IDA spends it's credibility, changes its name to IIROC

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http://business.financialpost.com/fp-co ... ted-bodies

Labour productivity among Canadian professionals is in the bottom fifth among all sectors

A cautionary tale for Canada is unfolding in a U.S. Supreme Court case that pits a David (small businesses that provide teeth whitening) against a Goliath (professional dentists) who wants them to stop. Could a similar case arise in Canada that involves shutting the door on competition? Yes, unless the provinces enact rules to ensure professional bodies don’t push the limits of their power to prevent or lessen competition in their lines of business.

The U.S. Supreme Court case may dramatically alter the landscape for professionals in that country. Enter the North Carolina State Board of Dental Examiners, who has initiated a legal fight over the fact that more people are whitening their teeth at spas and kiosks using cosmetic products instead of going to dentists who charge considerably more for their services. The Board began sending cease-and-desist letters to cosmetologists. Cosmetologists responded by complaining to the Federal Trade Commission, which commenced anti-trust action against the Board. The Board bases its authority to restrict cosmetologist’s teeth whitening on a 1943 Supreme Court decision that provides it with certain immunity from antitrust prosecutions.

In Canada, we have plenty of potential Goliaths. There are hundreds of self-regulated bodies that derive their authority to restrict economic activity within their space, mostly from provincial governments. Such bodies have immunity from competition laws, just as North Carolina’s dentists believe they have immunity under case law dealing with competition and regulation. Immunity from competition law allows them to act as de facto monopolies, in the case of the Dental Examiners claiming the exclusive right to practice a cosmetic procedure that most would consider ancillary or only tangential to the core expertise involved in provision of dental services.

Many professions are well-recognized fields, which include designations such as chartered accounting, law, medicine, etc. The number of self-regulating organizations is growing. The Ontario government, for example, has delegated administrative or quasi-judicial functions to more than 80 bodies, and plans to do more delegation through the Delegated Administrative Authorities Act. These groups have the power to devise and enforce the rules governing a professional’s relationship with her clients.


The capacity to self-regulate is a highly sought after power among occupations aspiring towards the status of professionalism. The mere fact of self-regulation enhances the credibility and standing of an occupation and its members in the eyes of consumers. Rulemaking or rule-enforcing powers grant autonomy and self-determination to professionals.

But problems can arise from self-regulation. Self-regulatory rules can grant economic power to such groups beyond the ability to certify, discipline or maintain the competence of their members. The case from North Carolina illustrates the ever-present problem with rent-seeking by a professional organization and the zealous desire by professional associations to protect their rents by relying on self-regulatory powers.

When self-regulating bodies have rulemaking or discretionary powers over professionals, they can often take steps that do not help consumers or, at worst, are directly contrary to their interests. The result can be undue limits on innovation, restrictions on competition or entry, and accumulation of economic power in the hands of small, politically established groups of professionals.

What’s the economic result? A recent study by the Competition Bureau found that labour productivity among Canadian professionals is in the bottom fifth of labour productivity among all sectors in the economy.

We expect that professional bodies make decisions that enhance economic outcomes for all Canadians. There is a certain social and political responsibility that comes with the status of professional, in many cases a fiduciary obligation.

Many Canadian governments are only giving token consideration to consumers when enacting legislation that delegates rulemaking or rule-enforcing authority, to an increasing number of occupations.

When we stop to examine the incentives at play, Canadians should be asking if delegation and self-regulation are the most consumer-friendly options. Should professionals of all stripes be granted more autonomy?

Consumers and small businesses should be paying attention to this issue as it has a direct impact on affordability of many services purchased by them, including things as diverse as hairstyling and real estate (the former will see more heated enforcement against unlicensed hairstylists with dubious rationales for public protection).

Provincial governments should take stronger steps to ensure that self-regulating organizations are using their rights and privileges to promote the public interest and not to restrict competition or limit innovation in the service sector.

These steps include consultation with the Competition Bureau and other consumer protection organizations on the delegation of statutory powers and the possible effects that such delegation can have on competition. Provinces should ensure that any regulations created or enforced by self-regulating organizations are minimally restrictive to competition.

If the public is to have continued faith in professionals and professionalism, provincial governments should ensure that the rules governing self-regulating professionals do not put the interests of industry insiders ahead of consumers.

Robert Mysicka is the author of a recent C.D. Howe Institute Commentary “Who Watches the Watchmen? The Role of the Self-Regulator.”

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http://insurance-journal.ca/article/iir ... s-in-2016/

IIROC acts more like an insulator between the investment industry, and being held accountable for crimes like fraud and forgery etc.

It serves to help protect financial crimes and systemic organized schemes to defraud the public from any police or prosecutor involvement. It is the perfect barrier (among many) to aid in high value organized criminal activity.

IIROC only collected eight per cent of fines against individuals in 2016
http://insurance-journal.ca/article/iir ... s-in-2016/

The Investment Industry Regulatory Organization of Canada (IIROC) published its annual Enforcement Report on April 19. The report shows the regulator was only able to collect eight per cent of the fines against individuals across the country, an almost 50 per cent drop from 2015.

Total sanctions imposed by IIROC on disciplined individuals increased year over year - $3.12 million in 2016 up from $2.95 million in 2015, noted the report. However, while IIROC collected 100 per cent of the fines it imposed against firms, the regulator says its inability to collect from most sanctioned individuals demonstrates its need for more enforcement authority. “This collection rate illustrates the importance of IIROC obtaining additional legal authority from various provincial and territorial governments to improve fine collection and other enforcement actions,” said the regulator in an announcement.





Unsuitable investments top complaint

In terms of enforcement activity during 2016, IIROC reports that it completed 138 investigations compared to 124 in 2015. The regulator began 55 proceedings in 2016, a 25 per cent increase from 2015.







IIROC also saw a year-over-year increase in the total number of complaints received with 1,459 in 2016, compared to 1,341 the year prior. Unsuitable investments continued to be the top complaint received and prosecuted by IIROC with suitability cases representing 37 per cent of complaints and more than 40 per cent of its regulatory prosecutions.

Legal authority to collect disciplinary fines

Earlier this year, the Prince Edward Island Office of the Superintendent of Securities granted IIROC the legal authority to collect disciplinary fines directly through the Supreme Court of PEI. On March 31, the Ontario government announced its intention to introduce legislative amendments to give IIROC the ability to pursue the collection of disciplinary fines directly through the courts.

"We appreciate the ongoing support of our regulatory and government partners in our quest to strengthen our enforcement abilities and to ensure a consistent level of investor protection across Canada," said IIROC President and CEO Andrew J. Kriegler.

"IIROC is urging other provincial governments to make similar legislative changes so investors can be confident that investment firms and individuals will comply with IIROC's regulatory rules and we can improve the effectiveness of our investigations and prosecutions bringing wrongdoers to justice."

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IIROC’S SLUSH FUND
James Hymas / June 1, 2011

IIROC currently holds over $32 million in an Externally Restricted ABCP Fund derived from fines and interest – a substantial sum of money by anybody’s standards. With IIROC expected to settle the disposition of the fund later this year, investors, advisors and legislators should consider the issues surrounding this fund and determine whether legislative and procedural changes are needed.

The fund is the result of fines levied against Scotia Capital ($29 million), Credential Securities ($200,000), and Canaccord Financial ($3.1 million) for their roles in the August 2007 collapse of the Canadian non-bank asset-backed commercial paper (ABCP) market.

The grounds upon which fines are levied are open to question, but the main issue is IIROC’s conflicting roles of judge, jury, prosecutor, investigator and, critically, determiner of the disposition of the proceeds of fines.

Legitimacy of the fines

IIROC has claimed it investigated “more than 100 investor complaints.” Oddly, not a single one is specified in any of the three settlement agreements, nor is any kind of connection drawn between the substance of these complaints and the agreements.

The media has reported some of the affected investors were told their investments were “just as safe as GICs.” This is a clear misrepresentation worthy of penalization by the regulators, but not a single advisor has been penalized by the regulators for such an assertion.

However, IIROC did produce an extraordinarily verbose report on the ABCP market and its collapse. The report emphasizes suitability as the standard for selling investment products to retail clients, but doesn’t consider the question of concentration. In fact, the words “concentration” and “diversification” are each found only once in IIROC’s regulatory study, and in both cases with reference to ABCP itself, not the portfolios of the investors.

The importance of portfolio diversification is well known to investment practitioners and academics, but IIROC has an explicit goal of revising its compliance modules to focus on suitability issues.

It seems clear “suitability” needs to be replaced with some version of the Prudent Investor Rule. While ABCP and many other things may be suitable for a retail investor’s account, a heavy concentration of anything is imprudent.

IIROC proudly states it may add “the account’s current investment portfolio composition, duration and risk level” as a suitability factor to the Client Relationship Model (CRM) proposals, but it remains to be seen how this requirement will be monitored and enforced if enacted.

Whatever the faults of ABCP, its credit quality was well within normal bounds. The three “Master Asset Vehicles” set up to receive the majority of the assets of the ABCP conduits have current credit ratings varying from BBB(low)(sf) to A(high)(sf).

The collapse of the Canadian non-bank ABCP market was not so much a failure of credit quality as it was a failure of market liquidity. The Bank of Canada has since taken steps to improve the liquidity of the market in future crises as part of its market development efforts.

The IIROC report stresses dealer members are required to understand the underlying asset composition of instruments sold to clients. But no one has taken action against those who failed to investigate related financial instruments sold or recommended to clients, such as the National Bank Money Market Fund, which held 49.42% ABCP on March 31, 2007.

These peculiarities pale in comparison to the fine IIROC levied on Scotia Capital. The ruling cites that one part of the firm did not talk to another, contrary to what is now Dealer Member Rule 29.1(ii).

This rule is a ridiculous catch-all provision that states “Dealer Members […] shall not engage in any business conduct or practice unbecoming or detrimental to the public interest.”

A fine of this magnitude for such an offence, which did not involve anybody outside the company, should be considered an affront to the most rudimentary notion of justice.

IIROC claims there are other, clearer contraventions, but evidence to support their position cannot be found in the settlement agreement, where one would expect to see references to specific Dealer Member Rules.

The claim that Scotia Capital “continued to sell Coventree ABCP without engaging […] other appropriate processes for the assessment of such emerging issues” is unclear and fails to serve the public interest.

To make matters worse, the settlement agreement specifically notes Scotia Capital is “increasing the number of compliance positions supporting the Respondent’s wholesale business,” and requires a consultant report to IIROC regarding Scotia’s fulfillment of this action.

In short, I question whether IIROC has served the public interest in this matter. Nevertheless, the fines, which with interest total over $32 million, are now sitting in IIROC’s coffers, awaiting disposition as determined by IIROC’s directors.

