CATEGORIES OF FINANCIAL ASSAULT IN CANADA
Systemic
1. CORPORATE- Accounting fraud, self dealing, executive kleptocracy, insider trading,
regulatory capture, toxic products approved, see no evil
2. CONFLICTED DEALERS/ADVISORS - misleading, misrepresentation, unsuitable investments, double dipping, self dealing, fraud, theft, overcharging, predatory practices, salesmen posing as trusted professionals
3. TOXIC PRODUCTS- highest fees possible, penalties, hidden compensation, hidden conflicts, caps, garbage packaged as quality
The above categories are all considered systemic. Built into the system by poor design. Intentional or otherwise, they serve to transfer more than $50 billion dollars each and every year from the hands of trusting Canadian consumers, into the hands of self serving financial interests.
Non-systemic
Non systemic categories of financial assault include brokers who out-and-out steal from clients, without even the pretense of "serving" the public.
1. Brokers who steal clients assets.
Estimated at ?? millions each year.
Hidden from public view
The third category of financial assault in Canada is an estimate of the dollar damages that are hidden by settlements with confidentiality agreements. Those damages where clients actually "catch" a financial firm assaulting them, suffer through five to ten years of denials by the firm, and then settle for pennies on the dollar, giving up their rights and their voice in exchange for a return of their own money.
Estimated at billions each year.
Un-compensated or un-punished
Last, but not least, is the amount of the above that goes without compensation, without accountability, without recourse. This is considered due to the ineffectiveness of Canadian financial regulators to do the job that they public wishes they would do.
The amount of financial crime in canada that does not have a recourse, a punishment, or where the perpetrator gets to keep the ill gotten gains is estimated at
99%?
Below is partial breakdown
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Corporate
Self-dealing –Hollinger /Conrad Black
Outright fraud –Bre-X
Defective disclosure/acct’g -Nortel
Front for Russian mafia- YBM Magnex
Misappropriation of fund assets-Crocus LSIF
Theft of fund assets -Norbourg
Mutual fund market timing -20 fund cos.
Theft of assets-Portus Alternative Mngt. Hedge fund
Fraudulent asset valuation –Strategic Value Corp.
Stock options on “faked” earnings
John Roth removes $120 mil from Nortel (US criminal investigation underway) (nothing in Canada)
CIBC on Global crossing
Global crossing bankrupt within one year of CIBC offering ??
CIBC execs get stock options of ?? Millions on deal
CIBC pays 2.4 bil in suit on enron deal
John Hunkin walks away from CIBC with $54 mil personally
Nortel bankruptcy after execs cook books and pay themselves on phoney bonus schemes $366 billion in market value lost as Nortel goes from the most valuable company in Canada to worthless.
$25 bil per year from mutual fund highest fees in world Keith Ambaschteer U of T
$10 bil “cost of fractured regulatory regime”, John Coffee, Columbia University
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CONFLICTED DEALERS/ADVISORS
Opaque disclosure / “educational” seminars
Excessive fees/undue leveraging
Deceptive marketing practices/financial porn
Incorrect Information
Misleading articulation of risks
Embedded commissions
Painting the tape. In what also is called "banging the close," portfolio managers run up the price of what they already own. $??
Double dipping (Commissions and IPO fees on top of commissions) $??
Abuse of fee based accounts 1 to 2% on every victim $??
Mutual Fund Market Timing $1,260 mil
Mutual fund Window dressing.....mutual fund practice of moving their funds into the top performing stocks at reporting time, so that their financial statements appear as if they were smart stock pickers.......when they made the moves “after the fact”. $??
FMF capital bankrupt within six months of BMO selling it $??
2% of all mutual funds sold in 2007 were into WRAP programs (large proportion of those being less suitable but more profitable house brand funds) est $1 bil per year
(source IFIC)
mutual funds sold at highest commission choice, contrary to duty of care owed to clients (source IFIC)
$1 bil per year on sales of $20 bil
Unauthorized Foreign Exchange Transactions in RRSP & RRIFs$2.5 bil
Canada exhibits illegal insider trading before 63% of its acquisition
announcements,
Insider Trading Surrounding Acquisitions $14.4 bil
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TOXIC PRODUCTS
Mutual funds- excessive fees ( Canada has highest in the world)
Income Trusts –misrepresentation
PPN’s -excessive fees, opaque disclosure
LSIF’s- just don’t make money
Structured products – complex/expensive
Commercial Paper- non-bank ABCP