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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 - Financial Abuse by "Trusted Professionals"

Financial Abuse by "Trusted Professionals"

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Postby admin » Fri Dec 02, 2005 12:13 am

I also agree with Ken's statement, "I also question the terms bad actors or rogue broker . I believe the abuses are systemic".

He is right on with this.
The unfortunate crimes are not the rogue broker, who when caught gets punished. This is how the system is supposed to work anywhere. This is a bare minimum that regulators need do in order to even be in the game.

But the much larger crime (by orders of magnitude) is the system which allows obfuscation, confusion, hidden fees and hidden motivations to systematically pick the pockets of trusting clients in Canada.

Every person in the industry, including the regulators are part of this "see no evil", game and it is simply and sadly wrong.
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Postby Guest » Fri Dec 02, 2005 12:03 am

Subject: Re: 12-01-05 ROB: All is not lost. Investors do have recourse against bad actors


Good column but please note the recently imposed 2 year constraint on civil litagation, OBSI's horrible track record , the seriously flawed IDA arbitration system
and the important fact that most publicized fines are never actually collected by the IDA or the MFDA.All these elements prevent justice.
Some of those banned simply end up selling Seg funds or PPN's which are loosely regulated.
Gag orders prevent abused investors from warning others.
What can we tell Norbourg, Argentum , Crocus or Portus investors?.
Basically, investors experiences with the IDA are negative and they are viewed as nothing more than an industry lobbyist but things are hopefully getting better..
The OSC's negotiated market timing settlement gave investors back a fraction of the losses incurred and no fundco paid a fine or was sanctioned.

In the case of seniors and retirees they just want their money back and are not out to solve world hunger. Many are so distraught, the abuse is a life-altering
event.

I also question the terms bad actors or rogue broker . I believe the abuses are systemic and only when the firms are fined
directly will you see real change. When investors see execs hauled away in cuffs for economic crimes against citizens , there will start to be some change.

Yes, justice is not only slow it is numbing, exasperating,stressful and often gets you ZIP .
Nevertheless you are doing very good pro-investor work and I fully support your initiatives.

Respectfully,
Ken K
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Postby Guest » Fri Dec 02, 2005 12:02 am

PERSONAL FINANCE: REGULATION
All is not lost. Investors do have recourse against bad actors

By ROB CARRICK

Thursday, December 1, 2005 Page B20

Hardly a week goes by where this column doesn't hear about something heinous done by an investment adviser.
Readers contribute some of these stories, but most of them come from regulators. In an effort to demonstrate how they're policing the markets, the Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada send regular notices to journalists about actions taken against that small minority of advisers who break the rules.

All regulators in the financial industry could do more to help people exploited by these advisers. But these e-mails show there is a working justice system that investors can certainly use, despite its flaws.

Be warned: Neither the MFDA nor the IDA can make good on losses sustained because of bad advice or unethical behaviour by an adviser. But they do investigate and punish, especially when the offences are flagrant.

The IDA is pretty good about publicizing its enforcement activities against advisers. On its website at http://www.ida.ca, you'll find that there were 158 current investigations and 79 disciplinary cases under review as of Oct. 31.

Data supplied by the IDA from its complaints and settlement database, or ComSet, shows that 10 people were permanently barred from working for member firms in the first nine months of the year, eight people were suspended, 25 had conditions placed on their continued employment and seven received warning letters. The total amount of fines assessed was $1.5-million, with an average amount of $45,530 per decision.

Investigations are conducted as a result of complaints that flow in either from the public or from ComSet, through which member firms report internal investigations and disciplinary actions, settlements and civil and criminal actions against the firm or its employees.

The IDA says it received 1,089 complaints from the public from Jan. 1 to Oct. 31 of this year, and 1,085 complaints were relayed through ComSet. If you refer back to the number of investigations and disciplinary actions, you'll quickly notice that most complaints go nowhere.

Still, it's important that individual investors report any unethical or illegal behaviour by their adviser, even if the regulator involved has no power to order restitution. The reason is simply to protect other investors from bad advisers.

In the extreme, we have a pair of advisers whom the MFDA recently fined a combined $575,000 and banned from the securities business. This was in connection with a scam that attracted $2.15-million that was not accounted for.

On a more mundane level, we have an adviser who was fined $25,000 by the IDA for breaking securities industries rules by facilitating a loan between clients and his son's company without telling his superiors, by failing to report a client complaint to his firm and by indicating to a client he would make up any losses in the client's account.

The IDA's complaints data for this year show the most common problem reported by investors is unauthorized trading in their accounts, followed by unsuitable investments. The ComSet figures show that unsuitable investments are the source of 39 per cent of the disciplinary events reported by member brokerage firms.

