Solutions, Self Defense and Best Practices

[admin]

Advisor Scorecard

http://www.secondopinions.ca/tools/AdvisorScoreCard/



Most investors get their investment advice from a financial advisor. Financial advisors can be important allies for financial success – if they are competent and have their client’s best interests at heart. Unfortunately most investors have no yardstick against which they can compare the service and advice they receive with the service and advice other investors receive and against basic standards designed to maximize the success of your investing experience.

Canadians have consumer reports to rate all kind of appliances and other material goods. We have surveys to rate the satisfaction of bank customers and for rating the effectiveness of advertising campaigns. But until now there was no simple tool that allowed you to see how your financial advisor stacks up. By using the following scorecard you can see how your advisor compares with other advisors. If you are in doubt as to whether the answer to a question is true or false – assume it is false.


go to http://www.secondopinions.ca/tools/AdvisorScoreCard/

and view some of the "best practices" checklist to see how your salesperson stack up to the pros.

cheers
advocate

[admin]

Here is a good set of solutions written by a 50 year old blogger.
Why is it that everyday citizens in Canada seem to be trying to do the job of our thirteen provincial and territorial securities commissions? My thoughts are that it is because they are not doing the job, or as Financial Guru Stephen Jarislowski said, "the securities commissions do the square root of nothing".

Thursday, 30 October 2008
My Suggestions to the Ontario Securities Commission on Retail Investor Issues
Last Thursday I noted that the Ontario Securities Commission, the financial securities regulator in Ontario, had established the Joint Standing Committee on Retail Investor Issues and is in the process of collecting public input. Being chronically opinionated, I must take a shot at this.

To the Joint Standing Committee on Retail Investor Issues,

Here are some actions that I believe would benefit retail investors:

Increase participation and seek wider input - with only 12 people on the conference call recently, that can hardly be representative; to uncover more suggestions and ideas, reach out to the online world and solicit input from discussion forums like the Financial Webring and Canadian Business and many bloggers from mainstream media folks like Ellen Roseman, Larry MacDonald, Jonathan Chevreau and Rob Carrick, to public-spirited professionals like Preet Banerjee, Norm Rothery, James Hymas, to joe public fanatics like Canadian Capitalist,Four Pillars, Michael James, Barel Carsan, Middle Class Millionaire, Million Dollar Journey, Investing Intelligently. See the links in the sidebar of my blog CanadianFinancialDIY. I am certain you will get well-informed, though perhaps pointed comments.
Abolish the OSC and other provincial regulatory bodies and create a single national regulator. This regulator should have greater resources and ability to investigate and enforce laws on the gamut of abuses that harm individual investors. Laws and regulations are of little use unless they are enforced.
Give priority to improving the regulation of advisors/ sales reps over the products themselves. Most retail investors do not have the time, inclination or skills to manage their own investing and this is becoming less so as the number and complexity of financial products increase. Investors want and need the convenience that already exists through the selling process of various providers but they also need someone trustworthy. Make the disclosure by advisor / sales person to the client of the compensation fees and payments mandatory in percentage and dollar terms.

Make the provision of financial advice a profession with regulatory requirements for certification ( a combination of knowledge and experience), licensing registration and ethics standards that are actually enforced. Recognize that investing advice is merely a subset of overall personal financial planning and cannot be isolated from it. For example, sometimes money is better spent on insurance than mutual funds, or invested in one's own human capital or an annuity etc. The investing process must start and end with a person or family's holistic, integrated neds so that investing decisions are made in the proper context. The Investored.ca website, which you at the OSC sponsor, implicitly recognizes this by providing information on such diverse not-strictly investing topics as managing debt, buying a house and insurance.

Oblige mutual fund companies to improve their disclosure by:
revealing all the costs associated with a fund, including trading costs borne by the fund, i.e provide total expense ratio not just management expense ratio, since this can be a significant drag on net performance; the new Framework 81-406 Point of Sale Disclosure for Mutual Funds and Segregated Funds is extremely disappointing in excluding trading costs since they are significant and are said to vary considerably amongst funds; total costs are an important predictor of future fund performance. See this article in Fundscope.

providing illustrations of the effects of the charges and fees on fund performance through standardized terms from the investor's perspective so that the investor can compare across funds and companies
publishing turnover ratios of funds
I would suggest that the OSC examine the UK system of regulating advisors and fact disclosure to investors. Many of the above ideas are already implemented in the UK under the Financial Services Authority, which is the single national regulator for investment and financial advice to retail investors.

Posted by CanadianInvestor at 09:16
http://canadianfinancialdiy.blogspot.co ... ities.html

[admin]

Regarding Finance Minister Flaherty's dilemma on how to replace 13 provincial and territorial securities commissions, now that it has become fairly clear that they are more likely "the problem" than they are "the solution" for some of what ails Canada.

I am going to urge Mr. Flaherty to consider the following, as I urged his department when I visited Ottawa and testified to the all party standing committee on finance re ABCP crisis:

If you find it difficult to eliminate all those commissions with all their salaried self interest, leave them alone. Establish a federal commission with powers over them, establish a federal investor protection agency with powers to enforce, and establish a federal financial investigative agency with proper skills to police financial crimes. Each of these things are now captured and "handled" in house by industry related parties.

Simply take the high ground from these 13 provincial and territorial commission who have very ably taken control of the low ground.

They will quickly dissolve into obscurity (it is hoped) after a year or two of death struggle to hang onto their salaries. Allow (or cause) them to eliminate any and all interprovincial barriers and employ the passport system that they have been using for years, so they can not hold our financial regualtory system for ransom, and effectively ignore them.

As Canada's top financier Stephen Jarislowski has said of our thirteen provincial and territorial securites commissions, "they do the square root of nothing". So let them keep doing the square root of nothing, and move beyond their industry conflicts of interest and their salaried self interest.

Move on. Establish a world class, "best practices" investment regulatory regime within a new federal framework, and simply refuse to allow it to be taken over or tainted by those who cannot separate the public interest from their own interests.

Sounds easy to say it, but probably a bit more difficult to impliment.

Good luck and god speed, before we are "helped" into third world status by these "public" agencies.

[admin]

The words "institutional crime" kept coming to me last night, in a partial explanation of this financial crisis. I think that this may be part of the difficulty in solving, preventing, or even investigating the causes of our current financial crisis.
Our police and regulators are well versed in prosecuting one man, one deed, or a few men, many deeds.

But they seem powerless to act, investigate, or even understand issues that might be perpetrated against the public by "institutions".

Imagine a non specialized police force trying to understand the issues within this current financial crisis. As we have seen, the issues were systemic. They were "the system" broken, and all persons in it were simply going with the flow. "Everyone was doing it", would be the excuse.

How do we proscute that when what everyone is doing is abusing the public (and their profession). Very difficult with today's policing and prosecution abilities in Canada.

Institutional crime has taken place at every level of every area of our economy. From pharmaceutical companies, to auto makers, to governments, banks, tobacco, RCMP, securites regulators. The list goes on. (I realize the absurdity of putting police and securities regulators in this category, but I am going on the record of their behavior, not on convenentional wisdom)

I do not have the solution, but there are steps we can take to improve:

1. A new crime reporting system in Canada, whereby crimes can be objectively received by independant, trained police agencies, and not by conflicted industry self regulatory agencies.

2. An updated definition of fraud in the criminal code, complete with a modern requirement for prosecution, rather than the nearly impossible requirement we have today. (must prove intent?) The United States has a much better model than us and our legal profession looks rather antique by comparision.

3. An ability to covene a grand jury, and compel witnesses to testify. Again the United States is making our system look antique by comparison.

4. An understanding of what "institutional crime" might be, and how it is affecting too any levels of our economy. The definition of "organized crime" in Canada is "It is serious crime planned and carried out by a group of at least three people to benefit one or more members of the group."
It is my belief that some of the self serving behaviors of our institutions meet this definition, and due to the size, scope, and quasi-authority that some of them have attained, they appear to be untouchable.

This needs to change.

