Solutions, Self Defense and Best Practices

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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Feb 27, 2010 5:24 pm

“The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between” by William Bernstein
In a nutshell

Must read book for investors; Bernstein calls it the way he sees it. He starts off with the observation that only a very small minority of investors will succeed at managing their own investments (this by the way makes me wonder why am I authoring a website of DIY investors?) because they lack the four essential requirements for success: interest, mathematical inclination, understanding of financial history and emotional discipline to execute strategy. Nevertheless, he then proceeds to fill his short (<200 page) book with valuable advice. It’s an easy read, which could pay you a lifetime of dividends; it might even help save you from eating cat food in retirement.

-“Muggers and worse” is one of the chapters I enjoyed the most; he calls them the way he sees them: “the prudent investor treats almost the entirety of the financial industrial landscape as an urban combat zone”. He argues that a combination of incompetence, motivation to make money and “agency conflict” are at the root of the raw deal that investors get from the industry. A key reason why the public is not as well protected when doing business with the brokerage industry as when we go to a doctor, lawyer or accountant is because brokers are not fiduciaries like other professionals. Bernstein says that you’ll do fine if you “act on the assumption that every broker, insurance salesman, mutual fund sales person and financial advisor is a hardened criminal”.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Feb 27, 2010 9:44 am

"Active ETFs will do to the mutual fund industry what iTunes did to the CD. It is so much better for the investor because they have a low management fee - in this case, 0.70 per cent." - Ken McCord, president of AlphaPro Management commenting on mutual fund managers joining the active ETF movement .
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Re: Solutions, Self Defense and Best Practices

Postby admin » Mon Feb 15, 2010 3:19 pm

I just remembered that I have a tiny tad of RRSP funds left sitting idle and ignored.

I finally put them to work today, and the exact investment is not of any import nor significance, but two things struck me as significant enough to warrant comment:

1. I made the investment in an ETF (exchange traded fund) instead of the mutual fund that the sales guy (sales guy who illegally misrepresents himself as an advisor). He wanted me to buy a canadian fund with a 2.5% management fee. I ended up buying an ETF with less than .5% fee. The extra 2% when compounded over 35 years results in half your money going to the investment guys and only half the future total that you should have. that is solution #1

2. solution #2 was that I made sure that my purchase was made on an American exchange, due to the fact that US securities laws are sometimes enforced and sometimes financial criminals actually do jail time. In Canada, the numbers of prosecutions are so low, as to be statistically insignificant. One could say, and some of the smartest investors in Canada are on the public record as saying, that to invest in anything supervised by Canadian financial regulators is to enter into a predatory buyer beware relationship.

It is unfortunate that I had to witness billions and billions and billions stolen from Canadians to date, before I finally figured out how badly rigged the game is in Canada.

safe investing

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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Feb 11, 2010 9:49 am

Investment Fraud in the market place


Securities Commissions in Canada are self regulatory and can use this system to often bypass
 real criminal investigation and prosecution.


The financial industry pays the salaries of the regulatory force, rather than the taxpayer.
This means that clever financiers get to choose who to hire to regulate financiers. (like hiring your own police)


The financial industry pays them three to four times more then what they would earn in the same job elsewhere. Over paying makes regulators, "compliant", more willing to say "YES" to the financial industry. 

All 13 securities commissions, acting in concert will allow any financial institution in the country to violate our laws, simply by filing an application to do so. With no public debate and no public notice.

Securities commissions in Canada have representation on RCMP Integrated Market Enforcement Team which further allows the investment industry to avoid criminal prosecution in the most sensitive cases.

That the public support the part that make it their policy to support and implement major changes to the Securities regulatory system in Canda.
Establish a national investor protection agency with the following attributes:

1. Separate all investment police functions and investigations from the securities commission and the securities industry. A separate, specialized, Securities Crime Police Unit would be formed.
2. Regulators will be appointed by the government, be representative of the public interest and paid with taxpayers money, not industry money.
3. No permission should be given for exceptions to the law, except in extreme cases where full public discourse and disclosure can show no damage to the investing public by such exemption.
4. Securities commissions and industry paid regulators will be separated from the RCMP Integrated Market Enforcement Team or any criminal police agency.

Whereas under todays self regulatory system, fines levied against investment wrongdoers are typically "kept" by the regulators and self regulators, rather than distributed to investment victims.

It is proposed that monies from fines and penalties could make such a National Investor Protection Agency self funded by such "proceeds of crime".  It is also proposed to increase fines and penalties against investment abusers in order to ensure that an effective national investor protection agency is established and to ensure that investor victims can be compensated wherever possible and practical.  This would be a 100% improvement over our current system where investors are left to duke it out with Canada's largest institutions to get their own money back. Penalties should be at least “double the damage” done to victims. This could provide for full restitution to victims as well as funding for the national protective agency to minimize the impact on taxpayers and maximize the impact on financial predators.
Larry Elford Feb 11, 2010
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Re: Solutions, Self Defense and Best Practices

Postby admin » Wed Feb 10, 2010 10:15 am

2/10/2010 12:13:45 PM ... p?id=12893
The Investor Advocate
Ken Kivenko’s column is all about investor protection. Ken fights for investors’ rights and exposes violations and malpractices. He also runs an advisory business, Portfolio Analytics, assisting investors obtain restitution due to sales or broker abuses.

The Investment Policy Statement

By Ken Kivenko | Tuesday, February 09, 2010

“Why an Investment Policy Statement ?..”
The Fund Library

When you open an account with an IIROC or MFDA investment Dealer you fill in an application form that requires you to reveal a number of facts about yourself. These include your age, income and net worth, level of investment knowledge, risk tolerance and other data. Using this and other information, advisors prepare a Know Your Client (KYC) composite so they can recommend suitable investments. The new account application form (the “NAAF”) requests simplistic answers to complex questions regarding risk, time horizon and goals. Moreover, terminology is ill-defined and there is no industry standard NAAF. The NAAF questionnaires are really pretty basic and rarely include specific investor goals. Unfortunately investors think they must answer them. If you ask someone, “How many stars do you think there are in the heavens?”- they have no idea - but they'll probably still answer the question. History has shown that this approach does not provide the necessary level of information and investor protection.