Problems with “proceeds of crime” laws

The ability of IIROC’s board to determine the disposition of revenue derived from fines is directly analogous to current Proceeds of Crime legislation, under which assets can be seized by the state in a civil action and the proceeds disbursed for purposes of victim compensation, cost recovery and grants.

According to the Ministry of the Attorney General, “Organizations eligible for grants are designated by the act, including law enforcement agencies and Ontario government ministries, boards and commissions. These institutions must meet the established criteria and submit a project proposal outlining how the grant will assist victims of unlawful activities or prevent victimization.”

As of August 2007, only a quarter of the funds seized under this legislation had gone to victims. But there are further problems beyond the disposition, which are best exemplified by the continuing debate regarding asset forfeiture in the United States. One guide for law enforcement officials states the primary argument for supporting “the need for forfeiture” as follows: “For many years, law enforcement agencies around the nation have faced shrinking budgets. […] asset forfeiture can assist in the budgeting realm.”

David Harris of the University of Pittsburgh points out, “Police have an incentive to gear law enforcement toward crimes that will result in forfeitures […] The prospect of a big payoff has a corrupting influence on police priorities […] to the detriment of targeting less lucrative but more damaging street-level crimes.”

It is, of course, impossible to say for certain whether IIROC’s enforcement process has been influenced by the prospect of levying large cash fines against corporations.

But it’s puzzling that after having received “more than 100 investor complaints” they:


Did not name a single complainant
Did not detail a single complaint
Did not name an individual whose conduct could be criticized
Did not revoke a single licence
Did not identify specific conduct by Scotia Capital that harmed the public
Reached an extremely vague settlement agreement behind closed doors.
The prospects of receiving a large cheque — rather than revoking a licence or two — may influence IIROC’s conduct in the course of pursuing settlements. But what does IIROC do with the fines it collects?

How IIROC disposes of fines

IIROC’s 2010 annual report lists two external initiatives funded by its “Externally Restricted Fund”: $282,000 to the Canadian Foundation for the Advancement of Investor Rights (FAIR), with a remaining commitment of $1.6 million; and $201,000 to the “Funny Money project,” with a remaining commitment of $357,000.

After these expenditures, along with $1.8 million in hearing panel-related costs and $224,000 on a Rule Book revision (paid to or disbursed by IIROC staff), the balance in this fund was $27.4 million.

The Funny Money project seeks to address financial literacy issues among high-school students, focusing on “the day-to-day realities of paying the rent, properly using a credit card, budgeting for the basic necessities or investing for their futures.” The program’s other sponsor is the Investor Education Fund (IEF), which is funded by settlements and fines from OSC enforcement proceedings.

The IEF states, “To be considered, these initiatives must contribute measurably to the development of consumers’ financial and investment know-how. The expected results from each project must be clear and measurable.”

When questioned, the IEF provided me with some impressive figures regarding improvements in self-assessed student financial literacy as a result of Funny Money presentations. For example, after the presentation, almost 80% understood the concept of compound growth, compared to just over 30% before.

It is with respect to FAIR that an investigation of IIROC’s granting practices are most interesting. The founder and current executive director of FAIR is Ermanno Pascutto, who requested funding from one of IIROC’s predecessor organizations, Market Regulation Services, at a time when he served on its board as an independent director. The Investment Dealers Association (IDA) was also solicited for funds. Pascutto was able to secure a commitment for three years of funding to a maximum of $3.75 million.

Issues of groupthink

The sidebar on page 25, “FAIR/OSC connections,” shows many prior career parallels among FAIR’s principal actors. It is not particularly difficult to find similar career overlaps and parallels between these players and the boards of the two granting agencies, which merged to become IIROC in 2008.

FAIR’s heavy concentration of ex-regulators could be justified if FAIR was taking meaningful action to gain credibility as a voice for the investors whose interests it claims to advance.

To its credit, FAIR has added the founder of the Small Investor Protection Association (SIPA) to its board. But FAIR has no social media presence, no membership and no formal mechanism through which it seeks to obtain the views of actual investors prior to pronouncing its position.

Why have regulators allocated $3.75 million to form an organization controlled by ex-regulators? This is a recipe for groupthink. Such a problem is further exacerbated by the fact that IIROC judges FAIR’s success by its impact on the regulatory process, the measurement of which includes the regulatory response to FAIR input and FAIR’s inclusion in regulatory initiatives.

It is hard to imagine a more circular feedback mechanism than one where IIROC can burnish the perceived success of its funding of FAIR by including FAIR in IIROC deliberations.

The UK’s Warwick Commission has warned against over-reliance on like-minded individuals, however expert and apolitical, and emphasized regulatory capture can be as much a matter of intellect as self-interest.

The IMF blames groupthink for its shoddy performance in the prelude to the financial crisis. If IIROC wishes to improve regulation in Canada, it should fund an organization more likely to criticize it than to seek inclusion in its processes.

Instead, IIROC’s support of an extraordinarily well-funded advocacy group may be viewed as an attempt to capture the public debate. Smaller groups, operating on miniscule budgets, will be forced to co-operate with FAIR to avoid having their voices completely drowned out.

If IIROC determines that an external advocacy group should be funded, the primary measure of success should be the achievement of credibility amongst actual retail investors. SIPA, for example, has over 500 members who spend $20 per year on a membership. It is SIPA that should be hiring former regulators for procedural expertise, not the other way around.

Pascutto proposed the concept of FAIR. There was no announcement that the boards of the IDA and RS were considering the concept of FAIR Canada, no competition between different groups for the funding and no consultation with the investing public to determine who was considered best suited to receive this generous grant. The funding may be viewed as a single-source, untendered contract.

What should be done?

A settlement process that does not identify any specific wrongdoing or wrongdoers does not serve the public interest. If a company has done something wrong, it should be penalized, as should the individuals who made and executed the faulty decision. If it has done nothing wrong, it should not be pressured to settle based on fear of adverse publicity and a costly investigation.

Settlement agreements should be banned completely. The public interest is best served by an adversarial process addressing the issues in an open hearing. The investing public will then have a basis for deciding whether the punishment fits the crime, and indeed whether a crime has actually been committed.

Doug Harris of IIROC has advised me that “[it] was IIROC’s enforcement position that ABCP was not suitable for retail investors,” irrespective of its proportion in the portfolio.

Yet this viewpoint was not reflected in the settlement agreements. IIROC had a clear responsibility to assert its view in a public, adversarial hearing — a responsibility that was ignored.

IIROC should not be able to award grants derived from fines, as this gives rise to a clear conflict of interest. If extra-organizational funding is worthwhile, it should be part of the normal budgetary process; if it isn’t worthwhile, it should not be funded.

All revenue derived from fines should be directed to the general revenues of the provinces, with shares determined as part of the recognition orders of the various securities commissions. This would introduce some badly needed accountability to these expenditures.

These changes will take time. In the interim, IIROC should show good faith by directing grants only to those institutions large enough and sufficiently disassociated from the regulatory process to be recognized as fully independent.

A good start would be the endowment of academic chairs at Canadian universities, intended to foster research into the capital markets – particularly those of importance to Canada – and the regulation of these markets.

http://www.advisor.ca/news/industry-new ... nd-2-53684

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Submission from an informed investor, a victim of financial abuse by financial professionals and trusted institutions:

Worth reading to learn about what IIROC is about in 2016:


Cleaner copy linked here: https://www.osc.gov.on.ca/documents/en/ ... housep.pdf

Via email
Comment Letter from Peter Whitehouse
Robert Day
Senior Specialist, Business Planning and Performance Reporting Ontario Securities Commission
20 Queen Street West
Suite 1900, Box 55
Toronto, Ontario M5H 3S8
(416) 593-8179
rday@osc.gov.on.ca
ONTARIO SECURITIES COMMISSION NOTICE 11-771 – STATEMENT OF PRIORITIES REQUEST FOR COMMENTS REGARDING THE STATEMENT OF PRIORITIES FOR FINANCIAL YEAR TO END MARCH 31, 2016
http://www.osc.gov.on.ca/en/SecuritiesL ... d-2016.htm
I am an 81-year old retired senior with some bad experiences with a Canadian Investment Dealer and its Investment Advisor employees and the subsequent complaint resolution process. This includes a lack of commitment on the part of the Investment Industry Regulatory Organization of Canada (IIROC) to enforce any of the present statutory Regulatory Rules, Regulations and Guidelines that are said to be in place to protect against such investor abuse.
I am pleased to provide comments on the proposed OSC priorities for the fiscal year 2015-2016 based on my experiences. My comments can only deal with recommendations based on my personal exasperation when finding out that there is a great void between the vulnerability of placing ones trust with an Investment Dealer which turns into an adversarial engagement after filing a complaint. My recommendations only deal with a narrow area of financial governance, that does not appear to be getting Regulatory implementation and enforcement. The effects of maintaining the status quo can only perpetuate the continued abuse of unwary investors strictly for the disproportionate financial gain of the investment industry and its employees.
From what I see as a layman, the years go by with all the talk, studies, reviews and reports and the banner headings on the websites of the FCAC, the CSA, the OSC, IROC and the OBSI proclaiming protection for investors, but the lack the preemptive deterrent for the protection for investors continues.
Recommendation #1 - An "Investing Instruction Manual" must be provided by the Investment Dealer to every investor at prior to, or at the time an investor opens an account with an Investment Dealer. The new CRM II requirements and the Fund Facts may be considered as ways to induce some conscience and moral responsibility in the dealing relationship by the Investment Dealer and its employees with the investors. However, what is required is a standardized manual set of investing instructions that is co-authored by the Regulators, the Investor Advisor Panel, The Office of the Investor as well as investors. It should not be diluted with the Investment Industry participation aimed at trying to keep the investor in the dark and from asking too many self-protection questions.
May 25th, 2015
Continued / 2
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#1Continued. . . . .
This Investing Instruction Manual would be written in point form just as any standard "User Operating Manual". In this way the first time user (the investor) would be provided with an education of the factors that should be considered and that would influence the success or failure of the investments and the ongoing relationship with their Investment Advisor. This is as opposed to the present situation whereby the investor lack of investment knowledge gets a posthumous education only after they later discover how the Investment "Advisor" has negatively influenced their investment results.
The present Regulatory requirement is that the Investment Dealer must, by law, provide every investor with instructions for the process of filing a complaint with the Dealer in the case of a dispute. Then, if the complaint is not resolved, there are instructions for the investor to register the complaint with the Self Regulated Organizations (SROs) of OBSI and IIROC.
It is then follows that it is ridiculous that there is a Regulatory obligation for the Investment Dealer to provide the investor with instructions on how to file a complaint after there is a dispute with the Dealer and the damage is done, yet there is no Regulatory specified obligation for the dealer to provide an "Investing Instruction Manual", including advice on all the vital points to consider before investing. With this preventative information, at least the investor would be better informed on how to protect their investment capital. The idea that there is investor educational information already out there for the potential new investor to get an education and all the investor has to do is go looking for it, is a philosophical cop out.
It is a fact that most investors engage the services of an Investment "Advisor" because they do not have all the knowledge necessary to make suitable investment decisions for a long term investment planning. As there is a drive for greater financial literacy, a standardized "Investment Instruction Manual" provided to every new investor by the Dealer would be a solid way to broaden the effectiveness of the drive for greater investor self-protection. Without the educational benefit of an "Investment Instruction Manual", the vulnerability of the trusting investor is already increased with the prospect of an Investment "Advisor" recommending and making inappropriate investments on behalf of the investor.
Recommendation #2 - Focus on Seniors Issues With the gradual demise of Defined benefit Plans, seniors are more dependent than ever on their own investments for retirement. Investment dealers are developing and offering a variety of complex new products and services that are intended to generate higher yields in a low interest rate environment. It is imperative that firms are recommending suitable investments and providing proper disclosures regarding the related terms and risks. With the dramatic increase in the population of our nation’s seniors, it is critical that securities regulators work collaboratively to make sure that senior investors are treated fairly. The culture of compliance at firms is key to ensuring that seniors receive suitable recommendations and proper disclosures of the risks, benefits and costs of any investments they are purchasing and have a fair dispute resolution mechanism. Clear standards and robust enforcement are critical investor protections that should be top of mind for 2015-2016.
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#2Continued. . . . . .
I urge the OSC to gather data from dealers regarding the products they market to seniors, the percentage of revenue they derive from those sales, how advisors are assigned to elderly investors and the designations/titles firms are using to market themselves to older Canadians. Once the data is distilled, appropriate measures need to be introduced.
Given that thousands of Canadians each month are retiring/entering into RRIF's, time is of the essence. This is a major socio-economic issue as well as an important regulatory
OSC establish a standing ,well funded multi-stakeholder
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issue. I also recommend that the
Investor Advisory Panel's incisive Report on Seniors.
and follow up on the
Seniors Advisory Committee to keep on top of the developing situation
Recommendation #3 - Implement a Fiduciary standard for all advisors: Much independent research has already been done in Canada and elsewhere that demonstrates that conflicted advice acts against investors. Multiple consultations have been conducted. It has been over a decade since the Fair Dealing Model was first proposed The adverse impact of NOT imposing a fiduciary duty is obvious. The status quo is, in my view, a prescription for a socio-economic crisis.
Canadian retail consumers need increased protection when dealing with the financial planning
industry, according to a report released March 26, 2013 by the Public Interest Advocacy Centre
(PIAC) entitled, Purse Strings Attached: Towards a Financial Planning Regulatory
Framework. The report reveals that the pace of reform has been slow for an industry entrusted
with the retirement security of Canadian consumers. “It’s time all employees of the financial
planning industry in Canada face the reality-they need to employ a uniform standard of care for
investors, complete with a full disclosure of how they’re being compensated,” noted Jonathan
Bishop, co-author of the report.
The research reveals Canadian consumers are potentially leaving thousands of their
retirement dollars in someone else’s hands by not being fully informed .The report
concluded that the time remains ripe for provincial consumer and finance ministries to
work towards a regulatory framework for financial advisors . Report at
I note parenthetically that the
Wynne Government has established a Panel to examine the regulation of financial planners.
ttp://www.piac.ca/files/pursestrings_at ... or_oca.pdf
In Should Canada's financial advisors be held to a higher standard? :Research paper
( Jan. 2015) http://dtpr.lib.athabascau.ca/action/do ... en/punkon- aprj-final.pdf the authors conclude “ The implementation of a fiduciary standard would have widespread implications for the financial industry, as advisors would be required to ensure that all recommendations were in the best interest of their clients, including the minimization of all fees and expenses, which is typically at odds with the advisor’s goal of maximizing revenue from a client account. “ . I agree with this for it is only a disruptive change that will elevate advice giving to the professional status it deserves and that clients need. Patching the system with more disclosure and enhanced investor financial literacy is not a effective plan
Continued / 4
Page/4 Recommendation #4 - Make OBSI a real Ombudsman Restitution is the top priority for
investors who suffer losses because of violations of the securities Acts. OBSI needs teeth as the current system is clearly not functioning. It should be noted that OBSI has encountered a record number of Name and Shame cases and in its latest Annual report cited the developing issue of low balling restitution settlements. The impact on victims, especially retirees is life altering.
Recommendation #5 - Rein in Free Lunch seminars Some rules and guidelines need to be put in place for such seminars. Seniors especially are adversely impacted by these well disguised sales pitches.
Recommendation #6 - Fix the NAAF/KYC process I appreciate that the OSC will continue with its focus on suitability sweeps and take enforcement actions as appropriate. This is necessary and appropriate. I believe however that the entire process needs an overhaul. We are hopeful that the OSC’s research into risk profiling will prove useful in improving KYC . One chronic underlying problem for investors and OBSI (and industry participants) – non-standard, misleading and inadequate NAAF forms within the industry. If the NAAF/KYC process were re- engineered and standardized, a large number of complaints could be avoided. I recommend this be a specific 2015-/2016 priority as it will have a big payoff for all stakeholders. This was recommended to the OSC by the Regulatory Burden Task Force in December 2003. http://www.investorvoice.ca/Research/OS ... _Dec03.pdf
Even where there are regulations, IIROCs' own 12-0109 Rules and KYC Guidance Notes are not being enforced by IIROC when they allow an Investment "Advisor" to illegally change the Risk Tolerance Rating on an investors KYC from Low to Medium after the investor refused to sell $63,000. in equity mutual funds purchased on a DSC basis and replace them with Fixed Income investments. What good are Regulations when they are not being enforced by IIROC !
Recommendation #7 - Update dealer complaint handling rules. Closely related to the KYC issue is the question of fairness of dealer complaint handling practices. Unsuitable investment recommendations is one of the top reasons for complaints. Dealer responses too often are unfair, dismissive and abrupt.
To support this point, at the age of 72 and in the RRIF payout phase, what was the Investment "Advisor" doing recommending and placing over 80% of our total of 3-RRIF portfolios in long term risky equity mutual fund investments. In addition, recommending that we purchase these investments on a DSC basis that increased the redemption liability costs if there was a necessity to make an early redemption before we reached the age of 79 ? There is something wrong here, the Dealer Supervision and Compliance Department could see nothing inappropriate. There is another problem here. When the complaint was submitted to IIROC, some way or other they did not seem to consider that these were unsuitable and appropriate investments. If, in the eyes of IIROC these were suitable investments, where does one draw the line on unsuitability ? With this level of IIROC permissiveness, no wonder complainants become frustrated with the IIROC complaint recognition process.
Continued /
#7 Continued. . . . . . . Page/5
I recommend that a compliance sweep of dealer complaint handling practices be part of the 2015-2016 work plan. There are many other regulatory issues facing small investors but
I believe these are among the most important for retail investors.
In a April 20, 2015 column entitled How mutual fund salespeople in Canada who lie, cheat and steal from clients are escaping justice Financial Post financial journalist Claire Brownell describes the results of his investigation into “advisor” wrongdoing. In the period 2013–14, the amount the MFDA claims was stolen by salespeople ranged from $3,500 to $11.6 million. The representative in the latter case, Toronto’s Paul Yoannou, was one of the three who were criminally charged. Yoannou was sentenced to six years in prison last year after pleading guilty.
The Post’s investigation restricted its scope to cases that appeared to constitute crimes, as defined by the Criminal Code, and where it appeared that the representative should have reasonably known the behaviour would harm victims or amount to improper personal gain.
Not included, for instance, were cases where mutual fund salespeople were found to have forged client signatures for the sake of convenience; but the investigation included several cases where the MFDA found representatives falsified information to get around limits on highly leveraged — and handsomely commissioned — investments.. Between 2013 and 2014 there were an additional 12 cases where mutual fund salespeople “misappropriated” client funds, as the MFDA calls it.
A common method the salespeople used was to incorporate a company with a misleading name and get clients to make cheques out to it, thinking the money would be used to purchase securities. Because MFDA decisions are not backed by the same enforcement authority as a court of law, of the $12,372,500 in fines and costs levied against the 20 mutual fund salespeople disciplined in the cases between 2013 and 2014, only $20,000 has so far been repaid. In the column, Shaun Devlin, the MFDA’s head of enforcement, is quoted as saying that the regulator has asked provincial securities commissions for the power to enforce fine payment by non- members — or, more to the point, ex-members — but so far, it has been to no avail. I strongly recommend this as a 2015-2016 priority. If that cannot be done, then regulators should make dealers responsible for unpaid fines of its representatives. This would help bring back trust in the system and in its regulators.
Recommendation #8 - OSC should immediately perform an in-depth examination of the way IIROC uses its discretion to take action on only some investor complaints, while at the same time it can indiscriminately reject, for its own convenience, other legitimate investor complaints. IIROC has openly declared to me that "IIROC uses its discretion in determining the most appropriate cases to pursue in order to ensure the most responsible use of our (IIROC) resources".
I would like to see under its charter how IIROC are permitted to indiscriminately use this said discretionary principle, especially when there is a demonstrated evidence of violations of Regulatory Rules, etc. by a registered Investment "Advisor" employed by an Investment Dealer.
Continued / 6
#8 Continued. . . . . . . Page/6 This raises the question of a possible conflict of interest when the aforementioned IIROC
discretion declaration takes precedence over the interests of a legitimate investor complaint.
Also related to this issue is the hierarchical dissuasion process used by IIROC whereby a Senior Case Assessment Officer authors a November 21st 2011 complaint rejection letter which includes an invitation for the complainant to ask questions. When the complainant asks questions, the response is elevated up the line. The response comes from the Manager, Case Assessment, Enforcement. Questions are then asked of this next person and the response comes from a further higher level Senior Complaints & Inquiries Specialist, Then, on account of the continuing twisted responses from IIROC, questions are raised with this person. The IIROC response is then escalated up one more level in the chain of command to the Director, Case Assessment, Complaints & Inquiries. The response from this person was so unbelievable it prompted further leading questions. That is when the next response dated January 28th 2014 came from the ex-Vice-President, Registration, Complaints & Inquiries. Copies of both the IIROC original November 21st 2011 complaint rejection letter and the January 28th 2014 V-P letters are being sent to you via Canada Post..
The purpose for providing the forgoing information is to show that certain IIROC staff members should not be free to make statements that, when challenged, are not responded to with facts to support their statements. Rather, they hope to silence the complainant by bringing in a higher person of authority. This policy should not be allowed. Either the evidence of violations provided by the complainant should be refuted or contradicted by IIROC or accepted as a fact.
Here is the evidence to support this #8 Recommendation.
Rather than going in to a long explanation for my #8 Recommendation, I am separately sending to you via Canada Post, a copy of the 7-page January 28th 2014 letter I received the fifth person in IIROC, the Vice-President Registration, Complaints & Inquiries. This person departed from IIROC shortly after sending the said letter. Enclosed will also be a copy of the IIROC original November 21st 2011 complaint rejection letter.
This V-P letter claims to be a review of our complaint file but it totally avoids refuting or contradicting any of our written allegations and evidence of where the Dealer and its employees violated Regulations. The said letter also ignores addressing our criticism of the explanations and rationalizations put forward in the ensuing communications by the four lower levels of IIROC staff, when they sought to justify their reasons for not taking action to enforce the Regulations.
In response to this IIROC V-P letter, I am sending you a draft copy of my 26-page letter dated May 5th 2014 which was to be delivered to IIROC, but was never sent after we were informed that the V-P was no longer employed by IIROC. It is important that OSC take an unbiased examination of the facts included in this letter. The facts speak for themselves.
The first page alone lists the CSA, OSC and IIROC Rules, Regulations and Guidelines that were violated by the Investment Dealer employees. There are other references on later pages.
. Continued / 7

