Securities Commissions assist predatory behaviours

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Postby Guest » Mon Dec 05, 2005 12:36 pm

October 2005

CMI Appointed Research Director to Task Force to Modernize Securities Legislation in Canada

The University of Toronto’s Capital Markets Institute (CMI) has been appointed as the Research Director for the Task Force to Modernize Securities Legislation in Canada. The CMI will assist in the design and direction of the Task Force’s research program. Paul Halpern, TSX Chair in Capital Markets, Rotman School of Management, University of Toronto and Poonam Puri, Associate Professor of Law, Osgoode Hall Law School, York University will jointly carry out the function of research director.

(this organization appears very capable of providing help to bring the regulatory system in Canada into the 21st Century)

Postby Guest » Mon Dec 05, 2005 8:42 am

Kirzner's book writing partner Richard Croft worked at Norwich Securities dealer before it was shut down by the OSC. Norwich was in the same category as penny stock broker Marchment & MacKay: ... 7Jul10.htm ... allenj.jsp

Postby admin » Sun Dec 04, 2005 11:03 pm

my biggest conclusions (shocks) from reading the report on capital markets enforcement effectiveness mentioned in the last post:

1. That financial crimes are subject to being overlooked or prosecuted depending on the significance of the crime and the wealth and strength of the defendant...............wheras they should be based upon the legality of the action.
How do abused investors feel when told they are "not important enough", or that their abusers are "too important" to prosecute?

Tell that to someone whose finances have been damaged and perhaps worse by a "big trustworthy" firm. It is immoral that regulators can arbitrarily interpret the law as they see fit.
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Postby admin » Sun Dec 04, 2005 10:39 pm

Excellent report on Investment regulatory enforcement.

Published by CMI, Capital Markets Institute
Authored by Professor P Puri, York University
Dated Dec 1, 2005

Some readers digest version quotes I found interesting and illuminating as to why today's regulators are behind the times:

page 3 "...........disconnect between securities regulators and investors in interpreting the mandate of investor protection. ...........aggrieved investors are most interested in being made whole as a result of capital markets misconduct.

page 3 "........recent events at the Alberta Securities Commission underscore the need for a disciplined enforcement system that has clear enforcement policies, guidelines and standards......."

page 4 "........a national commission or consolidated regulator would enhance enforcement effectiveness"

page 4 "....regulators should educate the investors, the press and the public the same time consider adopting best practices and policies from other jurisdictions........"

page 5 "..........insuffient enforcement activity, that the small investor is not well protected, that the commissions have been captured by those they regulate.............perceived or actual conflicts"

page 8 "It may very well be time to re-conceive of the role of the securities regulator in the 21st century, as one that not only takes forward-looking actions, but also one that acts as a facilitator or catlyst to assist investors in receiving compensation."

Page 12 "......studies reveal that white collar offenders are less likely to be imprisoned, receive lower average sentences and serve less time than offenders in relation to traditional crimes."

page 13 ".........a general perception among the public, including members of the judiciary, that capital markets misconduct is victimless and that financial crimes are not as serious as other criminal offenses that cause physical harm.

Page 18 "the current regulatory structure with multiple securities commissions may also increase the levels of non compliance......."
"..............inadequate enforcement is one of the most significant weaknesses of the current system."
"there is no legitimate reason why investors should have different protection depending on the province in which they happen to live".

Page 10 has some valuable comments about how corporate crime often has the defendants with equal (or more) resources than the government agency having to pursue them. It also quotes John Sliter, director of IMET as saying that they do not have any greater resources to pay informants of multi-million dollar securities frauds than they pay for break and enter offenses.

Page 13 has some examples regarding how fines etc for white collar crime is often not enough to deter criminals from profiting from the crime, and they need to be increased to the point where profit does not result after paying the small fine.

Page 14 give the suggestion that specialized courts to deal with capital market offenses would help.

Page 16 discusses how some regulators let go of some crimes in areas where the enforcement would be difficult, or the impact of a successful outcome would be less significant. Also difficult cases where the defendant may be too large and too powerful to pursue.
The above also leads to a disproportionate number of enforcement actions against smaller firms as opposed to larger ones.
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OSC Investor Advisory Committee

Postby Stan » Sun Dec 04, 2005 8:32 pm

The new OSC Investor Advisory Committee comprises individuals who have knowledge of the complaints handling process. I do not have any problem with those selected to serve on the committee although Glorianne Stromberg is conspicuous by her absence.