"When somebody says they can take risk in a questionnaire, is it because they can take risk, or is it because they are stupid enough to believe they have superior stock-picking abilities and are therefore overconfident? That can happen in periods of exuberance. Investors think they are geniuses, that there are no risks; what's to be averse to?" – Behavioural Finance guru Meir Statman Source: M. Noble, Building a better risk profile,, March, 2009 [His first piece of advice to advisors is this: Realize most investors have a much lower risk tolerance than they may let on. Statman's research has determined that investor risk tolerance is, on average, extremely low]

After you develop an overall financial plan, the next step is to create an investment strategy (no matter how simple it might be) and stick to it. Your strategy could involve something sophisticated like trading options or something simple like putting $100 into an ETF or index fund every month. It can be difficult to stick to your original strategy for several reasons:

• Memory - it’s not easy to remember a strategy that you came up with several months or years ago.
• Greed– if you have a conservative strategy and the market is going straight up, then it can be difficult to stay with the original strategy. Chasing returns is a bad disease.
• Fear – bear markets make for tough investing. It’s easy to forget or dismiss your original plan when the going gets rough.

Some research suggests that portfolio returns are driven at least as much by investor behavior (or misbehavior) than market performance.

Create and write down your Investment Policy Statement (IPS)

The Investment Policy Statement provides an effective channel of communication between client and advisor. This will help clarify issues of importance and concerns to both parties. Conflicts- of- interest and general misunderstandings are minimized since the IPS is in writing and both the client and advisor have agreed to adhere to it. If your advisor is unable or unwilling to prepare an IPS you should ask yourself if you are dealing with an advisor or a salesperson.

If you’re a mutual fund buyer you’ll have access to the person who sold you the funds. Advice is embedded in the MER expense. If you’re a Do-it-Yourselfer and don’t know enough about investing to create an investment policy then fill in the sections you do know and keep learning.

An Investment policy statement has several basic purposes: (1) setting realistic objectives, (2) defining the asset allocation policy, (3) establishing management procedures and (4) determining communication procedures. It should establish: risk tolerance; loss capacity; return requirements; cash income needs; liquidity requirements; investing time horizon; tax considerations; legal, estate issues ; and unique needs and circumstances. If you have a number of different accounts with varying objectives and timelines such as an RRSP and a RESP you may want to develop separate IPS’s for each. We caution however that such mental accounting may not lead to overall optimization of your investable assets.

This written investment statement clarifies the overall investment plan, and clearly articulates your investment objectives and restrictions, thus providing a measurable basis of feedback with your advisor. When done properly, unsuitable investments will be avoided. Because objectives and expectations are clarified for all concerned parties, expectations are harmonized and misunderstandings are less likely to arise. When financial markets come unglued, you can pull your statement out of the drawer and read it, instead of acting emotionally and deviating from your plan. An IPS compels the investor and the investor’s advisor to be more disciplined and systematic in their decision making, which in itself should improve the odds of meeting the investment goals and reduce conflicts and misunderstanding.

Keep in mind that it’s OK to change your policy periodically – the one you start out with after graduating university might not be sufficient 5 years later. Or, the economic climate might change, such as the 2008 credit crunch, necessitating an IPS revisit.

How to create an IPS

The IPS should have the following information:

• Background: Account information and summary of investor circumstances.
• Purpose: What is the money intended for? Retirement? New house? Children’s education?
• Input cash: Your statement can include such information as how much you intend to invest every month as well as any constraints.
• Investment time horizon: When will the money be needed?
• Risks: Your willingness and ability to assume investment risk (summarized by your investment risk tolerance category). If there is a conflict between the required return derived from the financial plan and risk tolerance ( the willingness to take risks) this must be resolved or there is no credible IPS .It should be stressed that while risk tolerance is important, you need to be sure your loss capacity is adequate to recover from any losses you may incur. Age is one of the key determinants of loss capacity as is other sources of regular income.
• Asset allocation: A number of studies have shown that asset allocation explains the lion's share of variance in looking at how a balanced portfolio performs relative to its investment policy. Your statement should include what your target asset allocation and range is between stocks, bonds, ETF’s and other investments. Recognize that fund impurity could be an issue if mutual funds are utilized. Buy and hold is fine for bull markets and works well with strategic allocation. In a secular bear market there is some research that suggests that tactical asset allocation is a wiser choice (i.e. buy-and-hold is inappropriate).
• Rebalancing: How often will you rebalance the portfolio?
• Return expectation: This section should be used to define what kind of real (after inflation) portfolio return you are expecting and the likely range of returns. Rate of return objectives are mostly tempered by your risk tolerance, but other important factors also apply. These are constraints such as: time horizons, income/liquidity needs, tax considerations, estate issues, and unique preferences or circumstances. A professional advisor will tell you if your return expectations are realistic. Typically, a Monte Carlo simulation is used. See
• Investments: This section should outline what type of investments are eligible for your portfolio – i.e. large cap stocks on the S&P/TSX, foreign stocks, 500, index funds, ETF’s
• Measurement ( What gets measured gets done): Regulators do not require personalized rates of return to be provided to clients. Yet , there’s overwhelming evidence to suggest that the long-term returns from carefully monitored portfolios are higher than those with no systematic measures of performance.You should establish a target annual return so you can measure performance versus goals. Additionally, you might choose to measure your portfolio against an appropriate set of stock and bond indexes as a metric for the investment advice you are being supplied. Check out ... hmark.aspx

This latter point is especially important. Personalized performance measurement appears to be a major soft spot for the advisory business .Critics believe the relative lack of personalized return information reflects the advisor’s fear that exposure of actual and benchmark results could lead to embarrassing questions. Advisors argue that providing such information could at times unduly panic investors, will consume a lot of their time to explain the results or even that the software tools are too expensive. Most professional advisors take it as a given that performance monitoring is essential .Here’s the questions to consider:

1. How often will I monitor my portfolio?
2. How will I determine how well my individual investments are doing?
3. How will I determine how well my overall portfolio is doing?
4. How will I determine if my portfolio is meeting my expected return?
5. How will I determine whether losses fall within my accepted range?

Some IPS’s also list prohibited investments . This could include denying DSC mutual funds leveraged ETF’s, hedge funds, private equity and partnerships and specifically exclude any type of leverage i.e. home equity loans, borrowing against RRSPs, margin etc.

When completed, an IPS will typically run 5-10 pages ; more or less depending on complexity.

Investment Philosophy

While a number of sophisticated portfolio design tools exist, a tailored approach is needed because each individual is different. Be realistic when answering these questions:

1. What’s important to me as an investor?
2. What’s my philosophy about risk (or volatility)?
3. What’s my philosophy about core versus non-core investments?
4. What’s my philosophy about diversification?
5. What’s my philosophy about trading? Dollar Cost Averaging?
6. What’s my philosophy about fees and expenses?
7. What’s my philosophy about taxes?

Sample investment policies

Here are a few sample investment policies I found on the net at ABC‘s for Investing:

• Passive investor.
• Active stock trader.

More detailed samples can be found at and ... _RPIFP.pdf

While researching this article, I also came across a very helpful Investment Policy Worksheet (PDF) that asks key questions in order to help you put together your IPS. To learn more about IPS’s and the client-investor relationship two wonderful books are available. The first is by John DeGoey, the Professional Advisor II and the second, the Unbiased Advisor by Warren Mackenzie.


