Peter W. - Canada April 27th 2015
>>>>>>>>>>>>(Confidential - not for immediate release)<<<<<<<<<<<<
Abuse of Market Dominance by Investment Channels
Owned by the Six Big Canadian Banks
10 points to consider why investors need to be made aware of how the "Abuse of Market Dominance" by the Canadian banking institutions of the financial markets
can detrimentally affect their personal investing interests.
The detailed information in this presentation is intended to alert the thousands of small investors that, when dealing with bank-owned investment channels, there are underlying influences that can seriously negatively affect the outcome of their investment expectations. Not the least of these is the way the six big banks investment channels can steer uninformed bank customer/clients into higher cost and less competitive investment options. This direction away from alternative lower cost competitive options can take many forms for the unwary investor, all of which can be categorized as an "Abuse of Dominance".
The University of Toronto undertook a study in 2007 which concluded that retail investors, using mutual fund products could be getting a “Haircut” of $25 billion dollars, each and every year. Today, with Canadian mutual fund holdings at nearly double those of 2007, it would be easy to assume this constant skim could approach $50 billion per year. Imagine if a billion EACH WEEK were surreptitiously transferred from people saving/investing for retirement, towards their most trusted financial servants.This is what professional financial abuse looks like.
See the U of T study at this link: https://drive.google.com/file/d/0BzE_LM ... sp=sharing
The Competition Act of Canada defines that any "Abuse of Dominance is a Serious Anti-competitive Offence" and an illegal act. The increasing market dominance by the Canadian banking systems is well fortified by their near-monopoly concentration of power over our financial systems. This includes their acquisition of competitors to their retail investor services that they have been allowed to freely buy up over the past 30-years.
If there was more true competition, these bank-owned Investment Dealer Managements would have to administer a much higher standard code of ethics and moral obligations to investors, by their "Advisor" employees than they now do. Instead, when their "Advisors" are "advising" investors, these bank-owned Investment Dealer channels could care less.
As long as their parent banks can continue to feed them new investors through their conduit, the abuse by some unscrupulous sales representatives masquerading as "Advisors" will continue. That unfortunately will be the price that will continue to be paid by unsuspecting and uninformed investors until real competition for the investor interests is reestablished.
The theme of this presentation is directed to raise questions related to how the "Abuse of Market Dominance" by the Canadian banks is manifested. The resulting detrimental effects from the bank dominance of investing channels are explained under the following headings.
1. Here is why the Competition Bureau should investigate the detrimental effects for
investors on account of the financial services industry abuse of market dominance.
2. Who out there in the Federal Government is listening and willing to take action on
the self-serving dominance of the six big Canadian banks controlling more than 60%
of Canadian investor's personal wealth ?
3. How the six big banks won the battle for Canadians’ wealth
4. How did the bank-owned investment channels achieve such market-dominance ?
5. How do the banks find and steer their customers into investments ?
6. Where the abuse of market dominance germinates
7. Here's why the bank-client acquisition steering system must be disbanded
8. Investment advice originating from a bank-owned investment channel "Financial
Planner" or "Advisor" needs to be questioned.
9. Trusting Investors are unaware that their personal interests are being freely
subordinated to those of the Financial "Advisor"
10. One wronged investors' voice can be multiplied many time over with your help
Continued / 2
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Here are quotations from the Competition Bureau website when they are explaining
the "Abuse of Market Dominance"
The following link provides the Competition Bureau definitions of "Abuse of Dominance" -
http://www.competitionbureau.gc.ca/eic/ ... 02820.html
The Competition Bureau says, "What is Market Dominance ?"
"The Bureau considers market dominance to be synonymous with market power. Although it can be difficult to measure market power directly, the Bureau places greatest emphasis on key factors such as market share and barriers to entry. In defining market dominance, the Competition Bureau looks at whether a firm, or a group of firms, substantially or completely controls a product or service in a given geographic area".
One absolute definition of Market Dominance identified by the Competition Bureau is -
"In the case of a group of firms, a combined market share exceeding 60% generally
raises concerns and prompts further examination by the Bureau".
"An Overview of Bureau Enforcement Guidelines"
"Abuse of Dominance Enforcement Guidelines - Key Information on Corporate Behaviour"
"The Canadian economy is based on vigorous and fair competition with well-defined rules in place to govern acceptable corporate behaviour. Canada's Competition Act is designed to foster such competition and protect the marketplace against anti-competitive acts. The Act's provisions against abuse of market dominance are one of its three main pillars, along with merger review and criminal conspiracy prohibitions".
