Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis.

by **admin** » Sun Aug 31, 2014 8:04 pm

Systemic Investment Industry deception on a scale of hundreds of billions each year, well hidden from public view.

The passing-off of commission sales agents, who are NOT legally licensed as "advisor" or even as "adviser" (with the SEC),…….. as professional "advisor's" is doing more harm "duping" North American society than a good portion of all other crimes in the country, combined….

I am a recovering broker, in Canada, who worked his career with the largest bank owned broker here (RBC) and perhaps 9th largest in the US (according to them at one time)

Myself and a few colleagues have worked over a decade toward honest accountability (making me a whistleblower….) in our areas of expertise. My area was in retail investment sales. I submit to you 88 words by SEC chair Mary Joe White in a 1.5 minute video and three short, but good national press articles about what we feel shine a light on the greatest systemic investment deception we have discovered. Tens of billions of dollars each year are cheated and shortchanged from investors here in Canada, and I can only imagine the magnitude of the damage to those in the US. Regulators are wilfully blind to the acts of deception:

http://youtu.be/TqBSiR6VwP4?list=UUy8dpTRZHEz-0JBa_l0w7AQ 1.5 minutes
88 words from SEC Chair Mary Jo White (describes the differences in duties to clients between those who legally call themselves "adviser" and those who call themselves "advisor" (no legality) (root of the deception)

http://blogs.wsj.com/totalreturn/2012/07/05/should-you-go-to-an-adviser-or-an-advisor/ Wall Street Journal Blog

http://www.ft.com/intl/cms/s/0/21b52478-068c-11e4-ba32-00144feab7de.html?siteedition=intl#axzz3AzDJwB5j Financial Times

http://www.nytimes.com/2010/03/04/your-money/brokerage-and-bank-accounts/04advisers.html?ref=business&_r=3& New York Times

http://www.moneygeek.ca/weblog/2014/06/05/your-financial-advisor-deceiving-you/ Former Hedge fund employee, Ph.D, blog

I thank you for your time, and your work on behalf of the public interest. If I can be of any help in this, I am at your service.

Larry Elford
Former CFP, CIM, FCSI, Associate Portfolio Manager, retired
Alberta, Canada T1J 1N3 lelford@shaw.ca

keywords: deception grand

by **admin** » Thu Aug 28, 2014 9:54 am

: images.jpeg (5.46 KiB) Viewed 16350 times

It is sleazy.
It is abusive.
It is unprofessional.
It is illegal and against written industry rules.
It is allowed for big money.
It is done by our most "trusted" investment providers.
It is covered up by captured regulators.
It is suppressed by nearly all business media.
It is your money that gets taken.

Comment from Stan:

I believe the fundamental cause for investor loss is labeling the commission motivated sales force of sales persons as "Advisors" and "Vice Presidents". This gains the trust of Canadians. Canadians are not stupid. Most are more than busy with careers and families. We also trust ... maybe when we shouldn't but when the regulators, media and Government says the investment industry is well regulated, the regulators say they protect investors, and the top dogs make over $700,000 per annum, there is just reason to believe.

Children are taught to believe in Santa Claus and the Tooth Fairy by the parents they trust. Small investors are taught to believe in "Financial Advisors" by the Government and regulators they trust. The media also helps to perpetuate this deceit.

In my opinion Brisko's August letter makes it perfectly clear. The titles "Financial Advisor" and "Vice President" are simply that (titles) and have no (legal) meaning. Why then do Goverment and regulators allow this to happen when it facilitates the fleecing of Canadians. Do they not realize how many lives are destroyed?

Investor education, better disclosure, more rules and regulations, more studies and reports, may make some feel they are doing something but it will do little to change the investment environment. As long as we accept the deception, Canadians will continue to trust their so-titled "Advisor".

The four words I have found most chilling for many years when I have spoken with small investors is "I trust my Advisor". Every individual I have met who lost a major part of their life savings trusted their so-titled "Advisor".

Even Earl Jones who was not even registered was able to gain trust by using a title of "Advisor".

It seems perceptions are hard to dispel. How do we get the message to Canadians so they can see the light? It seems few other than those who have had significant loss really understand.

by **admin** » Sat Aug 02, 2014 1:20 pm

Advocate comment:
The purpose of this posting is to highlight a "tilting" of rules and enforcement procedures in favour of investment industry players, and at harm to the public.

Of interest in this correspondence between SIPA (Small Investor Protection Association of Canada) and the CSA (Canadian Securities Administrators) is the following:

1. Persons who advertise themselves as investment "advisors" do not have to have that particular license or registration. Regulators will turn a blind eye to misrepresentation that favours the interests of the industry, (despite industry rules prohibiting misrepresentation by commission or by omission) while fooling the public into a false sense of security and trust in industry dealers. Only Quebec regulates and protects the public from title misrepresentation.

2. Investment dealers commonly give fake titles such as "vice president" to top producing commission salespeople, in further attempts to lure the public into a false sense of security and trust in what are mere commission sellers. (regulators also look the other way at this consumer misrepresentative practice)

3. The person (mis) representing his or herself to the public as an "advisor" has neither a fiduciary duty to care solely for the interests of customers, nor a "best customer interests" standard which to adhere to, despite this being sternly implied in the name, the actual license (advising rep) and in the marketing promises of the investment dealers who title their salespeople in this manner. (except in Quebec where they must place the best interests of the customer first)

4. The "suitability" standard is so vague, undefined and self-determined (by the selling dealer themselves) as to be shameful, and as such the email does not speak to it directly. It instead refers to separate bulletins which also do not speak, other than in legal jargon and obfuscating gobbledygook. Research and experience shows that such a vague term allows the VERY LEAST suitable choice, or the highest cost ( and commissions) investments to be sold to consumers, and yet still meet this consumer-cheating standard. Consumers who are not satisfied with that can always raise $500,000 in legal costs, and spend approximately ten years of their life in the courts, to prove otherwise, and the industry likes this fairness "hurdle" just fine.

Now to the email correspondence:

From: Besko, Chris (FINMSC) <Chris.Besko@gov.mb.ca>
Date: Fri, Aug 1, 2014 at 6:43 PM
Subject: Financial Advisor Registration
To: "sipa.toronto@gmail.com" <sipa.toronto@gmail.com>
Cc: CSA ACVM Secretariat <csa-acvm-secretariat@acvm-csa.ca>

Thank you for your letter of March 28, 2014. It was referred to the Registrant Regulation Committee of the Canadian Securities Administrators (which I chair) for a response. We have tried to answer all your questions as fully as possible, but if you have any follow up questions, please feel free to contact me directly.

For ease of reference, we have included your question (in italics) before each response.

Limitation Periods –
(Advocate comment: For purposes of brevity, a section of this email exchange related to Time limitation periods for compliant or civil action was removed. Also to keep this post on the topic of systemic misrepresentation)

Registration Classifications

1. Advising Representative – Is this the current classification for Advisers?

2. Dealing Representative – Is this the current classification for previous Sales Representative?

3. Financial Advisor – This is a common title used but there appears to be no classification. Are

these persons registered as Dealing Representatives?

4. Vice President – Are all vice presidents deemed to be officers of their firms?

The registration categories under securities legislation are set out in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. They are: dealing representative, advising representative, associate advising representative, ultimate designated person and chief compliance officer. These are the descriptions that apply to individual registrants for the purposes of registration. An individual who is acting as an adviser on behalf of a portfolio manager will be registered as either an advising representative or an associate advising representative. An individual who is trading in securities on behalf of a dealer (such as an investment dealer, mutual fund dealer, exempt market dealer, restricted dealer or scholarship plan dealer) will be registered as a dealing representative.

We do not prescribe specific titles to be used by those persons who are either dealing or advising in securities. Most securities legislation requires that an individual who holds themselves out as being registered to in fact be registered and to indicate the actual category of registration.

(advocate comments: Sadly, 13 provincial and territorial commissions ignore what I believe to be fraudulent misrepresentation or false pretence offences when they turn a willfully blind eye to approximately 150,000 registered "dealing representatives" who for the most part, strongly imply and represent to the public that they are registered as "advisors" (advising representative category).

Financial Advisor, as you noted, is a common title which many persons use, whether they are registered under securities legislation or not. The use of this title is not generally prohibited, and may be used by anyone, including persons who are only licensed to deal in insurance products, mortgage brokers, deposit agents, or employees of financial institutions. Some jurisdictions regulate the use of some titles. For example, in Québec, no person may use the title Financial Planner without holding the appropriate certificate issued by the Autorité des marchés financiers. The title Financial Advisor may not be used by anyone as it is considered similar to the title Financial Planner. Having said that, most jurisdictions do not regulate the use of Financial Advisor, and as such it is widely used.

(Common Sense comment from an investor who was misrepresented and then exploited by these so-called "regulated" investment practices:)

"We do not prescribe specific titles to be used by those persons who are either dealing or advising in securities." Wow! Well perhaps you should, since it is quite a deceptive game being played upon the unsuspecting investor.

As with Financial Advisor, the title of Vice President is increasingly a common title used in the financial services industry. While an officer of a firm may be designated to be a vice president, the use of the title is not reserved to actual officers of a corporation. As such, it is not safe to assume a person described as a vice president is in fact an officer of that corporation.