[admin]

9 Signs You Need to Fire Your Financial Planner
They never asked you about your personal goals and time frames before recommending investments.
Only one company’s HYPERLINK "http://www.wisebread.com/mutual-funds-for-wise-bloggers" \t "_blank" products are recommended.
You received no written financial plan, prospectus, or documentation.
You are pressured into making investments
Your planner’s recommendations don’t match your financial goals
You can never reach your advisor when you want to, and they don’t return your phone calls.
They constantly change your investments
The plan given to you seems too good to be true
They tell you they can time the market.
Source: HYPERLINK "http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner" http://www.wisebread.com/9-signs-you-ne ... al-planner


from www.canadianfundwatch.com

[admin]

Mike Macdonald's



TheUnbiasedPortfolio.blogspot.com/



I thought I was done for 2008, but apparently my last blog only

left readers with questions.
This one is a response to the age old question: what should we do?
It looks to solve for all markets and situations, not just the current mess!

Tuesday, December 22, 2008

THE ANTI-RANT:

HOW TO HANDLE THE MARKETS AND YOUR SO-CALLED ADVISOR

OK, having enjoyed my rant on what to stop doing, now I will share my thoughts on what you should do!

Let me preface this by saying my beliefs carry into the work I choose to do but do not require an investor to engage my services or, anybody's, to take charge of your investments. Consider it a free consult!

Point: “ONLY YOU CARE ABOUT YOU!”

You both "earn" your money and "own" your money. It seems that many people spend more time cleaning their golf clubs than they do "managing" their money. Sorry, I do not believe the common drivel that “I am so busy I have no time”. You spend 8-10 hours each working day to earn money and then you hand it to an advisor you met an hour ago because they are your friend’s cousin’s brother and thus can be trusted.

ACTION:

Understand that Advisors and Financial Planners are simply sales people. Would you hand your chequing account to a car salesman and say hold my money until you find me a good car? Not likely yet it is almost a certainty the car dealer cares more about your follow-up business than your advisor. If your car breaks down you are immediately inconvenienced; if your portfolio breaks down you pay a price at a future date. Trust your advisor like you would any 100% commission sales person.

Point: GET AN EDUCATION!

The investment industry fills the airwaves and newspapers with financial pornography designed to excite you and thus lower your defenses as they pick your wallet. The blogosphere cannot be trusted, after all who is behind the blog and how do they make money? Ya, that includes me if you have not done your homework.

ACTION:

Go to unbiased or low biased sources. An unbiased source would be “investopedia.com” which provides definitions and articles to help explain investing(ignore the ads). A "near unbiased" source would be the Canadian Securities Institute, which is supposed to be unbiased but seems to think mutual funds are heaven sent. Take the Canadian Securities Course, it will cost you a few hundred bucks and a few hours work but it will provide some good definitions and explanations. You do not need to do the exam to learn.


Point: You need to explore your personal needs before you

go hunting for a salesperson to sell you securities.

You can’t explain what you need if you do not know what you need. The sales person knows what they need; your money and a securities company that will pay them to deliver your money. What do you need?

ACTION:

Go and get a “real” financial plan.

DO NOT accept a two page plan that says you need to put $235 / month into our mutual funds. Get a plan with at least two scenarios so you can compare options, and by the way you should choose the options not the planner. If you are good with a spreadsheet then do your own forecasts but you will need to get the tax piece right so be careful. The plan should link to your investment strategy by pointing out what rate of return will meet your future needs.


Point: You need to direct your advisor on what you need to do.

You can take advice, but never hand the wheel to the advisor. If you have less than $150,000.00 you should probably just do it yourself as you will not likely find a good advisor anyway!

ACTION:

If you want to hire an advisor, interview at least three. You should set the parameters upfront with the advisor to weed out the obvious greedy bastards.
I will not pay total costs in excess of 2% ever
I will not buy deferred sales charge funds EVER
My target rate of returns net of fees is x%, what is the lowest risk portfolio you can structure to achieve that goal over the next 5-10 years
I will not hold any individual security that represents more than 10% of my portfolio
I do not want any product where I do not understand how it works or how everybody involved gets paid
You need to get the advisor to sign the above documented objectives for your records.


Point: We are back to the key point “ONLY YOU CARE ABOUT YOU”.

You need to have independent monitoring of the investment accounts. It is best if you do this yourself. You need to have a composite or blended benchmark and you need to know your rate of return (not the rate of the fund you’re in as it will differ)

ACTION:

There are a variety of ways to monitor your accounts. The best way is to use two free websites to determine both your true rate of return and how your benchmark returns performed.
i.) www.showmethereturn.ca

ii.) www.showmethebenchmark.ca

Point: The on-going management of your account is made either hard or easy based upon whether you think you have super powers or whether you think you are normal. If you have super powers and can tell really good B.S. from the truth and can explain why the smart folks with sure fire winning strategies are giving away the information for free, then you should actively manage your money and make lots of really smart trades every day!

Action: Nobody consistently beats the markets. Nobody consistently beats the market. Yes I did repeat that for a reason. It is very expensive to buy into the delusional view that some people know what random market move will happen tomorrow.


It is quite cheap to “participate” in the markets with a good diversified low risk portfolio of index funds and ETF’s. Similarly some well monitored, well diversified “buy and monitor” portfolios will be successful over time. Pick a strategy to participate at low cost. Avoid any strategy that is designed to beat the market.


THE SECRET TO SUCCESS:
SEPARATE WHO GIVES YOU ADVICE FROM WHO SELLS YOU SECURITIES.

Every advisor needs to have a secret solution that others seek. I gave my secret away (since I am not a securities advisor).

ONLY YOU CARE ABOUT YOU…..and based upon your actions,
EVEN YOU MAY NOT CARE ENOUGH TO DO IT RIGHT!
For years I was guilty of this....very busy and very important!

To those who do care and think your money is important for what it can provide your family for years to come; put in the effort or hire somebody to do it for you.

Find somebody who is very tightly bound to your goals (by contract in writing preferably) and monitor their performance and more importantly also their strategy ,to ensure they always put your family first.

When their need comes first you will see a change in strategy. That change should be viewed as the canary in the coal mine. Look for the signs:
1. more calls and recommendations for purchases,

2. a shift to "managed", "structured" or "guaranteed" products, and

3. the biggest warning sign: when they utter the killer phrase "it's different this time".
When that strategy shift happens, get out quickly!

Your skeptically focused blogger,

[admin]

watch this BNN video with former Toronto fraud squad detective Gary Logan

http://watch.bnn.ca/the-close/january-2 ... clip131108

in it he discusses the state of affairs currently whereby the industry is charged with policing itself, and he proposes a simple, easy to understand process where traditional police agencies are involved. This would lend some objectivity or autonomy to the process that is currently not there.

Best practices would insist that potential conflict of interest be removed from all investigative action, and I believe that this process is the top solution mentioned to accomplish this.


http://watch.bnn.ca/the-close/january-2 ... clip131108

[admin]

I as able to view a proposal from the The Canadian Foundation for the Advancement of Investor Rights (“Fair Canada”), which is sponsored by IIROC (the industry regulatory body funded by the industry......)



The Canadian Foundation for the Advancement of Investor Rights (“Fair Canada”) is commenting on the CSA Notice 81-318 Request for Comment (“Request for Comment”) which sets out the Joint Forum’s proposed framework for point of sale disclosure for mutual funds and segregated funds (“Framework for Mutual Funds”).
We strongly support the vision of the Joint Forum to provide investors with clear, meaningful and simplified information when the investors need it most, i.e. before or at the time they make their decision to invest their savings in a mutual fund or segregated fund. Our submission set forth our views with respect to the sale of mutual funds.



………..the extent of information involved above serves well to misdirect the public away from what I feel to be the more important concept. That concept is to ask, “are you (my mutual fund provider) dealing with me as a “salesperson”, or are you “my trusted financial advisor” as your literature states? This would be by far the greatest step towards honesty and transparency in a financial service relationship.