Nevertheless one would expect this committee chaired by Eric Kirzner to advise the OSC on issues that are important for retail investors.

It is expected that the OSC will be transparent and make public the terms of reference for this committee when they are available and post them on their website.

If the committee is to be effective it is expected that reports on the meetings and the recommendations made will also be disclosed and made available to the public and posted on the OSC website.

We look forward to the OSC leading the way with transparency and disclosure and hope that this committee may, by reporting the concerns of retail investors to the OSC, have some impact on the regulatory system.

Stan Buell
Small Investor Protection Association

Regulatory Failure

Postby Stan » Sun Dec 04, 2005 3:58 pm

For some considerable time we have said the regulatory system is failing the small investor.

We recognize the problem of small investors being robbed of their savings by a rapacious industry that has no regard for retail investors' savings.

It really is "Investor Beware" as Robert Goldin with his book wiht that title in 1998.

So what can be done?

More regulations, more rigid qualifications, more restrictive guidelines and better recommended best practices will not help if discovery and enforcement remain weak.

There are honest, or at least relatively honest, individuals working in the financial servcies industry. When they witness wrongdoing they are tempted to speak up but are intimidated. Those who dare to come forward are punished.

Critics of the industry have mentioned mafia-like behaviour and a "code of silence". In Alberta, the ASC was quick to fire those they could identify as whistleblowers. We have a history of whistlblowers who dared come forward being criticized and discredited. They have lost their jobs and often their careers.

If Canadians do not stand up and require protection for those who would come forward to tell the truth, they will have to live with corruption that is covered up because there will never be sufficient police and regulators to monitor all the criminal activity.

The police rely upon paid informers and citizens coming forward.

If the industry's regulators are ever to be effective they must also depend on TruthTellers coming forward. To achive this there must be legislated TruthTeller protection and severe penalties for those who intimidate them.

There is tons of evidence of what is worng and how the industry is robbing investors. So what is the solution?

As Glorianne Stomberg said many years ago there will be no change unless and until the public is aroused and angered so they stand up and demand remedial action.

One hopes that the mutual fund market timing scandal, the Portus and Crocus scams, the Income Trust fiasco and all the corporate and investment industry wrongdoing will convince Canadians there are serious issues causing the transfer of their wealth to white collar criminals.

This investor advocate forum is a worthwhile addition to the side that wants to see an improved investment environment for investors and for those in the industry that still believe in honesty and integrity, and who would like to see an investment industry operated in a moral and ethical fashion with transparency and disclosure.

Postby Guest » Sun Dec 04, 2005 1:38 pm

It's interesting to note they claim to be accountable to retail investors yet the contact information of the committee members has not been made available publicly.

Postby admin » Sat Dec 03, 2005 2:54 pm

good question, but in my opinion, if Kivenko, Urquahart, Stromberg, Rosen or any of those pro's were asked to serve, it would be like asking a Mario Andretti to drive in a soap box derby race.

The OSC (and ASC etc) is so far behind "best industry practices" worldwide, that they cannot see anyone ahead and they think they are in the lead. The professionals mentioned above could not even slow down enough to partake in anything OSC in my opinion. Waste of thier valuable time.

It should be the other way around. the OSC should be sending intelligent people to interview and understand the best in the industry.

The advocates mentioned above are the Japanese auto makers in the 70's, while the OSC is General Motors.
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Postby Guest » Sat Dec 03, 2005 11:18 am

New Securities Fraud Hotline Blog
Eppenstein and Eppenstein announces the creation of the new Securities Fraud Hotline Blog, providing information and insights on current business news that is relevant and of interest to the business community and investing public.

New York, New York (PRWEB) December 3, 2005 -- Eppenstein and Eppenstein, the New York-based law firm of national and international securities fraud and commercial litigation attorneys who have recovered approximately $50 million for their clients in the past five years, has a new blog at

The purpose of the blog is to provide information and insights on current business news that is both relevant and of interest to the business community and the investing public. Senior partner Theodore Eppenstein, who argued on behalf of investors before the U.S. Supreme Court in the landmark Shearson/American Express, Inc. v. McMahon case, assists investors, employees and businesses with valid claims to recover their losses in court or arbitration.