#8 Continued. . . . . . .
The fundamental IIROC explanation for not pursuing our complaint against the Investment Advisors and the Investment Dealer was because IIROC said in their original November 23rd 2011 rejection letter that there were no violations of the Regulations. As you will discover, there is no truth to this illusion. The inadequacy of the explanations and rationalizations in the letter speak for themselves.
Going back to the IIROC ex- Vice President letter. The letter illogically defends the four lower levels of IIROC employee explanations for not pursing our complaint. In permitting this discretionary principle to go unchecked, this IIROC act is an outrageous repudiation of their responsibilities, which is supposed to protect the interests of all defenceless investors (not just the most victimized) who have been abused by the acts of greedy Investment Advisors and their Investment Dealer employers.
In light of my experiences, the fact that the V-P is no longer with IIROC does not change my view that the oversight of the competence of the IIROC Management needs to be seriously examined by the OSC.
My 26-page letter to the exited IIROC V-P makes detailed reference to our original complaint about the conduct of the Investment Dealer and its employees. More over, my response letter dissected the twisted explanations of where the 7-page V-P letter tried to extinguish my complaint about the way IIROC had continued to defend their decision not to take enforcement action on our complaint. The nature of the responses received from the five levels of IIROC management, have done nothing but to confirm that my allegations that our complaints have been ambushed.
Reference to the OSC 2015 -- 2016 Regulatory Goals -
Overall, the proposed priorities appear to address most key investor protection issues and particularly the proclamation -
1. Deliver strong investor protection -- The OSC will champion investor protection, especially for retail investors
I would be pleased to discuss my comments and recommendations with you in more detail at your convenience.
I agree to public posting of this Comment Letter. Sincerely,
Peter Whitehouse
Page/7





https://www.osc.gov.on.ca/documents/en/ ... housep.pdf

[admin]

This letter about investor abuse by financial professionals, and about IIROC etc is particularly good and worth sharing with all. (the system ain't broke at all, it is perfectly "Fixed")

Zoomer Magazine Letter to the Editor September 12th 2016

Peter Whitehouse -3359 Chokecherry Crescent, Mississauga, Ontario L5L 1B2
Tel: 905-607-5654
FAX: 905-607-4916 email: PeterWhitehouse@bell.net
September 12th 2016
Ms Suzanne Boyd Editor-in-Chief Zoomer Magazine 30 Jefferson Avenue Toronto Ontario M6K 1Y4

Dear Ms Boyd

Letter to the Editor re: Zoomer Magazine article, “Who’s Got Your Back”

It is appreciated that the objective for the “Who’s Got Your Back” article, in the September 2016 Zoomer magazine issue, is to help foster an increased awareness of the pitfalls facing unwary investors when they are trying to secure their lifetime savings for future comforts.

The article opened up by encapsulating three case examples to show the nature of costly investor experiences and then followed that up with a commentary of the questionable investor protection conditions faced by unwary investors. It would have been great to see an expanded narrative with the more intense details showing just how investor experiences have failed the “trust” expectation test that many, many unsuspecting investors have been subjected to.

There are three expectations of trust that are exposed to abuse when investors sign on to make investments.

Those three expectations of trust are,

1) There is the trust that the Investment/Financial “Advisor” will provide advice that investment recommendations made will be in the investor’s best interest and

2) There is the trust that the Investment Dealer employer of the “Advisor” will protect its integrity by adequately supervising the proper conduct of the “Advisor” employee.

3) Then, there is the third and most important expectation of trust. And that is the trust that the SROs, namely the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association (MFDA), whose job it is to oversee the conduct of the financial investment services industry, will recognize and acknowledge and take appropriate enforcement action when they are presented with a legitimate complaint of Investment/Financial “Advisor” regulatory wrong-doing. Also, the Ombudsman for Banking Services and Investments (OBSI) are trusted as being a part of the restitution enforcement process against Investment Dealer “Advisor” regulatory wrong-doing.

Without exaggeration, the records show there have been thousands of investors who have complained to the above mentioned three trust levels about unresolved unsatisfactory investing experiences. Not surprisingly, there is

one common observation that flows from those unsatisfactory experiences and that is the lack of respect by these three levels for the investor’s financial best interests that have violated the investor’s trust

.
Firstly, the investors place trust in the Investment Dealer “Advisor” employee to put forward the most suitable and appropriate investments and to act in the investor’s best interests. However, this investor expectation does not materialize when an “Advisor” violates that trust with actions that subordinates the best interests of the investor to those financial self-interests of the “Advisor”.

Secondly, when the investors have complained to the Investment Dealer employer of the Investment/Financial “Advisor”, the aggrieved investors have trusted the Dealer to respond and deal with a complaint also in the investor’s best interests, but that also does not happen. The fact is,

there are few if any disincentives that would encourage Investment Dealers to be forthright and concede to any wrong–doings of their “Advisor” employees, short of hard to deny obvious outright fraud.

That’s why there have been 12,355 investor complaints alone registered with IIROC over the last 7-year period. Who knows how many more thousands of investor complaints should have seen the light of day except for the vulnerable victims not having the fortitude, inclination and/or resources to press the details of their complaint with IIROC, the MFDA and the OBSI.

Thirdly, when all else fails, the

aggrieved investors expect and then trust the SRO regulatory overseers to objectively and proportionately enforce the securities regulations to protect the investors who have legitimate complaints. However, in far too many cases that has not happened.

The IIROC statistics enumerated below show Complaints Received versus the Case Assessment Files Open versus Complaints Investigated and Completed will substantiate this statement to be all too true. MFDA complaint statistics are not considered.

Here is a Summary of IIROC Enforcement Reports Statistics

The below statistics were extracted from IIROC published documents Source of Complaints Received by IIROC

NB. According to IIROC, the designation for the “Number of Investigations Conducted” and the “Number of Investigations Completed” have identical meaning. Therefore, regardless of the vernacular, what is important is that, for example,

there were only 124 “Investigations Completed” in 2015 even though IIROC received a total 1,341 investor complaints

. This means that, according to IIROC, only 9.25% of the complaints warranted investigation.

The larger issue here is what happened to the other 1217 (90.75%) complaints?

The public have a right to know how IIROC classified each of these 1217 investor complaints that were not investigated. Furthermore, in order to protect the unsuspecting vulnerable investing public,

they have a right to know who are the less reputable Investment Dealers who generated these 1,341 investor complaints. This is what the IIROC President defines as “transparency” !

In answering the ZOOMER Magazine article question, ”Who’s Got Your Back”, don’t look for IIROC to be a qualifier based on an analysis of the above statistics. Let’s also deal with the IIROC Complaint and Settlement Reporting (ComSet) comparison statistics which directly involves complaints to Investment Dealers.
The ComSet regulation requires Investment Dealers report all investor complaints they receive. This is vitally important because the world needs to know that there have been 9,363 ComSet investor complaints over a 7-year period against Investment Dealers. This averaging of 1,337 complaints per year indicates that over the past 7-years

IIROC have not put in place sufficient preemptive deterrents that would support the IIROC mantra that reads, “Protecting Investors and Fostering Fair and Efficient Markets across Canada”

During this 7-year time period, IIROC only saw fit to “open up” a total of 2,491 files (averaging 355 per year) of the 9,363 ComSet registered complaints.

That means that only 26% of the complaints registered from Investment Dealers received IIROC’s scrutiny.

What happened to the other 74% (6,902) of the ComSet complaint files that IIROC divulged were not “opened up” ? Just what did IIROC do with these complaints ?

Here is why we need IIROC’s answers as to where these investor complaints originate

It is interesting to note that when IIROC were asked how many of the Investment Dealer ComSet complaint reports came from the five largest Canadian banks and the IGM group, the

IIROC response was that they do not publish this "granular" information.

In other words

IIROC hides this most important defensive investor protection information which then perpetuates the exposure of unwary investors to the less reputable Investment Dealers

and their less reputable “Advisor” employees, regardless of whether they be bank-owned or independent Investment Dealers.

What level of public outcry will it take before IIROC realizes that they need to investigate and report the detrimental effects facing retail investors relative to complaints against the Bank-owned Investment Dealer concentration.

From recent 2014 information attributed to the Investment Funds Institute of Canada (IFIC), the big six Canadian banks and another major investment conglomerate now collectively control over 65% of the personal mutual fund assets of Canadians. This is an astonishing dominance considering that as of last February, Canadians have over 3-trillion dollars(1) in personal wealth of which over 1.2 trillion dollars are invested in mutual funds.

These six Canadian banks alone have been credited with increasing their share of mutual fund sales to Canadians from 25% in 2003 to 57% in 2013(2). This increasing domination has been made possible through the banks facility to steer its customers through the bank-owned investment services, as well as the banks buying up the independent Investment Dealers in order to continue to reduce non-bank competition.