It can happen that there is a dispute when a portfolio loses money. Consumer investors should be aware that dealing with a complaint is stressful, time consuming and aggravating. This is where an IPS can be used to either make your case (or not). When a compliance officer, regulator, OBSI or judge reviews the file, the IPS will play an important role in assigning fault. As mentioned earlier, the IPS is best employed to prevent problems.


The absence of written policy reduces decision making to an individual event basis, and often leads to chasing short-term opportunities that may detract from reaching long-term goals. The presence of a policy encourages all parties to maintain their focus on the long-term nature of the investment process, especially during turbulent, or exuberant, times. By insisting on an IPS you will be treated with more respect and your advisor should work more diligently since you’ve raised the performance bar.

Once a client’s Investment Policy Statement has been created, it should be regularly updated as part of the quarterly or annual review process. Clients’ needs, situations, account values and objectives change frequently, requiring periodic updates to financial and investment planning documents.

A written Investment Policy Statement will not alone guarantee success in protecting and growing your optimal portfolio. Rather, it will shelter your portfolio from emotional ad hoc revisions, made by either you or your advisor and help maintain a sound long-term asset allocation policy.

Generic Mutual Fund Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated.

Personal Opinions & Recommendations Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please call the author to discuss your particular circumstances. ... p?id=12893
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Re: Solutions, Self Defense and Best Practices

Postby admin » Tue Feb 02, 2010 9:22 am

Time to Start Putting the “Corporate Person” Behind Bars
Five new laws, suggested by representative Alan Grayson, would help to bring some sanity back to our political system and reign in the corporate criminals and their political graft that have nearly destroyed our system. ... cy/?rc=fbp

The only difference between Bernie Madoff and hundreds of other corporate criminals is that after years of hearing about his abuses, they had incontrovertible evidence, so the Justice department chose to act. Remember the mantra, “Too Big to Fail.” The addendum is “Too Big to Prosecute.”
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Re: Solutions, Self Defense and Best Practices

Postby admin » Fri Jan 15, 2010 12:12 am

As I sit in my winter hideaway, dreaming of far off tropical locations, I came across this set of guidelines for duty of care, fiduciary duty, buyer or seller agent disclosure, etc. I thought it years ahead of the "no" disclosure required when selling investment products in Canada. We cannot even define what a salesperson or an advisor is, what duty of care is owed to a client. Very sad indeed.

simple real estate disclosures below:

Understanding the relationship between you and real estate agents can be confusing. Here are 6 things every home buyer or seller should know before working with a real estate agent.
1) What are the types of Agency?
Listing Agreements in which the Real Estate Agent represents the Seller.
Buyer Agency in which the Real Estate Agent represents the Buyer.
Dual Agency in which one Real Estate Agent represents both the Buyer and the Seller in a transaction.
2) What Is A Listing Agreement, and What Are Some Types of Listing Agreements?
A Listing Agreement is an agreement between a Broker and a Client.
Types Of Listing Agreements Include:
a) Exclusive Right To Sell Listing
The Broker has the exclusive right to market the property for the Seller and is paid the agreed-upon fee no matter who sells the property.
If the Owner sells the property with no help from the Broker, the fee must still be paid to the Broker.
b) Exclusive Agency Listing
The Broker is hired to act as the exclusive agent representing the owner and marketing the property for sale.
The owner will not have to pay the Broker a fee if the owner sells the property without the Broker’s assistance.
c) Open Listing (Nonexclusive/General Listing)
The property owner is not represented by any one Broker exclusively.
The property owner may use as many Brokers as necessary to sell the property.
No Broker will receive a fee if the owner sells the property without the assistance of any Broker.
3) What is the Multiple Listing Service (MLS)?
The Multiple Listing Service is a marketing service that allows Brokers to share information about listings.
Other Brokers may find a Buyer for a listed property, but the owner who has an agreement with the principal (the Seller) will earn a commission on the sale.
Other Brokers who facilitate a sale may or may not receive part of the commission depending upon their agreement with the Buyer.
4) What Is the Agent’s Responsibility To The Principal (Client)?
The Agent has a Fiduciary Duty to the Principal (Client), which may be a Buyer or a Seller. The Agent is the Fiduciary (Faithful Servant) of the Principal.
The Agent must represent the best interests of the Principal above all others, including the Agent’s own interests.
Brokers may be entrusted with funds such as the “earnest money” or “binder” that will be credited to the Buyer toward the down payment and eventually be transferred to the Seller. Other Buyer/Seller funds may also be held by the Broker.
The safekeeping of Client and Customer funds is part of their Fiduciary Duty of the Broker and all monies must be kept in a bank account separate from the Broker’s business or personal accounts to avoid commingling of funds, which is illegal, as is conversion, using Client or Customer funds to pay business or personal expenses.
5) What Are Fiduciary Duties?
A Real Estate Agent is bound by Fiduciary Duty to the Client, who may be the Buyer or the Seller.
The Primary Fiduciary Duties Are:
a) Care – Requires Agent To Use Their Best Effort and Skill To Help Their Client.
Suggesting that the Buyer Client hire a reputable Home Inspector.
Informing a Buyer Client about prices of other properties.
Helping a Seller Client determine the Property’s fair asking price.
Making every reasonable effort to market a Seller Client’s property.
b) Confidentiality (Provision of Fiduciary Duty)
Requires Agent to protect Client’s interest by keeping confidential all information that might harm the Client and personal information the Client wishes to keep private.
Even if the Agent believes that certain confidential information will not harm the Client’s interest if revealed, the information still must be kept confidential.
A Seller Client has a strong desire to sell their property to generate money needed for some other purpose.
c) Disclosure (Provision of Fiduciary Duty)
A Buyer Client has the ability to pay more for a home than is offered, or needs to buy a house soon so their kids can be settled in for the school year.
Requires Agent to reveal all known facts that might benefit the Client.
Even information not requested by the Client, but known to the Agent, must be revealed to the Client if it might benefit them.
Examples of DISCLOSURE:
A Buyer Customer tells the Buyer Agent that he may have difficulty getting a mortgage and asks the Agent to keep the information private. The Agent must reveal this to the Seller Client.
d) Loyalty (Provision of Fiduciary Duty)
Requires Agent to put Client’s interest above all others, including the Agent’s own interest.
Examples of LOYALTY:
An Agent knows a Seller will take $400,000 for a property and the Agent’s Buyer Client wants to offer $410,000 to make a lower offer. Fiduciary Duty requires the Agent to tell the Client.
E) Obedience (Provision of Fiduciary Duty)
Requires the Agent to follow Client’s instructions as long as they are legal and ethical.
6) What Are the Agent’s Duties To the Customer?
While this article deals primarily with the Agent’s duties to their Client, the Agent also has duties to the Customer who wants to either buy or sell the property of the Agent’s Client.
Agent’s Obligations to Customer:
Honest and Fair Dealing – Agents must be honest with Customers, treat them fairly and properly account for all funds entrusted to the Agent.
Reasonable Care – The professional expertise and skills of the Agent must be utilized to assist the Customer to the extent that their Client’s interests are not compromised.
Disclosure of Material Facts – Important facts that may affect a Buyer’s decision about a house must be told to the Buyer, including structural problems, environmental hazards, leaks, mold, etc.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Tue Jan 05, 2010 3:06 pm