Mr. Eppenstein’s expanded list of common broker and brokerage firm abuses includes over twenty practices which can be accessed easily through the internet portal to the firm’s website,, or directly on the firm’s main website at Each one of these potential claims is fact-specific and can differ according to jurisdiction.

According to Mr. Eppenstein, the five most common investor claims of broker misconduct are: breach of fiduciary duty; recommending unsuitable investments; fraudulent misrepresentation or omission to state material facts; breach of contract; and churning or excessive trading.

Five Most Common Claims Against Brokers

Unless a broker is merely an order taker, he may be acting as a fiduciary of the investor. Granting discretion to the broker is an excellent example of the broker being given special ability to trade a customer’s account without seeking approval first. Many cases have been filed against brokers who abused this relationship by placing their personal benefit above the interests of their client.

Unsuitable investments are those recommended by the brokerage firm to the customer that do not match up with the customer’s investment objectives or risk tolerance. The losses resulting from speculative investments with high risk to an individual’s retirement account, if it was opened to preserve capital with limited risk, can easily fall into this category.

Fraudulent misrepresentations can consist of knowingly false communications given by the broker to the customer, or the failure to give adequate notice about the risks or nature of investments which the consumer relied on and resulted in investment losses.

Typically when investment accounts are opened, contracts are executed which govern the dealings between the brokerage firm and the customer. When the provisions of these contracts are violated and cause investment losses, claims for those losses are often asserted.

Excessive trading or “churning” can occur when brokers trade more to earn their commissions than to make profits for their customers. The trading patterns of brokers who make recommendations for heavy trading should be investigated for possible claims.

Tips to Investors to Prevent Abuse and Recover Losses

Recent Securities Fraud Hotline Blog postings by the Eppenstein firm are instructive on how to avoid becoming the victim of securities fraud, commodities fraud and other investment abuses. The “Top 5 Investor Tips You Must Know to Protect Yourself from Deceptive Brokers” is a brief but clear-cut set of guidelines for investigating your investment advisor, establishing a personal relationship with your advisor and the branch manager instead of using an anonymous call center, knowing your investments, avoiding the practice of giving full discretion to a stock broker and writing down and confirming your investment objectives and risk tolerance to your broker and his supervisor.

The Securities Fraud Hotline Blog posting “What to Do If You Suspect Securities Fraud” gives a simple 3-step plan of action you can follow to try to recover your investment losses: gather your investment records; set up a client meeting with an attorney experienced in investor rights and protections to discuss the facts of your case; and get on the fast track to file your case, since there are various statutes of limitations that may apply to actions and eligibility rules at the SRO (self-regulatory organization) forums that normally adjudicate such claims, such as the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE).

For additional information about the new Securities Fraud Hotline Blog and to read our postings, contact Theodore G. Eppenstein, or visit the firm’s Blog at

About Eppenstein and Eppenstein:

Eppenstein and Eppenstein, in business over 25 years, is a respected New York-based litigation firm with a domestic and global practice, widely known nationally and in the international community for protecting the rights of defrauded investors and businesses, as well as for obtaining significant arbitration awards for their clients. The attorneys at Eppenstein and Eppenstein--securities, commodities and commercial litigation lawyers--have extensive experience representing investors in actions against securities and commodities brokers and their broker dealer firms and representing individuals and businesses in commercial litigation. They have successfully recovered millions of dollars in assets for investors, including a record-setting $46 million USD recovery in 2002 against Refco Inc. The portal to the firm’s newly updated website,, is an introduction to the firm’s history of successful representation of investors and businesses.

Theodore G. Eppenstein, the firm’s senior partner and a practicing securities fraud and commercial litigation attorney, is frequently called upon to author articles and speak at conferences on investor rights and securities fraud and commodities fraud litigation and arbitration, including appearing as a primary speaker in symposia at the Moscow Interbank Currency Exchange in 2000 and at the Cairo-Alexandria Stock Exchange in 2003. He is a two-term member of SICA, the Securities Industry Conference on Arbitration, an advisory group to the Securities and Exchange Commission, and has testified in Congress twice to try to level the playing field in arbitration for aggrieved investors. Mr. Eppenstein has been quoted frequently in the major media, including the major financial magazines and newspapers, and has made numerous network and cable television appearances promoting the interests of public investors.