Suitability –

[i]Does suitability have a common definition for all provinces or territories, and what is the definition? To whom or which license categories does it apply.
[/i]

CSA staff published on January 9, 2014 CSA Staff Notice 31-336 Guidance for Portfolio Managers, Exempt Market Dealers and Other Registrants on the Know-Your-Client, Know-Your-Product and Suitability Obligations. We believe this notice will assist in understanding the suitability requirement and our expectation of registrants.

Fiduciary –
[i]Does Fiduciary Duty apply to Portfolio Managers and other registrants? To whom or which license categories does it apply?
[/i]
A common law fiduciary duty may apply to portfolio managers or other registrants, depending on the circumstances. Typically, Canadian courts have identified five interrelated factors to be considered when determining whether “financial advisors” stand in a fiduciary relationship to their clients: vulnerability of the client in the relationship, the trust and reliance that clients place in their advisor, the extent to which the advisor has power or discretion over the client’s account or investments, and the professional rules and codes of conduct of the advisor. In Québec, where a civil law regime applies, the fiduciary duty does not exist since it is specific to the common law. For further information, see Parts 3 and 4 of CSA Consultation Paper 33-403, including specifically the table in Part 4.

Best Interest –
[i]Is this standard in place in Canada? To whom or which license categories does it apply?[/i]

Four provinces (Alberta, Manitoba, Newfoundland and Labrador, and New Brunswick) have a statutory requirement that when advisers or dealers have discretionary authority over their clients’ investments, the adviser or dealers must act in the clients’ best interests. Investment fund managers are also subject to a statutory best interest standard all across Canada. In Québec, according to both the general civil law and the Securities Act (Québec), registered dealers and advisers are currently subject to a duty of loyalty and a duty of care and must act in the client’s best interest. The extent of these obligations under the Civil Code varies depending on the legal context and nature of the investment advisory relationship (e.g. discretionary account or non-discretionary account, executing broker only), taking into account the degree of trust, dependence and vulnerability of the client. For further information, see Part 4 of CSA Consultation Paper 33-403.

Hopefully this answers your questions. As mentioned above, please feel free to contact me directly with any follow up questions you might have.

Chris Besko
Acting General Counsel & Acting Director
tel. (204) 945-2561
fax (204) 945-0330

The Manitoba Securities Commission
500-400 St Mary Avenue
Winnipeg, Manitoba, R3C 4K5
Toll Free (Manitoba only) 1-800-655-5244
http://www.msc.gov.mb.ca

This message, including any attachments, is intended only for the use of the individual(s) to which it is addressed and may contain information that is privileged/confidential. Any other distribution, copying or disclosure is strictly prohibited. If you are not the intended recipient or have received this message in error, please notify us immediately by reply e-mail and permanently delete this message including any attachments, without reading it or making a copy. Thank you.

Le présent courriel et les documents qui y sont attachés s’adressent exclusivement au(x) destinataire(s) mentionné(s) et peuvent contenir de l’information privilégiée ou confidentielle. Toute autre distribution, copie ou divulgation est strictement interdite. Si vous n’êtes pas le destinataire prévu ou si vous avez reçu le présent courriel par erreur, veuillez nous en aviser immédiatement en utilisant la fonction « répondre » et détruire le présent courriel et les documents qui y sont attachés sans en prendre connaissance ni les copier. Nous vous remercions de votre collaboration.

keywords Manitoba, Besko, FINRA, Financial Designations

From IIROC Rules Notice Guidance Note Dealer Member Rules
Use of Business Titles and Financial Designations

Joe Yassi
Vice President, Business Conduct Compliance 416-943-6903
jyassi@iiroc.ca
Use of Business Titles and Financial Designations
Internal Audit Legal and Compliance Operations Registration Research Retail Senior Management Training
14-0073 March 24, 2014

No IIROC Approved Person should hold his or herself out to the public in any manner, including without limitation, by the use of a business title or designation of qualifications or professional experience that deceives or misleads, or could reasonably be expected to deceive or mislead, a client or any other person as to the IIROC approval they hold, their proficiency or qualifications. (fair, honest, good faith)

1 “Registered Representative” refers to the name of an individual IIROC approval category. An individual approved by IIROC to act as a Registered Representative is permitted to trade and provide advice to retail customers with respect to securities.
2 “Investment Representative” refers to the name of an individual IIROC approval category. An individual approved by IIROC to act as an Investment Representative is permitted to trade in securities for retail customers. An Investment Representative is not permitted, however, to provide investment advice.
3 The term “financial designation” is used generically throughout this notice to include credentials that are used to indicate that the individual has specialized knowledge or expertise in an area gained through education and/or experience.

http://www.iiroc.ca/Documents/2014/3254 ... b67_en.pdf

by **admin** » Sun May 18, 2014 9:26 am

In Canada today it is current practice that most ”Financial Advisors” are registered as “Dealing Representative – A sales person – what they can sell depends on the firm they work for and their registration.”

(In the US, it is those licenced as "brokers" who usually call themselves as "advisors", check your US "advisors" licence here http://brokercheck.finra.org/Search/Search.aspx )

Over many years victims of loss of their savings believed their “Advisor” had a fiduciary responsibility, but that was not so. In some cases it was proven in court that the “Advisor” in a particular case, because of his actions and because of the client's lack of knowledge and dependence upon the “Advisor”, it was deemed that there was fiduciary duty in that particular case. However, fiduciary duty depended solely upon the "finding of fact" in the particular case.

Many persons do not see any difference between “Adviser” and “Advisor”. Dictionaries may give both spellings. On the other hand the industry literature by regulators and organizations is quite careful in the use of the two terms, but also fail to advise consumers and clarify the situation. The CSA in Canada and the SEC in the USA use “Adviser” to refer to those who give financial advice. The industry uses “Advisor” for those persons registered as “Dealing Representative – A sales person.” This practice is at best misleading for Canadian investors.

For several years there have been discussions about the duties of “Financial Advisors” and whether there should be a fiduciary duty or a requirement to look after a client's best interests. Ermanno Pascutto was instrumental in bringing this issue forward. It will likely be discussed for years.

Now that is not to say that all “Financial Advisors” act in the same way. Some do a good job for their clients, but they may in fact be portfolio managers and have a fiduciary obligation as defined in provincial Securities Acts. I have a broker registered as a Portfolio Manager although he is also called a “Financial Advisor”.

The CSA has clarified the situation with their document Understanding Registration. This document lists all registration categories. There is no “Financial Advisor” category but it is fact that most persons using the ”Financial Advisor” title are registered as “Dealing Representative – A sales person.”

The three main classifications (in Canada) that concern investors with “Financial Advisors” are:

- Portfolio Manager

- Advising Representative

- Dealing Representative - A sales person

(In the USA the license classifications to look for are "broker", and "registered investment adviser".)

SIPA recommends that every investor check the registration, qualifications, and discipline history of their “Financial Advisor” whatever their experience has been to date. Investors need to become aware of the facts. Many Canadians do not become aware until it is too late. Losing your life savings is traumatic and is a life-altering event. Many never recover and some do not even survive.

Please take the time to check with the Canadian Securities Administrators "Understanding Registration". http://www.csa-acvm.ca/uploadedFiles/Ge ... ion_EN.pdf

Small Investor Protection Association
http://www.sipa.ca
e-mail: sipa.toronto@gmail.com
tel: 416-614-9128

by **admin** » Wed Apr 23, 2014 3:46 pm

excerpt

The ASIC report reveals that the advice provided by financial planners is tainted with conflicts of interest. The regulator concluded that nearly 90% of licensee (i.e. dealer group) remuneration is paid by product providers in the form of ongoing commissions, up-front commissions, and volume rebates or manager fee rebates.

Only 10% is received in the form of client fees. ISN believes that reforming the financial advice industry should, at the very least, reverse this ratio: 90% of income generated by client fees and 10% by neutral product payments.

The ASIC report also demonstrated the critical need for consumers to be protected from being charged ongoing fees when no ongoing financial advice is being received, and that this should be accomplished by requiring consumers to regularly ‘opt-in’ to such fees (if asset-based fees are not banned altogether).

The ASIC report found that 3.1 million Australians, or two thirds of all of the clients of the largest 20 financial planning firms, are not ‘active’ clients. The inference is that these clients are continuing to pay ongoing advice fees but are not actively engaged with their planner.

link to report here: http://www.industrysuperaustralia.com/wp-content/uploads/2011/10/A-snapshot-of-the-financial-planning-industry-110930-1010version.pdf

by **admin** » Wed Apr 23, 2014 3:31 pm

Would you hire a lawyer who also represented the other side?

Why are you doing this with your investment "advisor"?

A great 11 minute explanation of the perils of having a broker/advisor with divided loyaty, or having a fiduciary adviser with an UN-DIVIDED LOYALTY to the client. Difference could be literally millions for the serious investor. http://www.cfainstitute.org/learning/pr ... ultsPage=1

(I found that this link requires a "log in" and not many can do this. If you can, I originally found the podcast on iTunes, in the CFA audio: "What Fiduciary Duty Means to Your Practice" 11:42 2010-01-29 Steve Horan, CFA, interviews Blaine Aikin, CFA

Sorry for not knowing the web link would require a log in......please find it on

This presentation is a very good look at the DUAL loyalties of the average, non-fiduciary, investment advisor, as compared to having an UNDIVIDED loyalty professional.

Ironic thing is, that for those who can afford it, the undivided loyalty is far less costly than being sold retail products, and far less likely you will be double and triple sold (double dip etc).