INVESTMENT EXECUTIVE MAGAZINE Canada's Newspaper for Financial "advisors"

SEC to consider banning trailer fees

Protecting retail investors should be regulator’s top priority, Shapiro says

Friday, December 4, 2009

By James Langton

The head of the U.S. Securities and Exchange Commission says that retail investors should be the SEC’s top priority, that it will focus on improving point-of-sale disclosure, and will rethink whether trailer fees should be permitted.

Speaking to the Consumer Federation of America’s 21st annual Financial Services Conference, SEC chairman, Mary Schapiro, said that retail investors are the constituency that the SEC should “be most attuned”.

“After all, broker-dealers and investment advisers put lots of thought and energy into selling their products and services to the public. They figure out how they can get new investors in the door and how they can make a profit. So, I want to be sure that we — at the SEC — are putting just as much thought and energy into how to protect individuals who are entrusting their money to our capital markets,” she said.

“I want to know that we’ve thought through what investors encounter when they walk into a financial professional’s office or call them on the phone. For example: Does the investor make a distinction between brokers and investment advisers, the way the law does? Does the investor get the relevant, simple and comparable information at the point of sale or recommendation, or only after the sale has occurred, if at all? Does the investor know about all the fees they are being charged and whether they are getting the services they are being charged for? And, does the investor appreciate the nuances of retirement investments and products?” she said.

To address these concerns, the SEC is considering a variety of reforms. For one, it is planning to hold both broker-dealers and investment advisers to the same standard of care, imposing a fiduciary duty on them. “I believe that all securities professionals should be subject to the same fiduciary duty — and that all investors receiving advice should rest assured that the advice they get is being given with their interest at heart,” she said.

Additionally, she said that both types of firms should be subject to the same level of oversight. “This approach may disrupt a number of entrenched interests. But, we are doing no service to retail investors by continuing with a distinctly different regulatory approach for professionals who perform virtually the same or similar services,” she stressed.

Point-of-sale disclosure must also be improved, she said. “I believe retail investors should be provided clear, simple, meaningful disclosure at the time they are making an investment decision — disclosure that includes comprehensible and comparable information about the securities products and services being offered. It also should include information about the compensation the professional will receive on each product being sold — and information about the conflicts that may be causing the advisor or salesman to steer the investor to a certain investment,” she noted.

Schapiro admitted that this will not be easy, and that the financial industry will resist, but she stressed that it’s necessary. “Based on past experience, I know that getting to the point where we can have meaningful point of sale disclosure will be difficult. There will likely be significant pushback from the industry related to cost and convenience. But anything worth doing is not easy,” she said.

Related to the question of upfront disclosure, is the issue of trailer fees, or 12b-1 fees, as they are known in the U.S. “The problem is that our investor may have no idea these fees are being deducted or who they are ultimately compensating. That’s why I believe there needs to be a better approach,” she said.

“When it comes to these fees, there is a need for more fundamental change than merely disclosure reforms and a name change. We must critically rethink how 12b-1 fees are used and whether they continue to be appropriate,” she said. “For example, do they result in investors overpaying for services or paying for distribution services that they may not even know they are supposed to be getting?”

These fees amounted to more than $13 billion in 2008, up from just a few million dollars in 1980 when they were first permitted, she reported. “Of course, in 1980, they may have made sense — but after 30 years of growth and change in the mutual fund market, it is past the time to reassess their need and their effectiveness,” she said, adding that she has asked SEC staff for a recommendation on 12b-1 fees for the commission to consider in 2010.

Finally, she said that more effort needs to be applied to improving investor education and financial literacy. In particular, she has also asked SEC staff to provide the commission with its recommendations on target date funds early next year, noting that recent market losses have undermined the promise of these funds for investors near retirement.

“The ‘set it and forget it’ slogans of these funds resulted in shocked investors who were on the verge of retirement. It was a wake-up call for investors, employers and regulators, alike,” she said “Our staff has been focused on the marketing materials related to these funds and the use of target dates in fund names. I believe this an area in need of reform for the benefit of America’s retirement investors, and I look forward to completing the work we have started.”
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Re: Solutions, Self Defense and Best Practices

Postby admin » Mon Dec 21, 2009 11:51 am

further positives on complaint handling process: ... on3251.htm




Amendments to version published for comment on February 13, 2009


1. A new Dealer Member Rule and Guidance Note{1} on the complaint handling process are enacted as follows:


Client Complaint Handling

1. Introduction

This rule establishes minimum requirements for the client complaint handling process including timely complaint resolution, record retention, and internal discipline. Clients who are considered to be institutional clients pursuant to Rule 2700 are not subject to this rule. There are additional requirements set out in Rule 3100 that are also applicable to the processes of handling client complaints.

2. General

A "complaint" subject to this rule must be submitted by a client or a person authorized to act on behalf of a client and is deemed to includeincludes:

• A recorded expression of dissatisfaction with a Dealer Member or employee or agent alleging misconduct; and

• A verbal expression of dissatisfaction with a Dealer Member or employee or agent alleging misconduct that would reasonably necessitate an investigation based on the circumstances of the complainant, or the nature or severity of the alleged misconductwhere a preliminary investigation indicates that the allegation may have merit.

Alleged misconduct includes, but is not limited to, allegations of breach of confidentiality, theft, fraud, misappropriation or misuse of funds or securities, forgery, unsuitable investments, misrepresentation, unauthorized trading relating to the client's account(s), other inappropriate financial dealings with clients and engaging in securities related activities outside of the Dealer Member.

Complaints are to be handled by sales supervisors or compliance staff (or the equivalent) and a copy must be filed with the compliance department / function (or the equivalent) of the Dealer Member.

A matter which is the subject of litigationa civil claim or arbitration is not considered a "complaint" for the purposes of this Rulerule.

3. Designated complaints officer

The Dealer Member must appoint an individual to act as the designated complaints officer. The individual must have the requisite experience and authority to oversee the complaint handling process and to act as a liaison with the Corporation.