>>>>>>>>>>>>>>>>>>>>>>>>> O <<<<<<<<<<<<<<<<<<<<
1. Here is why the Competition Bureau should investigate the detrimental effects for
investors on account of the financial services industry abuse of market dominance.
From recent 2014 information attributed to the Investment Funds Institute of Canada (IFIC), the big six Canadian banks and another major investment channel now collectively control over 60% 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 in personal wealth of which 1.2 trillion dollars is invested in mutual funds.(2)
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.(1) This increasing domination has been made possible through the banks facility to feed its customers through the bank-owned investment services as well as through a continuingly reduced non-bank competition.
Even more stunning is a Globe and Mail article(1) showing the six banks share of Canadian wealth management assets when compared with a couple of major non-bank Investment Dealers. In comparison, by 2013, the six banks had accumulated relative control over 73% of Canadians investment wealth.
That being the case, the Competition Bureau needs to take action to investigate the declining competition and then make a public declaration of its findings ?
(1) Source: July 26th 2013 Globe & Mail (2) National Post quoting IFIC
Continued / 3
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2. Who out there in the Federal Government is listening and willing to take action on
the self-serving dominance of the six big Canadian banks controlling more than 60%
of Canadian investor's personal wealth ?
The Federal Government has allowed the banks to continue to purchase and the merge all of the significant Canadian investment dealers into their operations. What were the conditions in the merger approvals by the Federal Government to ensure that true competition was maintained in order to protect consumer interests ? All the largest investment dealers that were independent 30-years ago are now owned by the Canadian banks.
In their consolidation, the banks have removed what could have been a more competitive environment of benefits for the investing consumer. 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.
This has not been the case. The abuse of dominance by the bank-controlled Investment Dealers is well documented with their easy denials of wrong-doing by their "Advisor" employees when faced with aggrieved investors legitimate complaints.
3. How the six big banks won the battle for Canadians’ wealth
A couple of years ago this below linked Globe & Mail article explained why we should be seriously concerned about how the majority of the life savings of individual Canadians had been accumulated and under the control of the six big Canadian banks.
Review the below link -
http://www.theglobeandmail.com/report-o ... /?page=all
4. How did the bank-owned investment channels achieve such market-dominance ?
There are six big banks and one major non-bank financial organization with their investment Dealer subsidiaries each competing for the retail investor business. The consumer regular banking operations at the banks are effectively a marshalling yard for directing consumer needs for investing savings into the bank-owned 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 Investment Dealer subsidiaries.
Thirty years ago, the Canadian banks came to the realization that they were missing out on additional profits from their customer's need for long term savings investments services.
To capitalize on this opportunity, the banks had a choice of investing and building their own Investment Dealer operating structures for these investment services or, to save time and effort and the reduced risk, buying up all the largest Canadian Investment Dealers.
It would not have escaped the banks reasoning that, if they had invested to build their own 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 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.
Here are the results of the mergers. BMO-Nesbitt Thompson, TD Bank-Canada Trust,
Royal Bank-Dominion Securities, CIBC-Wood Gundy, Scotiabank-McLeod Young Weir & Dundee Securities, National Bank- Levesque Beaubien Geffrion.
Continued / 4
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In addition, the Power Corporation controlled IGM Financial Inc is also a major player in the mutual fund sales business with about $1 1/4 billion under their asset management.
IGM must be doing OK as they are a publically traded company currently paying a 5% dividend after paying sales commissions and all their operating expenses. Investors would do better investing int the IGM company than in the mutual funds they are selling.
Now, we the investors are paying the price for this market dominance by the concentration of the Canadian banking system and one conglomerate, non-bank financial operation who control so much of the Canadians personal wealth.
5. How do the banks find and steer their customers into investments ?
The integrated client-investor acquisition systems now enjoyed by the banks, gives them an unfair, captive monopolistic advantage not available to the independent Investment Dealer. It is so easy for the bank to use its influence to dampen the investor interest into looking outside of the bank-owned investment channels for investment advice. Therein lies the first deception that has led the banks to achieve such market dominance in the investment field. The convenience for the bank customer to assume that the comfort and trust for the banking services will continue when investing with the bank-owned investment channels is badly misplaced.
6. Where the abuse of market dominance germinates
The monopolizing banks have been able to build an unfair, semi-captive, investor client acquisition system for their investment services that needs to be dismantled for the financial health and competitive benefit of all investing consumers. The process operates like gently herding cooperative cattle into a corral to feed the banks own investment services. That is where the opportunity for "Abuse of Market Dominance" is germinated.
