeping with the intent of this notice."
The Mutual Fund Dealers Association also prohibits confidentiality restrictions on settlements between IDA members and clients, says MFDA president Larry Waite. Any settlement above $25,000, and in some cases $15,000, must be reported, he says. However, he adds, these disclosure requirements do not extend to the press.
Investor advocate Joe Killoran (www.investorism.com) suggests settlements are being wrapped up in advance of the election because "the banks are hoping the Liberals get back in and allow amalgamation."
Another investor advocate who fought and won his own case before taking on others is Jim Roache. He says there was a "flurry" of settlements two months ago, when it looked like a re-elected Liberal majority was a slam dunk. Bay Street wanted to clear the decks for a new round of bank mergers and didn't want the dirty laundry of abused investor cases upsetting their cosy relationships with the ruling party.
Seldom do these investors recoup their losses, Roache says. Most are lucky to get 50 cents on the dollar five years after the fact. "Many get nothing. The vast majority decide to write it off to experience."
Settlements save both sides the costs of dragging litigation through the courts. The rule of thumb is it's not worth pursuing unless the amount involved is at least $250,000 and you have another $250,000 to chase it down, Roache says.
The "financial euthanasia" of Canadian retirees is as important an election issue as health care, Killoran says. Gag orders would never be tolerated in the health care system -- the public has a right to know about the spread of SARS or other diseases. Investors should receive similar warnings of financial industry practices that threaten investors' financial well-being, Killoran believes.
Stan Buell created the Small Investor Protection Association after settling a dispute with a big bank several years ago. Since then, a number of SIPA members have quietly settled out of court.
"The industry covers up this huge problem of investors losing due to industry wrongdoing."
Ironically, Buell suggests it may be better that these cases are covered up. "If everyone knew the truth there would be many fewer small investors."
He concludes regulators have failed to protect investors and it's "time for the government to step in." Buell has contacted leaders of all major federal parties and hopes investor protection legislation will be introduced after the election.
© National Post 2004
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Postby admin » Tue Jun 28, 2005 10:15 pm

Cover-ups at the Provincial Securities Commissions?
Seeing the headlines surrounding the Alberta Securities Commission, following the hiding of all material facts, denial of any involvement by the OSC around Assante allegations, reading official responses from provincial Securities Commissions lead me to wonder just how much wrongdoing is being hidden and covered over.

It appears the Alberta Securities Commission will spare no expense, and leave no avenue unexplored. In an effort to ferret out abuse of investors? No. In attempts to avoid full, clear and plain disclosure of ASC activities or audit of the ASC by the provincial auditor. After twenty years in the investment business, I was personally convinced that the ASC was nothing but a "paperwork tiger", unable to protect the average investor, yet unwilling to admit to this. Now I see they area actually a fairly strong organization, unafraid to fight........unfortunately not for small investors, but rather for secrecy and coverup of the job that they are doing.

Now as I watch them, run, hide, and hire lawyers to evade an open look into themselves, it makes one wonder just how large is the iceburg beneath the surface. I guess we will find out soon enough.

To see the OSC dodge, squirm, and avoid having anything to do with documents handed to them on obvious investment improprieties is akin to watching my son explain why he cannot do his homework.

To read the responses from both the ASC and the OSC to investors, industry participants etc, who write to them of wrongdoing, as these commission do everything in their power to justify why they are not the proper people to get involved. They point, they refer, they delegate to others, but I have yet to see them actually take on an investigation into investment abuses and I have yet to see a single abused investor receive compensation due to efforts from a provincial securities commission. That after twenty years.

This smells of regulators who have become so close to those that they are supposed to regulate, that they are unable to any longer recognize what it was they were put there for. This looks like total dedication to job protection instead of investor protection.