4. Complaint procedures / standards

Establish written procedures for dealing with complaints

Dealer Members must have written policies and procedures to ensure that complaints are dealt with effectively, fairly and expeditiously. Such policies and procedures must address the following:

• the fair and thorough investigation of the complaint;

• the process by which an assessment is made regarding the merit of the complaint;

• where the complaint is determined to have merit, the process to be followed in determining what offer should be made to the client; and

• the remedial actions which may be appropriate to be taken within the firm.

Policies and procedures must not allow for complaints to be dismissed without due consideration of the facts of each case. There must be a balanced approach to dealing with complaints that objectively considers the interests of the complainant, the Dealer Member, the registered representative, employee or agent of the Dealer Member, and/or any other relevant parties. Each Dealer Member must ensure that registered representatives and their supervisors are made aware of all complaints filed by their clients.

Each Dealer Member must put procedures in place so that its senior management is made aware of complaints of serious alleged misconduct and of all legal actions.

Dealer Members must have policies and procedures in place to monitor the general nature of complaints. When a Dealer Member reasonably determines that the number and / or severity of complaints is significant, or when a Dealer Member detects frequent and repetitive complaints made with respect to the same matter which may on a cumulative basis indicate a serious problem, then internal procedures and practices must be reviewed, with recommendations to be submitted to the appropriate management remedy any such systemic or recurring matters.

Client access to complaint process

At time of account opening, Dealer Members must provide new clients with:

• a written summary of the Dealer Member's complaint handling procedures, which is clear and can be easily understood by clients; and

• a copy of a Corporation approved complaint handling process brochure.

On an ongoing basis, Dealer Members must make available to their clients (either on their website or by other means) a written summary of the Dealer Member's complaint handling procedures, so that clients can stay informed on how to submit a complaint.

Complaint acknowledgement letter

The Dealer Member must send an acknowledgement letter to the complainant within five (5) business days of receipt of a complaint.

The acknowledgement letter must include the following:

(a) The name, job title, and full contact information of the individual at the Dealer Member handling the complaint;

(b) A statement indicating that the client should contact the individual at the Dealer Member handling the complaint if he / she would like to inquire about the status of the complaint;

(c) An explanation of the Dealer Member's internal complaint handling process, including but not limited to the role of the designated complaints officer;

(d) A reference to an attached copy of a Corporation approved complaint handling process brochure and a reference to the statutes of limitations contained in the document;

(e) The ninety (90) calendar days timeline to provide a substantive response to complaints; and

(f) A request for any information reasonably required to investigate the complaint.

Complaint substantive response letter

The Dealer Member must send a substantive response letter to the complainant. The substantive response letter must be accompanied by a copy of a Corporation approved complaint handling process brochure.

Dealer Members must respond to client complaints as soon as possible and no later than ninety (90) calendar days from the date of receipt by the firm. The ninety (90) days timeline must include all internal processes (with the exception of any internal ombudsman processes offered by an affiliate of the firm) of the Dealer Member that are made available to the client. The client must be advised if he / she is not to receive a final response within the ninety (90) days time frame accompanied by, including the reasons for the delay and the new estimated time of completion.

The Dealer Member is required to advise the Corporation if it is unable to meet the ninety (90) days timeline and must provide reasons for the delay.

The substantive response must be presented in a manner that is fair, clear and not misleading to the client, and must include the following information:

(a) A summary of the complaint;

(b) The results of the Dealer Member's investigation;

(c) The Dealer Member's final decision on the complaint, including an explanation; and

(d) A statement describing to the client the options available if the client is not satisfied with the Dealer Member's response, including:

(i) arbitration;

(ii) if a request is made within 180 days from the date of the Dealer Member's final response, the ombudsperson service (i.e. the Ombudsman for Banking Services and Investments);

(iii) submitting a regulatory complaint to the Corporation for an assessment of whether disciplinary action is warranted;

(iv) litigation / civil action; and

(v) other applicable options.

In addition, where an internal ombudsman process is offered by an affiliate of the Dealer Member, the Dealer Member must disclose in the substantive response letter:

(a) that the use of the internal ombudsman process is not mandatoryvoluntary; and

(b) the estimated length of time the process is expected to take based on historical data.

Duty to assist in client complaint resolution

Approved Persons must co-operate with Dealer Members where they were employed or acted as agent when moving to a different firm after events or activities resulted in a client complaint.

Dealer Members must co-operate with each other if events relating to a complaint took place at more than one Dealer Member or the Approved Person is an employee or agent of another Dealer Member.

5. Settlement agreements

A release entered into between a Dealer Member and a client may not impose confidentiality or similar restrictions aimed at preventing a client from initiating a complaint to the securities regulatory authorities, self regulatory organizations or other enforcement authorities, or continuing with any pending complaint in progress, or participating in any further proceedings by such authorities.

6. Complaint record retention

The complaint file must be maintained for seven (7) years and retrievable within a reasonable period of time.

Each Dealer Member must keep an up-to-date record in a central, readily accessible place of all recorded submissions and follow-up documentation received by it relating to the conduct, business, and affairs of the Dealer Member, or an employee or agent of the Dealer Member for a period of two (2) years from the date of receipt of the complaint.

The following information must be retained for each complaint:

(a) The complainant's name;

(b) The date of the complaint;

(c) The nature of the complaint;

(d) The name of the individual who is the subject of the complaint;

(e) The security or services which are the subject of the complaint;

(f) The materials reviewed in the investigation;

(g) The name, title, and date individuals were interviewed for the investigation; and

(h) The date and conclusions of the decision rendered in connection with the complaint.

7. Internal Discipline

Each Dealer Member must establish procedures to ensure that breaches of the Rules of the Corporation as well as applicable securities legislation are subjected to appropriate internal disciplinary measures.

{1} IIROC is in the midst of a project to rewrite its Rule Book. Should these proposals be made effective prior to the implementation of the new Rule Book format, the rule and the guidance note will be implemented on an interim basis using the existing rule numbering approach.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Mon Dec 21, 2009 11:48 am

one positive move regarding confidentiality agreements:

Canadian securities regulators approve new complaint-handling rules proposed by IIROC /MFDA
In a Dec. 18 OSC Bulletin, the Ontario Securities Commission announced that it has approved the new rules and rule amendments required to implement new complaint-handling standards by the IIROC and the MFDA. The other regulators have ruled similarly. The objective of the proposed amendments is to establish minimum requirements for the client complaint handling process, and to harmonize them between the self-regulatory organizations and the Canadian Securities Administrators. Among other things, the IIROC rule requires firms to appoint a designated complaints officer, establish written procedures for dealing with complaints, it imposes deadlines (complaints must be acknowledged in five days, and clients must receive a substantive response in 90 days), and it prohibits settlement agreements from imposing confidentiality restrictions.OSC Bulletin ... on3251.htm

finally, a step towards ending the industry code of silence by which it has hidden its bad deeds for far too long.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Sat Dec 12, 2009 2:33 pm

House votes to reform financial regulations
Crisis-inspired overhaul faces an uncertain future in Senate
By Brady Dennis
Washington Post Staff Writer
Saturday, December 12, 2009

More than a year after the near-collapse of Wall Street plunged the economy into crisis, a divided House on Friday approved the most sweeping overhaul of the nation's financial regulatory system since the Great Depression.