The only way bank investing consumers could get the benefit of true competition would be to have access to a wider range of incentivized non-bank-owned Investment Dealers.
Over the past 30-years, the business opportunity climate for the establishment of more independent Investment Dealers has been frauted because the banks have been able to stifle the competition by directing investor traffic through a pipeline to their own captive investor services.
The independent non-bank Investment Dealers have no comparable means of directing potential investors to their services other than by open advertising and referrals from other satisfied client-investors. That is why so many would-be independent Investment or Financial "Advisors" have found it more profitable to attach themselves to the bank-owned Investment Dealer channels and one other major financial conglomerate than try to establish their own businesses. This process is not a secret. There are actually publically available training manuals which are used to attract and encourage independent "Advisors" into joining the dominant seven investor servicing channels. The more these seven dominant investment channels can corral Investment or Financial "Advisors", the less independent competition is in the market place.
7. Here's why the bank-client acquisition steering system must be disbanded
On the face of it, with six banks and one other large financial institution in the investment business, it looks like there should be strong competition. That is if one limits the consideration to the promotional advertising from these organizations. Any benefits of the bank's captive investor client acquisition process should accrue to the investor with more competitive lower effective costs. Instead, it provides extra continuing hidden profits for the banks and their "Advisor" employees that are being sucked out of unwary, unsuspecting investors.
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As an example, with the purchase of most mutual funds, every dollar invested through a bank employed "Advisor", the patient investor does not realize that after 20-years, more than 50% of the returns go into the pockets of the "Advisor" via up-front and trailer commissions. How does this happen ? Every time a Financial "Advisor" makes a sale of mutual funds with trailer commissions to an investor, the "Advisor" can first make some level of up-front commission on the sale. Then thereafter, the "Advisor" makes a continuing 0% -2% annual trailer commission for the duration of the investor holding the mutual fund investment.
The pretext for these continuing trailer commissions to be paid to the Investment "Advisor" is that the "Advisor" needs to get a continuing incentive to stick around to give free advice. However there is no guarantee that the investor is going to get any advice in proportion to the continuing trailer commissions being paid.
This is the unpublicized reason why the bank-owned investment channels love to sell the banks own mutual funds or mutual funds from other fund companies to their trusting bank customers. Their continuing compensation with trailer commissions after first advising, recommending and then selling one particular mutual fund investment is the most egregious part of how the sales process to the investor works.
The investor can only once get advice on which investments to purchase and then pay a sales commission for advice on that one purchase. So why the trailer commissions ? The next time the investor makes the next purchase the investor pays a commission. Even when the "Advisor" later recommends rebalancing a portfolio that requires selling the previous mutual fund purchase, the "Advisor" makes a commission on the new purchase.
So why does the Regulatory system allow the "Advisor" to become a partner with the investor and continue to get a paid a guaranteed continuing trailer fee commission on the original sale without the "Advisor" being an investing partner ?
How much more egregious can you get when these 1% to 2% trailer commissions are paid to the "Advisor" based on the unit price of the original purchase. even if the unit price of the mutual fund later collapses and investors lose their investment capital. Remember, investment advice is already delivered and has been paid for at the time of the purchase and yet the "Advisor" still continues to rake in the cash regardless of the investor losses !
The answer to this question from the investment industry is that the present scheme of compensation is a standard practice, so don't try to change it.
The only continuing beneficial advice coming from the "Advisor" is for the investor to
retain the mutual funds so that the "Advisor" can continue to receive trailer commissions. This open spigot is just one reason why the banking institutions resist change which would reduce costs for investors. The banks want to maintain their preferential position of being able to influence bank customers to make their investments, especially with mutual funds, through the bank investment services. This fortifies the bank profits out of the unjustifiable sales commissions paid by investors.
According to a report, a 2007 U of T study showed that $25-billion a year is finding its way from investors into the direction of Investment Dealers and their employees. By now,
in 2015 that figure must have doubled. And the largest part of that is ending up with the bank investment channels. From this elevation of dominance, one then has to understand why the bank dominated investor services industry tries to maintain the status that there are sufficient Regulatory Laws, Rules and Guidelines to protect investors against Investment Dealers and some of the unscrupulous Investment "Advisors" plying their trade.
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8. Investment advice originating from a bank-owned investment channel "Financial
Planner" or "Advisor" needs to be questioned.
Without giving it much thought, it is so easy for the bank customers to gain trust and be influenced into using the banks' own extended investment channels. That is the point when the customers are introduced to bank related employees with the title of "Financial Planner" or "Financial Advisor" or "Investment Advisor".