Unsuitable investments are not mentioned much in those enforcement bulletins that the IDA and MFDA send out, but it's still worth lodging a complaint if you've been victimized by this type of advisory incompetence or malfeasance. The IDA may send an informal warning letter to the adviser involved or, if there are other complaints about the same adviser, it might start a broader inquiry into his or her practices.

Before you make a complaint with a regulator about an adviser, be sure you've got good grounds that go beyond market-related losses. Bad investments don't qualify unless they were demonstrably a result of your adviser putting you in investments that weren't in sync with your risk profile.

You can complain to the IDA about an adviser at one of its member firms by calling 877-442-4322 or by filling out an on-line complaint form you'll find in the "Investors" area of the IDA website. The MFDA, which handles complaints about advisers who sell mutual funds only, can be reached at 888-466-6332, or you can send an e-mail to complaints@mfda.ca. Call your provincial securities commission for advice if you're unsure about where to complain about your adviser.

If you've lost money and you deal with a bank-owned broker, you can attempt to get restitution through the bank's in-house ombudsman. Go to the Ombudsman for Banking Services and Investments (obsi.ca) if you deal with an independent brokerage, or if a bank ombudsman tells you to buzz off. The courts are a possibility if you don't mind spending money to recover money, while another option is an arbitration plan offered through the IDA.

Remember, justice for wronged investors is slow at best and unattainable at worst, but it does exist.

rcarrick@globeandmail.ca
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Postby admin » Mon Nov 28, 2005 10:06 pm

News Release

Norbourg Wins 2005 Lump of Coal Notoriety Award

Toronto, Nov. 30, 2005-the Fund Observer today announced the winner of the 2005 Lump of Coal Award for Most Notorious Fund Company.

Lumps of Coal Awards recognize managers, executives, groups, regulators and companies for attitude, performance, action or behavior that is offensive, duplicitous, disingenuous, reprehensible or just plain stupid. Based on an idea from Chuck Jaffe.

The Most Notorious Fund Company Award must meet stringent criteria:

1. Must have significant negative media, regulator and law enforcement attention
2. The allegations must be grievous
3. Unitholders should be adversely affected
4. A trade Association should be embarrassed

The Award goes to. …Norbourg funds for setting a new low in media coverage of a Fund Company.

Here’s the unique Norbourg accomplishments:

· Disturbing media coverage in both official languages and shocking photos of a raid of Head Office
· The Autorite des Marches Financiers (AMF), the provincial regulatory body for Quebec , alleges that nearly $69.8 million belonging to Evolution and Norbourg funds were embezzled.- a first for a Canadian mutual fund
· A discrepancy of $70.7 million between the company's latest financial statements and its assets under management.
· Allegations by investors that annual financial reports for the past three years were misleading or false.
· The alleged falsification of documents for Norbourg's operations.
· The Investment Funds Institute of Canada (IFIC) accepted the resignation by Michel Fragasso, Chair of Fonds Evolution Inc and SVP of Norbourg. as Chair of IFIC.

We believe these factors make Norbourg the hands-down choice for the 2005 Award.

Other Awards will be announced in January 2006 including the least sought after Award for Worst Securities Commission and the humiliating Worst Fund Governance Award.

CONTACT: Ken Kivenko , President Kenmar kenkiv@sympatico.ca
About the Fund OBSERVER: A free bi-weekly industry-independent e-publication devoted to investor protection and education
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Postby admin » Mon Nov 28, 2005 10:03 pm

US still ensuring settlements on this kind of thing

Federated Investors to Settle Charges
Monday November 28, 2:56 pm ET
By Michael Gormley, Associated Press Writer
Federated Investors Agrees to Pay $100 Million to Settle Mutual Fund Probe With New York, SEC


ALBANY, N.Y. (AP) -- Federated Investors Inc., one of the nation's largest investment managers, has agreed to pay $100 million to settle state and federal charges that it allowed favored clients to benefit from mutual fund trades at the expense of other investors, New York Attorney General Eliot Spitzer and U.S. regulators said Monday.


"With this agreement, virtually the entire mutual fund industry has now sworn off improper trading practices and agreed to compensate investors who were harmed," Spitzer said of the settlements with his office and the U.S. Securities and Exchange Commission.

"Federated worked with regulators to address problems with improper trading," Spitzer said.

Federated's president and CEO, J. Christopher Donahue, said in a statement that the settlements "reflect our focus on strengthening the trust and confidence of investors and our dedication to safeguarding the investments of our clients."