"We are sending a clear message to Wall Street: The party is over," House Speaker Nancy Pelosi said after the 223 to 202 tally, which failed to attract a single Republican vote.

The bill's passage marks a milestone in the Obama administration's efforts to rein in the abuses that contributed to the crisis and to prevent similar failures in the future. President Obama has called financial reform one of his top priorities, alongside health care and climate change. In a statement Friday, he said the legislation "brings us another important step closer to necessary, comprehensive financial reform," and he urged the Senate to act as quickly as possible.

The 1,279-page House bill would create a new federal agency dedicated to consumer protection, establish a council of regulators to police the financial landscape for systemic risks, initiate oversight of the vast derivatives market and give the government power to wind down large, troubled firms whose collapse could endanger the entire financial system. The legislation also would give shareholders an advisory say on executive compensation, increase transparency of credit-ratings agencies and set aside billions of dollars to aid unemployed homeowners.

Rep. Barney Frank (D-Mass.), who guided the bill through the House Financial Services Committee, compared the legislation to efforts in previous generations to expand the government's oversight of private enterprise.

"Innovation is generally a good thing. But in the absence of sensible regulation, it can cause abuses," he said. "And so I think this is, frankly, of the historic dimensions of what Theodore Roosevelt and Woodrow Wilson did, and what Franklin Roosevelt did."

House Republicans were unanimous in their opposition, saying that the bill would amount to an egregious overreach of government powers and leave unresolved many of the problems that led to the recent crisis. They argue that it would create unnecessary new layers of bureaucracy and stifle financial innovation.

"We are left with a perpetual Wall Street bailout bill," Rep. Jeb Hensarling (R-Tex.), an outspoken critic, said during Friday's debate. "We are left with a bill that will crush job creation at a time when our nation needs to be creating jobs. We have a bill that assaults the fundamental economic liberties of every American citizen."

Despite Friday's victory for administration officials, the elation won't last long. An uncertain road lies ahead in the Senate, where success requires a three-fifths majority and where support from key Democrats is far from certain.

Vision for reform
"We did not choose how this crisis began, but we do have a choice in the legacy this crisis leaves behind," President Obama said June 17, as his administration unveiled an 85-page white paper that laid out its vision for financial reform. From there, Frank steered versions of that blueprint through the House Financial Services Committee as lobbyists of all stripes descended on lawmakers in a furious effort to shape the outcome.

Consumer advocates pushed for more rigorous regulation, saying that the institutions responsible for wrecking the economy need strict supervision. Financial and business groups mounted multimillion-dollar attacks on the proposed consumer-protection agency and other parts of the bill, arguing that too much regulation could strangle both large and small firms.

The summer passed in a flurry of press releases and public statements, conference calls and letter-writing operations. There were rallies and protests, closed-door meetings and shoe-leather lobbying in the marble hallways of Congress. The U.S. Chamber of Commerce produced ads claiming that a new consumer agency would crack down on local butchers and bakers.

Faced with so many competing interests, Frank often was forced to compromise.

He cut a deal with the big banks, Republicans and moderate Democrats who objected to a provision that would allow state consumer protection laws to exceed federal standards. He exempted groups such as retailers, lawyers, auto dealers and real-estate brokers from oversight by the new consumer agency. He agreed to a proposal that would require financial firms to pay ahead of time into a fund that the government could use to wind down large, troubled institutions. He didn't fight a popular measure by Rep. Ron Paul (R-Tex.) that would subject the Federal Reserve to unprecedented scrutiny. He worked to placate members of the Congressional Black Caucus, who held up the bill in protest of the administration's handling of the economy.

Pelosi praised Frank on Friday as a "maestro" for the way he navigated the various legislative landmines. The maestro looked more disheveled than usual after three days of intense debate. He emerged from the House floor to handshakes and hugs from fellow Democrats, his belt pulled sideways, his shirt coming untucked, his eyes bleary. He thanked his staff and wound down a news conference saying, "I'm sure you're as worn out as we are."

Uncertain future
While Frank has done his part, the fate of regulatory reform remains in jeopardy.

"It's probably the third inning of this game," said Robert Litan, an economist and senior fellow at the Brookings Institution. "This is not going to be the bill that finally passes. Not all of it will survive."

By all accounts, the Senate presents a much tougher ballgame. There, financial lobbyists have said they plan to target a handful of moderate, business-friendly Democrats who have expressed skepticism about parts of the president's proposals in hopes of reshaping the final legislation next year.

The Senate Banking Committee only recently began to consider a 1,136-page bill by its chairman, Sen. Christopher J. Dodd (D-Conn.). It differs in significant ways from Frank's legislation and the administration's original vision, bulldozing the existing regulatory establishment, stripping power from agencies including the Federal Reserve and the Federal Deposit Insurance Corp., and erecting a triumvirate of new regulators with sweeping, unprecedented powers.

Edward Yingling, president of the American Bankers Association, said his group assumed that Frank would get a bill through the House despite industry opposition. But he and other financial industry lobbyists expect that final legislation would look quite different. "There is a possibly of getting a bipartisan bill in the Senate, but it will entail compromise. I think it would have to be modified significantly," he said.

Dodd has expressed a desire to reach bipartisan agreement, but Republicans have not endorsed his version of reform. Unless they can find middle ground, it would prove tough to round up the 60 votes necessary to avoid a filibuster.

One indication of the delicate road ahead came Friday in the waning moments of the House debate. An amendment from Rep. Walt Minnick (D-Idaho) to eliminate the proposed Consumer Financial Protection Agency and replace it with a council of existing regulators failed, but not before it garnered more than 30 votes from moderate Democrats. Like-minded Democrats in the Senate hold far more collective power and will play a central role in shaping any legislation with a prayer of passing.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Tue Dec 08, 2009 11:13 pm

Quebec to form squad to fight financial exploitation of seniors

The Montreal Gazette, December 8, 2009

The Quebec government rolled out a plan to fight the financial exploitation of seniors on Tuesday, saying far too many seniors are losing their savings to fraudsters like Vincent Lacroix and Earl Jones.