When the investor first receives an Investment Proposal and Investment Policy Statement (IPS) from the Financial "Planner" or Financial "Advisor" employed by the bank, the investor is lulled into taking the words on paper at face value.
However, when moving from using the comfort of trust of banking services to using investment "advice" channel employees with titles "Financial Planner" or "Financial Advisor" of "Investment Advisor", the comfort and trust should end right there.
Although the "Advisors" present themselves as experienced financial advisers being there to help with the best interests of the investor, they are in fact undeclared sales persons masquerading and using the misleading title of "Planner" or "Advisor". Instead, they should be more truthfully disclosing the title that they are really financially incentivized "Sales Representatives".
When the investor agrees to engage an Investment "Advisor", from a bank-owned investment channel, the investor expects the "Advisor" to be sitting on the same side of the table taking care of the best interests of the investor. However, it comes as quite a jolt when the investor later discovers that the "Advisor" has been sitting on the other side of the table making investment recommendations which in fact maximize the financial benefits to the "Advisor" and the Investment Dealer at the expense of the unsuspecting investor.
Unbeknownst to most investors, Investment Dealer "Advisor" employees must have licenses from Investment Industry Regulatory Organization of Canada (IIROC) which show the given title of "Registered Representative". The Regulatory Authorities do not recognize the title of "Advisor". However, with the financial industry permissiveness, these employees are allowed to use the unrestricted and fraudulently misleading title of "Advisors", when in fact they should be presenting themselves as "Sales Representatives" giving advice on financial products.
Quoting from a Wall Street Journal article title, "Should you go to and "Adviser" or an "Advisor" ? This title question authenticates the message being delivered in this WSJ article when it opens up by saying, "Much like garbagemen rechristening themselves “sanitation engineers,” the folks who flog investments are tweaking their titles to make what they do seem fancier and more impressive than it is".
You must read this article. There is an inexcusable complacency with Canadian investors not taking a stand on this fraudulent misrepresentation, when and if it occurs to them. The investors should be aware that they are really dealing with a sales person not an "Advisor" who is not bound by fiduciary duty to them.
Here is the link to the Wall Street Journal article that deals with the title deception issue related to the fiduciary duty -
http://blogs.wsj.com/totalreturn/2012/0 ... n-advisor/
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The titles "Advisor" and "Adviser" are not interchangeable. A real "Adviser" is a person who by law has a fiduciary duty to subordinate their personal financial interests to the best interests of the investor. That's why there is misleading connotation of advice for the investor when the "Sales Representative" uses the title of "Advisor". It is only when the investor goes to the legal expense of making a claim in court that the responsibility for wrong-doings by an "Advisor" can be judged without the consideration of the fiduciary duty.
Refer to the below link to the CSA Consultation Paper 33-403: "THE STANDARD OF CONDUCT FOR ADVISERS AND DEALERS: Exploring the appropriateness of introducing a statutory best interest duty when advice is provided to retail clients".
https://www.osc.gov.on.ca/en/Securities ... y-duty.htm
Let's face it, the CSA only addresses the title of Advis(e)r, there is no such legal entity as an Advis(o)r. It is to the dismay of the investor, when they later find out that the title of Financial Advisor is a deception and the person using this deception has no such fiduciary duty obligation to an investor.
Anyone who is a Sales Representative is like any other sales person, they use their knowledge of their products by giving "advice" on what is best recommended for the customer. Financial Advisors are no different. Just because we are talking about giving advice on investing money and not talking about giving advice on investing in widgets or engineering services, the title of "Advisor" somehow has the connotation exuding more reverence and respect than a plain old Sales Representative giving advice and selling commercial products or engineering services.
The purpose behind any sales person giving advice on products is to make a sale in order to receive some form of sales remuneration for that advice. Bank-owned investment channel employees are no different. The deception is that the banks permissively allow this illusion that the investor is privileged to be dealing with their investment "Advisor", when in fact they are really dealing with a financially motivated Sales Representative.
The bank-owned Investment Dealers would have the potential investor believe that at all times their employee "Advisors" do not make a practice of violating the Regulatory Laws and Rules even when their Compliance Department ignores the evidence to the contrary.
On paper, the banks would have the investor believe that their "Advisor" employees always subordinate their personal financial interests to those of the investor. From the experience of one investor, just try to hold a bank-owned Investment Dealer to this illusion when filing a legitimate complaint. Regardless of the evidence, the bank Investment dealer supervision tries to deny that their "Advisors" have failed to fully inform the investor of all the implications and conditions associated with an investment that has been misrepresented.