"Today's announcement comes after an extensive internal review, which was substantially completed over a year ago, and our implementation of several initiatives over the last 20 months to enhance our policies and procedures ...," he said.

Founded in 1955, Pittsburgh-based Federated is one of the nation's largest investment managers with assets under management of more than $207 billion, according to the firm's Web site.

Federated is the 14th firm to settle improper mutual fund trading charges since Spitzer's case against the Canary Capital Partners firm in 2003.

Federated has agreed to make reforms, to be censured and to pay $35 million in restitution to investors, $45 million in civil penalties, and cut its management fees by $20 million over five years. Federated will also hire a senior officer to monitor the setting of advisory fees for managing funds to be sure they are "at arm's length and are reasonable," according to the announcements by Spitzer and the SEC.

Under the settlements, which involve three affiliates of Federated Investors -- Federated Investment Management Co., Federated Securities Corp. and Federated Shareholder Services Co. -- they neither admitted nor denied the regulators' allegations.

The investigation of Federated focused on mutual fund timing by insiders that can hurt long term mutual fund shareholders by reducing their shares' value.

"By allowing undisclosed market timing in Federated funds, (the company) disregarded its fiduciary duties to the funds' long-term shareholders," SEC Enforcement Director Linda Thomsen said in a statement. She said the agency "will continue to pursue mutual fund advisers and other fiduciaries who place their interests above those of fund investors."

Spitzer and the SEC accused Federated of secret market timing with three trading groups, knowing it gave an unfair advantage to the groups over individual investors. There were other agreements that Federated failed to stop, the regulators said. Federated collected "substantial" fees on the traders' assets as a result of the dealing, they said.

The regulators said Federated secretly allowed Canary to make more than $1.6 billion in timing transactions. Canary, in exchange, made a "sticky money" investment for $10 million in a Federated-advised fund. Federated then collected additional fees.

So-called "sticky assets" are investments made by favored customers as a condition for their improper trading privileges.

The regulators also said Federated placed orders from a hedge fund after the 4 p.m. close of the markets, when law requires the mutual fund orders to be placed before the closing to receive that day's price.

New York Attorney General's office: http://www.oag.state.ny.us

Securities and Exchange Commission: http://www.sec.gov

Federated Investors Inc.: http://www.FederatedInvestors.com
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Postby Guest » Mon Nov 28, 2005 7:09 pm

Here is more evidence of criminal acitivity in the mutual fund industry.

http://biz.yahoo.com/ap/051128/mutual_f ... .html?.v=8
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"financial industry has lost its moral compass."

Postby admin » Mon Nov 28, 2005 5:48 pm

PAUL B. FARRELL

David vs. Goliath -- bet on the underdog!
Tenacious shareholder challenges big fund

By Paul B. Farrell, MarketWatch


ARROYO GRANDE, Calif. (MarketWatch) -- America was built by pioneers, underdogs, little guys, unsung heroes, lone wolves -- Davids who get mad as hell and stand up to Goliath while their neighbors get ripped off and just sit, grumbling in quiet desperation.

MARKETWATCH
PERSONAL FINANCE



Allan Roth is one of those Davids. His battle is so unusual you need to hear the story. It's not like the other megabuck stories dominating today's news. But it's great to see how one shareholder can make a difference. Goliath is the $8.4 trillion fund industry. Roth's been challenging it since 2003, before Spitzer jumped on the fund scandals.

Roth is a lone wolf taking on the $3.3 billion Dreyfus S&P 500 Fund (PEOPX:
Dreyfus S&P 500 Index

Roth copied me on his dealings with Dreyfus' chairman, attorneys and others. He's polite, tactful and tenacious. Hi opponents are too, although trapped in denial about doing what's really right for their shareholders.

What Roth has done is force the Dreyfus board to consider something so bizarre I've never heard anything like it in years of writing about mutual funds: He proposed a tax-free merger deal between Dreyfus' S&P 500 fund and Vanguard's S&P 500 fund which even got Vanguard interested enough to consider the deal.

No surprise: Dreyfus turned down Roth's merger idea. It didn't have much choice: Selling the S&P 500 cash cow to Vanguard's better performer would look like an admission that Dreyfus was taking advantage of investors.

But before you dismiss Roth as just a wild-eyed Don Quixote tilting at windmills, consider all the facts.

In spite of the denials, it sure looks like this Dreyfus fund is charging shareholders in excess of $11 million annually in unnecessary fees and expenses, based on Roth's calculations. That's big money, perhaps more than $100 million in a decade (not even considering the effects of compounding), the kind of incentive that's like waving a red flag in front of some plaintiff's attorneys. And that's just the money involved in one of Dreyfus' 193 funds.