This group is Canadian and gives some further info about what undivided loyalty looks like, who they are and what they do.

http://www.portfoliomanagement.org/wp-c ... L_WEB1.pdf

http://www.portfoliomanagement.org

best of luck with your investing.

by **admin** » Tue Apr 22, 2014 9:16 pm

Out dated legal arguments re fiduciary obligations!
Posted on February 26, 2013
Canadian industry submissions on the CSA Best Interests Standards are relying on out dated legal arguments, which were themselves based on no longer relevant service relationships, for determining whether fiduciary duties apply to advisory relationships.

I have argued that the complexity of the process underpinning the relationship imbues the relationship with fiduciary type duties because of the considerable discretion the advisor has over the processes that comprise portfolio construction, planning and management (advice) irrespective of whether the client has the final decision.

A recent 2010 article by Arthur Laby, Professor of Law at Rutgers Schools of Law (US), argues, inter alia, that in the US brokers were only allowed to evade a fiduciary type responsibility in the 1940 Act because their advice was incidental to the transaction. This is no longer the case. As is the case with Canada, advice has become the predominant service activity and the transaction incidental.

“The decision to exclude brokers that provide advice from the Advisers Act may have been appropriate in 1940 when advice was a minor ingredient in the services provided. Today, however, brokers’ functions have changed and advice is more central……

….When a customer turns to a broker for advice, the customer reposes discretion in the broker to provide appropriate guidance and direction. Moreover, the broker has the ability to affect the customer’s legal position, either directly, in the case of a discretionary account, or indirectly, in the case of a non-discretionary account, assuming the customer accepts the advice. The furnishing of advice therefore calls for the imposition of fiduciary duties…..

….These titles imply that the individual is not acting at arm’s length. They are meant to induce a customer to repose trust in the professional as a neutral source of research and recommendations. Because advice is such an important part of a broker’s activity, and because dispensing advice calls for the imposition of fiduciary duties, brokers that give advice should be subject to fiduciary obligations…..

…..Though at one point it may have been appropriate to allow brokers to provide advice incidental to brokerage without the obligations imposed on advisers, the exclusion is no longer applicable because providing investment advice looms as the more significant aspect of a broker’s activity”

I have taken some considerable excerpts from the article itself (some noted above) and reproduced them below, but I would recommend reading the entire document.

The following text is taken from – FIDUCIARY OBLIGATIONS OF BROKER-DEALERS, AND INVESTMENT ADVISERS, ARTHUR B. LABY*

http://digitalcommons.law.villanova.edu/vlr/vol55/iss3/6/

or

http://digitalcommons.law.villanova.edu/cgi/viewcontent.cgi?article=1050&context=vlr&sei-redir=1&referer=http%3A%2F%2Fwww.google.com%2Fcse%3Fdomains%3D.villanova.edu%26cx%3D000561345830600848454%253Auqohildtyds%26cof%3DFORID%253A10%26ie%3DUTF-8%26sitesearch%3Dvillanova.edu%26q%3Dfiduciary%26sa%3DGO%2521%26ad%3Dn9%26num%3D10%26rurl%3Dhttp%253A%252F%252Fwww1.villanova.edu%252Fvillanova%252Fsearch.html%253Fdomains%253D.villanova.edu%2526cx%253D000561345830600848454%25253Auqohildtyds%2526cof%253DFORID%25253A10%2526ie%253DUTF-8%2526sitesearch%253Dvillanova.edu%2526q%253Dfiduciary%2526sa%253DGO%252521%26siteurl%3Dhttp%253A%252F%252Fwww1.villanova.edu%252Fvillanova%252Flaw.html#search=%22fiduciary%22

Nature of the Relationship:

Although the differences may be exaggerated, the fiduciary obligation imposed by the Advisers Act appears broader than the duties imposed on brokers through application of the Exchange Act’s antifraud rules and FINRA requirements.

The primary reason for this stems from the way courts and regulators view the scope of activity undertaken by each when administering non-discretionary accounts. As discussed, the duty imposed on an agent depends on the scope of his or her activity.

Although the scope of activity can be altered by contract, in the case of non-discretionary accounts, a broker’s activity generally is limited to conduct surrounding a particular transaction, whereas the scope of an adviser’s activity extends beyond a particular trade. The different scope of activity yields different duties.

Consider the scope of activity undertaken by advisers. In some cases, an adviser might limit its advice to providing a financial plan, or it might restrict its advice to a particularly type of security, such as municipal bonds, or a particular sector, like technology.163 In those cases, the adviser’s fiduciary duty would be commensurate with the scope of the relationship.

Most advisers, according to the Rand Report, however, agree to provide portfolio management services. The phrase “management services” connotes an ongoing relationship, which extends beyond the time a particular trade is made. Moreover, the scope of activity for federally registered advisers is usually to provide ongoing, continuous services, even for a non-discretionary account.

If an adviser has agreed to provide continuous supervisory services, the scope of the adviser’s fiduciary duty entails a continuous, ongoing duty to supervise the client’s account, regardless of whether any trading occurs. This feature of the adviser’s duty, even in a non-discretionary account, contrasts sharply with the duty of a broker administering a non-discretionary account, where no duty to monitor is required. The two accounts in this example are similar in nature—both the broker and the adviser hold themselves out as providing non-discretionary investment advice—yet the adviser’s duty entails ongoing diligence while the broker’s duty is episodic.

……..For non-discretionary accounts, however, brokers’ duties tend to be intermittent, while advisers’ duties tend to be ongoing—extending to dormant periods of inactivity in the customer’s account. During these periods, a typical stockbroker owes no duty to the customer while an adviser acts more like a protective guardian and has a positive duty to act should market conditions or the client’s circumstances call for a change.

…….whether fiduciary duties should be imposed on brokers that provide advice. In 2005, the SEC recognized the importance of this issue, calling for a study regarding whether brokers that provide advice should be subject to fiduciary obligations normally imposed on
advisers. This is precisely the question taken up in the Obama Administration’s 2009 White Paper and in the Dodd-Frank Wall Street Reform Act. Although brokers have always provided advice, that component of their services did not predominate at the time the Advisers Act was passed.

In recent years, however, advice has displaced transaction execution as a chief activity carried out by brokers. It comes as no surprise that today brokers market themselves as financial advisers rather than stockbrokers. This change in emphasis from execution to advice as a primary feature of a broker’s business represents a change in circumstances for the brokerage industry and justifies the imposition of fiduciary duties.

Although brokers historically provided advice to their customers, advice rendered in the past was relatively less significant in the context of the overall relationship than it is today. The Security Market study referenced above explained that in the 1930s, a brokerage firm’s relationship with a customer had four aspects. First, it acted as a broker in the purchase and sale of securities and in borrowing and lending stocks. Second, it acted as a pledgee, lending its own capital to the customer or advancing capital borrowed from banks. Third, it was the custodian of the customer’s cash and securities. Fourth, it exercised, “to some extent,” the function of investment counsel.

The advice component is last on the list and qualified in scope. A history of the Merrill Lynch firm explains that, in the early part of the twentieth century, many brokerage firms did not do much more than execution—their sales forces were primarily intermediaries arranging trades on secondary markets—and the information available to investors seeking advice was rather meager. Open a modern description of the activities of broker-dealers and advice often is paramount.

….primary reason for this shift is technology.209 In the early part of the twentieth century, transaction execution was difficult to accomplish. Today, advances in technology have reduced the time and cost to process trades.210 As a result, the advice component of brokerage business has eclipsed transaction execution in importance. When asked which professional services matter most, survey responders chose retirement planning, investment advising, financial planning, and estate planning over executing stock or mutual fund transactions and other possible responses

Although brokers provided some advice when the Advisers Act was passed, as long as advice was not the primary service offered to investors— that is, as long as the advice was “solely incidental” to brokerage services performed—the broker was excluded from the definition of adviser and the Advisers Act’s fiduciary standard was not imposed.213

The decision to exclude brokers that provide advice from the Advisers Act may have been appropriate in 1940 when advice was a minor ingredient in the services provided. Today, however, brokers’ functions have changed and advice is more central

When a customer turns to a broker for advice, the customer reposes discretion in the broker to provide appropriate guidance and direction. Moreover, the broker has the ability to affect the customer’s legal position, either directly, in the case of a discretionary account, or indirectly, in the case of a non-discretionary account, assuming the customer accepts the advice. The furnishing of advice therefore calls for the imposition of fiduciary duties.

….Because advice has eclipsed execution as the primary service performed by broker-dealers, advice can no longer be considered “solely incidental” to brokerage. Indeed, it is brokerage that appears to be solely incidental to advice. In the 1980s, to better compete with investment advisers, many brokerage firms began to offer financial planning services and shun the title of stockbroker.224 Instead, broker-dealer registered representatives began to label themselves as financial advisors, financial consultants, financial representatives, and investment specialists.

These titles imply that the individual is not acting at arm’s length. They are meant to induce a customer to repose trust in the professional as a neutral source of research and recommendations. Because advice is such an important part of a broker’s activity, and because dispensing advice calls for the imposition of fiduciary duties, brokers that give advice should be subject to fiduciary obligations.

The provision of advice is the type of activity where agency costs are high and, therefore, fiduciary protections are needed most. It can be difficult ex post to determine the wisdom of an investment recommendation at the time it was made. A decision to recommend one investment over another is based on many factors; one can seldom know if self-interest was a motivating force. The imposition of the fiduciary duty of loyalty and the regulation of conflicts are ways to control the risk that an investment recommendation will not be objective.