If the investor does not accept the bank-owned Investment Dealer denial, the investor is then directed over to the Bank-Ombudsman for more of the same unsupported twisted denials rejection.
9. Trusting Investors are unaware that their personal interests are being freely
subordinated to those of the Financial "Advisor"
Here is just one out of dozens of examples of why the forces of change need no more debates, immediate action is the only recourse. When an Investment Dealer's Compliance Department allows one of its investment Advisor employees to propose and process an order for mutual funds (paying trailer fee commissions) for a client's RRIF Portfolio Account on a Deferred Sales Charge (DSC) basis, how does the affected investor get the Investment Dealer to see the error of their ways in not protecting the investor ?
Continued / 8
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The answer is quite simple. Just take a look at the discretionary call that an Investment Dealer and its Investment "Advisor" employed when they were looking after their own financial gain and violating the trust of the investor client.
By convincing the investor to purchase mutual funds (with trailer fee commissions) on a DSC basis, undeclared to the investor, the Financial Advisor made a 5% to 6% immediate sales commission versus a 0% to 2% for front-end commission. Undeclared to the investor was that the Advisor was also the beneficiary of annual trailer commissions of approximately 1% to 2%.
The reason for the Investment Advisor selling the mutual funds to the investor on a DSC basis was explained that the investor would not have to pay upfront sales commissions. Undeclared to the investor were all the detrimental consequences when purchasing on a DSC basis. These consequences had no relevance for the Investment "Advisor".
What are we saying here ? Some investment advisors value their services as warranting a hidden 5% or 6% commission plus the hidden 1% to 2% trailer commissions, while other investment advisors are quite satisfied to provide investment advice for the 1% to 2% trailer commissions (without front-end commissions) for as long as the investor holds the mutual fund investments ?
No, No, No, what we are saying is that there is a lack of regulatory enforcement that permits unscrupulous investment advisors to cheat the unsuspecting investor by not fully disclosing all of the relevant facts related to any and all recommendations by the self-serving Investment "Advisor". That's where the problem lies.
This proves that the uneducated investor is totally vulnerable to the present discretion and indiscretion of the greedy individual self-serving "Advisors" who fail to be properly supervised by the Bank-owned Investment Dealer. This problem is further exacerbated when the bank-owned investment dealer has the brazen gall to try to convince the investor that this conduct of their Investment "Advisors" is at all times professional and appropriate.
Only the initiatives of the Federal Government can enforce a change of this unhealthy bias that favours the big banks. The Federal Government permitted the mergers with banks to acquire Investment Dealers in the first place, so it is now the Government's responsibility to recognize that this concentration needs to be dismantled in the interests in fostering a more true competition and lower costs for the investing consumer.
10. One wronged investors' voice can be multiplied many time over with your help
Have you made any mutual fund purchase through the Canadian big banks over the past
10-years ? Was it recommended that you purchase on a DSC basis ? If you purchased through the investment subsidiaries of the big banks, let us have your comments on if you feel they cheated you into believing that their investment advisor's were looking after and protecting your investment interests, when in fact they were lining their own pockets.
If you invested in mutual funds based on misleading "Advisor" guidance, are you interested in being part of a class action against your particular investment dealer ?
Send your response to -
Small Investor Protection Association - email: sipa.toronto@gmail.com
Misconduct and malpractice. Investment industry "best and worst practices". Information to improve public protection. Expert witness services for industry and investors. Forensic investment analysis.
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Competition Bureau ignores Competition Act?
47 posts
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Re: Competition Bureau ignores Competition Act?
by admin » Sat Jul 29, 2017 4:54 am
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Re: Competition Bureau ignores Competition Act?
by admin » Sat May 27, 2017 7:29 pm
Beer, Butter, and Barristers: How Canadian Governments Put Cartels Before Consumers
May 22, 2013
Governments in Canada maintain monopolies in certain sectors of the economy through regulations that advance private interests at an unreasonable cost to consumers, according to a report from the C.D. Howe Institute. In “Beer, Butter, and Barristers: How Canadian Governments Put Cartels before Consumers,” authors Robert Mysicka and Marty McKendry criticize the view, established by the courts, that regulations conflicting with competition law should be deemed to operate in the public interest.
https://www.cdhowe.org/public-policy-re ... -consumers
The Study In Brief In Canada, various sectors of the economy are subject to government regulations, many of which are designed to correct market failures. However, such regulations are generally inconsistent with federal competition law, which aims to promote economic efficiency by maintaining the integrity of competitive markets.