Let me outline a few more facts so you can see the "power of one" in action. Look closely, because Roth's challenge to Dreyfus is a microcosm of everything that's wrong with the entire fund industry today. And why his story is a modern-day sequel to the Biblical story of David and Goliath.

Roth began buying into the Dreyfus S&P 500 index fund in 1991. He currently has about $100,000 invested. The potential tax consequences make him hesitant to sell, although new money is now going in the Vanguard S&P 500 where the expense ratio is about a third the ratio of the Dreyfus fund, 0.18% versus 0.50%.

Is Goliath openly picking a fight?

In 1994, Mellon bought the Dreyfus family of funds. Today the Dreyfus funds manage about $50 billion in assets, an increase from $16 billion in 1989, according to Morningstar. Meanwhile, Mellon has not only refused to pass along any economies of scale to shareholders but also the funds' collective expense ratio has doubled from 0.75% to 1.49% in 15 years.

The Goliath plot thickened after Mellon bought Dreyfus. Mellon kept Joseph DiMartino, Dreyfus' president, as Dreyfus Funds chairman of the board. It seems absurd that one man can effectively manage 193 funds, but unfortunately that's common in today's fund industry.

Worse yet, Dreyfus has the audacity to claim DiMartino is an "independent" director, which is another farce the pro-management/anti-investor SEC permits America's fund industry to torture investors with. And to rub salt in the wounds, this so-called "independent" chairman was paid $874,125 for part-time work in 2004. That's more than four times what the next-highest-paid Dreyfus director gets.

In 2004 Morningstar gave Dreyfus Funds a low "D" on the fiduciary rating scale, just slightly better than the "Fs" the fund families who were caught up in the scandals got. Morningstar specifically noted that the Dreyfus board quality was "poor" in part because DiMartino was managing too many funds.

Frankly it sure looks like Dreyfus is vulnerable in today's new legal climate where many shareholders are asking why expenses are ridiculously high and most growing fund families refuse to pass on economies of scale to shareholders. You can't help but wonder if maybe "Roth versus Dreyfus Funds" isn't on some savvy lawyer's mind.

Goliath's lost its moral compass

There were a lot of questions I wanted to ask the Dreyfus folks, but their attorneys would not return calls. Roth says their attorneys contacted him about a settlement. He refused to consider an individual settlement. He said any settlement had to involve all shareholders and that his real goal was to get Dreyfus to "put shareholders first" and lower their expense ratio for everyone. That's something the DiMartino-controlled board has refused to do three times.

A Dreyfus spokeswoman declined to comment when I asked about the settlement discussions Dreyfus attorneys wanted to open with Roth. She did acknowledge that any shareholder could go public with any communications involving Dreyfus, but otherwise, no comment.

Dreyfus better watch out. Roth's paper trail is exposing what might well turn out to be the basis for a class-action lawsuit.

Then Goliath may wish it had taken David up on his novel offer to merge the Dreyfus S&P 500 index fund into Vanguard. But then, the Dreyfus behavior is consistent with a remark Morningstar's president said not long ago, "the fund industry has lost its moral compass." Today, funds are run like cash cows for the benefit of insiders. Shareholders come second in this greed driven industry.
Last edited by admin on Sun Jul 27, 2008 7:18 pm, edited 1 time in total.
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Postby Guest » Thu Nov 24, 2005 7:50 am

Other possible criminal practices in the mutual fund industry:

Fund buying securities promoted by investment banks in exchange for shelf-space at the retail level.

Kickbacks: tickets, vacations, offshore deposits (e.g. Valentine of TK) where an investment banker or wealthy investor offers money in exchange for taking a security off hands.

Pressure: subtle threat of unemployment if fund manager doesn't "cooperate"
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Postby Guest » Wed Nov 23, 2005 11:50 pm

NOVEMBER 23, 2005 - 12:01 ET

Thousands of Burnt Canadian and U.S.A. Investors Fight Back

Attention: Business/Financial Editor, Lifestyle Editor, News Editor

THORNHILL, ONTARIO--(CCNMatthews - Nov. 23, 2005) - The recent publicity given to Robert Goldin of MACGOLD DIRECT INC's "Do it Yourself" Investors Loss Recovery model, has resulted in thousands of enquiries from Canadian and American mutual fund investors, who are concerned that their mutual funds may have been market timed in the recent market timing scandal, and that they may have lost hundreds or thousands of dollars.
Until now investors have not claimed their market timing losses because most didn't know whether they were affected by the scandal or whether their mutual funds were market timed. Many others didn't know how much they had lost, or how to calculate their losses. This model, which is a world first, solves all these problems. It gives investors easy to follow instructions how they can calculate and recover their losses without a lawyer.