If you tell me that you are a salesman, then are we in a “buyer beware” relationship like when I purchase a used car? If you are truly an advisor, then are you acting in my interests with a duty of care to me? If so, then all of the various prospectus and disclosure details are for you to figure out to my benefit, not to yours. Thanks for your help in disclosing that bit of information to me and to the public. The rest is unimportant to me if I can trust you to handle it in my best interest. Why would I even bother to read legal and financial documents if I have trusted legal and financial advisors doing this for me?)

To see the The Canadian Foundation for the Advancement of Investor Rights (“Fair Canada”) miss this so clearly indicates that they might be just another industry funded "yes" organization for the industry. I will withold judgement on this until further evidence comes forth, but so far they score zero on advancement of investor rights with this proposal. The missed the obvious.

[admin]

this expert writes and tells it like it in the financial services industry

New Book: Warren Mackenzie’s latest book New Rules of Retirement: What your
financial adviser isn’t telling you (co-authored by Ken Hawkins) is now available. It’s
targeted at retirees and those planning to retire in the next 10 years or so. The authors
attempt to debunk many of the myths perpetuated by the financial service industry and
provides an insightful and unbiased approach to planning for your retirement. The
paperback lays out 38 Retirement Rules and, unlike most retirement-focused books,
covers both the financial and non-financial aspects of retiring. Warren MacKenzie’s
credentials include a chartered accountant (CA), certified financial planner (CFA),
certified investment management analyst (CIMA) and teacher (B.Ed.). He runs Second
Opinion Investor Services Inc. You can order the book on-line for about $16-17.
Publisher: Collins Canada (Dec 22 2008); ISBN-10: 1554680018

[admin]

Goodbye trailer commissions for DIY’s, but…
Toronto-based Questrade's (an IIROC member firm) Mutual Fund Maximizer is a service
that reimburses mutual fund trailer commissions directly to investors. The trailer
commission is one of the expenses associated with actively-managed mutual funds. It can
be as much as 1%+ (less for fixed income funds) of the value of your investments. The
stated purpose of trailer commissions is to pay your financial advisor or broker for
ongoing services they may provide you. They are paid for as long as you own the fund
whether or not you want, need or use advice. The fund company pays the same trailer
commission to your broker no matter how much or little advice they provide or the
quality of the advice provided. The trailer commission is an ongoing expense; as your
portfolio grows, so do the commissions. Most mutual funds pay the trailer directly to the
brokerage where your funds are invested. You don’t see the trailer commission deducted
from your fund because it is typically embedded in the fund's MER, thus quietly reducing
returns while out of sight .The average trailer commission is about 1% for equity funds.
The primary competitor to mutfunds are ETF’s with MER’s a fraction of an activelymanaged
mutfund, TD’s efunds and TBC DI’s D series.
Questrade's Mutual Fund Maximizer reimburses trailer commissions back to you.
Questrade deducts a monthly processing fee of $29.95 per account from the trailer rebates
received from the mutual fund company and reimburses you everything above this
threshold. This processing fee is never charged to your account, so there is no additional
payment if your rebate is less than $29.95 for a given month. The trailer fee rebate will
show up as a rebate on your statement. It is not clear whether or not the rebate is taxable.
Trailer commission rebates are deposited into your account as cash, and cannot be used
as part of a re-investment program. However if you own mutual funds that issue
dividends, you can register your mutual fund as part of our dividend re-investment
program. Once you start your account application you will have access to MyQuestradethe
admin aspect of your account. Within MyQuestrade the firm offers a Mutual fund
Center which is powered by Morningstar Canada. This gives you access to a variety of
news, charts, and a lookup function.
To check out the kind of rebate you’ll receive go to the link for the mutual fund
maximizer calculator. The listings of all fund companies are in middle section; the actual
fund names are below. This link will take you straight through to the calculator:
http://www.questrade.com/trading/mutual ... lator.html
Typically, the breakeven point is about $45,000 (for a 50:50 bond/equity portfolio mix).
On top of the processing fee, online mutfund trades will cost you $9.95 per trade; for
mutfund phone trades the cost is $9.95 plus a $25 telephone surcharge. If the fund
company is negligent or delayed in disbursing trailer commissions, Questrade says it will
pursue full and timely payment. When and if a fund company disburses a tardy trailer
commission, your account will be credited the full eligible amount. Note that fund returns
will still be calculated using the posted MER.
http://www.questrade.com/trading/mutual ... tails.aspx Exclusive to
Questrade, you can also trade U.S. stocks and options in registered accounts without the
9
currency conversion hit imposed by other firms. Questrade is covered up to $1M by the
Canadian Investor Protection Fund in the event of insolvency.

[admin]

If you have lost money on your investments, get it back.
http://web.me.com/lelford/breachoftrust ... inute.html

My name is Larry Elford. I worked inside Canada’s top financial firms for twenty years. When I finally figured out the game, and refused to play it the way they wanted it played, I left the industry and chose to document it instead. See some of my efforts at http://web.me.com/lelford/breachoftrust ... inute.html

It takes three minutes to view the film trailer of some of what I have learned in my decades inside the industry. Nearly thirty years of study, boiled down to three minutes. But oh, what a journey!

And go get your money back if you were lied to by the investment industry.

Best of luck to you and best wishes.

Get it back if the investments were sold to you by someone who told you that they were an “investment advisor”. I can almost assure you that their license and registration category is instead, “salesperson”. You can look this up yourself on the “registration” section of your local securities commission. (see osc.gov.on.ca if your provincial commission does not list registration categories)

The following criminal code sections may be of use to you in getting your money back:

Fraud, section 380
Negligent Misrepresentation, section 219
Fraudulent concealment, section 341
False Pretences, section 361
(not to mention all internal codes, rules and regulations against industry misrepresentation of job titles)
(see also Competition Act of Canada criminal violations for misleading and misrepresentation)

If you purchased investments from someone claiming to be an “investment advisor”, and with the experience of some hindsight and some research, find that you purchased the highest compensating investment (to your salesperson) that you could possibly purchase, and that there are several choices of the identical product that would have saved you money, get your money back. See DSC, Deferred Sales Charges for the most common method of making the largest commissions on your purchase.
(See “salesperson or advisor” flogg topic at www.investoradvocates.ca for research)


If your “investment advisor” has moved your investments into their own proprietary or “house brand” funds, then they have used your investment assets to increase their own remuneration by between “12 to 26 times” according to Ontario Securities Commission studies on house brand funds. (IFIC sales figures show that 92 of all mutual fund sales in 2008 went into “wrap” accounts, the largest component of which would include house brand funds.


To give an analogy to what the banks have done since taking over 90% of the entire brokerage industry in Canada................imagine IF.........................IF the pharmaceutical industry were to take over 90% of the medical clinic's in the country, putting them under the ownership of the drug co's.

Then change the title of every drug sales rep in the country to that of "doctor", and have them not only dispense pill product, but dispense medical advice as well.

Finally incent them to sell only house brand drugs, due to the higher profit margins available when the house brand drugs are sold.

Like this analogy, when we give everyone in Canada the title of "advisor" we will end up with no one in the country giving advice. And when all that are sold (or most of) are house owned mutual funds, there will be nothing in the way of choice.

Canada will have the highest costing, and lowest performing mutual funds in the world, and the highest profit banks in the world..................hey! We are already there.

Get your money back! You have been misled, misrepresented and you have been cheated. My research is free. My motivation is to help right wrongs, not to charge. You must provide a large dose of your own spunk, your own motivation in order to get over the huge hump of an entire industry telling you that you have no right to have your money back. I disagree. I say that they are lying to you. Demand the same consumer redress as you would if you bought a defective toaster from WalMart, or if you were lied to with any other consumer product.


Check www.investoradvocates.ca

www.investorvoice.ca

www.canadianfundwatch.com

My name is Larry Elford. I worked inside Canada’s top financial firms for twenty years. When I finally figured out the game, and refused to play it the way they wanted it played, I left the industry and chose to document it instead. See some of my efforts at http://web.me.com/lelford/breachoftrust ... inute.html

It takes three minutes to view the film trailer of some of what I have learned in my decades inside the industry. Nearly thirty years of study, boiled down to three minutes. But oh, what a journey!