Theodore G. Eppenstein
Eppenstein and Eppenstein
767 Third Avenue, 23rd Floor
New York, NY 10017

(of course, this forum at is an attempt to help people in some fashion as well, and we hope to be able to use it, and all avenues until our regulators are brought up to the speed of the industry)

Postby admin » Fri Dec 02, 2005 11:29 am

Screen shot 2010-08-31 at 7.44.45 PM.png
The first post about a bad broker brings up a question. Can the regulators do anything against the real systemic abuses? Can they hunt down corporations and or CEO's who allow widespread abuse of clients in the name of profit?

Sure they can catch a small time hood here and there. Even a blind chicken gets a few kernels of corn. But where are they on something seriously unethical? Seriously illegal? The sad truth is they are absent.

My opinion is that they ignore the real challenges because thier next job may come inside the very industry they are supposed to police. They make a big deal out of hunting the little man on the street, while ignoring the entire system behind him that fosters his crimes.

Misrepresentation, hidden fees, secret commissions, double dipping, deferred sales charges not in client interest, commission motivation rather than professional advice, title inflation (calling yourself an advisor when not registered as such), selling unsuitable investments to unwary clients for personal gain, etc., etc., etc
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Regulators in your pocket

Postby admin » Fri Dec 02, 2005 11:23 am

Mutual funds salesperson settles with BCSC

Foresight Capital rep breached know your client and suitability rules

Thursday, December 1, 2005

By IE Staff

The British Columbia Securities Commission has reached a settlement with a mutual funds salesperson who admitted to breaching know your client and suitability rules when he recommended leveraged investments to clients.

Martin Hall, a B.C. resident, is barred from trading securities other than mutual funds for three years except in limited circumstances. As well, Hall’s registration is subject to conditions for at least 12 months, including: daily strict supervision by his employer of his client and personal trading as well as restrictions on his ability to deal with clients who use leveraged funds to purchase mutual funds.

Hall was a registered salesperson at Foresight Capital Corp. from Jan. 7, 1999 to July 3, 2002. During his employment at Foresight, Hall recommended to two clients that they purchase mutual funds using money borrowed against the equity in their homes. The clients each had some or all of the following characteristics:
Low to average net worth;
Little or no investment experience and sophistication;
Limited income, and
Low tolerance for investment risk.
Hall also breached rules when he signed a client’s name on account and bank transfer documents.

With this settlement, Hall is no longer a respondent in the hearing currently underway at the BCSC.
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Postby Guest » Thu Dec 01, 2005 10:25 pm

Good news at the Alberta Securities Commimssion!

All one needs is to follow ASC staff and chair examples, and kindly ask for forgiveness. Ask if you can please put your indiscretions behind you and move ahead with your life. It is a kindler, gentler regualtory environment.

Bill Rice, head of the Alberta Securities Commission, speaks to the Herald's editorial board.

Charles Frank, Calgary Herald
Thursday, December 01, 2005
It's good to see Bill Rice hasn't lost his sense of humour. Rice, the embattled new chairman of the Alberta Securities Commission, dropped by the Herald on Wednesday to set the record straight on where things stand at the province's troubled market regulator.

"It feels like I've been here for four years but it's only been four months," he said with a wry smile, while offering up his personal take on the potpourri of events that have had the ASC in the public eye for most of 2005.

Yes, mistakes were made before his arrival. Policies weren't followed to a T. Lapses in judgment may have occurred. Working conditions at the ASC were problematic. Senior staff were at odds with each other.

But, he insists, those are all things that can be fixed.

In fact, the veteran securities lawyer is adamant that going forward, things will be different.

Recommendations from a number of reports into the ASC, including some from Auditor General Fred Dunn, will, for example, be implemented. And that as a result, anyone who finds themselves dealing with the regulator can expect to get "a fair shake."

If only it were that simple.

Rice's desire to "move on" -- and his growing frustration at not being allowed to do so by a seemingly endless stream of events and people beyond his control -- is understandable.

That's what any of us would want, were we in his shoes.

But the murky waters that have engulfed the ASC since last spring, when Finance Minister Shirley McClellan revealed that she had ordered an investigation into goings on at the regulator in the wake of a myriad of complaints from employees, have been slow to recede.

With good reason.

McClellan's reluctance to make a full disclosure of her findings, the secretive behaviour of the part-time commissioners responsible for overseeing the ASC once word of concerns hit the public arena and the aggressive remedial actions of interim chairman Peter Valentine all contributed to keeping the ASC in hot water.

And Rice is quick to admit that the negative publicity surrounding his own circumstances hasn't helped matters, either. Nor has the ongoing controversy over the ASC's director of enforcement, John Petch.