Only 5 mutual fund companies (out of possible 20) have settled with the Ontario Securities Commission, who ordered that the settlements be paid to affected investors. Investors are angry at the small payments received, some as little as a few dollars. Meanwhile hundreds of thousands of investors in the other 15 mutual fund companies got nothing! The model helps all investors to calculate and recover what they are entitled to.

/For further information: Website: www.robertgoldin.com (Click on "Market Timing of Mutual Funds")
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Postby Guest » Fri Nov 18, 2005 7:19 pm

What we are dealing with today is NOT new!

Tuesday, May 11, 1999

Canadian market reform urged
'Disasters have turned us into laughing stocks'

Barry Critchley
Financial Post

Two weeks ago, Claude Lamoureux, chief executive at the Ontario Teachers Pension Plan Board, ripped into the investment industry -- specifically accountants and directors -- for placing corporate interests above their professional obligations and the interests of shareholders.

Mr. Lamoureux, who oversees a $55-billion collection of assets, is not the only one concerned, nor is he the only one who has put those concerns into print.

Toronto-based Burgundy Asset Management Ltd., in a 11-page missive, outlined its concerns about the past two years of "embarrassments and disasters in the Canadian capital markets." The gaffs "have turned us into the international laughing stocks." Burgundy, which manages assets for private clients and institutional investors, makes its argument based on the examples of Bre-X, YBM Magnex, Philip Services, and Livent.

"We believe it is important that responsible people intervene to stop the drift and ineptitude that afflicts Canadian markets at every level. Canada is no longer comfortably mediocre in this field as we are in so many others; we are a good deal worse than that," Burgundy said.

After surveying the minefield -- which cost a total of $9-billion in terms of market capitalization -- enough to purchase Power Corp., Trimark and Astral Communications -- Burgundy reached four main conclusions:

z That Canadian investors are not doing their jobs;

z That Canadian auditors are not tough enough in demanding transparent accounting;

z Regulators cannot do their jobs due to the Canadian markets "ridiculous" Balkanization;

z That Canadian exchanges are too busy competing with each other to serve the public interest.

"Whatever emerges we believe that Canada should have one gold-standard exchange of premier quality," said Richard Rooney, president of Burgundy, and the report's author. "That hasn't existed in Canada."

So what does Burgundy advocate? It breaks its so-called lessons learned into four areas:

Analysts and investors: In making investment decisions, it argues that management is key.

"The kind of managers we like are the ones who are dedicated to their businesses, but able to keep themselves in perspective, and their egos under control," it writes. It also argues that simplicity matters, transparency matters, and capital allocation matters. And to be convinced, Burgundy argues that investors should be able to mutter a quote from Peter Lynch: "Once you've been able to tell the story of a stock to your family, your friends, or the dog ... so that even a child can understand it, then you have a proper grasp of the situation."

Auditors: Burgundy makes the argument that "a rediscovery of the conservatism principle would make balance sheets 'harder,' prevent aggressive accruals, and improve the quality of earnings reports." It adds the Canadian Institute of Chartered Accountants "should mandate the preparation and disclosure of a true statement of cash flows for all public firms.

Regulators: Burgundy argues that the problems with the Canadian regulatory system are structural. However, it believes that some of the best regulators are not full-time staffers but fast-track lawyers joining the securities commissions almost on a pro bono basis. Burgundy believes what is needed -- given that it is skeptical about a proposed Canadian securities regulatory system -- is a "seamless, national, full-time, fully funded, tough, and consistent regulator for the securities industry, someone to 'kick butt and take names.' "

Stock exchanges: Given the experience of Bre-X and YBM -- both of which were listed on the Alberta Stock Exchange and then transferred to the Toronto Stock Exchange -- Burgundy says the TSE has everything to gain in terms of credibility and investor confidence if its shuts these loopholes and requires prospectuses for all listings. Burgundy would make one exception: Where the issuer is listed on a stock exchange with high standards like Montreal or New York.







Copyright © Southam Inc. All rights reserved.
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Postby Guest » Sat Nov 12, 2005 9:44 am

Memo to Members & Others - November 12, 2005

WHEN WILL OUR GOVERNMENT TAKE ACTION TO PROTECT INVESTORS, JAIL THE PERPETRATORS, AND REQUIRE RESTITUTION.