The courts have resolved this tension by developing the Regulated Conduct Defence (RCD) – an interpretive judicial doctrine that immunizes various regulatory regimes from the application of competition law. In this Commentary we challenge the wisdom of the RCD from an economic and legal standpoint. In particular, we criticize the view, established by the courts, that regulations conflicting with competition law should be deemed to operate in the public interest.
We argue that certain regulatory regimes advance private interests at an unreasonable cost to consumers. Our analysis includes three examples of regulatory regimes that interfere with competitive forces but nevertheless benefit from immunity to competition law: agricultural supply management, private alcohol retail, and legal services.
We propose:
(i) clarifying the Competition Act’s application to regulated conduct;
(ii) where practicable, limiting the scope of immunity for regulated sectors such that if regulation is deemed necessary, it is narrowly tailored to be minimally impairing to competition; and
(iii) requiring the federal government to assess the competitive effects of all legislation prior to enactment.
https://www.cdhowe.org/sites/default/fi ... _382_0.pdf
S. 45 of the Competition Act (R.S.C. 1985, c. C-34).In Canadian competition law, a conspiracy is a criminal arrangement between competitors to control the supply or price of a product.
May 22, 2013
Governments in Canada maintain monopolies in certain sectors of the economy through regulations that advance private interests at an unreasonable cost to consumers, according to a report from the C.D. Howe Institute. In “Beer, Butter, and Barristers: How Canadian Governments Put Cartels before Consumers,” authors Robert Mysicka and Marty McKendry criticize the view, established by the courts, that regulations conflicting with competition law should be deemed to operate in the public interest.
https://www.cdhowe.org/public-policy-re ... -consumers
The Study In Brief In Canada, various sectors of the economy are subject to government regulations, many of which are designed to correct market failures. However, such regulations are generally inconsistent with federal competition law, which aims to promote economic efficiency by maintaining the integrity of competitive markets.
The courts have resolved this tension by developing the Regulated Conduct Defence (RCD) – an interpretive judicial doctrine that immunizes various regulatory regimes from the application of competition law. In this Commentary we challenge the wisdom of the RCD from an economic and legal standpoint. In particular, we criticize the view, established by the courts, that regulations conflicting with competition law should be deemed to operate in the public interest.
We argue that certain regulatory regimes advance private interests at an unreasonable cost to consumers. Our analysis includes three examples of regulatory regimes that interfere with competitive forces but nevertheless benefit from immunity to competition law: agricultural supply management, private alcohol retail, and legal services.
We propose:
(i) clarifying the Competition Act’s application to regulated conduct;
(ii) where practicable, limiting the scope of immunity for regulated sectors such that if regulation is deemed necessary, it is narrowly tailored to be minimally impairing to competition; and
(iii) requiring the federal government to assess the competitive effects of all legislation prior to enactment.
https://www.cdhowe.org/sites/default/fi ... _382_0.pdf
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Re: Competition Bureau ignores Competition Act?
by admin » Tue Apr 28, 2015 7:48 pm
Dear Mr. James Moore, MP
Further to your good question to the Competition Bureau of Canada this year, namely, "why does Canada suffer such high prices relative to our American counterparts?"
This is a $10 billion dollar reply, which is followed immediately by the next post which describes a $25 billion dollar reply from the University of Toronto. (I might point out that the U of T study numbers come from 2007 as well, and since the assets invested in mutual funds, the investment under study by the U of T have doubled since that time, their numbers might be closer to $50 billion per year in harm to Canadians.
Either way Mr. Moore, you had asked why we pay so much relative to Americans, and yet when presented with over ONE BILLION DOLLARS per week being skimmed by abuse of market dominance by the investment industry and abuse of the fair and honest regulatory process by 13 provincial securities commissions (keystone cops), you choose to suggest that the matter is not important enough to waste the Competition Bureau's time??
Sorry, I thought that you might actually want an answer to your question to the Comp Bureau. I mistook your motives. My apologies.
I will take my information to ordinary Canadians (the Competition Bureau is not even professional enough to respond in writing to these complaints….what does that say about this organization), and hope that they might find it to the advantage of everyone to find a replacement for your job. (what exactly is your job Mr. Moore?)
I am certain that you are acting against the interests of millions of Canadians Mr. Moore, but you can take solace in knowing that your are an investment bankers very best friend.
================================
Canada suffers $10B 'discount'
OTTAWA -
, according to a U.S. securities law expert commissioned to advise the federal government.The lack of a single securities regulator in Canada costs the economy as much as $10 billion and 65,000 jobs a year
BY THE EDMONTON JOURNAL SEPTEMBER 18, 2007
OTTAWA - The lack of a single securities regulator in Canada costs the economy as much as $10 billion and 65,000 jobs a year, according to a U.S. securities law expert commissioned to advise the federal government.