………….. A fiduciary duty should be imposed on a broker providing advice regardless of the method of compensation employed. Customers who pay commissions need fiduciary protections to guard against opportunism that may arise in any commission-based business.

In the world of securities brokerage, a common risk in a commission-based account is the risk of churning, where a broker makes excessive recommendations.240 Customers who pay an asset-based fee are equally in need of protection.

An asset based fee, although reducing the likelihood of churning, increases the chance that a broker-dealer will ignore a customer’s account—aptly called “reverse churning”—because the firm will be paid regardless of whether a transaction occurs.241 In a fee-based account, regulators are concerned about “opportunism by neglect”—inattention and indifference to the account. Payment of a fixed asset-based fee provides disincentives to monitor, which results in neglected customers who receive little or no advice and seldom trade even when transactions are called for.

Though at one point it may have been appropriate to allow brokers to provide advice incidental to brokerage without the obligations imposed on advisers, the exclusion is no longer applicable because providing investment advice looms as the more significant aspect of a broker’s activity. Moreover, both types of remuneration brokers receive—commissions and asset-based fees—call for the introduction of fiduciary duties

http://blog.moneymanagedproperly.com/?p=2228

by **admin** » Tue Apr 22, 2014 5:59 pm

The top 3 hidden risks facing all investors today:

(a) fraudulent license misrepresentation by commission salespersons (financial and insurance) as licensed "professionals" with a "professional duty" to protect the customer. By salespeople and investment dealers who falsely imply that they have an undivided loyalty to the customer. This is the biggest risk today.

(b) The capture, or weakening of every regulator or protective agency, when compared to the strength of the financial industry, means that there are virtually none today who can stand, or speak out, about the cheating of the public. The would quickly be unemployed:)

(c) The financial capture of media, to the point where some cannot sustain themselves in business, without pandering to the marketing needs of the financial industry.

The result in Canada, is a river of money, approximately $50 billion a year, or one billion per week, flowing from the hands of all unsuspecting, saving, and investing Canadians, into the hands of giant financial institutions who are fooling and misleading them……"you are richer than...."

I can only imagine what the dollar value of harm might be to American consumers.

It is the greatest social and economic issue that I can see in my field of view today.

by **admin** » Tue Apr 22, 2014 5:49 pm

From: "\"Help\" <help@sec.gov>" <help@sec.gov>
Subject: Re: SEC Response HO::~00389250~::HO
Date: 22 April, 2014 4:52:28 PM MDT
To: "lelford@shaw.ca" <lelford@shaw.ca>

Let's see if this is more helpful.

An individual may be licensed as a broker (a registered representative), as an investment adviser/or (a investment adviser/or representative) or both. They are often licensed both ways. There are a myriad of "special designations" that require additional and different licensing, and most of those titles include the word "adviser/or" in some capacity. If an investment professional refers to him or herself as an "Advisor" (regardless of the spelling), s/he should be licensed and performing services through a firm that is SEC registered as an investment advisery firm. You may find the explanation on our website a bit clearer. Here's the link to get you started: http://investor.gov/researching-managing-investments/working-brokers-investment-advisers.

I hope that helps. If you still have questions, please feel free to call me at (202) 551-6324.

Sincerely,

Beckie Marquigny

--------------- Original Message ---------------
From: larry elford [lelford@shaw.ca]
Sent: 4/22/2014 4:36 PM
To: help@sec.gov
Cc: lelford@shaw.ca
Subject: Re: SEC Response HO::~00389250~::HO

Thank you for your reply. I am afraid I am a bit dense, and still confused. About: Advisor/adviser/broker names, I am trying to understand, how can brokers call themselves "advisor" without holding the proper advisor or adviser license.

Are they "interchangeable" as stated by SEC Attorney-Advisor" Rebecca Ament Marquigny below in red?

Or are they separate and distinct, words, titles or license's with separate duties and obligations? (the latter is suggested by SEC Chair Mary Jo White in a recent speech that touched on Investor protection. (March 21, 2014 speech to Consumers Federation of America, titled Protecting the Retail Investor)

There is much confusion and enough loopholes in the missing, or varied interpretations, to allow billions of dollars to flow from the hands of retial investors, into the hands of dealers who interpret the words to their favour.

Thanks in advance for helping to clarify the confusion

larry Elford

On 2014-04-22, at 7:00 AM, "\"Help\" <help@sec.gov>" <help@sec.gov> wrote:

lelford@shaw.ca

Dear Mr. Elford:

Thank you for contacting the U.S. Securities and Exchange Commission (SEC) to ask whether there is a difference between financial professionals who use the title "advisor" and those who use "adviser," and whether the titles carry different qualifications or responsibilities. I appreciate the opportunity to respond to your question.

In general, the two terms are used interchangeably, and the choice to use one or the other is simply a matter of preference. However, with some titles, the small differences do carry a distinction. For example, the acronym RIA and the term "Registered Investment Adviser" (or "Advisor") refer to the investment advisery firm or company. The title "Investment Advisor/er Representative" or "Registered Representative" usually refers to the individual person. You can find additional information regarding professional designations on the Financial Industry Regulatory Authority (FINRA) website at http://apps.finra.org/DataDirectory/1/p ... tions.aspx.

I should add one caveat to the response above: I believe the alternative spellings for advisor are not universally synonymous. It is my understanding that British and American financial lexicon differs depending on the formality of the situation. Both terms are acceptable on both continents, but "advisor" is often referred to as "the American spelling."

Thank you for inquiring; please contact us again if we can be of assistance in the future.

Sincerely,

Rebecca Ament Marquigny
Attorney - Advisor
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(800) 732-0330
www.SEC.gov
www.Investor.gov
www.twitter.com/SEC_Investor_Ed

by **admin** » Tue Apr 22, 2014 1:30 pm

Stan nails it, and writes very well.

DRAFT for memo to media contacts - Comments?

For some time we have been concerned about Financial Sales Persons using the title Advisor when they are in fact registered as a "Dealing Representive - A sales person" as defined by the CSA document Understanding Registration.

The investment industry regulators seem unwilling or unable to provide adequate investor protection although they claim to provide preventative protection. They are unable to prevent fraud and wrongdoing from happening. It would therefore seem logical that they should provide remedial protection for those victimized by industry fraud and wrongdoing.

We believe one of the fundamental issues resulting in widespread investment loss is the regulators allowing the industry to use misleading titles for persons registered as sales persons. Many ordinary people believe that Adviser and Advisor mean the same thing and the public perception is the same. This results in investors placing their complete trust in a commissioned sales person because they believe he is an Adviser with a fiduciary responsibility. Of course this perception is wrong.

The NRD indicates that most of the so called "Investment Advisers" are registered as a"Dealing Representative". According to the CSA document "Understanding Registration" there are many categories of registration listed including:
"Portfolio Manager"
"Advising Representative" (search here http://www.securities-administrators.ca ... spx?id=850 )
"Dealing Representative - A sales person" (shown here: http://www.securities-administrators.ca ... ion_EN.pdf

The document does not indicate Dealing Representatives can give advice but does indicate other classifications which can.

The question is where can the registration classification "Financial Advisor" or any classification with the word "Advisor" be found?

Are Adviser and Advisor both considered to mean the same and if so why is it not mentioned in the CSA document?

If Adviser and Advisor do not have the same implication then why are "Sales Persons" allowed to call themselves "Advisors"?

We feel that if Advisors are not the same as Advisers then it is at best misleading when sales people use the title Adviser.

It would be greatly appreciated if you would provide comment regarding this issue.

--
Stan I. Buell

Larry Elford comments:

There is no "definitive" article that I know of, but there is a groundswell of stuff popping up like gophers in spring around here.

I will try not to bury you Andrew, but place a list of links herein, that might help bring you up to speed…..and then you can write the definitive article that spells it out for laypersons to understand.

In some order of importance or credibility………

2 minutes of clarity by SEC chair Mary Jo White found here http://youtu.be/TqBSiR6VwP4 This is the chief source of info on name games.

Should You Go to an Adviser or an Advisor? http://blogs.wsj.com/totalreturn/2012/0 ... n-advisor/

GOOD SEC Study on Investment Advisers and Broker-Dealers http://www.sec.gov/news/studies/2011/913studyfinal.pdf

a few postings and some musings and regulator confused answers on topic here viewtopic.php?f=1&t=10

American Banker Editor nails it here in 7th paragraph titled FINANCIAL ADVISOR CHICANERY http://www.americanbanker.com/bankthink ... 940-1.html

: images.jpeg (5.46 KiB) Viewed 18355 times

SEC’s Lack of Fiduciary Action Is Hurting Investors, Advocates Warn http://www.thinkadvisor.com/2014/04/15/ ... -investors

The Difference Between A Stockbroker, Financial Advisor And Planner Explained http://www.forbes.com/sites/feeonlyplan ... explained/

Financial advisers' credentials mislead seniors, watchdog says http://www.reuters.com/article/2013/04/ ... 2420130418

http://www.sec.gov/answers/invadv.htm

http://secsearch.sec.gov/search?utf8=✓&input-form=advanced&affiliate=secsearch&query=advisor&query-quote=&query-or=&query-not=adviser&filetype=&filter=1&commit=Search

CSA registration categories explained http://www.securities-administrators.ca ... ion_EN.pdf

Larry Elford videos on trying to understand and explain the issue http://youtu.be/wY1qfzzRrgY

Larry Elford videos on trying to understand and explain the issue http://youtu.be/1fIJ08STwDE

Stan, I think we might be getting close to catching regulators in a wilfully blind corner………where on the one hand, if advisors and advisers are "same same", then 150,000 "dealing reps" in Canada are fraudulently misrepresenting themselves to the public as "advisors/advisers" (as something which they are not licensed as)……………..or on the other hand, if they are a totally different title and category of professionalism (as the top experts say), then they are playing ANOTHER misrepresentation game, trying to IMPLY to the public that they are some kind of professional that they are not.