THE INVESTMENT INDUSTRY CIRCUMVENTS REGULATIONS AND PREYS ON THE WEAK AND ELDERLY. THERE IS NO MORAL INTEGRITY OR SOCIAL RESPONSIBILITY. THE INEFFECTIVE REGULATORY SYSTEM CONDONES CORRUPTION AND FRAUD BY FAILURE TO EFFECTIVELY PENALIZE PERPETRATORS.

HOW CAN RESPONSIBLE CITIZENS ALLOW THESE SITUATIONS TO HAPPEN? WILL GOVERNMENT ACT ON THIS CRISIS? SENIORS ARE LOSING THEIR SAVINGS AT AN ALARMING RATE. LIVES ARE BEING DESTROYED. HOW MANY SENIORS ARE CRYING THEMSELVES TO SLEEP?

CONTACT YOUR MEMBER OF PARLIAMENT.

SUPPORT SIPA. SAVE OUR SENIORS.

STAN BUELL, FOUNDER & PRESIDENT
SMALL INVESTOR PROTECTION ASSOCIATION - WWW.SIPA,CA



http://www.canada.com/montreal/montreal ... 0e30c0aa13




Investors' life savings disappear - again
Regulators crack down on Mount Real. 800 investors may hold about $65 million in mostly illegal, potentially worthless notes

PAUL DELEAN and DON MACDONALD
The Gazette


Saturday, November 12, 2005



CREDIT: CP
Mount Real CEO Line Matteo has been ordered to cease trading.

A 68-year-old woman with $135,000 tied up in Mount Real Corp. securities said she doesn't expect to ever see her money after a crackdown this week against the company by Quebec securities regulators.

The woman, who did not want to be named, said she's been trying since August to get her money back from iForum Financial Network.

One of its financial advisers sold her a promissory note issued by Mount Real. She got nothing but a runaround and had been expecting the worst.

"I cried myself to sleep many times in the past number of weeks. I feel very helpless," she said. "That's my RRSP. It's what I need now, the money I should be using for the next number of years."

She's one of an estimated 800 investors that Quebec securities regulator L'Autorite des marches financiers believes to be holding about $65 million in mostly illegal, and potentially worthless, promissory notes from Mount Real.

Another victim who stands to lose $400,000 said he, too, has lost a good portion of his retirement fund. "I'll have to keep working now," said the man, who is 65.

Many purchased the notes through representatives of iForum Securities Inc. (formerly Norshield Securities Inc.) and iForum Financial Services, for which the notes constituted a major source of business.

The AMF said it started getting complaints from investors in August that Mount Real was defaulting on the notes. There were 15 complaints on file when Mount Real and several related companies were shut down by bailiffs on Thursday and turned over to a government-appointed administrator.

Cease-trading orders also were issued against several executives and directors of the companies including Lino Matteo, Mount Real's chief executive officer, and Joseph Pettinichio, chief executive of iForum and former president of Mount Real, the latest in a series of confidence-rattling regulatory strikes in Quebec's financial-services industry this year. Norshield, Norbourg, Zenith and Argentum were the subjects of earlier interventions.

Holders of Mount Real notes aren't the only ones now in a tough spot. Also left in limbo are investors with shares in the publicly traded company.

The Toronto Stock Exchange issued a cease-trading order on the stock late Thursday for an unspecified violation of the requirements for continued listing.

The shares, priced as high as $5.90 in March, last traded around $1.10. IForum shares on the TSX Venture exchange are also halted.

The arrival of bailiffs at Mount Real's Allard St. offices Thursday coincided with the announcement Pettinicchio was stepping down as president and third-quarter revenue had plummeted to $3.3 million from $12 million in 2004. The company provides financial management and accounting services and strategic advice to companies and individuals.

Mount Real and related companies have been under investigation since February by the AMF, which began probing its brokerage and advisory practices, the trades of employees and directors, and its links with another company in hot water with regulators, Norshield Financial Group.

Norshield founder John Xanthoudakis is a former director of Mount Real, its one-time principal shareholder and a long-time associate of Matteo.

Norshield, a Montreal hedge fund operator, is the target of a major regulatory investigation. Authorities say $130 million of investors' money is missing.

The AMF concluded Mount Real had been issuing promissory notes without a required prospectus. It requested the asset freeze and appointment of an administrator earlier this week from the Bureau de decision et de revision en valeurs mobilieres.

"Any additional delay risked compromising further the interests of investors and the protection measures put in place by the AMF," it said.

The Bureau delivered the order Wednesday after a hearing with an AMF lawyer and investigator.

The allegations are "very serious," it said, "and tend to show we're faced with a well-structured and multi-faceted organization for whom respect of the law and elementary investment and securities rules is not a priority.