John Coffee, a professor at Columbia University law school in New York, said Monday he based his figures on various existing studies.
"There is a discount on Canadian securities," he said. "You have to sell more of your stock to raise the same money in comparison, say, to a similar U.S. company. And you may have to pay more on your debt rate, too."
The so-called Canadian "discount" stems from the fact investors are less confident about putting money into Canadian public companies, he said.
The reason for this is
they feel the Canadian system, which has 13 provincial and territorial agencies that monitor the industry, leads to less reliable enforcement of public companies and can lead to poorer corporate governance.
Less checks on activities such as insider trading, Coffee noted, result in a lower level of return for ordinary investors.
http://www.canada.com/story.html?id=178 ... e0e0355053
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Re: Competition Bureau ignores Competition Act?
by admin » Sun Apr 12, 2015 9:34 pm
Industry Minister and Competition Bureau prefer “Rigged” investment services??
I was encouraged when I saw Industry Minister James Moore’s instruction to the Competition Bureau to “find out why Canadians pay so much more than do US citizens for similar goods or services”. I immediately set out to tell him about what I believe to be a billion dollar drain on Canadians....each and every week!
When materially false or misleading representations are made knowingly or recklessly to the public, this matter also falls under the mandate of the Competition Act of Canada. I was certain that with both parties interested in this area, they would be receptive.
It was made clear to me by both Moore and the Competition Bureau, that they had no interest whatsoever, in a billion dollar weekly drain from Canadians, and thus I write to all Canadians, in hopes they might act to protect themselves from abuse by financial professionals.
My experience is that the Bureau has forgotten the consumer and sides with big business...
Here is an excerpt from study after 3 decades in the investment field, with most experience in the field of “investment advice”.
One vowel can make big legal difference in the investment industry, and the case in point is in the legal meaning given to the word “adviser” (spelled “er”) under Canadian Securities Acts, and the very different, “non-legal” treatment given the word “advisor” (spelled “or”).
They do this to prevent having to tell customers what their true license and registration category says. (This can be searched at CSA http://www.securities-administrators.ca) They also do this in order to exempt themselves from any fiduciary responsibility to their clients – because for what it’s worth, Canada’s law applies only to “advisers.” (spelled “er”) (source CSA head counsel Chris Besko)Most investment sellers in Canada call themselves “advisors,” (spelled with an “o”).
All “advisors” (spelled “or”) are required to do, (under self regulatory rules of IIROC Investment Industry Regulatory Organization of Canada), is offer clients a product they consider “suitable,” no matter whether the seller reaps more benefits than the buyer.
“Suitable”, is a perfectly vague, self-determining and subjective term which is practically meaningless. Investors duped by it (and the non-legal “advisor” spelling), can see half their life savings disappear as a result of the deceptions. Investors are comforted by the term, whilst
industry uses it as an "escape clause" allowing dealers to sell anything which they deem fits the description.
To those readers who would rather believe that both words mean the same thing, the industry silently thanks you for believing this, as it forms the basis for these and many other deceptions of the public. The Small Investor Protection Association of Canada (http://www.sipa.ca) has studied this and is offering $5,000 in prize money for videos or animations to inform the public about this billion-dollar consumer deception.
Search the name "Chris Besko" in this flogg, and you will read for yourself what the lead counsel for the CSA (Canadian Securities Administrators says about the word "advisor". Like this:
Financial Advisor, as you noted, is a common title which many persons use, whether they are registered under securities legislation or not. The use of this title is not generally prohibited, and may be used by anyone, including persons who are only licensed to deal in insurance products, mortgage brokers, deposit agents, or employees of financial institutions. Some jurisdictions regulate the use of some titles. For example, in Québec, no person may use the title Financial Planner without holding the appropriate certificate issued by the Autorité des marchés financiers. The title Financial Advisor may not be used by anyone as it is considered similar to the title Financial Planner. Having said that, most jurisdictions do not regulate the use of Financial Advisor, and as such it is widely used
http://www.investoradvocates.ca/viewtopic.php?f=1&t=10&p=3759&hilit=besko#p3771
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Re: Competition Bureau ignores Competition Act?
by admin » Sun Apr 12, 2015 9:31 am
During a recent presentation, Lethbridge investment industry critic Larry Elford emphasized the legal difference between an investment “adviser” and an “advisor.”