And go get your money back if you were lied to by the investment industry.

Best of luck to you and best wishes.

Larry Elford

[admin]

APRIL 11, 2009

Investors Face Tough Duel With Brokers


Heath Heingardner

Investors Face Tough Duel When Fighting Brokers


THE INTELLIGENT INVESTOR
By JASON ZWEIG
As my Aunt Betty once told me, it's only when the rinse cycle begins that you see how dirty the laundry really was.

With the market still off more than 40% from its peak in 2007, investors are examining how their portfolios ended up so filthy -- and blaming brokers. Through March 31, investors filed 1,264 arbitration cases with the Financial Industry Regulatory Authority, or Finra, up 114% from the year-earlier period.

Many will walk away disappointed.

If your broker has lost your money, it may not really be lost. In some cases, arbitration is possible. WSJ's Jason Zweig explains the recourse investors have if they feel their broker's specific advice went against their risk profile, best interests or instructions.

With rare exceptions, when you sign a brokerage-account application you also sign away your rights to sue the broker or the firm for any bad advice they might give you. Instead, you must settle any dispute through the arbitration system run by Finra, which is funded by the brokerage industry.

Losses alone aren't enough. "Everyone has lost money," says David Robbins, an arbitration specialist at Kaufmann Gildin Robbins & Oppenheim in New York. "Even the arbitrators have lost money." In general, you must demonstrate that your broker put you into investments that violated your stated instructions, financial objectives or risk tolerance.

Consider Edward and Jean Marnell of Pleasanton, Calif. In 2005, at age 82, they had no investment experience; Mrs. Marnell had been diagnosed with Alzheimer's disease a year earlier. That February, the Marnells gave $100,000 to a broker at Morgan Stanley.

According to Christopher Ulrich, a law student who represents the couple through the securities arbitration clinic at the University of San Francisco, the Marnells instructed the broker that they needed steady income and had a low tolerance for risk.

The Marnells contend the broker put all their money into only four securities issued by Ford Motor, General Motors, GMAC and Sears Roebuck Acceptance; they quickly fell. By December 2005, when the Marnells finally sold the securities and closed their account, they had lost more than $20,000.

"Morgan Stanley denies the allegations," a spokesman stated by email, "and intends to contest them."

Compelling as their case might sound, the odds of getting most of their money back aren't in the Marnells' favor. At least 60% of cases that are filed for arbitration end up being settled before a hearing. In arbitration hearings, investors win at least something in about 42% of cases, down from more than 60% in the 1990s. Richard Ryder of Securities Arbitration Commentator estimates that the typical investor recovers about 40 cents on the dollar.

Finra has had an effective monopoly over arbitrations since 2007, when it absorbed the regulatory operations of the New York Stock Exchange. An industry member -- someone from within the brokerage industry -- is often required in arbitration panels.

"Other alternatives [to Finra's system] would be too expensive for customers," says Linda Fienberg, president of dispute resolution for Finra. "Also, if a broker doesn't pay an award, Finra suspends the broker or firm until they do pay. So I think Finra's forum is at least as fair and beneficial as any outside forum."

Here are some steps you can take to improve your odds.

Keep good records. Incomplete or sloppy documentation works against you.

Ask what happened. Write to your broker explaining why you feel your account was mismanaged. Be polite but specific, detailing what you told the broker about your level of experience, investment objectives and risk tolerance. Ask your broker to explain what went wrong.

Lock in the loss. Get a second opinion from another broker and your accountant, then dump whatever you should never have owned in the first place. You can't usually make a convincing claim without a realized loss.

Get help. To learn more about whether to arbitrate, try finra.org/ArbitrationMediation. To find an attorney: piaba.org. If your losses are under $100,000 or you are on a spartan budget, law clinics are at sec.gov/answers/arbclin.htm.

Don't "go on the papers." You might be offered an all-paper arbitration, in which neither side appears in person. If you "go on the papers," you release the brokerage firm from its obligation to send people to a hearing, thus reducing its incentive to settle with you.

Pick your panel. You can choose who will arbitrate your case, and you are free to ask Finra for more information on any potential arbitrator. You can research an arbitrator's past decisions at www.arbchek.com. Exercise your right to veto anyone who seems hostile to investors.

(advocate comments..........if you have any dispute with anyone who represented themselves to you as an "advisor" in Canada, look up their true license category through the securities commission web site.......and if you find that they are in fact licensed in the category of "salesperson", demand a full refund of your money back on the basis of false representation. See a lawyer and force the issue if you do not get satisfaction. You have been lied to, and your trust has been taken and taken advantage of based on this misrepresentation. Do not accept this kind of financial abuse.)

[admin]

PERSONAL FINANCE: LEGAL REMEDIES
Portfolio battered? You may have a case
Bad financial advice shouldn't have to cost you. Two lawyers with expertise in the area explain the ins and outs
ROB CARRICK
E-mail Rob Carrick | Read Bio | Latest Columns
April 21, 2009
rcarrick@globeandmail.com

The stock market has recovered a bit from the depths of last fall, but not enough to fix the damage done to some investor portfolios by bad financial advice. One option for investors who believe their advisers have cost them money is to take legal action. To learn more about suing an adviser, I spoke with Harold Geller and John Hollander, lawyers with the Ottawa firm Doucet McBride LLP, who spend much of their time representing investors.

Gentlemen, how's business right now?

Mr. Geller: A bit of a tsunami. There's clearly a high level of interest among people to find us and discuss their situation. But there's also an element of the ostrich here. People don't want to think about the degree of loss. What we're hearing is that advisers are saying, 'Look, you haven't got a loss because you haven't sold.' To me, that's poppycock.

Are you getting lots of phone calls?

Mr. Hollander: Several a week.

How long does it take people to get out of the shock-and-dismay phase of suffering a big financial loss and start taking action?

Mr. Hollander: If it follows the pattern of the last bear market, then it may be anywhere from six months at the earliest to 24 months at the latest. But there's a reason why that's a problem. In the last bear market, you had six years from the time losses occurred in order to start a lawsuit. In 2004, a new limitations act went into effect in Ontario. So now you have two years from when you discover a loss. If you don't act fairly quickly now, you may find your complaint has been barred by statute.

What are you seeing in the portfolios of the investors coming to you for help?

Mr. Hollander: What you find are people who should not have had all their eggs in the equity basket. The issue is a misallocation of assets.

Can you tell us about a current client?

Mr. Hollander: A woman, nearing retirement, came into funds, has an income but intends to retire in a few years. She goes to see a discretionary portfolio manager (has discretion to make investing decisions without consulting the client). All the money is put into small-cap stocks. In the debacle we've just seen, if the banks are down 40 per cent, the small caps are down by 80 per cent. And in some cases, there is no bid (no one wants to buy them).

How often do you look at an investor's complaint and find it's not legitimate, that his or her losses were in line with the correct set of benchmarks and thus not out of line?

Mr. Hollander: I would say that two or three [prospective clients] in 10 think they have a claim, but don't.

Mr. Geller: This immediately begs a second question - is it a claim which, on a financial basis, makes sense to proceed with?

So, how do you decide on a dollar basis?

Mr. Geller: If somebody's talking to me about $30,000, $50,000, $70,000, then we have real concerns about the price efficiency.

So we're talking at least six figures?

Mr. Geller: Yes.

You're both paid on a contingency basis for the investor cases you handle - how does that work?

Mr. Geller: Essentially, it's payment upon result, although clients can be asked to pay out-of-pocket expenses. There's a [base] rate of 30 per cent [of the settlement].

Mr. Hollander: Most lawyers require a fixed fee to determine whether or not they like the case. We call it an investigatory retainer. The range would be $2,500 at the low and, so far, $10,000 at the high end.

What percentage of cases are settled before trial?