A four-page pamphlet advising seniors on how to avoid being a fraud victim will be published in several newspapers across Quebec on Saturday including The Gazette. About 50,000 copies of the pamphlet will be distributed to seniors’ organizations.
“Seniors groups have been asking the government for help,” Marguerite Blais, the Quebec minister responsible for seniors, said Tuesday at a press conference in Montreal.

Quebec Justice Minister Kathleen Weil said the Quebec Human Rights Commission will put together a squad of six (6) investigators who will look into allegations of financial exploitation. The squad will be up and running in April.

In the past eight months, the commission has received 50 requests to intervene in cases of alleged financial exploitation of seniors.

“As soon as someone calls with doubts about someone or suspicious behaviour, the squad will intervene and do an inquiry,” Weil said. “If it looks criminal, they will advise the police.”

..............article online at ... story.html
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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Dec 03, 2009 8:53 am

Stromberg: Champion of change

Canadian Investment Awards: Career Achievement Award

Wednesday, December 2, 2009

By Megan Harman

Canadian Investment Guide 2010

In a world in which many people resist change, Glorianne Stromberg embraces it. A securities lawyer and former commissioner with the Ontario Securities Commission, Stromberg has been chosen for the Career Achievement Award because of her outstanding contributions to securities regulation and oversight of the investment funds industry.

Along the way, Stromberg has become known for her tenacity and dedication to identifying problems in the industry and her work to resolve them.

“I’ve always been ready and willing to do whatever I could to make things happen,” says Stromberg, now chairwoman of the Toronto-based Public Accountants Council for the Province of Ontario. “That’s just part of my nature.”

Stromberg, 70, became known for this strong-willed attitude during her stint as an OSC commissioner from 1991 to 1998 — a role she took on after decades of practising corporate and securities law at Cassels Brock & Blackwell LLP in Toronto. Midway through the 1990s, a time when mutual funds were rapidly gaining popularity, Stromberg was commissioned by Edward Waitzer, then chairman of the OSC, to undertake a review of the investment fund industry.

“At the time we undertook the review of the mutual fund industry, it wasn’t that anything was broken,” explains Waitzer, now a partner at law firm Stikeman Elliott LLP in Toronto. “The industry had grown way beyond its own expectations and way beyond the regulatory framework.”

Waitzer chose Stromberg as the best candidate to conduct the review because of her vast knowledge of the industry and the law, and her willingness to steer her own course. “Glorianne is fiercely independent, in terms of her thinking,” Waitzer says. “She listens to people, but she comes to her own view.”

The result of the review was a groundbreaking report entitled Regulatory Strategies for the Mid-’90s: Recommendations for Regulating Investment Funds in Canada. The report called for a slew of regulatory reforms, including the creation of a self-regulatory organization, improved corporate governance for investment funds and improved disclosure requirements, among others. A key theme underlying the recommendations was the need to protect individual investors and enhance consumer knowledge.

This theme was also prominent in two subsequent reports overseen by Stromberg: one on investment funds and consumer protection, commissioned by Industry Canada’s Office of Consumer Affairs; and another on financial services industry regulatory recommendations, prepared for the Organization for Economic Co-operation and Development’s committee on financial markets.

Investor rights groups have praised her work. The Markham, Ont.-based Small Investor Protection Association, an organization committed to fair practices in the investment industry, calls Stromberg a “SIPA Hero” for supporting the needs of small investors in her reports.

Some investors have even offered Stromberg their gratitude in person. On several occasions, Stromberg says, individuals have approached her in public to thank her for her work in advocating change. “To me,” she says, “that made it all worthwhile.”

But Stromberg’s recommendations were considered controversial among other groups. Many mutual fund industry players argued the industry was functioning well, and were unprepared for the extensive changes that Stromberg encouraged. “There was a natural inclination on the part of the industry to say, at the time: ‘If it ain’t broke, don’t fix it’,” says Waitzer. “So, there was some degree of antagonism.”

David Velanoff, president and CEO of Winnipeg-based MGI Financial Inc., who has been in the industry for more than 30 years, says Stromberg’s ideas were simply ahead of their time. “A number of her recommendations were very forward-thinking,” he says. “But probably at the time, they were a little radical in the eyes of the mutual fund industry.”

Upon gathering a group of industry representatives to provide feedback on the recommendations, however, the industry’s tone was more receptive. A steering group of industry players submitted a report to the Canadian Securities Administrators (CSA) in response to Stromberg’s 1995 report, and ultimately supported many of her recommendations.

“When we got together a group of industry leaders to work through it, there wasn’t a lot of substantive disagreement,” says Waitzer. “They basically validated most of what she said.”

As a result, several of Stromberg’s recommendations became the foundation for much of the regulatory reform that was eventually adopted, as well as for changes that are still being shaped. For example, creating a mutual fund industry self-regulatory organization became a key priority for the CSA following the reports, leading to the creation of the Mutual Fund Dealers Association of Canada in 1998. Efforts to improve disclosure requirements have also been underway in the years since her reports, and recently have moved closer to implementation.

Although Stromberg admits that progress on reform has been slow, she’s frustrated by the widespread skepticism within the industry regarding the possibility for change in areas such as securities regulation. “Instead of sitting on the sidelines doubting,” Stromberg says, “why don’t we roll up our sleeves and make sure it happens?”

Her advice for the industry is simple, a caution that is well to keep in mind in a rapidly evolving business: “Don’t be afraid of change.” Rather, she says, “Change before you have to.”
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Re: Solutions, Self Defense and Best Practices

Postby admin » Fri Nov 27, 2009 9:55 am

White House pushes investor protection

Obama administration seeks new powers for the SEC to regulate compensation for investment advisors and other measures.

July 10, 2009: 3:47 PM ET
WASHINGTON (Reuters) -- The Obama administration on Friday proposed legislation to strengthen the Securities and Exchange Commission's investor protection authority, including the power to ban certain forms of compensation for brokers and investment advisers.

The SEC would get authority under the bill to establish consistent fiduciary standards for broker dealers and investment advisers and could ban bonuses or other forms of compensation for financial intermediaries that encourage them to steer investors into products that are not in the investors' best interests.

The bill, one of several financial regulatory reform bills sent by the U.S. Treasury to Congress this summer, also aims to improve disclosures to investors, close gaps in standards and pay whistleblowers for information that can be used in enforcement actions.

The bill comes just days after the administration proposed a new agency that would get sweeping powers to protect consumers on many financial products that fall outside of the SEC's jurisdiction.

The bill would give the SEC authority to require delivery of disclosures and prospectuses before investors buy into mutual funds, not after as is typically the case currently. The SEC could require a concise summary prospectuses and a simple disclosure form showing fund costs.