I think they are doing wrong whichever way it gets sliced and diced in the end. Or as Stan so properly puts it at the end of his draft memo for media: "We feel that if Advisors are not the same as Advisers then it is at best misleading when sales people use the title Adviser."

And if the opposite is true, that advisors and ARE the same as advisers then persons licensed as "dealing reps" are misrepresenting themselves to customers as something that they have no license for.

by **admin** » Tue Apr 22, 2014 8:41 am

Continuing to look at the "advisor/adviser" name game

....confusing, yes. Different answers from nearly every securities regulator. All want to paint it in manner most advantageous as always. If they are different legal terms, THEN those persons who do NOT possess and "advisor" or an "adviser" license should NOT be representing to the public that they do.......simple concept of misrepresentation

Here is another reply, this one from the SEC today:

Dear Mr. Elford:

Thank you for contacting the U.S. Securities and Exchange Commission (SEC) to ask whether there is a difference between financial professionals who use the title "advisor" and those who use "adviser," and whether the titles carry different qualifications or responsibilities. I appreciate the opportunity to respond to your question.

In general, the two terms are used interchangeably, and the choice to use one or the other is simply a matter of preference. However, with some titles, the small differences do carry a distinction. For example, the acronym RIA and the term "Registered Investment Adviser" (or "Advisor") refer to the investment advisery firm or company. The title "Investment Advisor/er Representative" or "Registered Representative" usually refers to the individual person. You can find additional information regarding professional designations on the Financial Industry Regulatory Authority (FINRA) website at http://apps.finra.org/DataDirectory/1/p ... tions.aspx.

I should add one caveat to the response above: I believe the alternative spellings for advisor are not universally synonymous. It is my understanding that British and American financial lexicon differs depending on the formality of the situation. Both terms are acceptable on both continents, but "advisor" is often referred to as "the American spelling."

Thank you for inquiring; please contact us again if we can be of assistance in the future.

Sincerely,

Rebecca Ament Marquigny
Attorney - Advisor
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(800) 732-0330
http://www.SEC.gov
http://www.Investor.gov
http://www.twitter.com/SEC_Investor_Ed

Clear as mud now right? Trust a lawyer to make things impossible for human consumption......

If they are different legal terms, THEN those persons who do NOT possess and "advisor" or an "adviser" license should NOT be representing to the public that they do.......simple concept of misrepresentation

However, if Rebecca is right, and the terms are interchangeable, like differently spelled "nouns" as some would say, then those persons who call themselves "advisor" (for which there is no license found in Canada or the USA), are actually representing to the public that they are an "adviser", or trying to. For 600,000 licensed "brokers" in the US, and 150,000 "dealing rep's" in Canada, this is ALSO a misrepresentation. It means every commission sales "broker" or salesperson, or dealing rep, or whatever they are called in whatever country they work, gets to ignore their license, and go by the better sounding "title". Fraud, deceit and false pretence come to mind.

Oh well, salespeople must be salespeople I guess.......always spinning a tale to make a sale........

It is a simple game of watching a salesperson use words and titles, to purport and pretend to customers that he is not a salesperson, but rather some kind of planning professional. The games are amazing to watch, whether in financial sales, or others, dressed up as planning of some kind. It is akin to a door to door salesperson, sticking their foot in the door, so it is not so easily closed, and their opportunity lost.

by **admin** » Mon Apr 21, 2014 10:50 pm

I have spent quite some time on this issue and yet I do not claim to have it quite figured out.

What I can say with certainty, however is that IF an "advisor" is equivalent to an "adviser", then approximately 150,000 market registrants (in Canada) and 600,000 in the US, are misrepresenting themselves to the public.

Most market registrants do NOT hold the license category (found here http://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850 ) called "advising representative". This is for professional portfolio managers. (like the folks found here http://www.porfoliomanagement.org )

For USA license checks, please see http://brokercheck.finra.org/Search/Search.aspx

My experience in the industry is that "brokers" (salespersons on commission) will do anything to avoid letting the customer think that they are mere commission salespersons, hence the term "advisor" was added to my own business card in 1988, after the crash of 1987. I was at RBC at the time and it was RBC's idea that this "title" would give salespersons a better chance at earning client's trust.

The license held then was called "salesperson" and in 2009 this word was deleted from securities acts in 13 provinces and territories and replaced with a license called a "dealing representative" (aka "salesperson") according to the CSA web site here http://www.securities-administrators.ca/uploadedFiles/General/pdfs/UnderstandingRegistration_EN.pdf .

For 150,000 market registrants to refer to themselves as "advisors", while not having the license, is incorrect, and leads customers into a false sense of trust. They automatically assume that they are dealing with a professional with a fiduciary duty or at least a "do no harm" to the client obligation. This is not true EXCEPT for those small number of professionals who are truly registered as "advisers".

Here is what the editor of American Banker Magazine wrote about it:

Financial Advisor Chicanery: Imagine a two-tiered health care system in which some doctors were legally obligated to do what's right for their patients and others, like snake-oil salesmen of yore, could recommend whatever treatments made them the most money, as long as they didn't kill patients outright. Now imagine that the shysters did all they could to blend in with the real doctors. That's effectively the type of system we have today among the people Americans count on to tell them how to invest their life's savings. Registered investment advisors must, by law, put clients' interests first. Many thousands of other "advisors" at places like Morgan Stanley, Merrill Lynch and smaller shops are held to a much lower "suitability" standard. In essence, even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. Some do a great job serving their clients. Others don't. It's up to them. Under the law, as long as they avoid putting an 85-year-old widow into an exotic derivative with a 20-year lockup, they're bulletproof. Few clients know this fiduciary-suitability gap exists. The suitability crowd has worked tirelessly to keep the standard low and the distinctions murky. The cost to the public is incalculable but huge. source http://www.americanbanker.com/bankthink ... 940-1.html

Here is how SEC chairman Mary Jo White puts in in just 88 words

http://youtu.be/TqBSiR6VwP4

Gordon, I could go on, but I will stop there, rather than drown you in details. I link a site below where at least three provincial securities commissions disagree with terms as "advisor" and "adviser" being equal terms. An anonymous person at the CSA agrees that they are identical things, as does many a reporter, and I say these people are simply not well informed. Why? Again, if the terms "advisor" and "adviser" are equal under the law, then 150,000 market registrants in Canada, and about 600,000 in the USA are fraudulently misleading clients into a false sense of trust with a license category which they do not possess. Either way, the conversation is coming out, and the size of the issue is huge.

Cheers and best and hoping to hear some rousing discussion, debate and questioning Gordon, and Stan. Lets get to the bottom of this.

Larry Elford

[url]
viewtopic.php?f=1&t=10#p3721[/url]

by **admin** » Sat Mar 29, 2014 7:31 pm

"any advisor bringing in more than $375,000 but less $400,000 in gross production now will earn a flat 20% commission; last year's payout grid offered a 30%-44% payout for the same level of productivity."

(if you are generating only $2000 per day at TD, you are facing a pay cut of epic proportions.......achieve or leave:)

If you are dealing with one of these unfortunate folks, calling themselves an advisor.......you are being fooled.

Article (source of the quote at top of page) below:

Changes to the payout grid at TD Wealth PIA add to the trend in which firms are looking to reduce their ranks of lower producers
By Clare O'Hara, Geoff Kirbyson | Mid-November 2013
At first glance, it appears that lower producers are being hit by the changes to the payout grid at TD Wealth Private Investment Advice (PIA). But, upon closer inspection, financial advisors across the board are at risk of seeing compensation dollars disappear.
According to a confidential document from TD Wealth PIA entitled Drive to 100, the threshold for earning income on the low end will rise while the payouts for low producers will drop in the bank's 2014 fiscal year, which began Nov. 1. For example, any advisor bringing in more than $375,000 but less $400,000 in gross production now will earn a flat 20% commission; last year's payout grid offered a 30%-44% payout for the same level of productivity.
That change could translate into some brokers seeing their annual income drop to roughly $70,000 from about $150,000.
"All of a sudden, the bus driver is making more than you and you're taking a lot more risk," says Charlie Spiring, chairman of the Investment Industry Association of Canada and senior vice president of Montreal-based National Bank Financial Ltd. (NBF). "You don't have conventional hours and you have the risk of litigation. It's not worth being a broker [at that kind of salary]."
But it's not just the predicament of "lower" producers at TD Wealth PIA that's raising eyebrows. The firm also has introduced new policies relating to the discounting of fees and advisors' stock-option bonuses known as restricted stock units (RSUs). These changes could affect advisors' take-home bonus regardless of their gross production level, as 40% of the bonus amount is based on hitting new targets. (The old RSU award was 100% based on production.)
To qualify for the first 20% of the bonus amount, an advisor now will have to hit a minimum of 16 closed client referrals a year. Previously, advisors were required to complete two referrals a month, regardless of whether they were closed.
A further 20% of the qualification requirement is now based on the advisor reducing the number of non-profitable households in his/her book. This would include households generating less than $1,000 in annual gross revenue. Advisors' books now will have to hold 70% "profitable" households, by either increasing the activity of the lagging accounts or referring the stagnant accounts to another corporate partner firm, such as TD Canada Trust or a wealth partner.
Many TD Wealth PIA advisors have stock options that are deferred for at least three years — meaning their financial ties to the bank are stronger than some may think. Says Spiring: "Unless they have a competitor willing to offset the loss, [these advisors] aren't going to be walking out the door."
TD Wealth PIA is eliminating its registered-plan fee payout for 2014, which will cut $15-$35 per account for brokers. The firm says it has been successful with its RRSP penetration but there have been some "unintended outcomes" as a result. For example, 60% of the firm's 18,000 single-account households are RRSPs and there is a "heavy concentration" of small and stagnant ones.
"You can no longer look at our grid and think that is what you will get paid," says a TD Wealth PIA advisor in Ontario. "You can't compare us to the rest of the banks because now we have so many moving parts that are all behind the scenes."
Adds a TD Wealth PIA advisor in Western Canada: "It's a bit sneaky of the bank because, for me, it is not represented as a reduction in my grid. But my compensation will certainly change because some of these targets are unattainable."
Also on the table is a new fee-based household discount policy that came into effect Nov. 1. Previously, an advisor could discount a client fee without any repercussions. Now, for all new fee-based accounts, advisors who discount commissions below the firm's recommended minimum will see their payout drop by 5%-15%. The confidential document says that the change is to encourage advisors to price their fees based on their value proposition and reduce discounting within their practices.
TD Wealth PIA has also boosted the minimum amount for advisors to discount a client commission for equities trades to $400 from $300 — also in hopes of reducing widespread equities discounting that's happening at the firm.
"What they're doing is punishing the advisor for doing [a] client a favour," says a TD Wealth PIA advisor in Ontario. "At some point, if you have to charge the full price to clients, you are going to end up having a conversation with them about the discount brokerage, where the bank will make $9.99 on the trade. It doesn't make sense."
Dave Kelly, TD Wealth PIA's president and national sales manager, declined to comment on the compensation changes.
Ongoing uncertainty in the investment community is persuading many clients to stay on the sidelines, Spiring says, and the resulting decline in revenue for brokerages conflicts with the need for higher profits.
"Most of the firms aren't making their regular margins on wealth, and one of the ways to achieve that is to lower broker payouts," Spiring says. "Is it fair if you're a smaller broker? Of course not. But shareholders demand firms achieve regular margins. [And cutting payouts to the lower-end brokers] has become the easiest solution.
"Top-end brokers have a lot of loud voices and are desired all over the Street," he adds. "Lower-end and medium-producing brokers are more vulnerable."
Spiring has been advocating for banks to rethink their options for widening their margins. At NBF, he has advised his team to consider dropping the level of gross production to $300,000 and start recruiting advi-sors who fall in the mid-tier category and who bring in "good-quality business."
Spiring is worried that there will be fewer brokers at small and medium-sized firms in the future — and that doesn't bode well in an industry in which the average broker's age is already high: "One day, we're going to need someone to take [the books of retiring brokers] over. I'd like to have a well-trained, medium-sized broker take it over rather than a rookie who [needs] time to learn."
TD Wealth PIA is not alone in addressing lower-end producers. Last year, Toronto-based Canaccord Genuity Group Inc. eliminated 35 advisory teams that it labelled as "underperformers" from its total of 180 such teams. And Toronto-based Raymond James Ltd. cut its grid for advisors making less than $400,000. Still, Raymond James added a number of mid-tier levels for in-house advisors making $175,000-$400,000 to encourage an increase in production. The lowest tier (for $175,000 gross production) dropped to a payout of 15% from 20%.
"I really commend Raymond James on this model," Spiring says, "because I think [it has] done a good job at starting to address the problem."
Three years ago, Toronto-based ScotiaMcLeod Inc. followed a similar strategy, introducing a "developmental" grid for junior advisors to hit specific targets. The firm also changed its bonus compensation structure to move the focus from bank referrals and toward new external asset growth, says Hamish Angus, head of ScotiaMcLeod.
Both ScotiaMcLeod's and NBF's grids have minimum thresholds at the lower end of the scale to escape the lowest commissions — NBF's threshold is $350,000; ScotiaMcLeod's, $350,000-$375,000. In contrast, Toronto-based RBC Dominion Securities Inc.'s threshold is at the top end at $500,000.
TD Wealth PIA's Drive to 100 report lists several key drivers for the investment dealer's future, including evolving to be a "premium price" firm, encouraging productive and profitable behaviour among advi-sors, and attaining industry average pretax profit margin by the end of 2015 and industry-leading pretax profit margin two years later. Says the report: "We want your practices, on average over time, to grow faster and be more productive and more profitable than our competition."
Dan Richards, founder and CEO of Toronto-based Clientinsights, believes increased regulatory oversight for financial advisors is one of the primary causes behind the brokerages' desire to reduce expenses. "These are fixed costs, regardless of book size," he says. "If you're an advisor at a bank-owned firm and you're producing at a threshold that the bank cuts the payouts on, they aren't that interested in having you around."
The commission cuts leave many affected brokers with a trio of options: accept the significant (about 50%) pay cut; move to a smaller firm with a higher payout grid; or become an associate on another advisor's team at your existing firm. (Richards doesn't believe the brokerages would want to move lower-producing advisors into bank branches.)
"You take your book," Richards continues, "meld it onto the book of a bigger advisor and, if the payout is twice as high on that bigger producer, you've doubled the total payout. All firms want advi-sors to focus on bigger clients, and one way to do that is [by] having bigger teams."
Unfortunately for many advi-sors at bank-owned dealers, the option of teaming up to hit targets is not allowed.
"It's a missed opportunity, in my mind," says Spiring, who had several mid-tier producers join forces when he was CEO of Winnipeg-based Wellington West Holdings Inc. "There are ways to make this strategy work. And, at Wellington West, it certainly helped us get the business." [NBF acquired Wellington West in 2011.]
Instead, the new grids also could lead to bad trading decisions, says one bank-owned brokerage executive who asked not to be named. Advisors who may be close to hitting the next pay scale, the executive says, could start to display behaviour that's not in the best interest of clients or the industry in order to reach that target. IE

http://www.investmentexecutive.com/arti ... Mode=print

This video tells of a real game of consumer misrepresentation around "advisor": 2 minutes http://www.youtube.com/watch?v=1fIJ08ST ... AQ&index=3

by **admin** » Fri Mar 28, 2014 9:26 am

Advisor-adviser?? That is the question.

From my 30 years around the industry (20 years inside) it was observed that we "make things up as we go along". Not that this is a terrible thing, because when times and conditions change, certain things must also change.

The trouble that I observed repeatedly in the investment dealers where I worked (top Canadian bank owned brokers) was that the rules they found most difficult to meet were:
a) ignored at will
b) not enforced by choice
c) altered after the fact to benefit the dealer
d) papered over to benefit the industry, even at harm to the public

One exemple of this that I have found interesting is the use of certain titles by commission investment salespeople, and investment dealers.

These titles began (Investment Advisers Act of 1940) with two simple categories of investment service provider. One was a "broker" who bought and sold securities for a commission, and the other was an "Adviser" who did professional portfolio management, using his or her skill and discretion to make investment moves and decisions on behalf of the customer.

Fast forward to about 1988, and recall Black Monday, the 500 point crash in the Dow Index. I go only from memory but this crash erased 500 points in one day from an index that was standing around the 2200 or 2300 mark back then. It make quite a mark on society and on finance.

A few months after this October crash, all our (investment brokers, stockbrokers, investment salespersons etc) business cards were "recalled" and new ones issued to us by the dealer. The new cards called us by the title "Investment Advisor", and I was informed that this was because the words "stock" and "broker" has lost some of it's status, and "advisor" was seen as far more professional sounding.

This was perhaps my first or second experience in seeing my industry simply "re=paper" things as they went along, to make things better for themselves. Such was the wild west nature of the business back then.

Certainly there were, or are rules and regulations about titles, names, and license categories, but the enforcement of those is entirely left to the industry itself, or to "self" regulators put into place by the industry, so it continues to this day, the ability to magically make "anything happen", that the industry wishes to make happen, even when rules do not allow, and even when it does harm to the public. With that as some background, lets jump ahead to where we stand today with the ADVISER/ADVISER name game.

I made a few videos on Youtube, about this topic, and some of you might wish to visit there and see what has been said already. This "flogg" article is written mostly to summarize some of the new info and research that I have been gathering just in the last few days. It is a place and a way to combine this info into one location for reference. Youtube videos here:

https://www.youtube.com/user/investorad ... ature=mhee

(There are six or seven different videos on this channel about how the industry makes billions by misleading consumers into the belief that their commission salespeople are some version of a professional investment fiduciary (undivided loyalty to the customer).