Related to reduced competition - the Globe & Mail(3) reported that the Investment Industry Association of Canada (IIAC) stated that over the past 3 1/2 years, there has been a demise of more than 50 independent Investment Dealers and Brokers. Some have been swallowed up by larger competitors, such as the six Canadian banks, while others just gone out of business. (Refer to the Appendix for details of how the bank anti-competitive methods of operation have helped them accrue such a market dominance)

Even more stunning is the Globe and Mail article showing the six banks share of Canadian wealth management assets when compared with a couple of major independent Investment Dealers. In this comparison, by the year 2013, the six banks had accumulated relative control over 73% of Canadians investment wealth.
Here are Mutual Fund Assets under the Management of the banks, etc., for YE 2014
Page / 3
Royal Bank Assets Management - TD Asset Management - Scotia Global Asset Management - CIBC Asset Management - BMO Financial Group - National Bank Securities -
Investors Group
Mackenzie Financial Corporation -
Counsel Portfolio Services - 3.850 Billion
Total - $ 628.676 Billion
-
73.458 Billion 47.118 Billion
$124.456 Billion controlled by IGM Financial Inc which in turn
is controlled by the financial conglomerate Power Financial Corp
$ 166.165 Billion 94.872 Billion 86.392 Billion 78.049 Billion
59.410 Billion 19.632 Billion

By the time the $124.456 billion mutual fund assets invested through the IGM Financial Inc. group are added, the mutual fund assets of Canadian investors under management by this group of banks and non-bank operations, is closer to 80%. This does not include other forms of retirement plan products for Canadians that are under the control of an assurance group controlled the financial conglomerate, Power Financial Corp.
(1)Financial Post April 13th 2013 quoting MFDA (2) Globe & Mail July 26th 2013 (3) Globe & Mail Dec 1st 2015

The IIROC explanation for their refusal to divulge this critical information reporting on the number of ComSet complaints coming from each registered Investment Dealer is in order to protect the Dealers against frivolous complaints. IIROC said, their concerns regarding disclosure before the commencement of discipline proceedings relate, in part, to questions of fairness to firms and individuals being named in frivolous complaints, but also to possible confusion for investors who may not fully appreciate that allegations against a particular firm or individual have not been proven. This IIROC policy subordinates the investor’s best interests to the Dealer self-interests.

The question raised is, how does IIROC separate what they say are "frivolous complaints" against Dealer resolved complaints, as well as against those legitimate substantiated complaints that have not been resolved by the Investment Dealer ? After all, what's the point in having Investment Dealers report the number of complaints if most are only used as a bare statistic to glamorize the IIROC Enforcement Report with no COMPLETE consequential purpose ?

It would seem reasonable and part of the IIROC review process that their job is to classify the legitimate complaints versus what they classify as frivolous complaints and then publish names of the offending Dealers responsible for the cause of the legitimate complaints. This is not happening.

Can the IIROC top management not see and

understand the hypocrisy of IIROC publishing statistics in the IIROC Annual "Enforcement Report", with the title "Protecting Investors and Fostering, Efficient and Competitive Capital Markets across Canada", when investors are denied the names of the less reputable Investment Dealers whose ComSet reports are the source of 9,363 complaints over the 7-year period.

This IIROC policy is nothing short of protecting the powerful investment dealer questionable reputations against the powerless unsuspecting small investors. And the damage continues.

Another way of looking at it, compare these figures with average number of investigations that were completed over the past 5-years to show the ineffectiveness of IIROC claim of protecting investors. Over the past 5-years, out of 7960 complaints received, IIROC say they have opened up 2,924 case assessment files and they have completed 967 investigations. What happened to the other 5,036 (64%) investor complaints that did not get as far as assessment files, let alone being investigated.? There needs some IIROC answers here !

Considering the pathos of all this information,

one has to wonder how much impartiality is present when the SROs, IIROC and MFDA are being financed by the very Investment Dealers whom the SROs are regulating.

Until the potential for bias against investor interests is removed from this equation, there can be no perception of impartiality. The perception of impartiality cannot be claimed just on the merits of a few IIROC prosecutions for serious breaches of the law such as fraud, etc.

The IIROC statistics illustrate that the problem with the present investor regulatory protection process being focused on the threat of post-mortem penalties, only after the damage is done, is not in the investor’s best interests. The problem is there is not sufficient IIROC emphasis on preemptive deterrents to remind all Investment Dealers that their names will be exposed relative to the number of legitimate complaints that are brought forward by investors.

The enumerated IIROC complaint statistics shows that,

if a potential investor has been fortunate enough to have accumulated a financial nest egg from years of labour and believes that all Financial “Advisors”, the Investment Dealers and the SROs overseeing the investing process can be trusted as guardians of the investor’s best interests, the investors are sadly mistaken.

There are too many incentives for disproportionate amounts of the investor’s money to be inappropriately transferred to the “Advisor” and Investment Dealer pockets relative to the services provided.

There are no compelling preemptive disincentives for Investment Dealer wrongful conduct, other than penalties after the damage has been done to the investor’s best interests. These are called post mortem penalties.

The IIROC March 31st 2016 Press Release puts a spin on the enforcement situation that is enough to cause serious indigestion. Here is the link to the press release –

http://www.iiroc.ca/Documents/2016/40e3 ... eb3_en.pdf
This IIROC Press Release title reads, "Report highlights IIROC's focus on strengthening enforcement tools and deterring wrongdoers"
The choice operative words "deterring wrongdoers" in this IIROC declaration are hardly supported when you consider the continuing number of 9,363 investor ComSet complaints registered over the past 7-years as shown in the previous table of investor complaints. Added to this figure are the 3,000 investor complaints from other sources. Publishing the names of Investment Dealers who employ the Investment "Advisors" attracting investor complaints would certainly contribute to reducing these above complaint statistics. The more concerned Investment Dealers would then be quick to discipline any wrongful conduct of their Investment "Advisor" employees, instead of condoning it.

What is more important, protecting the wellbeing of future investors or Investment Dealers with bad reputations ?

In the Zoomer magazine article, Mr Wade Poziomka, CARP’s Director of Policy and Litigation, only lightly touched on the publically available IIROC statistics. The IIROC statistics that I have presented, along with the commentary shows a greater dimension of the staggering complaint abuse that investors are being subjected to.

The details of the IIROC Complaint Statistics reporting that I have brought to your attention indicate a very serious situation concerning IIROC's first and foremost responsibility, which is to protect the powerless investor before they invest. This is every bit as important as IIROC employing many legal and paralegal staff engaged in post mortem investigations after the damage has been done to the finances of unsuspecting investors by some self-serving Investment "Advisors" and Investment Dealer employers.

As it is now, there are conflicts of interest and incentives for investment Dealers to condone the self-interests of their Investment "Advisor" employees because the Dealer can also financially profit from overlooking those "Advisor" self-interests conduct.

There is something terribly wrong with the way IIROC is reporting investor complaint facts. Don't think for one moment that Investment Dealers are unaware of these statistics I have enumerated. The IIROC batting average that I have detailed certainly encourages the Dealers to push the limits of ignoring the Regulatory Laws, Rules and Guidelines that are supposed to protect investors.

It is the

unbridled practices of some “Advisor” individuals and Investment Dealer companies who perpetrate a variety of Regulatory violations that are allowed to unfairly bleed unwary investors of hundreds of millions of dollars from their life's savings.

The extent of this deleterious condition will continue as long as IIROC declines to put forth sufficient disincentive speed-spike strips to get the attention of the offending parties, especially as these are the same parties who are financing the very existence of IIROC.

As a side note, if IIROC were truly protecting investors, discount brokers would not be allowed to transact orders for A class mutual funds since they are not permitted to provide advice, the cost of which is embedded in the fund fee. And IIROC dealers wouldn't be allowed to reject OBSI compensation recommendations with impunity. In addition, IIROC has allowed deceiving advisor titles to proliferate to the point that investors are utterly confused as to who they are dealing with. As for deterrents, only a tiny fraction of the fines imposed on advisors are ever collected – therefore, the IIROC announcement of fines imposed is just an IIROC PR exercise.

I will be happy to supply any other information you may need to support action on the issues I have brought forward in this missive.
Respectfully
Peter Whitehouse
PS. Let me know if you would like a Windows WORD version so that you can extract quotations for you to use.

Appendix
How did the bank-owned captive retail Investment Dealer channels achieve such market dominance ?

On the surface of it, the six big Banks and one other major non-bank financial organization appear to compete with their Investment Dealer subsidiaries for the retail investor business. However, the Bank customers regular day-to-day banking relations at their Bank, effectively becomes a means of corralling and steering customer needs for investing savings into the Bank-owned retail investment channels. The real issue here is the innocent looking freedom that is enjoyed by the banks for them to steer their customer needs to save and invest through the banks own captive conduits. This includes the Banks own in-branch investment services as well as the facility to also feed Bank customers to the Bank-owned retail Investment Dealer subsidiaries.

Thirty years ago, the Canadian banks came to the realization that they were missing out on additional profits from their customers' need for long term savings investments services. To capitalize on this opportunity, the banks had a choice of investing and building their own retail Investment Dealer operating structures for these investment services or, to save time and effort and the reduced risk, buying up all the largest Canadian retail Investment Dealers.

It would not have escaped the banks' reasoning that, if they had invested to build their own retail Investment Dealer structures, they would still have been faced with the competition from all the other well established non-bank Investment Dealers. These investment Dealers would also be competitively selling investments such as mutual funds. It therefore follows that

by buying up all the major Investment Dealers, the banks also
removed what could be future major competition.

All it took was for one Bank to buy up a major Investment Dealer and the rest of the Banks followed.

Now, we the

consumer-investors are paying the price for this market dominance by the concentration of the Canadian banking system and one non-bank conglomerate financial operation, who collectively control well over 65% of the Canadians personal wealth.

With so much concentration of financial power from the mutual funds savings of Canadian investors controlled by so few companies, is there any wonder where the power to influence and resist Government policy and Regulatory change initiatives can originate.
The Federal Government has allowed the banks to continue to purchase and merge all of the significant Canadian investment dealers into their operations. All the largest investment dealers who were independent 30-years ago are now owned by the Canadian Chartered Banks.
What were the conditions in the merger approvals by the Federal Government to ensure that true competition was maintained in order to protect consumer best interests ?

It is now up to the Competition Bureau to intervene and dissolve the unjust anti-competitive power of this bank-owned retail Investment Dealer concentration.

Here is a list of the most significant Canadian Bank and Investment Dealer mergers -
1. BMO & Nesbitt Thompson, 2. TD Bank & Canada Trust, 3. Royal Bank & Dominion Securities, 4. Scotiabank & McLeod Young Weir plus Dundee Securities, etc., 5. CIBC & Wood Gundy,
6. National Bank & Levesque Beaubien Geffrion.
In addition, the Power Corporation (PC), who controls IGM Financial Inc., has also acquired other retail Investment Dealers. The PC group is a major player in the Canadian mutual fund sales business with over $124 billion under their asset management.
IGM must be doing OK as they are a publically traded company currently paying about a 5% dividend after paying sales commissions and all their operating expenses. Investors would do better by investing their RRSPs in IGM Financial Inc shares than in many of the mutual funds that IGM Financial are selling. But then, that would not work, because IGM Financial would not have the profits from the sale of mutual funds in order to pay dividends!
If there was more true competition, the bank-owned investment channels would have likely been more pro-active by showing an initiative to protect the investor-client interests, in order to earn their continued loyalty.