The SEC also would gain authority to establish a fund to pay whistleblowers for information leading to enforcement actions that result in significant financial awards. The money would come from penalties paid that are not distributed to investors.

"This authority will encourage insiders and others with strong evidence of securities law violations to bring that evidence to the SEC and improve its ability to enforce the securities laws," The Treasury said in a summary sheet on the legislation.

A new SEC investor advisory committee, which examines new products, trading strategies, fee structures and disclosures, would be made permanent under the legislation.
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Re: Solutions, Self Defense and Best Practices

Postby admin » Thu Nov 19, 2009 8:47 pm

Investor protection is Priority No. 1

INVESTMENT EXECUTIVE, Canada's Newspaper for Financial Advisors ... m=&nbNews=
The head of FAIR Canada says the new investor rights advocacy group is filling a necessary role

By Rudy Mezzetta

Ermanno Pascutto tends to be blunt when talking about Canada’s regulatory regime, especially when it comes to effecting change to protect individual investors and shareholders.

“Glaciers move faster than the pace of reform [in Canada],” says the executive director of the Canadian Foundation for Ad-vancement of Investor Rights, a Toronto-based investor and shareholder rights advocacy group launched last year.

As an example, Pascutto cites the efforts taken by regulators and investor advocates to get the financial services industry to adopt point-of-sale disclosure for mutual funds and segregated funds. “To produce a two-page fund disclosure document has taken a decade,” Pascutto says. “Is that reform?”

Pascutto wants FAIR Canada to grab the financial services industry’s attention and to help regulators shake off what he feels is complacency when it comes to protecting small investors. He is specifically critical of the Ontario Securities Commission.

“The people who run the OSC are all from the financial markets, which is not to say that they’re not well intentioned — I’m sure they’re trying to do a good job — but they don’t have a passion for protecting investors,” Pascutto says. “I think [the OSC] has ceased to be the investors’ advocate, and because it seems to have given up a lot of that role, I thought that created a gap that needed to be filled.”

But in testimony before the Ontario government’s standing committee on government agencies in February, OSC chairman David Wilson defended the OSC: “Everything we do at the OSC has, at its core, investor protection of one sort or another; not necessarily just retail investors [but] all investors — institutional investors, global investors and small individual investors. They all form the universe of investors. We think that our commissioners and our goals are all focused in the right direction.”

In responding to stakeholder presentations made to the standing committee, the OSC said it would be establishing an investor secretariat, a body within the OSC, to “better identify and address issues of concern to investors.”

Pascutto says he welcomes the OSC’s initiative and is pleased the OSC continues to engage in dialogue regarding retail investor issues. That said, the OSC is one of the regulatory bodies that has become a target for FAIR Canada’s criticism as the advocacy group tries to establish itself as a legitimate and effective voice for investor and shareholder rights.

FAIR Canada is very much a product of Pascutto’s efforts, an advocacy group he first envisioned while he was serving as an independent director with Market Regulation Services Inc., which later merged with the regulatory arm of the Investment Dealers Association of Canada to create the Investment Industry Regulatory Organization of Canada. Pascutto received a one-time, $3.25-million grant from IIROC, taken from the money collected in fines, to fund the new organization.

Pascutto is a lawyer and a veteran in the world of financial services regulation. After starting his career with Toronto law firm Osler Hoskin & Harcourt LLP, he joined the Toronto Stock Exchange in 1981, at which he served as director of market policy. He moved to the OSC in 1984, as executive director and head of staff. In 1989, he moved to Hong Kong to become the vice chairman of the securities and futures commission there, and, in the mid-1990s, he joined the Hong Kong office of Toronto-based law firm Goodman Phillips & Vineberg LLP before returning to Toronto in 1998. Prior to taking on the role at FAIR Canada, Pascutto worked as a senior advisor, first for Montreal-based Stikeman Elliott LLP and, most recently, with U.S.-based law firm Troutman Sanders LLP.

In the 16 months since FAIR Canada launched, it has tackled several shareholder concerns, such as advocating for shareholder approval on major transactions or criticizing TMX Group Inc.’s role as a regulator of listed companies now that TMX is a “for-profit” firm. But, Pascutto says, the bulk of FAIR Canada’s work has been on the retail inves-tor side, including pressing for more efforts at boosting financial literacy among Canadians and advocating for POS disclosure materials for funds.

Earlier this year, FAIR Canada gained much attention when it publicly criticized firms that sold leveraged exchange-traded funds for what FAIR Canada feels is inadequate disclosure given to potential inves-tors about the risks of investing in ETFs. The financial services industry has responded that the charges were unfair, saying that investors were being provided with adequate information about how the underlying portfolios of the ETFs worked and the potential risk and rewards of investing in the product.

Pascutto says that at the moment, FAIR Canada has two overriding goals: to advocate for more investor representation at the various regulators and to find ways of providing compensation and redress to victims of fraud and other forms of financial misconduct.

Pascutto says his organization is in favour of efforts to create a national securities regulator, but believes it would be of benefit to retail investors only if it adopts the investor protection recommendations made in the Expert Panel on Securities Regulation’s report, which was released this year. These include the creation of an investor panel at the national regulator and implementing improvements on how investors are compensated in cases of fraud.

FAIR Canada is also concerned about commissions-based advisor compensation, which creates a conflict of interest that doesn’t serve investors well, Pascutto says: “The interests of advisors and their clients are generally not aligned. That concerns us. Firms put pressure on advisors to sell products that generate high fees. And, often, that’s not in the best interest of the client.”

Pascutto says FAIR Canada wants to work with the financial services industry and regulators to look at different ways advisors can be compensated, including examining the ideas of banning commissions, something being considered in Australia and Britain (see story on page 1), and imposing a fiduciary duty on advisors, which is being considered in the U.S. Next spring, FAIR Canada will be participating in a conference to be held at the Toronto-based Hennick Centre for Business and Law, to look at how best to align the interests of advisors and clients.

“There are a lot of advisors out there who would like to sell products that are in their clients’ interests,” Pascutto says, “because they want to be in the business for the long run. They want to feel good about what they do.”

Pascutto has staffed FAIR Canada with two associate directors to assist him in designing policy and making submissions to relevant bodies, a research analyst and an office manager. The original funding for the organization is expected to run out at the end of 2012, but Pascutto hopes FAIR Canada will attract new funding to continue its efforts before then. For now, the top priority is becoming an effective body. “If we can show we’re having some impact,” he says, “that we’re providing bang for the buck, that means next year we’ll [be in a good position] to start looking for funding.”

Pascutto says he hopes to have FAIR Canada on more established footing, and to prepare a successor to take over from him, by next summer, at which time he hopes take a more limited role: retaining his position on the board and perhaps taking over as chairman. He hopes then to take a breather in order to pursue personal interests. IE
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