Mr. Hollander: In my own situation, there have been four trials and four abandoned cases on about 70 cases that I initiated. The rest were settled for financial compensation that some clients would have said was fine and some clients would have been left unhappy, but at least it was worth their while."

With a settlement, how many cents on the dollar can the client expect on average?

Mr. Hollander: It's a huge range. I've had cases where the settlement has been 200 per cent of the loss and I've had cases where it was 10 per cent of the loss.

What are my chances of getting a settlement on my own, sans lawyer?

Mr. Hollander: Remote. Occasionally, we get calls from people who say, "This is what they're offering, should I take it?" That has happened.

Next week: Mr. Geller and Mr. Hollander on the usefulness of the financial industry's ombudsman offices, and their take on investment advisers.

*****

RECOVERING YOUR LOSSES

What you need to know about hiring a lawyer to recover funds lost to bad investment advice.

Finding a lawyer: Very few specialize in this area, so you'll need to ask lawyers, accountants and financial planners in your community for referrals.

The size of your losses: It takes at least $100,000 or so in losses to make legal action economical.

The cost: Lawyers who work on contingency take a percentage of the funds they recover; others charge a flat fee

What to expect: With legitimate claims, the typical outcome is for the investment firm involved in a dispute to make a settlement offer.

A typical complaint: You lost more than you should have in the bear market because your portfolio was more exposed to stocks than it should have been, based on your personal situation.

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Financial Consumers Guide to Effective Complaints

Introduction
Over 10 million Canadians make investments in stocks , bonds, GIC's and mutual funds. It’s a BIG business and highly profitable for the banks, fund companies, dealers and brokers Mutual funds alone collect over $10 billion in fees each year. The sales are commission based and include embedded sales commissions . When financially unsophisticated investors meet commission or quota- driven advisers, a toxic mixture can be created. So, it's not unnatural that problems will develop due to greed, misrepresentation, incompetence or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses.

While formal mechanisms such as the International Standards Organizations’ (ISO) new complaint-handling standard, ISO 10002, Quality Management - Customer Satisfaction - Guidelines for complaints handling in organizations, may ultimately be adopted in Canada's financial services industry ,financial institutions and trade associations have adopted their own practices that guide the complaint-handling function. In this Guide we’ll review how best to file a complaint so that justice is done when dealing with investments that have gone awry. We exclude complex cases involving trading abuses or fund governance that may be best dealt with via class-action suits.

Unlike a physical product, complaining about a financial institution requires a unique tailored approach. The complaints can cover a wide range of issues from unauthorized trading, failure to follow instructions, fraud, and undisclosed fees to account churning, inappropriate leveraging ( borrowing to invest) and unsuitable investments. Any of these issues can cause investors an undue financial loss, sometimes a very significant one. The primary objective of a complaint is to obtain restitution for salesperson or broker wrongdoing, realizing that all investment products carry some degree of risk.

The basis for a complaint is the duty of care owed by an advisory firm to its clients. In some relationships there is also a fiduciary duty. There are 5 factors that courts typically consider in determining whether a fiduciary relationship exists: trust, reliance, discretion, vulnerability and the existence of professional rules or codes. In a non-discretionary account, despite its validity, abused investors will face vigorous opposition to the necessary ‘trust’ and ‘reliance’ elements [to make a case for breach of fiduciary duty]. All of the industry manuals, training and codes of conduct implore advisors that they owe a duty of care to clients…anything less would contradict millions of dollars worth of industry advertising on the topic. Investors also have rights of action for breach of contract and negligence if a broker/advisor carries out unauthorized or unsuitable trading.

Most investors do not complain because they do not believe they have any rights, do not understand the complaint process, are embarrassed by the losses or do not believe they have a chance of getting their money back. Some just don't want the hassle and decide to lick their wounds, perhaps discouraged by the strong initial response from the dealer or the Investment Industry Regulatory Organization of Canada (IIROC)/Mutual Fund Dealers Association (MFDA) –so called self –regulating organizations ( SRO's). Remember, it's often not a lawyer writing the letter, but they are attempting to put it forward as a legal conclusion. These are numerous examples of claimants that have received a letter from the firm or IIROC saying that they have a invalid complaint, and the case is ultimately settled for a large sum of money because it was in fact a very valid claim.

An illustrative case

Here’s an interesting actual case that exhibits a variety of investor abuses. Ms X is a 78-year-old widow, functionally blind, speaks English poorly and has a grade school education. Further, the advisor knew she was in Florida from Nov-March and did not have access to her mail. Several letters are on file stating she does not understand the confusing statements, the fees charged by the fund companies and can’t figure out if she’s losing or making money. In fact she lost about half her RRIF within 2 years, her advisor never advised her of the risks involved and he knew that she was heavily dependent on RRIF withdrawals to pay her rent, clothe herself and eat. She was advised to put 80% of her portfolio in equity growth funds for her RRIF; all purchased on a DSC basis and all high MER proprietary funds with lucrative trailer commissions. Her trust in the advisor was completely abused but the brokerage firm thinks all is well and won’t settle the $175,000 claim without a fight. Precisely defining and making a claim for unsuitable investments isn’t always easy.

The standard of care necessary to consider a negligence action are largely based upon the Know-Your-Client (KYC) rule which requires that an investment advisor ascertain material information about a client's financial circumstances, investment objectives , time horizon and he is required to make investment recommendations in light of this information. The courts rely upon the codification of this obligation which is found for example in Regulation 1300 of the Investment Industry Regulatory Organization of Canada HYPERLINK "http://iiroc.knotia.ca/Knowledge/View/ViewAttachment.aspx/B3241_en.pdf?kType=445&dBID=200706344&ftID=B3241_en.pdf"http://iiroc.knotia.ca/Knowledge/View/ViewAttachment.aspx/B3241_en.pdf?kType=445&dBID=200706344&ftID=B3241_en.pdf Supervision of Accounts

Preventing problems
Nobody likes complaining and getting involved in disputes so first a few words on how to prevent problems. First, choose your advisor carefully, making sure there is a fit. You can check with the IIROC ( HYPERLINK "http://www.iiroc.ca/"www.iiroc.ca ), Mutual fund Dealers Association ( HYPERLINK "http://www.mfda.ca/"www.mfda.ca) or your provincial securities regulator if he or she has been disciplined in any way but note that not all bad guys are in the database. Secondly, make sure you fill in the New Account Application Form with great thought and don't let your ego get in the way. These little tick marks can prove to be very expensive should a dispute arise. Be sure to document what you told the advisor and what the advisor told you. If you are given the KYC to sign, you might consider writing in plain English exactly what you expect. i.e., “I want low- risk investments to produce an income for my retirement”, or “I am seeking growth and willing to accept some (high, medium, low) degree of risk with 20% of capital”. And to be very careful in signing any powers of attorney or authorizations to allow the advisor to trade on your behalf.

Be realistic about your expectations. Be sure to a obtain a Letter of Engagement which establishes the rules of the client/advisor relationship and the expectations of each party and an Investment Policy Statement (IPS), a document that outlines your financial situation, objectives and risk/loss tolerance. The IPS is an important written document that should clearly (not jargon filled and incomprehensible…it should be understandable by yourself or any member of your family) define your objectives and constraints over a relevant, explicitly stated time horizon. The IPS is the linkage between you, the advisor, and your portfolio. The IPS is the foundation of managing your investments, and serves as a structured decision making process to make most all of your investment decisions. This helps to suitably balance return seeking and risk taking; increasing the probability of success in achieving your investment goals. And above all, read the offering documents/fund prospectuses especially as regards risk, volatility, fees and performance.

Don’t sit on an unauthorized transaction, knowing that it was unsuitable or unauthorized, in hopes that it works out — and then turn around and sue the broker and the firm if it doesn’t work. Act promptly, call /write the advisor-broker and move decisively before things get out of hand-you have an obligation in fact to do so. Note that if you don't act within the statute of limitation periods applicable in your province you will lose your right to sue.