I make these videos in fun, but obviously with a slight resentment that I was unable to get my own profession to straighten up and be honest. The rules are pretty clear and I found myself able to follow them, but was drowned out by the majority I guess, looking back. Industry requirements of "honesty, fairness and good faith" when dealing with customers is just a series of words, and nothing else. I have yet to see a single case where those exact words were trotted out and used to benefit the public on a specific case of dishonesty.......but I digress.

After taking ten or more years, just to understand how the "behind the scenes game" worked, and how the regulators act more like a "defence mechanism" for the industry, or "damage control" for the industry as one US senator puts it, I became so sick of writing to industry paid sycophants (self regulators etc) and getting run-around answers.....that I gave up for a time. It was just like what I imagine people felt in the 1960's, when writing their concerns and questions to the tobacco industry at that time. They were the most powerful thing going, and they simply "bought the truth" that they wanted to "be" the truth.

In my opinion, the financial industry has perfected that art today, the art of "buying the truth". As you will see from one of my videos, very credible people are beginning to put financial harm estimates together that easily come up with billions in harm to the public from playing games with names, rules and "honesty, fairness and good faith".

One good example how games are costing Canadians $25 billion a year (now might be $38 billion, 2014) in this U of T study by Keith Ambaschteer, Global Pension Studies expert.

https://drive.google.com/file/d/0BzE_LM ... sp=sharing

Recently I found the motivation to, once again, write to investment industry-paid "regulators", to ask them to clarify, if they can, the terms "Advisor", and "Adviser" as they apply to the retail investment selling industry.

Immediately below, I will paste in my correspondence to them, and a few of the replies I received (most do not bother replying).

As you will see, they vary in their answers, and a some refuse to even put their names on their replies. Personally, I discount any reply where the person is unable to sign their name to their "facts".

(Marketwatch columnist Paul B. Farrell, puts the skim number in the USA at $100 billion per year in this article from May 2014, titled "10 ways Wall Street skims $100 billion of your money" )

http://www.marketwatch.com/story/10-way ... 4882413745
========
Emails sent out March 22, 2014

I write to you seeking clarification of any difference and definition of the words "adviser" and "advisor",

Since it is fraud prevention month, and March 19th was "check your adviser" day, can you tell me if there is any official license category that need be held to hold oneself out to be an "advisor"?

Also wondering if there is any official difference or definition between the words "adviser" and "advisor", with the second last letter spelled with an "e" or an "o"?

Thank you for clearing up any confusion, so consumers can be better informed.

Best regards

=============================================

Replies received:

First response:

Thank you for contacting the Alberta Securities Commission (ASC).

While the "check registration" day was a CSA initiative, I can tell you that "adviser" is a defined term in the Alberta Securities Act meaning "a person or company engaging or holding itself out as engaging in the business of advising in securities or exchange contracts." Pursuant to section 7.2(1) of NI 31-103, there are two categories of registration for a firm that is required to be registered as an adviser: (1) portfolio manager; (2) restricted portfolio manager.

Individuals who conduct registerable activities for a firm registered as a "portfolio manager" or "restricted portfolio manager" must be registered as an "advising representative" or an "associate advising representative" pursuant to section 2.1(1) of NI 31-103.

An "advisor" is a generic term with no specific meaning in Alberta securities law.

Kind regards

Information Officer
Alberta Securities Commission
Suite 600, 250-5th Street SW,
Calgary, AB, T2P 0R4

Tel: 403.355.4476
Toll Free: 877-355-4488
Fax: 403.355.4453
Email:
http://www.albertasecurities.com

===================

Response # 2 (from the OSC)

Dear Mr. Elford:

Thank you for your inquiry to the Ontario Securities Commission (OSC) concerning checking registration for your adviser.

When you refer to "check your adviser" day on March 19, 2014, I believe you are referring to "Check Registration Day". Here is the link to information about this day on the OSC's website: http://www.osc.gov.on.ca/en/NewsEvents_ ... eg-day.htm.

"Adviser" is a legal term under securities law that describes a company or individual who is registered to give advice about securities. "Advisor" is not a legal term under securities law.

Investors often refer to the person or firm who provides an investing service to them as their "adviser" or "broker", and this is a common term used in a generic, not legal way. Business titles, designations for courses completed, and professional memberships may be informative, but the important facts for any investor are to know what the person's registration is, what products they are permitted to trade or advise about, and the services they are allowed to provide. It is important to check with the relevant provincial securities regulator to ensure that the individual and company you are dealing with is registered to trade or advise in securities, if that is part of what they are doing.

This link: https://www.securities-administrators.c ... 1128#tools on the Canadian Securities Administrator's (CSA) website provides information about checking registration. You may also find this link to Understanding Registration useful, as it describes the different categories of registration and what they mean: https://www.securities-administrators.c ... ion_EN.pdf.

Since securities law is regulated provincially, if you have specific questions about a company or individual through which you are considering investing, you may wish to check with the securities regulator in your jurisdiction for more information.

Sincerely,

Senior Inquiries Officer

=====================================
Response #3 (another response from another OSC staff member)

Industry Titles
Investors often refer to the person or firm who provides an investing service to them as their "advisor" or "broker", and this is a common term used in a generic way. Business titles, designations for courses completed, and professional memberships may be informative, but the important facts for any investor are to know what the person's registration is, what products they are permitted to trade or advise about, and the services they are allowed to provide. It is important to check with the relevant provincial securities regulator to ensure that the individual and company you are dealing with is registered to trade or advise in securities, if that is part of what they are doing.

The CSA has very useful information on checking registration and what the various categories of registration mean, and other helpful information that I would suggest you look at to see if you want to provide a link to from your web page. http://www.securities-administrators.ca ... px?id=1128

Since securities law is regulated provincially, if you have specific questions about a company or individual through which you are considering investing, you may also wish to check with the securities regulator in your jurisdiction for more information.

The Ontario Government is currently examining the need for more consistent standards for individuals who offer financial advice and planning services. The OSC will work with the government as this initiative evolves.

In addition, IIROC issued guidance on the Use of Business Titles and Financial Designation in March 2014 and in October 2013 IIROC launched an online glossary of common designations to assist investors. The MFDA rule 1.21(d) prohibits MFDA members from using any business name or designation that deceives or misleads as to their proficiency qualifications.

Consultation Paper 33-403
With respect to your question on CSA Consultation Paper 33-403, the consultation was meant to solicit views of the applicability of the standard to all categories of registrants, which would include both advising and dealing representatives

Regards,
Lisa

Lisa Enright | Ontario Securities Commission | Office of the Investor | Advisor
20 Queen Street West, Suite 1903 | Toronto ON M5H 3S8
(416-593-3686 | 7416-593-8252 | *lenright@osc.gov.on.ca
Please consider the environment before printing this e-mail

====================================
Response #4
(some people in the industry do not wish their comments to be in writing, I called her and she was very nice)

Hi Larry,
I received your email inquiry regarding the difference and definition for the words advisor and adviser? I wonder if I could call you to discuss?
Let me know what number I can reach you at and when would be a convenient time to chat.

Thanks!

Michelle Robichaud
Communications and Media Relations Specialist
Spécialiste des communications et des relations avec les médias
Tel / Tél : (506) 643-7045
Michelle.Robichaud@fcnb.ca
Financial and Consumer Services Commission
Commission des services financiers et des services aux consommateurs
=========================

Response #5

Mr. Elford,

Thank you for contacting the CSA Secretariat.

Although we strive for consistency in all of our terminology, there is no difference in the definition of the word adviser, whether it is spelled “adviser” or “advisor”. National Instrument 14-101 Definitions uses the spelling with an “e”:

“adviser registration requirement” means the requirement in securities
legislation that prohibits a person or company from acting as an adviser
unless the person or company is registered in the appropriate category of
registration under securities legislation;

We have also consulted the Public Works and Government Services Canada’s Termium Plus database and both spellings, adviser and advisor, are correct.

(The CSA is the umbrella organization for 13 provincial and territorial securities commissions in Canada)

(advocate comment: The problem we see with this anonymous reply, is simply this: If this person is correct in their answer, namely if "there is no difference in the definition of the word adviser, whether it is spelled “adviser” or “advisor”, then approximately 150,000 persons in Canada who are licensed as "dealing representatives" while calling themselves "advisor" (which they are not licensed as).......these salespersons are effectively misrepresenting themselves to the investing public.)

=======================
Response #6

From: "Tavares, Isilda (FINMSC)" <Isilda.Tavares@gov.mb.ca>
Subject: RE: I write to you seeking clarification of any difference and definition of the words "adviser" and "advisor", MSC
Date: 31 March, 2014 10:51:36 AM MDT
To: "lelford@shaw.ca" <lelford@shaw.ca>
Hello Mr. Elford:

Your e-mails below have been directed to my attention. You have requested clarification on the words "adviser" and "advisor".

The definition of Adviser under the Securities Act:

"adviser" means a person or company that engages in or holds himself, herself or itself out as engaging in the business of advising others with respect to buying, selling or investing in securities or derivatives; (« conseiller »); and

Under The Commodity Futures Act:
"adviser" means a person or company engaging in or holding himself, herself or itself out as engaging in, or being held out by a registrant as engaging in, the business of rendering advice as to trading in contracts, and includes a person or company engaging in the publication of newsletters, analyses or reports or broadcasting analyses or reports advising others respecting trading in contracts; (« conseiller »)

We are aware that under the Manitoba Securities Commission website there is reference to "advisor". This matter will be discussed with our webmaster to request that "advisor" be replaced with "adviser"

Thank you, should you require further information please advise.