Zoomer Magazine article which prompted this letter to the Magazine: http://www.everythingzoomer.com/small-investors-pushing-greater-protection/2/

[admin]

After years and years of runnaround, by IIROC and other industry "regulators", "self"-regulators etc....here is one of perhaps a hundred such letters written by an 81 year old victim of fraud and abuse (used a TD "Advisor" who had no "advisor" license)

This man has spent that last several years of his life, going in fruitless circles inside the spin machine that is called Canadian financial services regulation. It usually takes at least 5 years for one to come to the realization that these entities are there to protect the industry FROM the public, and not the other way around, as they claim:

From: PeterW
Sent: Tuesday, March 08, 2016 10:42 AM
To: 'InvestorInquiries'
Cc: 'akriegler@iiroc.ca'
Subject: Attention Mr Garry Hickey re IIROC Complaint Statistics Requested



Dear Mr Hickey

First, I thank you for your prompt response to my email. Although, your response is somewhat confusing.

You say that IIROC does not regulate the "entities" that I mentioned. You say that IIROC only reports on "investment dealers" registered by IIROC. There must be a mistake in your response.

Please re-read my email. I specifically mentioned and underscored " bank-owned Investment Dealers and IGM Financial".

You were good enough to provide a link to the investment dealers regulated by IIROC and low and behold, there in the list are the investment dealers who are owned by the banks that I named. It therefore means that your directing me to the CSA and the OSC and the MFDA was a misdirection.

I will now add the names of the Investment Dealers owned by the banks that I mentioned using the reference list that you provided -

- Royal Bank Assets Management - RBC Direct Investors Inc. - RBC Dominion Securities Inc.

- TD Asset Management - TD Securities Inc. - TD Waterhouse Inc. (Now TD Wealth)

- Scotia Global Asset Management - Scotia Capital Inc.

- CIBC Asset Management - CIBC Investor Services Inc. CIBC World Markets Inc

- BMO Financial Group - BMO InvestorLine Inc. - BMO Nesbitt Burns Inc.

- National Bank Securities - National Bank Financial Limited

- IGM Financial Inc (which includes related companies of Investors Group and Mackenzie Financial Corporation and Counsel Portfolio Services) - Investors Group Securities Corporation and IPC Securities Corporation.

The figures I quoted were from the IIROC Enforcement Reports. I referenced statistics between 2009 and 2014 and they were - 9,461 ComSet registered complaints from Investment Dealers and 2,325 Case Assessment files were opened by IIROC.

Your response referred to IIROC not providing the type of "granular information" I was seeking. That's a new one for the glossary. The 9,461 complaints that IIROC received from Investment Dealers under the ComSet Regulations can hardly be referred to as "granular".

Each one of those grains represents a singular investor who has registered a complaint with the Investment Dealer. Collectively, all those "grains" involve hundreds of thousands of hard earned savings dollars that are part of investor disputes. Each one of those grains also represents disputes with the Investment Dealer and in all probability with the Dealer's "Advisor" employees.

IIROC must have logged in each of those 9,461 complaints "grains" and must have a record 2,325 Case Assessment files that IIROC opened. As a member of the investing public I would appreciate knowing how many of those complaints were registered by IIROC from each of the named Investment Dealers I quoted.

Let me put this proposition to you. When you are preparing to spend money on any kind of purchase, before you make that commitment, in your own best interests, if you are smart, you certainly are going to check out the reputation of whom you are going to do business with. This is why your refusal to provide the "granular information" that I have requested does no favours for those Investment Dealers who have a good reputation by hiding from the public the Investment Dealers who have a history of an unacceptable reputation. As to which Investment Dealer has a good reputation and which Investment Dealer has a not-so-good reputation, let the investing public be that judge.

If you cannot provide the information requested and for the reason you mentioned, then IIROC is hardly living up to its mantra as a footnote to your email, "IIROC: Protecting Investors and Fostering Fair and Efficient Capital Markets across Canada"

Looking forward to a positive response.

Regards

Peter Whitehouse

[admin]

IIROC is the ultimate SPIN MACHINE, designed to spin abuse victims in such speeds and directions so as to protect the industry, which of course is the origins and the history of IIROC. This is a copy of a letter written by an abuse victim of at least one IIROC regulated entity. The writer of this letter has watched as his 90 year old father has been victimized by no less than three firms, without help in any case from the "regulators":

March 14, 2016
To: IIROC
Re: FW: Attention Mr Garry Hickey re IIROC Complaint Statistics Requested
Thanks very much for this, -
cc Susan Greenglass

I am wondering if IIROC is planning to adopt any form of rule of law, from any of your observations? I am curious to know if you or any other participant on this thread has ever had dealings with a man by the name of Rankin who is with IIROC....I feel that a statement that he made to my dad about 7 years ago is an enigmatic comment that must be followed up.

My dad had made a fully documented complaint against Canaccord in 2007 that had a complete body of evidence that Canaccord was acting in bad faith - failing to supervise a broker who was churning and putting funds in questionable securities under false pretenses and against the instructions of the client. IIROC, inexplicably, said that they would not deal with the complaint.

My dad had to go on to court and he won two judgements against Canaccord for breach of contract. IIROC has expressed no interest whatsoever in cleaning up the mess inflicted against my dad - DESPITE the fact that they - IIROC - convicted Canaccord of failing to supervise their Montreal and Kelowna offices from 2005 to 2011. This conviction came in 2013. [Approximately the same month as the court awarded my dad $27,000 leaving him still about $78,000 short including what he had to put out in legal fees.]

Two years later, after the 2007 complaint against Canaccord, my dad entered a complaint against Investors Group. My dad, in 2009, reported the fact that he had contracted for GICs with Investors Group and had been instead given seg fund wrapped mutual funds. This Rankin on the phone said to my dad

"You needn't bother sending us any evidence - we'll just deal with it the way we dealt with Canaccord."

Since 2014 we now are in possession of the evidence that Investors Group was lying when they said that my dad's memory was faulty and they would never have signed him up for GICs. This position of Investors Group proved to be false when the file was disclosed after we commenced a court action - and the records were delivered through legal channels in the summer of 2014.

The copy of the contract was sent in September of 2014 to Warren Funt of IIROC. He did not appear to be in any way interested in dealing with the fact that he had been provided evidence that the complained against company was making false claims against the complainant - and in effect obstructing justice.

The evidence from the encounters of my dad - are that IIROC is divorced from having any shred of interest in being an industry SRO that enables the industry to police itself. What IIROC is doing is insulating the industry from having to face the law, and that is now a publicly accessible fact, as has been articulated broadly from the public consultation conducted by OBSI last month.

This litany of events demonstrates corruption and incompetence of major proportions - and it means that the time has come, none too soon, that we need to consider establishing a genuine governance process that will acquaint deceptive dealers with both their obligations under common law of contract, and the criminal code.

This needs to be achievable WITHOUT having to witness the atrocities of secondary abuse and blatant impunity that has been visited upon clients like my 95 year old dad. He has had his retirement years derailed by having to put this fight as his main characteristic of his life. The regulators as they exist in this de-regulated, self-regulating environment have no interest of any kind in dealing with such matters.

Accordingly, we need to look at the broader implications of industry controlled governance tribunals that "regulate" investment. For clients of retail brokerages, these tribunals - from all the evidence I have seen in the past nine years are a failure. We do not need and we must avoid this kind of industry/investment tribunal encroaching into international trade under the Investor State Dispute Settlement process. Instead, I would suggest that the time has come to look at how a continent-wide foundation could be established that would be based on Indigenous cultural practices that are categorically against deception against the elderly. I am sending this to the Hupacasath First Nation, which has been valiantly defending rule of law with regard to trade practices between Canada and China.

A comprehensive mechanism is needed that polices the industry - not set up disingenuous mechanisms for impunity for predatory practices.

Cordially,

Alan Blanes

[admin]

From an elderly victim of professional, systemic and endemic financial abuse:
(after learning the hard way that regulators and self regulatory organizations (SRO's) care generally chosen and paid for by industry dealers)

you may want to put the following views of our experiences into your own descriptions.

Defective complaint investigations can be attributed to -

• The discretionary freedom enjoyed by SROs to pick and choose which complaints to NOT thoroughly investigate even when there is solid evidence of wrong doing by a Financial Advisor. (We have a response from IIROC where they say they have to choose to investigate those complaints that make the best use of their resources. This even when there is an alleged case of fraudulent misrepresentation. Also, it took 10-months for the OBSI to respond to our Appeal for them to further investigate our case. It required that we had to elevate our request the highest executive level before we received a response. )

• Myopic lack of competency by the SRO staff to perform a true in-depth review of an investors complaint. This has been demonstrated with the defective rationalizations for rejecting an investors complaint.

• The SROs not recognizing the damage of the deception when Advisors omit (non-disclosure) detrimental investment influencing information before processing an investment transaction.

• There should be a legal requirement that Advisors present Prospectuses to the investor before consummating an investment transaction. All investment influencing information should be highlighted. (presently the Law says that it is the Dealer who has the responsibility to deliver a Prospectus before or after a transaction - With our experience, to our detriment, this latter did not happen several times. When we brought this non-delivery to IIROC's attention, all that they could come up with was that they were quite satisfied with their audit of the Dealers processes and practices - there is nothing in the law about IIROC auditing the Dealers processes - the Law specifically says the Prospectuses must be delivered by the Dealer. There are also substantial financial penalties for non-delivery of the Prospectuses - one has to wonder if this ever happens. Enforcement, enforcement, enforcement, enforcement.)

P
=======

And later the same day he updated his comments with this:

something triggered me to send this email. I just saw a truism that well describes a phase of life we have gone through after placing our trust and life savings RRIFs in the hands of a TD Waterhouse PIA Financial Advisor 9-years ago.

That truism is "Experience is something you don't get until just after you need it".

I believe this truism is one that most seniors are faced with that needs to be brought to the forefront to show Regulators that there needs to be preemptive discipline DISCLOSURE Regulations spelled out as 1, 2, 3, etc. that are obligations for Dealers and Advisors to investors.

I know you prefer to see an abbreviated explanation of an issue, however, to illustrate my point, the attached documented 6-page March 22nd 2011 "experience" complaint we sent to BIG BANK NAME REMOVED is something that would not have not been necessary if the Dealer had provided us with a 1, 2, 3, etc., list of Regulatory obligations of the Advisor to the investor.

It has taken us those 3-years since March 22nd 2011 to gain the "experience" to discover what is wrong with the permissive investment industry system and the SROs.