Complaining Ground rules
Now some ground rules. Make sure you have a legitimate case. If you were greedy and lost money , you’ll have to take your lumps. Do your homework and research your position. Visit such investor-friendly websites as HYPERLINK "http://www.investorism.com/"www.investorism.com, HYPERLINK "http://www.Canadianfundwatch.com/"www.Canadianfundwatch.com, HYPERLINK "http://www.sipa.to/"www.sipa.ca, and HYPERLINK "http://www.fcac-acfc.gc.ca/eng/default.asp"http://www.fcac-acfc.gc.ca/eng/default.asp .Be prepared to put in some effort as financial institutions rarely concede easily or promptly. Some may try to intimidate you by writing you a formal looking letter summarily stating you have no valid claim. Others may ask you for tons of back- up documentation that you likely don’t have. Still others try to slough off accountability by claiming that the abusing broker or salesperson is no longer employed by them. They may claim you are a knowledgeable investor and were well aware of the risks involved. Don't be put off by any of these maneuvers, as they are often ploys to get you to go away. Here's a typical rebuff:

“As you know, our firm mails account statements to its clients on a quarterly basis, as well as for months in which activity occurs, wherein the current value of investments is reflected. Trade confirmations are also issued shortly after each trade that occurs in an account. If at any time Ms. X’s intentions were not followed as you have suggested, we believe the seriousness of such a situation would have prompted notice to Branch Management for timely resolution. We have no record of any expressed dissatisfaction until we received the letter of complaint and claim We suggest that investment advice is intended to provide a client with the guidance necessary to make a reasoned and informed decisions but it is not intended to substitute for the client’s own decision making.”
-actual text of a letter from broker advisor to Ms. X’s legal counsel


As you prepare to file your complaint you should have a copy of the following documents organized in your file:
The Letter of Engagement
the signed NAAF for each account
the account statements for the period of interest
transaction confirmation slips
records of any meetings, correspondence, emails, prior complaints or phone calls
copies of investment proposals and the IPS
copies of fund ads, brochures and other sales literature
a copy of the relevant Know Your Client (KYC) Form
a copy of Offering documents/prospectuses , promotional materials
handouts or notes from any “educational” seminars attended
any brochures the firm may have on how to file a complaint

You will receive the best response, the more accurate and complete the information you provide.  If you have a complaint about a broker or salesperson, specific details of how, why, and when you were financially assaulted, sold unsuitable investments or encountered problems with investments or your broker/ advisor is required.

The success of many complaints against greedy or incompetent advisors and the firms that employ them hinges on what the client investor told the advisor about the type of investments desired as determined by the New Account Application Form [this should be signed by clients, a copy retained and updated as required NOTE: forgeries and adulterations have occurred!] and how the advisor interpreted this instruction when he/she filed out the firm’s Know Your Client (KYC) form. Few firms provide a copy of the completed KYC form to clients; it seems to suddenly pop up at dispute time. KYC forms and terminology are not standardized and vary from Company to Company. Suitability, along with churning and unauthorized trading make up the bulk of investment complaints.

Before you start on your complaint journey, realize that the odds of a fast settlement are not high. The financial services industry didn't get to be so powerful and profitable by easily parting with its money. They are skilled at rebutting claims and seasoned veterans of investor litigation. They have experienced negotiators and lawyers ready and willing to negate your claim. Expect a protracted, emotional and frustrating trip.

A starting reference here is “ A step-by-step Guide to Making a Complaint” available from the Ontario Securities Commission. ( HYPERLINK "http://www.osc.gov.on.ca/Investor/Resources/res_making-a-complaint_en.pdf"http://www.osc.gov.on.ca/Investor/Resources/res_making-a-complaint_en.pdf ). The document cautions however that the OSC cannot give advice on an investment, unwind a transaction, act as your legal counsel or get your money back. They can however answer your questions about investment products , tell you if your advisor is registered in Ontario and investigate complaints. To date, it has been extremely rare for these Commissions to order restitution for retail investors.


The elements of claims
To varying degrees you may file claims for the following:
actual investment losses due to purchase of unsuitable investments
excessive fees paid
early redemption penalties to exit unsuitable investments
interest charges for unnecessary margin or loans
excessive sales commissions
undue income tax liabilities as a result of churning or unsuitable investments
the costs associated with preparing the claim/complaint
opportunity losses
emotional stress, pain and suffering( rare)

As part of your negotiating tactics you may wish to include some items (e.g. 8. and 9.) that, albeit legitimate, are difficult to quantify or debatable, realizing that any settlement will be a tough negotiation and usually less than you feel is fair. Be sure to definitize the time period covered by the claim. It’s wise to have an investor friend, accountant or lawyer double-check your claim rationale, clarity and figures. You may in fact not have a legitimate or winnable claim or one that’s worth the time , effort and frustration.

Investor Complaints- Self-Regulatory Organization (SRO) Rules

Self –Regulating Organizations (SROs) such as the Mutual Fund Dealers Association and the Investment Industry Regulatory Organization of Canada publish rules or by-laws to which members must adhere. Complaint related links are listed below.

Investment Industry Regulatory Organization of Canada (IIROC)Rule BookThe rule book contains:
rules pertaining to complaint handling and ombudservices that must be followed by IDA members (see IDA By-law 37.1- 37.2 (Alternative Dispute Resolution) -page 160)
standards for the handling of client complaints (see IIROC Policy # 2-page 392)
procedures for reporting of client complaints (see IIROC Policy # 8-page 474) HYPERLINK "http://www.iiroc.ca/English/ComplianceSurveillance/RuleBook/Pages/DealerMemberRules.aspx"http://www.iiroc.ca/English/ComplianceSurveillance/RuleBook/Pages/DealerMemberRules.aspx
Mutual Fund Dealers Association (MFDA)
( HYPERLINK "http://www.mfda.ca/"www.mfda.ca)MFDA Policy No. 3
Handling Client Complaints
Policy establishes minimum industry standards for handling client complaints for MFDA members. HYPERLINK "http://www.mfda.ca/investors/complaints.html"http://www.mfda.ca/investors/complaints.html


So, if you’re going to complain about advice or wrongdoing, it’s wise to review the rules industry participants play by. For complaints about mutual fund dealers ,be sure to read How to Make a Complaint to the MFDA HYPERLINK "http://www.mfda.ca/Enforcement/HowToComplain.pdf"http://www.mfda.ca/Enforcement/HowToComplain.pdf HYPERLINK "http://www.mfda.ca/Enforcement/HowToComplain.pdf"

The Mutual Fund Dealers Association Member Regulation Notice MR-0025

In Member Regulation Notice MR-0025 - Suitability Obligations for Unsolicited Orders, the MFDA says that the suitability notice intends to clarify dealer and rep obligations in the event that they receive an unsolicited order that they determine is unsuitable for the client. It says that firms and reps are required to make clients aware that the proposed transaction is not suitable based on the information provided on the current New Account Application Form or “Know-Your-Client” form and provide appropriate cautionary advice. It advises dealers to adopt "appropriate safeguarding procedures" (cover your butt) where the client insists on proceeding with the order.

Where an unsolicited order is determined to be unsuitable for the client, the record of the order must include, at a minimum, evidence that: the transaction was unsolicited; a suitability review was performed; and the client was advised that the proposed transaction was unsuitable. See also the well written MFDA Suitability Guidelines HYPERLINK "http://www.mfda.ca/regulation/notices/MR-0069.pdf"http://www.mfda.ca/regulation/notices/MR-0069.pdf

Representatives must clear unsuitable, unsolicited orders with their branch managers or compliance officer before proceeding with the trade. As well, dealers must set out procedures for dealing with unsuitable, unsolicited orders in their Policy and Procedures Manual. It notes that firms are not obligated to accept a purchase order from a client that is determined to be unsuitable. Investors should apply their own safeguards when being solicited by a dealer to make a purchase. Keep a record of the conversation and the reason the fund was recommended and if you were advised of fees, risks, dealer compensation and Terms &Condition’s. Unsuitable investments have been at the root of investors problems. Examples include inappropriate asset allocation, inadequate diversification, high MER funds (index ETF’s rarely recommended), and high- risk securities incompatible with the NAAF, KYC or common sense.