I wish to thank the forward thinking officials of the Alberta Securities Commission for doing such a forcefull job of evading a public audit. They are doing a better job of insinuating guilt than I could imagine. I thank them for not opening their books and their operations to audit, as it speak volumes about the kind of job they feel they are doing. Typically the people who evade accountability are those with something to hide. For public servants without something to hide, an invitation to audit is nothing but an opportunity to prove the job is being done correctly.

I look forward to the day when the disinfectant of sunlight is allowed to shine on the affairs at these commissions. Until that day I believe that Canadians are not covered by any effective securities regulatory agency whatsoever. It is very much "buyer beware".
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eatons

Postby urquhart » Tue Jun 21, 2005 1:51 pm

The Eatons fiasco is discussed in the following letter from Thomas Caldwell on the OSC website under the NI 81-107 proposal to "deregulate" the mutual fund industry in Canada.


April 23, 2004

John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West 19th Floor
Toronto, ON M5H 3S8

Proposed NI 81-107

Over the years securities regulators have tolerated and encouraged massive concentration within the Canadian Securities industry, with approximately eighty percent of the securities business now controlled by the five major banks. It is apparent these entities are trying to serve too many masters. Conflicts are the natural by-product of this situation. We continue to make more rules, which drive up compliance costs for independent organizations and thus reinforce the consolidation trend. The mutual fund industry is a clear case in point.

We have also forgotten or disregarded history in the creation of the current industry structure. In the U.S., the Glass-Steagall Act, which separated commercial and investment banking functions, was put in place to deal with the abuse of banks using their equity placement (or investment management) capabilities to underpin problem loans with equity issues. Clearly, we cannot expect memories to extend back to the Act’s enactment in 1933 but we should be able to depend upon regulators’ having recall extending to 5 or 10 years.

For example, the T. Eaton Company issued its only IPO in 150 years only to be declared insolvent one year later. Whatever losses its bankers suffered were reduced by the size of the $175 million underwriting. It is ironic to note that financial projections used by the bank-controlled underwriter at the time of the financing were declared to be incorrect within three months of the deal’s closing. Part of the bankruptcy agreement included the provision that the underwriter could not be sued.

Laidlaw Inc., one of Canada’s most widely held companies, was declared insolvent when a bank initiated and advised acquisition (Safety-Kleen) declared its bookkeeping to be fictitious. Many of the shares held were owned through bank-controlled mutual funds. The banks aggressively sought recoupment of their loans to Laidlaw and not one spoke up on behalf of the direct or indirect common shareholders, many of whom held shares through their mutual funds. Clearly, in a crunch, the banks’ priorities were on the side of getting their loans back at all costs.

Canadian bankruptcy laws, unlike those in the U.S., clearly favor creditors in restructuring rather than also allowing equity holders some means of partial recoupment. This fact, when coupled with removing conflict of interest provisions, reinforces this form of common shareholder abuse.

The intent and results in these two relatively recent issues appear to be lost in the Canadian Securities Administrator’s submission. That is no surprise. For 40 years in the Canadian Securities industry, I have watched our major banks always get what they sought from the securities regulators. This, despite conflicts, trading abuses, the destruction of agency stock trading, aggressive tied selling (yes, it still exists) and the negative economic impact for small to mid-sized firms trying to raise capital.

One provision that should be specifically allowed in, however, is the ability of an investment manager to trade on a principal basis with an affiliate in the fixed income sector. All bond trading is conducted on a principal basis. It would be chaotic to reinvent this when one understands that all world-wide trades are conducted in this manner. In regards to equity trading, principal transactions are becoming the norm on an institutional basis. In this instance real costs are often hidden from investors and capital is used to buy business and further consolidate our industry. Approximately 20 years ago, as banks took over investment firms, I asked the Ontario Securities Commission: “How powerful do you want the banks to be?” The question still stands.