P

===========

Sadly the world has changed enough in my time so that financial dealers are now seen as generally NOT trustworthy, with the odd exception to the rule, whereas just one generation ago the opposite was true. (regulators also generally captured and co-opted to be willfully blind to any serious or systemic public infractions)

[admin]

Next name change for IIROC will be IISOC…..(if there is honesty involved:)

This article about FINRA the USA's broker self regulator group illustrates very well the type of behaviours that industry participants have always experienced with IIROC.

Those I talk to tell of an agency which talks a good game of regulation and protection of the public, as well as the industry reputation, but when push comes to shove, it is industry protection and damage control and damn the rest.

In this NY Times article about a US whistleblower, we see how the self regulator blew off his complaint and did not act. That is basically what our sock puppets do to honest and ethical market participants. There is just too much money to be made the old fashioned way, to bother with "fairness, honesty and good faith".

The Man Who Blew the Whistle
AUG. 18, 2014


Joe Nocera

Late last month, the Securities and Exchange Commission issued an oblique press release announcing that it was awarding an unnamed whistle-blower $400,000 for helping expose a financial fraud at an unnamed company. The money was the latest whistle-blower award — there have been 13 so far — paid as part of the Dodd-Frank financial reform law, which includes both protections for whistle-blowers and financial awards when their information leads to fines of more than $1 million.

The law also prevents the S.E.C. from doing anything to publicly identify the whistle-blowers — hence, the circumspect press release. But through a mutual friend, I discovered the identity of this particular whistle-blower, who, it turned out, was willing to tell his story.

His name is Bill Lloyd. He is 56 years old, and he spent 22 years as an agent for MassMutual Financial Group, the insurance company based in Springfield, Mass. Although companies often label whistle-blowers as disgruntled employees, Lloyd didn’t fit that category. On the contrary, he liked working for MassMutual, and he was a high performer. He also is a straight arrow — “a square,” said the mutual friend who introduced us — who cares about his customers; when faced with a situation where his customers were likely to get ripped off, he couldn’t look the other way.

In September 2007, at a time when money was gushing into variable annuities, MassMutual added two income guarantees to make a few of its annuity products especially attractive to investors. Called Guaranteed Income Benefit Plus 6 and Guaranteed Income Benefit Plus 5, they guaranteed that the annuity income stream would grow to a predetermined cap regardless of how the investment itself performed.

Then, upon retirement, the investors had the right to take 6 percent (or 5 percent, depending on the product) of the cap for as long as they wanted or until it ran out of money, and still be able, at some point, to annuitize it. It is complicated, but the point is that thanks to the guarantee, the money was never supposed to run out. That is what the prospectus said, and it is what those in the sales force, made up of people like Lloyd, were taught to sell to customers. It wasn’t long before investors had put $2.5 billion into the products.

The following July, Lloyd — and a handful of others in the sales force — discovered, to their horror, that the guarantee didn’t work as advertised. In fact, because of the market’s fall, it was a near-certainty that thousands of customers were going to run through the income stream within seven or eight years of withdrawing money.

Lloyd did not immediately run to the S.E.C. Rather, he dug in at MassMutual and, as the S.E.C. press release put it, did “everything feasible to correct the issue internally.” For a while, he thought he was going to have success, but, at a certain point, someone stole the files he had put together on the matter and turned them over to the Financial Industry Regulatory Authority, which is the industry’s self-regulatory body. It was only when the regulatory authority failed to act that his lawyer told him about the whistle-blower provisions in Dodd-Frank and he went to the S.E.C., which began its own investigation.

The Dodd-Frank law has provisions intended to protect whistle-blowers from retaliation, but there are certain aspects of being a whistle-blower that it can’t do anything about. “People started treating me like a leper,” recalls Lloyd. “They would see me coming and turn around and walk in the other direction.” Convinced that the company was laying the groundwork to fire him, he quit in April 2011, a move that cost him both clients and money. (Lloyd has since found employment with another financial institution. For its part, MassMutual says only that “we are pleased to have resolved this matter with the S.E.C.”)


Mr. Nocera's rah-rah approach, praising the Dodd-Frank legislation for creating a reward for whistle-blowers, is too uncritical. The facts...

In November 2012, MassMutual agreed to pay a $1.6 million fine; Lloyd’s $400,000 award is 25 percent of that. It was a slap on the wrist, but more important, the company agreed to lift the cap. This will cost MassMutual a lot more, but it will protect the investors who put their money — and their retirement hopes — on MassMutual’s guarantees. Thanks to Lloyd, the company has fixed the defect without a single investor losing a penny.

Ever since the passage of Dodd-Frank reform, the financial industry has been none too happy about the whistle-blower provisions, and there have been rumblings that congressional Republicans might try to roll back some of it. The S.E.C. now has an Office of the Whistleblower, and a website where potential whistle-blowers can report fraud. It has given out $16 million in whistle-blower awards.

There are, without question, parts of the Dodd-Frank law that are problematic, not least the provisions dealing with the Too Big to Fail institutions.

But the whistle-blower provisions? They are working as intended. That is the moral of Bill Lloyd’s story.

http://www.nytimes.com/2014/08/19/opini ... istle.html

[admin]

click once to enlarge, twice to zoom in


IIROC "self" regulation turns a blind eye to misrepresentation of 150,000 persons who are licensed and registered in a category legally titled "dealing representative" (formerly called "salesperson" until Sept 2009)…….and who wish to avoid the label of salesperson and instead use a title of "advisor".

(adviser is a regulated title, and is both clear and unclear whether they are two spelling versions of the same thing (which would be misrepresentation) or two totally different titles. (either way IIROC lets members who do not have the registration and HAVE another registration use whichever title they prefer for marketing and trust building. (Fair, honest, good faith?)

=========

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

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

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

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

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

[admin]

An good example for Jane Jacobs book "Dark Age Ahead"

Jargon, obfuscation, distraction, diversion, spin, and misinformation………3 minutes

[url]http://www.investmentexecutive.com/-/cifps-2014-the-evolution-of-the-investment-industry-and-professional-standards
[/url]


3 minutes (from a calm and pleasant spokesperson earning in the neighbourhood of 3/4 of a million dollars……speaking on behalf of her "self" regulatory organization) whereby 3 or more items of greatest importance to investors financial health are cleverly ignored, obscured, glossed over and obfuscated.

For those for whom 3 minutes is to much time (and I do not blame you:) to spend listening to investment industry marketing spin and propaganda, I have summarized the deceit below:

1) We are never going to inform consumers that our so-called "advisors" do not carry an "adviser" nor even an "advisor" licence, nor the proper government registration to be called either. (we will mislead you, which is dishonest) (CSA National Registration Search, available online, is the national registration search that contains the names of all registrants (individuals and firms) in Canada) More at footnote #1 below.

2) We are never going to be honest with consumers and tell them we do NOT even have to place their financial interests above those of our sponsoring dealers. (we will not be fair nor honest with you, whilst telling you that "we will be fair and honest"…….:) (search suitability standard vs fiduciary standard online) More at footnote #2 below.

3) We will do everything to proclaim the highest moral ground on investment dealer related matters, whilst supporting practices which obfuscate doing intentional harm to the the financial interests of Canadian investors…….for greater profits for our dealer/members. (we will lie) More at footnote #3 below.

4) We exist almost solely to support a myth…….a myth that our investment dealer/members, armed with commission-hungry salespeople and incentives to sell investment products or "investment-like" "products"……. are trusted, independently regulated and supervised, licensed and registered professionals, ……...who serve investors with an undivided loyalty to each one of their customers. Nothing could be further from reality.

I could go on, but what is the point? Until we in Canada have a willingness for open and honest debate, there is little to be gained. That day has not yet arrived, but it is coming. Until then, I bring this up to warn and protect consumers financial health. The so-called regulators are part of "gaming" the system to cheat investors.

For a bit of history and backstory of how this occurred in Canada, please visit the decade old but historically interesting site http://www.investorvoice.ca and click on the tab for IIROC, IDA and MRS.

(for a few thousand more examples, some solutions and free personal self defence against Investment Industry Sock Puppets (IISOC) please visit http://www.investoradvocates.ca )

[url]
http://www.investmentexecutive.com/-/ci ... -standards[/url]


footnote #1
CSA license and registration search for Canadian investment sellers:
https://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850

FINRA (for USA broker/advisor) license check:
https://www.google.ca/search?client=safari&rls=en&q=finra+brokercheck+search&ie=UTF-8&oe=UTF-8&gfe_rd=cr&ei=NrDSU4_7AcnEoATD0oGQBw

CSA guide to understanding/defining what your license and registration category really means:
[url][url]https://www.securities-administrators.ca/uploadedFiles/General/pdfs/UnderstandingRegistration_EN.pdf[/url][/url]

footnote #2

88 words from SEC chairman Mary Jo White to explain difference between those in the broker role, verses the fiduciary adviser role:
http://youtu.be/TqBSiR6VwP4?list=UUy8dpTRZHEz-0JBa_l0w7AQ
transcript of SEC speech" Protecting the Retail Investor, Chair Mary Jo White
Consumer Federation of America, 2014 Consumer Assembly, March 21, 2014

New York Times, Trusted Adviser or Stock Pusher?:
http://www.nytimes.com/2010/03/04/your-money/brokerage-and-bank-accounts/04advisers.html?ref=business&_r=4&

Wall Street Journal, Should You Go to an Adviser or an Advisor?:
http://blogs.wsj.com/totalreturn/2012/07/05/should-you-go-to-an-adviser-or-an-advisor/

New York Times, Brokers Fight Rule to Favor Best Interests of Customers:
http://www.nytimes.com/2014/06/13/your-money/rule-to-make-brokers-act-in-clients-interest-still-pending-after-4-years.html?smid=tw-share&_r=1

Financial Times of London: ‘Trust me, I am a financial adviser’ is not good enough:
[url]http://www.ft.com/intl/cms/s/0/21b52478-068c-11e4-ba32-00144feab7de.html?siteedition=intl#axzz37J0tdqY7
[/url]

Jin Choi, Ph.D. Is Your Financial Advisor Deceiving You?:
http://www.moneygeek.ca/weblog/2014/06/05/your-financial-advisor-deceiving-you/

Forbes, Investors Misled By Brokers Masquerading As Fiduciaries:
http://www.forbes.com/2010/08/09/cfa-fiduciary-duty-personal-finance-broker-suitability.html

footnotes #3 & #4

Visit the decade old but historically relevant site http://www.investorvoice.caand click on the tab for IIROC, IDA and MRS. (it will provide some clarity and background to organizations like IIROC and IISOC)

Investor Advocates topics on tricks of the investment industry and "self" regulator organizations (IDA, IIROC, IISOC)
http://www.investoradvocates.ca

CIFPs 2014: The evolution of the investment industry and professional standards
Interview of Susan Wolburgh Jenah | June 09, 2014

[admin]

These are the seven "independent" directors at IIROC, the investment industry self regulatory player:

(the ones IIROC's Susan Wolberg Jenah claims keep IIROC from "regulatory capture:) The other seven are from the investment industry....