"We're faced with an unacceptable situation where market professionals abused their position to mislead investors, over a long period, and it's still going on. Instead of being a rampart protecting investors who entrusted them with their assets, they profited from the situation to confound their interests."

Robert Laflamme, an external director of Mount Real Corp. since 1997, said he was "totally flabbergasted" by the turn of events. "I honestly don't understand what's going on," said Laflamme, chairperson of Investpro Securities and an industry professional since 1968. "If you're going to sit on the board of a company, you have to have faith in the people running it."

As recently as a board meeting Wednesday, Laflamme said he was assured by interim chief executive Matteo that Mount Real had answered all the AMF's questions.

In an interview with The Gazette last month, iForum executive Yves Mechaka denied his firm's advisers were selling unregistered investments to clients.

"The Mount Real paper is definitely a registered security and it's done as per the rules and regulations," Mechaka said. "We're not doing something wrong at all."

Laflamme said Mount Real directors also were regularly assured the company was onside in matters of securities regulation. They were told no prospectus was needed if the investments were for terms of less than a year, Laflamme said.

"The way we read (securities) law, that's not the case," AMF spokesperson Philippe Roy said.

© The Gazette (Montreal) 2005
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Postby Guest » Mon Nov 07, 2005 9:04 am

As we approach November 11th REMEMBRANCE DAY we must not forget the many who gave their lives during the wars that enabled us to live in peace.

We should also not forget that many seniors and widows are being robbed of their life savings by incompetent or unscrupulous people and these actions seem to be condoned by a greedy industry that continues to seek profit by any means.

There is no doubt there are many good people in the investment industry but they are failing to speak out because whistleblowers are persecuted.

Canada's proposed Whistleblower Act for federal civil servants is a start but Canada needs similar legislation to protect all Canadians from fear of retribution when they come forward to tell the truth.

For members who have not seen the SIPA Report you can now access it on the Department of Finance Canada website at:

http://www.fin.gc.ca/consultresp/06Rev3_44e.html#Letter
The SIPA Report concludes:

"It is time that the responsibility for investor protection is mandated to a federal government agency that is more responsive to the need for consumer protection than the need for providing viable capital markets. To allow any agency to establish a balance between fostering capital markets and investor protection is just not acceptable for Canadian investors. An independent watchdog is needed with a sole function to provide investor protection."

Stan I. Buell
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
Tel: 905-471-2911
e-mail: stanbuell@sipa.to
website: www.sipa.to

INVESTOR ALERT - Limitation Periods reduced from 6 years to 2 in AB, ON, SK & NL. Investors with a complaint should first consult legal counsel regarding limitation periods.
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Canadianfundwatch.com The Fund OBSERVER

Postby Guest » Sun Oct 30, 2005 10:21 pm

Mutual fund salesmen fined-likely won’t pay
Two former London mutual fund sellers who lost more than $4 million of customers' cash in a bogus investment scheme were fined $0.575 million and a lifetime ban by the Mutual Fund Dealers Association of Canada www.mfda.ca disciplinary hearing Oct. 14. Joseph Van Der Velden and Andrew Stokman admitted that while working at Cartier Partners Investment Services, they convinced customers to buy into an investment - which didn't exist - with rogue financier Andrew Lech. Lech, was never registered with the Ontario Securities Commission to sell securities. He has been found by an Ontario Superior Court judge to have committed civil fraud by not returning $62 million of clients' money. Van Der Velden admitted selling the deal to more than 67 investors, 41 of them Cartier customers. Stokman, who was at the hearing and admitted selling the deal to 15 clients, was fined $75,000 -a $50,000 fine had been requested. Both men kept the dealings secret from Cartier and expected to gain 120 per cent in interest on whatever clients invested. They would give the client 15 to 20 % and keep the rest. "They were known to be observant Christians and they stressed to their clients that they were Christian people who wouldn't mislead them." Source: London Free Press, Jason Tchir http://lfpress.ca/newsstand/CityandRegi ... 2-sun.html
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Canadianfundwatch.com The Fund OBSERVER