Isilda Tavares
Registration Officer, Deputy Director
The Manitoba Securities Commission
500-400 St. Mary Avenue
Winnipeg, MB R3C 4K5

tel : (204) 945-2560
fax: (204) 945-0330
toll free: 1-800-655-5244 (Manitoba only)
email: Isilda.Tavares@gov.mb.ca
web site: http://www.msc.gov.mb.ca

======================================

Response from IIROC
(this man was very helpful)

On 2014-03-27, at 4:45 PM, Joe Yassi <jyassi@iiroc.ca> wrote:

Larry, I'm out of town. This is my second response. In my first, from memory I suggested that all the primarily relevant rules and Nis are cited in the guidance. If there are not links to the rules set up yet there will be soon. In any event you can access the Dealer Member Rules through our public site. There is no requirement to use an RR or IR title on a business card for example. There is a Rule of more general application prohibiting the use of misleading titles. National Instrument 31-103 can give you some insight into the use of the term adviser as a registration category in the CSA jurisdictions. You might also want to research the more historical attempt to deal with financial planning through the regulation of titles...using words like adviser in combination with other words was part of this initiative which ultimately was not adopted. I think this was draft National Instrument 81 or 31 -107. The OSC's Office of the Investor I believe is undertaking a look at titling in the context of registration issues and the "misleading" issue as well.

I hope this helps,

Cheers,

Joe

=================

with apologies for the length of this flogg post (there is a reason I call it a flogg:) I am going to paste in here some rules/laws/cases on "misrepresentation" to help me build my next video chat on this topic. You will find some of my chants/rants at my youtube channel here, I am making a series to highlight how many ways I know of to "steal* a billion dollars", with the word "steal" used to apply to any misrepresentation for money, any fraudulent misrepresentation, negligent, used to cheat, skim, shortchange, or bamboozle trusting and vulnerable people out of some of their money......even when it is not ALL of their money, it is still stealing in my mind.

rules/laws/cases

--Competition Act of Canada
Marginal note: Misrepresentations to public
PART VII.1
DECEPTIVE MARKETING PRACTICES Reviewable Matters
1 74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,
1 (a) makes a representation to the public that is false or misleading in a material respect; 2 http://laws-lois.justice.gc.ca/eng/acts ... ns#s-74.01

===========

--What is a false pretence under the Criminal Code?
Under Section 361., (1), a false pretence is a representation of a matter of fact either present or past, made by words or otherwise, that is known by the person who makes it to be false and that is made with a fraudulent intent to induce the person to whom it is made to act on it. Subsection (2) states that exaggerated commendation or depreciation of the quality of anything is not a false pretence unless it is carried to such an extent that it amounts to a fraudulent misrepresentation of fact. For the purposes of subsection (2), it is a question of fact whether commendation or depreciation amounts to a fraudulent misrepresentation of fact.
Under the Criminal Code, every one who commits an offence under paragraph (1)(a) (a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding ten years,
******

=============

IIROC Rule 3100 - Definitions "Misrepresentation", i), ii)
"misrepresentation" means:
i) an untrue statement of fact; or
ii) an omission to state a fact that is required to be stated or that is necessary to make a statement not
misleading in light of the circumstances in which it was made.
=================

From the BCSC Securities Act (link 1) comes this;
Persons who must be registered
34 A person must not
(a) trade in a security or exchange contract,
(b) act as an adviser,
(c) act as an investment fund manager, or
(8) Misleading Trade Name
No Dealer Member or Approved Person shall use any business or trade or style name that is deceptive, misleading or likely to deceive or mislead the public.
13
(d) act as an underwriter,
unless the person is registered in accordance with the regulations and in the category prescribed for the purpose of the activity.

==============

A misrepresentation is defined by the Securities Act as “an untrue statement of a material fact or an omission to state a material fact that is required to be stated or necessary to prevent a statement ... from being false or misleading in the circumstances in which it was made.”7

===========================================

Fraud section 380 of the Criminal Code of Canada
380. Fraud

380. (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,

========

media quotes about violations of the public by so-called-professionals.

The quotes following, are from respected experts and refer to industry misrepresentation, deceit, false pretense or outright fraud:
1. “.........financial advisors, wealth managers, senior financial planners, financial analysts, and investment managers are just a short list of titles that salespeople like to adopt, in an effort to steer clear of the “salesperson” stigma........”

From “Understanding Misleading Financial Advisor Titles – Your Right to Know” Bryon C. Binkholder

2. "Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying. " Edward Waitzer article, Financial Post · Tuesday, Feb. 15, 2011) (Mr. Waitzer is a Bay Street Lawyer and former Securities Commission chair, and this quote ( by another person) appeared in his article.
viewtopic.php?f=1&t=173&p=3438&hilit=waitzer&sid=315213c6fd740f3160d45ff7965fd5de#p3438

3. “The greatest risk the average investor runs is the risk of being misled into thinking that the broker is acting in the best interest of the client, as opposed to acting in the firm’s interest,” Professor Laby said. New York Times (Arthur Laby, a professor at Rutgers School of Law-Camden, and a former assistant general counsel at the S.E.C.) http://www.nytimes.com/2012/07/07/your- ... html?_r=1&

4. This misrepresentation allows persons with a “phony title” to financially violate trusting and vulnerable Canadian investors (and similar across the USA)...............here is one comment from Quebec Superior Court Justice The Honorable Jean-Pierre Senécal, J.S.C., Quebec Superior Court , District of Montreal
The Honorable Jean-Pierre Senécal, J.S.C.

¶ 263 The defendant attributed to Migirdic fake titles, i.e. "vice-president" and "vice-president and director", in addition to letting him use the title "specialist in retirement investments". Those titles were false representations that misled the plaintiffs, hid reality from them, disinformed them, comforted them in their confidence in Migirdic, reduced their distrust, and contributed to Migirdic's fraud. The defendant committed a fault in terms of its obligation to inform and advise, in addition to misleading the plaintiffs.

Further and link to full court documents here: [url]http://www.investoradvocates.ca/viewtopic.php? f=1&t=10&p=3454&hilit=markarian#p3454
5[/url].

========================

Under the new National Instrument 31-103 as of September 28, 2009, mutual fund representatives, formerly called “salespersons”, are now called mutual fund “dealing representatives” and individuals who were an advisor under a portfolio manager are now called an advising representative. See this link for full details: http://www.bcsc.bc.ca/uploadedFiles/sec ... BNI%5D.pdf see appendix C, page 70 for license category changes

(keywords: deceit )

==========================================

FINALLY!
This last communication from 2010, from the BCSC: (found on a posting in another topic in this same forum)
Re: Are advisors professionals, or salespeople masquerading?
by admin » 27 Jan 2010 04:22 pm

Dear Mr Elford,

Thank you for your message.

With regards to your questions and comments, you are quite right in that the term "advisor" on its own and used loosely, would be inappropriate for a dealing representative to use without having the educational requirements and experience to be registered as an advising representative.

If you are certain that an individual is holding themselves out inappropriately, please feel free to contact the appropriate securities commission or self regulatory body (Mutual fund Dealers Association or Investment Industry Regulatory Organization of Canada ) through our related links available on our website at: http://www.bcsc.bc.ca our email is inquiries@bcsc.bc.ca We also have a helpful link on our website called Invest-right , which members of the public can use to assist themselves with their investing.

Thank you,

Kent Waterfield
Senior Registration Administrator
Registration & Compliance Branch
Capital Markets Regulation

British Columbia Securities Commission

Phone: 604 899 6694
Fax: 888 242 9341
800 373 6393 (toll free across Canada)
kwaterfield@bcsc.bc.ca
(advocate comments.........my problem, as I see it is that the securities commissions (BCSC included) are morally blind as evidenced by the fact that NONE of the 130,000 people registered today in the category of "dealing represntative", or yesterday's category of "salesperson" properly identify themselves to the public, and virtually all of them misprepresent themselves as "advisors". It is in every newspaper, every day, on every advertisement, etc., and for the BCSC to ignore this is the ultimate in "see no evil" behavior) Having spent many years of my life already trying to point out rules broken and laws ignored by these very same regulators, what would be the point of letting this person in on the moral blindness? Can anyone tell me the correct solution? Please?)

by **admin** » Wed Mar 26, 2014 5:12 pm

click to enlarge image, click twice to zoom in

Thank you for contacting the Alberta Securities Commission (ASC).

While the "check registration" day was a CSA initiative, I can tell you that "adviser" is a defined term in the Alberta Securities Act meaning "a person or company engaging or holding itself out as engaging in the business of advising in securities or exchange contracts." Pursuant to section 7.2(1) of NI 31-103, there are two categories of registration for a firm that is required to be registered as an adviser: (1) portfolio manager; (2) restricted portfolio manager.

Individuals who conduct registerable activities for a firm registered as a "portfolio manager" or "restricted portfolio manager" must be registered as an "advising representative" or an "associate advising representative" pursuant to section 2.1(1) of NI 31-103.

An "advisor" is a generic term with no specific meaning in Alberta securities law.

Kind regards

Don Rodgers
Information Officer
Alberta Securities Commission
Suite 600, 250-5th Street SW,
Calgary, AB, T2P 0R4

Tel: 403.355.4476
Toll Free: 877-355-4488
Fax: 403.355.4453
Email: don.rodgers@asc.ca
http://www.albertasecurities.com

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