IIROC's "Independent" (non industry?) Directors

Mariánne Harris former Managing director of Bank of America Merrill Lynch Canada.
Mike Gagne former CEO of Winnipeg Commodity Exchange
Brian Heidecker former board member of ATB Financial.
Jerry O'Mahoney ,Principal of Tralee Capital Markets limited.
James Donegan Pres. of OMERS Capital markets
Edward Iacobucci director ,Dominion of Canada General insurance Company.
Catherine Smith formerly of CIBC Wealth management.

All good people no doubt but do they represent Main Street? Why not include small investors, CARP, FAIR , SIPA, investor advocates ..to get a better cross section of the investing public and the issues they face?

(advocate update Aug 18th, 2014)

FINRA (industry self regulatory body in the US, for brokers) appoints IIROC Pres as "PUBLIC" director. Why are all the "public" regulatory chairs filled by the longest standing cronies in the business…..:)

http://business.financialpost.com/2014/ ... directors/

Susan Wolburgh Jenah, who led the merger that created the Investment Industry Regulatory Organization of Canada and then ran that organization for six years, has been appointed as a public governor of Wall Street’s self-funded regulator.

Governors of the Financial Industry Regulatory Authority (FINRA) are appointed or elected to three-year terms……..continued at Financial Post link

[admin]

A very clear and succinct followup to the previous posting:

Larry, another abbreviated way of expressing the repugnancy of the deception is as follows. We were lead to believe that we were opening up a relationship with a person representing an Investment Dealer who was going to be sitting on our side of the table giving us the best "advice" to protect our capital as we were already in our retirement years. Instead, we were suckered into opening up a relationship with an Investment Dealer and the Representative who were actually sitting on the other side of the table, whose job was to relieve us of the maximum amount of commissions regardless of the ensuing financial damage to our assets. Especially, in our case, they used fraudulent misrepresentation that IIROC are not interested in pursuing.

[admin]

Here is some back and forth between an abused, elderly investment client, with some sound questions, and IIROC, with "gamesman-ship" answers. Shame on them for playing games and for what appears to be obvious wilful blindness to investor victimization:

"Larry, here is the fuel for your fire. Here is the official IIROC response to the question I raised this past May regarding misleading designation titles used by -------- PIA Representatives. Look at the glib "kiss-off" when IIROC says,

" Please note that the term “Investment Advisor” is commonly used within the investment industry and its use by Mr.-------, in and of itself, does not amount to a breach of IIROC’s Dealer Member Rules. IIROC recently published for public comment a guidance notice that identifies supervisory best practices that would improve transparency regarding the use of business titles and financial designations and associated services offered by registrants of IIROC regulated firm".

IIROC sees nothing wrong in the "Sales Representative" using the title qualification deception of "Investment Advisor". Why is a "Sales Representative" allowed to deceptively masquerade as an "Advisor" to get the confidence and trust of an unsuspecting small investor ? How can the "Investment Advisor" be allowed to mislead the inexperienced small investor when the "Advisor" is really there to make a sale in order to reap a commission. This is even worse when the "Advisor" recommends that a couple of 70 and 72-year-olds purchase fraudulently misrepresented performance mutual funds for RRIFs on a DSC basis. This means that the "Advisor" was able to immediately pick up a 5% "Sales" commission. It is even more disturbing and pervasive when the "Advisor" knows that the investments must immediately start making RRIF payouts to those two 70-year-olds.

IIROC is supposed to be the most important body that we consider...... are masquerading as a small investor protector. Then they have the nerve to use the softsoap and permit this deception to continue with the assurance " Please note that the term “Investment Advisor” is commonly used within the investment industry" Here IIROC says everybody is doing it so that makes it OK.



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

From: Susan Farrell [mailto:SFarrell@IIROC.CA]
Sent: Tuesday, May 14, 2013 12:24 PM
To: --------
Subject: RE: IIROC File # 0467/Jun/11- IRROC Title Designation Regulations & False Promo Adevertising

Dear Mr.------------ ,

As previously explained, the age of the activity in question is a significant consideration when determining whether to pursue further action in all cases. In this particular instance, you have asked us to review activity dating back to 2004 – namely that-------- provided misleading promotional materials to you 9 years ago to elicit your attendance at a seminar for ----------mutual funds. You have also raised concerns regarding Mr. --------usiness title of “Investment Advisor”. Please note that the term “Investment Advisor” is commonly used within the investment industry and its use by Mr. -------, in and of itself, does not amount to a breach of IIROC’s Dealer Member Rules. IIROC recently published for public comment a guidance notice that identifies supervisory best practices that would improve transparency regarding the use of business titles and financial designations and associated services offered by registrants of IIROC regulated firms.

Mr. --------, IIROC will not be reopening our file to further review this matter for all of the reasons previously advised, and specific to the Brandes materials, the age of the activity.

Sincerely,

Susan Farrell | Director, Case Assessment, Complaints & Inquiries | Investment Industry Regulatory Organization of Canada | PH: 403.260.5669 | Fax: 403.234.0861 | sfarrell@iiroc.ca
IIROC: Protecting Investors and Fostering Fair and Efficient Capital Markets across Canada.

*Please note, as of November 26, 2012, the Calgary IIROC office’s new address is:
SUITE 800
BOW VALLEY SQUARE 3
255 – 5TH AVENUE S.W.
CALGARY, AB T2P 3G6



This message is intended only for the use of the intended recipients, and it may contain information that is privileged and confidential. If the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient, such reader is hereby notified that any review, retransmission, conversion to hard copy, copying, circulation or other use of this message is strictly prohibited and may be illegal. If you have received this communication in error, please immediately notify us by replying to the message and deleting it from your computer. Thank you.

Le présent message s'adresse uniquement au(x) destinataire(s) envisagé(s) et peut renfermer des renseignements privilégiés et confidentiels. Si le lecteur de ce message n'est pas le destinataire envisagé, ou s'il n'est pas un employé ou un mandataire chargé de remettre ce message au destinataire envisagé, le lecteur est par les présentes mis en garde contre le fait que l'examen, la retransmission, le transfert sur support papier, la copie, la diffusion ou toute autre utilisation de ce message est formellement interdit et peut être illégal. Si cette communication vous a été transmise par erreur, veuillez nous en aviser immédiatement en y répondant, puis supprimez le message de votre ordinateur. Merci

From: -----------
Sent: Monday, May 13, 2013 2:16 PM
To: Susan Farrell
Cc:
Subject: IIROC File # 0467/Jun/11- IRROC Title Designation Regulations & False Promo Adevertising

Dear Ms Farrell,
On April 30th, we had brought up two newly discovered issues which we had previously not made as part of our original complaint to IIROC. Those issues were -

1. The misleading titles used by the --------------Representatives when soliciting our business. In the case of both--------- Representatives, they presented themselves as "Investment Advisors". These titles were on their business cards and as they signed Proposals. The connotation being that we could trust them to be giving us "advice" that would be in our best interest.

However, both our -----------Representatives were only registered and designated as a "Sales Representatives" or "Registered Representatives", when they influenced our investment decisions between 2004 through to September 2009. In other words the IIROC and OSC classified these individuals as "sales" persons who were out to sell investment products, whereas the investor is left with the impression that it is "Advice" he or she is getting, and the purchase of investments comes after due diligence "Advice" by the ----------- Representatives.

On this basis, we ask IIROC to pass judgment on this use of misleading titles in order for the Investment Dealer and its Representative to gain the trust of the unsuspecting and unsophisticated investor.

2. False investment performance claims used in sales promotional material by the ----------- "Investment Advisor Representative" in order to convince the investor to invest in ----------- Mutual Funds. Please refer to the details included in the attached Complaint filed with the OSC against ------- in this connection. We are only asking IIROC to look at the ---------- and the -------- Representatives participation in this false and misleading promotional advertising, not the Brandes participation. (we understand that falls under the OSC direct jurisdiction)

Kindly let us know as to whether or not you will be dealing with these two additional levels of complaint.

Regards

(advocate comment: IIROC's rules require all market participants to deal with the public in a "fair, honest and good faith" manner at all times. Fooling the customer into believing that a licensed commission salesperson may actually be a trusted professional "advisor" does not seem to fit within the bounds of "fair, honest and good faith". Shame on IIROC for being wilfully blind to what appears fraudulent.)

[admin]

http://www.thelitigator.ca/2004/07/the- ... investors/

COMMERCIAL LITIGATION
The Investment Dealers’ Association Found Not To Owe A Duty Of Care To Disgruntled Investors
Angela Yadev
Affleck Greene McMurtry LLP
Commercial Litigation | Securities Litigation July 29th, 2004
Morgis v. Thomson Kernaghan & Co. (2003), 65 O.R. (3d) 321 (C.A.)

In a recent decision, Ontario’s highest Court considered whether liability can be imposed on the Investment Dealers Association of Canada (the “IDA”) for the economic losses sustained by investors in their margin accounts with an IDA member.

As a result of sustaining substantial losses in their margin accounts, several investors sued their investment dealer, Thomson Kernaghan & Co. (“Thomson”). Thomson’s IDA membership was subsequently suspended, and it was petitioned into bankruptcy. The investors then sought to add the IDA and certain IDA directors and officers as defendants. The IDA is a voluntary organization that is recognized by statute as being responsible for regulating the conduct of its member investment firms. In this case, individual investors claimed that the IDA owed them a duty of care to ensure that Thomson complied with the IDA’s rules, regulations and bylaws.

The Court of Appeal found that the IDA did not owe a duty of care to the investors because the IDA’s obligation to protect investors generally and the public in general, does not extend to any particular investor. As the Court found, imposing such a duty on the IDA, it would indirectly create “an insurance scheme for dissatisfied investors who have paid the IDA nothing.” Because the IDA owed no duty to the individual plaintiffs, their action was dismissed.

This is a significant decision because it expands upon earlier Supreme Court of Canada decisions establishing that statutory regulators (ie. the Law Society of Upper Canada and the Registrar of Mortgage Brokers) owe no duty of care to individual members of the public. Although the IDA is not a statutory body, it is cloaked with similar responsibilities to statutory regulators; and therefore, owes a duty of care only to the public as a whole – not to individual investors. In the future, be aware that other quasi-statutory bodies may also be found to be exempt from negligence claims by individuals.


Published July 29, 2004