Yours truly, Thomas S. Caldwell, C.M. Chairman

Cc: The Right Honourable Prime Minister Paul Martin
Premier Dalton McGuinty
Honourable Greg Sorbara, Minister of Finance
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eatons

Postby admin » Thu Jun 16, 2005 2:03 pm

thanks for the reply. I will post a note in the class action area of this forum on it. The underwriters of this (if they were also the bankers to Eatons) would have been aware and had a tremendous conflict of interest IF it is true that they floated a dead horse issue on the public just to bail out their own bad loans.

Cheers
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Re: cover-ups

Postby Guest » Wed Jun 15, 2005 4:12 pm

It was obvious to anybody at the time who followed the markets that Eatons was in trouble so I'd have to say yes the dealers floated the new issue at the expense of mostly small investors and any institutional managers who could be bribed. A lawsuit to recover losses should have followed but investors as we know aren't organized. To the Eaton's family credit, at the time I recall they did the best they could to wind down the company in an orderly fashion.
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eatons new issue, was it a scam?

Postby advocate » Wed Jun 15, 2005 4:04 pm

yes, that is the one. Was it as poorly (or as crookedly) done as I am being told?
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Re: cover-ups

Postby Guest » Wed Jun 15, 2005 12:34 pm

advocate wrote:can anyone elaborate on the Eatons new issue?

Do you mean new issue a few years ago before they went bust?
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cover-ups

Postby advocate » Wed Jun 15, 2005 12:27 pm

can anyone elaborate on the Eatons new issue?

I was in the business when it came thru but paid no attention to it. Is there any truth to the rumor that the red bank had a fair amount of loans to eatons on the books, so they used their investment dealer to float a new share issue on the unsuspecting public as a good investment, used the proceeds to pay off the loans and then let the company fail shortly after??

any thoughts? Just trying to build the list of good examples
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Postby Guest » Wed Jun 15, 2005 7:31 am

The provincial securities commissions ignore the majority of fraud. Lots of obvious examples but also the not so obvious like overpriced stock sold to unsophisticated clients. Executives dumping stock while promoting is worse than the plague, many now use derivatives to hide their trades. Bribery: large shareholder pays fund to take stock off his or her hands. Bay street lawyers turning their backs on misleading prospectuses. The list goes on and on...
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elder abuse examples

Postby advocate » Tue Jun 14, 2005 12:36 pm

norah cosgrove of Ontario, taking RBC to court, and their defense was that they felt they owed no duty of care or fiduciary duty to this client????
That seems a bit odd when compared to industry advertising and industry behavioral standards.


Mel and Marion Hunt of Kitchener, who despite a similar attempt by their dealer to deny a fiduciary duty to the clients, and despite findings that the firm made unauthorized trades in their accounts, still received no satisfaction, and instead spent the last years of Mel's life in battle without help.

Pola Goldfluss, and 80 yr old widowed Holcaust survivor in Toronto area being sued by TD Waterhouse, after being caught up in perhaps less than suitable investment suggestions by her TD advisor, the advisor subsequently treminated and Pola compensated........then TD turns around and sues Pola to get their money back based on technicalities of some sort. Not a flattering story for the industry.

So many more I do not know where to begin. All generally elderly, all vulnerable, trusting, and all either financially or emotionally unable to stand up for themselves against multi billion dollar abusers.
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elder abuse

Postby advoate » Tue Jun 14, 2005 12:25 pm

I can think of 92 year old Murdo Mcdonald of Kelowna, who's family found out his RBC advisor purchased his home from the elderly man, at less than fair market value, with no appraisal, no down payment, and a zero interest loan held by the poor fellow. When the BC Securities Commission were notified of this matter by no less than two separate family members, investigators there wanted no part of it, and asked one family member to perhaps see the real estate association.
They could think of no reason to get involved in this form of elder abuse by a registered investmenet professional.
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Cover-ups anyone?

Postby admin » Mon May 16, 2005 8:35 pm

how many client abuses can you point out that are either covered over by the perpetrators, or perhaps ignored by the Provincial Securities Omissions?
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