If that's not enough, the RCMP, following up on a complaint from Alberta Liberal Leader Kevin Taft, are trying to ascertain if there is reason to open an investigation of the ASC.

Rice earned the ire of corporate governance afficionados by asking to stay on as chair of Tesco Corp., while stepping into his duties at the ASC and for failing to file an insider trading report, an error that saw him penalized $1,000 by the Ontario Securities Commission.

The latter he says simply, was embarrassing -- but not reason enough to resign, as critics have suggested.

The former, was merely a matter of minding his p's and q's during a transition period for both Tesco and himself.

Again, if only it were that simple. Out here in the real world there is an expectation regulators not only talk the talk, but walk the walk.

Especially when they happen to be regulators who are charged with restoring public confidence in an organization that has been accused of favoritism and being vulnerable to political interference.

The same holds true for the director of enforcement's ill-conceived decision to buy and sell shares in a company under investigation by the commission -- a decision that ASC officials, Rice and McClellan see as nothing more than a breach of the organization's rule book even though many others, including the province's auditor general, consider it a more serious offence.

It is that disconnect -- and the seeming inability of Rice, McClellan and the part time commissioners who oversee the ASC to grasp the breadth of the current credibility gap -- that is threatening to keep the regulator in the public eye.

At this point, people simply do not feel the ASC is poised to act in an impartial and open manner; and that it will not be able to do so until it has its own house in order.

That probably isn't what Rice wants to hear. But it's the truth.

Even as he was vowing to get the regulator back on track, Rice acknowledged that he -- and the ASC staff -- are growing weary of the negative publicity that continues to swirl about their agency.

They're not the only ones. Rank and file Albertans are tired of the year- long soap opera at the ASC, too.

Unfortunately, at this point in time, there's no end in sight.

© The Calgary Herald 2005

Postby Guest » Tue Nov 29, 2005 4:23 pm

Little will be accomplished by this committee because it has no binding authority. At least with a kick *** crew of "Al Rosens" there could be some jawboning. Why wasn't Stromberg asked to serve.

Postby Guest » Tue Nov 29, 2005 3:49 pm

looks like a pretty decent lineup to me.
I heard W Steinkrauss give an awesome presentation on behalf of investors to the senate standing committee on finance. I can support her as being competent and capable without even having met her.

Lawyer John Hollander is great.

Robert Goldin has to know his stuff although he keeps a profile like he is hiding.

Ellen Roseman has been around the block, and the industry long enough to know what is going on.

I don't know the rest but they sound capable.

I like the group. the question I have is will the OSC change it's stripes enough to work with a forward thinking, client thinking group like this. That would be a rather dramatic change in my opinion.

Postby Guest » Tue Nov 29, 2005 2:07 pm

Gang, is there anybody on this committee who isn't legit? I don't know anything about Hutton, Manicom, Reeve and Steinkrauss.

William Gleberzon Co-director of Canada’s Association for the Fifty-Plus (CARP). Co-author of CARP’s submission to the Standing Senate Committee on Banking, Trade and Commerce on Financial Services.

Robert Goldin Investment dispute consultant and forensic financial auditor.

John Hollander Civil litigator with Ottawa-based Doucet McBride LLP, concentrating in securities negligence matters.

Gloria Hutton Private investor with first-hand experience of the redress process who made a submission to the Ontario Legislature’s Standing Committee on Finance and Economic Affairs.

Richard Manicom Information technology consultant and private investor who has been active on various issues including the recent mutual fund settlement.

Poonam Puri Associate Professor of Law, Osgoode Hall Law School, York University, specializing in securities law, corporate law and corporate governance.

Pamela J. Reeve Private investor who has submitted comments on the OSC's Fair Dealing Model, and complaint handling to the Senate and federal Department of Finance.

Kelly Rodgers Consultant to private clients, foundations and aboriginal communities on investment policy, portfolio management and evaluation. Founding member of the Canadian Investment Funds Standards Committee.

Ellen Roseman Business columnist with the Toronto Star, author of numerous consumer guides on financial matters. Ms. Roseman teaches personal finance courses at the University of Toronto's School of Continuing Studies.

Whipple Steinkrauss Consumer Council of Canada Board Member. Author of a paper to the Ontario Standing Committee on Finance and Economic Affairs regarding the five-year review of securities legislation


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