Postby Guest » Sun Oct 30, 2005 10:16 pm

Ken’s Believe-it –or-Not Case
We think we've finally come across the ultimate investor abuse from Hell. A 59-year-old labourer earning $45.000 p.a., a recent immigrant to Canada, was approached by a new member of his church group. As it turned out, the new member was a broker for a major bank-owned brokerage. By any measure the senior was an unsophisticated investor wholly dependent on his adviser. Suffice it to say that the initial $195,000 in his RRSP 5 years ago is now worth $67,000.Unsuitable investments, DSC early redemption penalties and other fees contributed to the massive financial assault. Here's what happened:
The broker suggested the investor sell his GICs and Canada Savings Bonds which he had held in another account and transfer them to the brokerage. Within days the cash was 100 % invested in Nortel at $79 a share and a number of high MER international mutual funds (as it turned out, all had been market timed). He never received the fund prospectuses. The NAAF had stated that he wanted 80% income and 20% growth! The KYC form, which is not required to be signed by the investor, mysteriously stated 90% growth and 10% speculation. A new NAAF form has appeared supporting this new risky allocation but it is not signed by the client and was never disclosed to him. The investor after finally realizing how he had been taken, sent a registered letter, with some coaching in English, to the company asking 8 definitive questions. He got answers to only four and even these were cover-ups. One of the unanswered questions involved unauthorized trades. The investor pointed out seven statement and transaction slip errors, 6 of which the firm ultimately admitted to. None were in the client’s favour. The remaining error had to do with proceeds from a disposition which did not match calculations made by an accountant friend .The firm claims that the broker is no longer with the firm and therefore they have no responsibility. The process took over two years and is now finally being referred to OBSI where hopefully Justice will finally be done. They better move fast though because he has only has a few months left under Ontario’s draconian Limitations Act to file a civil action.
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Market Timing Scandal goes on

Postby Guest » Mon Oct 24, 2005 4:55 pm

Fund scandal far from settled
Goldin: Market timing: Advocate claims investors still owed up to $1-billion

Peter Brieger
Financial Post; pbrieger@nationalpost.com


Saturday, October 22, 2005


Investors were cheated out of more than $800-million when a handful of the country's biggest mutual fund companies settled a market timing scandal last year, and now they can prove it, claims an investor advocate.

Robert Goldin, president of investment dispute firm Macgold Direct Inc., launched a Web site this week that claims market timing took place in more than 100 funds in Canada between 2000 and 2003.

Four major fund companies and a trio of brokerages paid investors $200-million in compensation, but that is a drop in the bucket, Mr. Goldin said.

After poring over monthly trading reports, Mr. Goldin's firm developed software that spits out a personal report tallying losses for individual investors.

The software -- sold on Mr. Goldin's eponymous Web site for $35.99 -- comes less than a year after CI Fund Management Inc., Investors Group Inc., AGF Funds Inc. and AIC Ltd. agreed to pay investors $156.5-million.

As part of the settlement, TD Waterhouse Canada Inc. paid $20.7-million, RBC Dominion Securities Inc. shelled out $17-million and BMO Nesbitt Burns Inc. paid $3.7-million.

The site lists at least nine other Canadian fund companies as being complicit in market timing, which cheated individual investors out of "a few hundred to a few thousand dollars," Mr. Goldin said.

If between three million and five million investors lost an average of $400 -- an estimate Mr. Goldin describes as "low" -- mutual fund companies could be on the hook for at least $1.2-billion.

"That's a big number," he said. "The losses for U.S. investors are even higher -- maybe US$4-billion or US$5-billion."

In recent years, regulators in both countries accused financial speculators of reaping profits by trading Canadian and U.S.-based funds to exploit discrepancies between their price and the value of foreign stocks held in a fund's portfolio.

Fund companies were paid to allow market timing transactions while the traders -- many of them hedge funds -- were not charged early redemption fees, Mr. Goldin said. The transactions are not illegal, but they are "unethical" and left small investors out of pocket, he added.

"Imagine you invited four people to a pizza party and then a fifth person [the speculator] comes along, eats a piece of pizza and then leaves without paying for his slice," Mr. Goldin said. "That means there is less for the original four who paid for the pizza."

Armed with personal loss data, investors can file a claim with the fund companies, complain to an ombudsman overseeing the financial services industry or take the firms to small claims court, Mr. Goldin said.

Launching a class-action lawsuit is another option, he added.

"It's up to the investor whether they want to pursue this or not," Mr. Goldin said. "But at least now they can make an informed decision."

However, Dan Hallett, head of investment research firm Hallett & Associates Inc., is wary of Mr. Goldin's numbers.

"To calculate the actual dollar losses, you'd need daily trading data," he said. "The only people who have that are the fund companies."

But the monthly trading reports, provided by the Investment Funds Institute of Canada, still show big swings in trading activity, the hallmark of market trading, Mr. Goldin said.

"In an ideal world, one would have daily trading data too," he said.

"That information wasn't available, but the monthly data still sticks out like a sore thumb."

© National Post 2005
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