Some observations on industry complaint resolution responses

Here’s a few lessons learned that should prepare you for the types of controversial defence arguments used by the financial industry to counter claims:

Expect industry claims analysts to try to limit the period of time for losses by claiming that definitive loss mitigation action should have been taken early
Bond mutual funds may be unduly accepted as satisfying the criteria of fixed income in asset allocation decisions –investor advocates argue this classification is misleading,
There could be an attempt to use the KYC. form. even if it is in congruent with the investors signed New account application Form (NAAF) and even if it contains material errors. In any event, anything favourable to their pro-industry case can and will be used against you, so be careful what you put down on the NAAF at the outset.
the NAAF (s) and KYC (s) may or may not be applied to separate accounts depending on which position minimizes the claimed loss i.e. they may apply the investment objectives and risk tolerance from account A to all your accounts if it suits their case, or any other combination
The eligible loss may be limited to cash out/ cash-in and may exclude all sales loads, commissions, wrap fees and fund early redemption penalty fees
Mutual fund capital gains distributions might be considered as income
There will be little compensatory consideration even if the funds chosen were high MER, are high turnover with heavy-duty sales loads. Opportunity costs/losses aren't normally part of the current industry mindset
If it is favourable to them, they may backtesting data to argue that even if the proper asset allocation had been followed, losses would still have been incurred
Selling a DSC fund with a six-year redemption schedule to a 89-year-old may not be deemed inappropriate behaviour.
While a malpractice, fund churning by itself may be disregarded if the net effect does not result in a net capital loss for the portfolio
An argument could be put forward that a non-discretionary account deserves little sympathy even if all buy/sell recommendations came from the broker, fund salesperson or advisor. The industry- promoted concept of trust seems to melt away at the time of dispute, arbitration or trial.
They may argue that if an investors’ income ( or net worth) from all sources, including those outside the account(s) in dispute is “adequate”, then a higher proportion of equity/income is justifiable and not inconsistent with the stated objectives of the designated accounts
The time value of money may be ignored
Currency exchange losses may be ignored
They may claim that the signed NAAF suggested that you claimed to be an experienced investor and could understand and accept risk
Specific aspects of your case may be addressed and others ignored
Decisions may be inconsistent, as they do not follow normal judicial practices of jurisprudence.
On top of all this, they may close the file and simply refuse to correspond further, leaving arbitration, ombudsman services or civil litigation as the only alternatives. Some of these responding arguments might in fact not be totally unreasonable IF most investors weren’t financially illiterate, could understand confusing NAAF’s/transaction slips, could decode foggy client statements, were provided with personal rate of return information and didn’t exhibit blind trust in their advisors.

The complaint sequence

A proper protocol is to first complain in writing to your advisor. If no resolution results you should contact his supervisor or branch manager. If this fails, you should contact the organization’s ombudsman office if they have one. If your contact methodology is telephonic which is not recommended, be aware that your call may be recorded for “quality control purposes ”. Because of statues of limitation , time is of the essence.

Describe your complaint in as much detail as possible, including the full name(s) on the account, the exact type of account/account #, the dates of specific transactions or conversations, the name or code/ symbol of the security (ies) involved, and the names of all the people at the firm you have contacted about this complaint. At this point you may not be able or willing to cite a specific dollar figure for your claim.

In some cases this will be the end of it but truth to tell, only a minority of cases will be satisfactorily resolved at this stage.
For the next stage you have a few choices. Your provincial securities regulator will likely refer you to the IIRC, MFDA, OBSI or to civil action if your looking for financial redress. The IIROC's binding arbitration program allows restitution up to $100,000- but the verdict is final and can cost several thousand dollars. According to IIROC, total costs (including a filing fee, the arbitrator's hourly rates, room rentals and other disbursements) can be expected to range between $3,000 to $4,000 for a typical dispute. Costs are generally split equally between the parties, but the arbitrator can make a different determination. Moreover, as with the costs for arbitration, the arbitrator, as his or her discretion, may assign one party’s legal costs to the other party in the arbitration. The rules may vary from province to province. Some observers point out that about 50-60 % of claims find in favor of the investor with about 50 –65 % of the amount claimed as the settlement. See HYPERLINK "http://www.ida.ca/Files/Enforcement/ArbitrationStatistics_en.pdf"http://www.ida.ca/Files/Enforcement/ArbitrationStatistics_en.pdf
Another alternative is the Ombudsman for Banking Services and Investments (OBSI; HYPERLINK "http://www.obsi.ca/"www.obsi.ca). Restitution here can go up to $350,000, there is no direct charge for the complaint evaluation service and the final report is non-binding on either party. The two systems are fundamentally different and investors should research the pros and cons of each. Consider sending copies of the complaints to the Provincial Regulator, the MFDA, or the IDA as it may help your case. The IIROC and MFDA do not have the authority to order a firm to pay compensation; they are however the appropriate organizations to complain to if a breach of securities laws or member rules/policies/by-laws is suspected. Both the IIROC and OBSI are industry- sponsored organizations so their independence is far from obvious and in fact they have been criticized by Independent studies and Task forces, the media, investor advocates and investors. The MFDA does not assist abused investors in civil claims against dealers or direct dealers to reimburse clients for losses claimed.
If none of the above approaches are working out you may need to retain legal counsel (one experienced in securities cases), and proceed in civil court. Unfortunately, this can be a long, very expensive, emotional and frustrating experience and your chances of recouping your losses uncertain. Be sure you understand the implications and consequences before proceeding down this route. According to the IIROC website, a lawsuit typically costs $37,500 and take two years before it even gets to trial. Nevertheless, it’s an option that has met with some success. Alternatively, you can work with firms that work on a contingency fee basis. In some cases mediation could be useful – in this event consider an external mediator but realize there are costs involved. If the amount is relatively small –under $10,000- Small Claims Court may be an appropriate channel.
How to write a winning complaint letter
Each complaint situation is so unique that it's virtually impossible to create a prototype letter. Nevertheless there are some basic points about all effective complaint letters:
A complaint letter should be businesslike and to the extent practical, avoid emotion
the letter should include contact information and be dated-include your full name, mail address, email address and telephone numbers
address your letter to a real person; send a copy of the correspondence to the individual’s supervisor or branch manager
begin your letter with a good reason to read it
clearly state the problem, time lines, employee names and the specific reason(s) you believe you have a valid complaint
back it up with documentation, facts, background, special circumstances and chronological detail
ask for what you want i.e. restitution
set a definitive deadline for a response and hint at the “consequences” of no response
your letter should be courteous and professional; never use profanity -stay civil
be careful not to make any libelous comments –attack the problem, not the person
Remember too, that any comments you make can and will be used against you should the case turn ugly. You might want to register the complaint letter to ensure you know it’s been received. If you can’t find the correct mailing address ( a less than rare occurrence these days) try searching the internet for the Company.
Here’s some of the things you should know about OBSI

Many investors mistakenly believe OBSI is a government agency. You should understand who you are dealing with and its ground rules when you deal with OBSI. Here’s the lowdown:

the OBSI is funded by Member firms- OBSI salaries and expenses are paid for by industry participants .The Ombudsman’s dispute resolution services are at no direct cost for complainants and legal representation is not required.
OBSI will not accept a complaint until the firm has completed its investigation ( new proposed rules would quantify the period as 90 days maximum after which they will take on the case)
OBSI has a general guideline that investors must bring complaints to them within six months of completing the exhausting process at their financial services provider.
OBSI deals only with abuse effects (symptoms), not root causes
if the Ombudsman recommends that a investor receive monetary compensation, the amount is limited to the loss or damage suffered.
as set out in the terms of OBSI’s reference, the Ombudsman may not recommend the payment of an amount greater than $350,000 as part of the resolution of a Complaint.
When OBSI does adjudicate a decision on behalf of a financially abused investor, there is no public warning to other investors that may be affected by a similar pattern of abuse ( plans are underway to give OBSI a mandate to deal with systemic issues)
the OBSI Board of Directors will not consider a request to hear an appeal of any recommendation made by the Ombudsman, or of the rejection of a Complaint by the Ombudsman
the discussions and correspondence of the Complainant, the member firm, the firm’s representatives and the Ombudsman that form part of the dispute resolution process will not be disclosed or used in any subsequent legal or other proceedings. (arbitration, mediation, litigation etc) - OBSI staff cannot be subpoenaed as witnesses in any civil court action.
OBSI recommended that the financial service provider take substantial action in favour of the client in about 50% of the investigations completed i
The final recommendation is non-binding but historically member firms have accepted the decision(s), at least after behind-the scenes negotiations. According to hearsay, and we stress, hearsay, member firms are not always quick to respond to OBSI queries.
The industry- sponsored OBSI Board of Directors isn’t peppered with demanding investors or investor advocates who demonstrably represent investors interests by challenging OBSI policies, budgets, methodology or decisions. 
OBSI itself has complained that a majority of firms fail to advise complainants of OBSI's free dispute resolution service
Never forget that the Ombudsman's decision on the resolution of a complaint is normally based on four basic criteria:
Accepted industry standards and practices
Standards established by the individual financial services provider, professional associations or industry regulatory bodies
Overall fairness as determined by the analyst/investigator
Good business practices NOT Best practices ((even though you may have been promised BEST practices by the firm and the advisor advertising)

These points are troubling and there have been criticisms on how investment complaints have been handled by OBSI and other industry-sponsored organizations. Right now however, it’s the cheapest route to use to obtain redress consideration. At the very minimum, you’ll get a detailed report analyzing the situation from a third party without laying out a dime or prejudicing your future case should you decide to sue. Lawyer John Hollander of DOUCET MCBRIDE LLP in his Aug. 19,2004 submission to the Ontario Standing Committee on Finance and Economic affairs (securities legislation) cautioned “… Last, the process of submitting claims for review by the IDA and by the Ombudsman takes such a long period of time that the new Limitations Act (Ontario) may prevent the claims from proceeding; they may become statute-barred...”In Ontario you have just 2 years to file a civil action.

The OBSI complaint form can be found at HYPERLINK "http://www.obsi.ca/images/up-Online_complaint_form_text_for_download.pdf"http://www.obsi.ca/images/up-Online_complaint_form_text_for_download.pdf

Some winning arguments

Here are some sample arguments that individually and/or collectively have helped recover money from dealers:
the advisor failed to disclose his conflicts -of- interest regarding fees leading to unsuitable investments
the portfolio’s asset allocation is wholly unsuitable either because it is inconsistent with your stated needs, temperament, age, marital status and health or physical/ mental disabilities or loss tolerance
the portfolio character is a significant departure from your historical conservative investing pattern and/or risk tolerance
the advisor failed to deliver required offering documents/a fund prospectus
the advisor failed to disclose the risks-market risk, currency risk, volatility [high standard deviations and betas are indicators of excessive risk]
your investment knowledge is demonstrably limited and all buys/sells were based on your advisor’s recommendations i.e. you trusted him-defacto control granted
there is no persuasive rationale for the account churning .
the broker accepted payment from the mutual fund company to flog the fund but you were not advised of this
you were not advised of reduced sales commissions or MER discounts for large purchases/holdings
the dealer does not comply with securities regulations, SRO rules, or company policies
unduly expensive funds were purchased without advising you of alternative equivalent but lower MER funds
the KYC form is incongruent with the NAAF and/or contains material errors
your financial and/or linguistic literacy is such that you were totally dependent on your advisors investment recommendations for buying, selling or switching investments and the timing of such transactions
the signed NAAF form was confusing with vague, ill-defined terms that even experts can’t agree on
there was ineffective supervision of the advisor/broker
point out that you are a senior, a retiree, a widow or disabled and incapable of making up the losses from the unsuitable investments

Tactics to speed resolution

Oftentimes the negotiation process gets stalled with dealers hoping they can wear you down. There are a few tactics you might consider using to get things moving again. All can be time-consuming and will likely add to your aggravation level. Nevertheless, you can threaten to:
transfer your account and your accounts at affiliated companies to a competitor
contact independent board members or fund trustees
contact provincial securities regulators
contact professional accreditation organizations
go to the media
post details of your alleged maltreatment on internet chat rooms or use FACEBOOK as was done in the non-bank ABCP fiasco
tie in with consumer or seniors groups
start a petition using ipetition.com
file civil and/or criminal charges via a lawyer ( other than Small Claims Court, litigation cases should involve at least $100,000)

Conclusion

The journey to a successful conclusion can be stressful, aggravating and time consuming –resolution requires diligence and determination .In the end though, persistence pays. Some shrewd investors have not only received their money back but have received “ consideration ” in the form of waived fees, free trades or reduced early redemption time frames. Assuming all has gone well, you'll have to sign a settlement release in order to receive compensation. Part of this may be a gag order preventing you from discussing the case or the terms of settlement with anyone. Assuming you’re happy with the amount, hold your nose and sign off. Move on to living your life.

Ken Kivenko P.Eng
May , 2009

[admin]

Investors Bill Of Rights 2009
http://www.investoradvocates.ca

These are the basic rights that an investor in a developed country deserves. One who seeks help, or advice from someone purporting to be a professional. Anything less than delivery of these rights is considered to not be best practices, and may be actionable. This depends upon how the salesperson, advisor or investment firm represented themselves to the client.

The right to have the customer interests take priority over that of the advice giver.
(this means, all other things being equal, that if there are two or more nearly identical investment products available, that the advice giver must direct the client towards the one which is most beneficial to the client and not the one which pays the advice giver most.

The right to know whether the advice giver is licensed as a salesperson or as something else.
The right to know if the advice giver is compensated as a salesperson or in some other way.
The right to know, in writing, whether the advice giver, and or his or her investment firm owes a duty of care, a fiduciary duty to the client, or no duty to place the interests of the client first. Is the relationship one of a salesperson to a customer. Is it “buyer beware” or “duty of care”.
The right to an independent regulatory and investor protective body, outside of the capture, the funding, or the influence of the investment industry itself.
The right to fair, fast and adequate compensation for investment abuses where the client interests have been taken advantage of by the investment industry.
The right to have their investment plan, their objectives, their risk and reward tolerances placed in writing, by the advice provider, such that a third party could observe and understand what client and advice giver are agreed upon.
The right to have a simple, understandable one page written summary, from he advice giver, of each and every possible or potential form of compensation that is earned, could be earned, or earned indirectly as a result of the advice given by the advice giver.
The right to a written summary of all claims, judgements, awards against, penalties or any other sanctions against the professional standing of the advice giver.
The right to receive account statements that could be considered decipherable and understandable with regard to the age, the state of mind, the literacy and the competence of the client.
The right to full disclosure of investment positives, risks and negatives, with full and accurate information. To a standard of the best of efforts and practices by a prudent professional at the time.
The right to full, timely and fair recourse, despite any industry obfuscation, delay, distraction, untrue denial.
The right to damages of some multiple amount of the actual damages to the client, if the industry can be shown to practice any attempts at dishonesty, delay, bullying tactics, or anything less than the highest professional standards or care for a client who has a dispute or a complaint.
To a clearly defined process for raising and resolving a complaint.
Your right to know if your investment firm has a clear and concise policy of fairness, honesty, and professional due diligence process towards whistleblowers or employees who attempt to tell the truth about inappropriate corporate behaviors or customer abuses. Or do they shoot, shut up and shovel?
The right to approach and complain to independent, objective police agencies about matters which involve criminal or potential criminal violations. NOT a process where complaints are handled internally, by industry trade and lobby groups, or by regulators or self regulators who are paid for by the industry.


If you are investing in any country which does not have these kinds of rights and protections for each investor, you will be placing your economic future at risk of loss or theft.

To be candid, Canada is failing on nearly all of these rights and basic protections. Canadians are totally under the care and protection of industry paid, industry driven organizations, which means you are being protected entirely by the foxes of the industry.