In Canada, registered “advisers” have a fiduciary interest – like a lawyer – to act in the best interests of their clients. But he told an University of Lethbridge audience “advisors” – with an O, not an E – may act in their own interest by selling anything they consider “suitable” for their client and more profitable for themselves.
During an edit before publication of the story, the spelling distinction was lost. The Herald regrets the error.
Under the Competition Bureau mandate to protect Canadians from unfair, misleading or other improper market practices, the misdirection of Canadians by "title deception" from the investment industry speaks volumes.
This is why the silence (complete lack of any written communication) by the Competition Bureau of Canada appears to this writer, as if they have a hidden agenda which falls outside the boundaries of their published mandate.
Letting Canadians be abused by $500 million per week (U of T numbers on mutual funds alone) or $1 billion per week (my estimates when adding investment products and practices beyond just mutual funds) is simply NOT acceptable. Silence and non-communication by a government agency on this matter appears more like corruption at work, rather than public service. This is my opinion.
Included in the collection of posts in this topic is a criminal complaint to the Bureau, which has gone without reply. It also includes about eight or nine years of correspondence where they appear to have less than professional ability to communicate on what appears to be substantial crimes or harms to Canadians. Crimes which I believe fall within their mandate.
Industry Minister James Moore comes into the picture more recently, and appears to be more protective of the system, than protective of Canadians financial health.
Time will tell the story of whether this is correct or not. What is correct at this point is that Canadians are being cheated and shortchanged by deception and misdirection, and the Competition Bureau is for now, willfully blind to the problem.
Keywords James Moore
Competition Bureau
Criminal Complaint
Investor Deception
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Re: Competition Bureau ignores Competition Act?
by admin » Mon Jan 12, 2015 3:51 pm
(This is news to me)
On 2015-01-12, at 11:42 AM, <CorrespondenceMinister@ic.gc.ca> wrote:
Dear Mr. Elford:
Thank you for your email of December 9, 2014, regarding the Competition Bureau with respect to alleged anti-competitive conduct and/or misrepresentation in the financial services industry. I appreciate your taking the time to share your concerns.
I note that you have had a number of exchanges with the Competition Bureau over the last several years.
Please accept my best wishes.
Sincerely,
The Honourable James Moore, P.C., M.P.
(the game is perfectly rigged (and blocked) at every avenue of fairness and accountability for Canadians…and James Moore claims to want to learn why there is added costs to Canadians…….:)
=============
My reply to him looks like this:
January 12, 2015
Mr. Moore,
I wish to thank you for your reply to my correspondence of December 9, 2014.
You mention that the Competition Bureau is an independent enforcement agency, and I was under the impression that is was an agency of the Government of Canada.
Would you please be so kind as to confirm this and if possible, tell me how the agency operates, who it reports to, and so on? I am sorry to trouble you but I am quite surprised and confused if I was mistaken about who they are and whose interest they may represent.
Thank you very much for your help.
Larry Elford
===========================
March 11, 2015, 9:14
Dear Mr. Elford:
Thank you for your follow-up emails of January 14 and February 4, 2015, seeking clarification on the nature of the Competition Bureau’s independence and its reporting obligations.
The Bureau is required to report annually to Parliament, through the Minister of Industry, on the operation of the Competition Act, and these annual reports are available on its website. The Bureau’s funding and financial reporting form part of Industry Canada’s program delivery. The most recent Departmental Performance Report, which includes financial and performance information related to competition law enforcement by the Bureau, is available on Industry Canada’s website.
I trust that this information is helpful. Please accept my best wishes.
Sincerely,
The Honourable James Moore, P.C., M.P.
The Bureau is an independent enforcement agency
On 2015-01-12, at 11:42 AM, <CorrespondenceMinister@ic.gc.ca> wrote:
Dear Mr. Elford:
Thank you for your email of December 9, 2014, regarding the Competition Bureau with respect to alleged anti-competitive conduct and/or misrepresentation in the financial services industry. I appreciate your taking the time to share your concerns.
I note that you have had a number of exchanges with the Competition Bureau over the last several years.
carrying out the mandate of the Commissioner of Competition under the Competition Act. It retains independence and discretion over which matters to pursue. As it receives thousands of complaints per year, it is necessary for the Competition Bureau to select its cases carefully on the basis of established criteria, such as the number of complaints and the volume of commerce affected. Moreover, the Competition Act stipulates that the Bureau’s investigations be conducted in private. As such, it cannot follow up or provide details on all complaints received.The Bureau is an independent enforcement agency
Please accept my best wishes.
Sincerely,
The Honourable James Moore, P.C., M.P.
(the game is perfectly rigged (and blocked) at every avenue of fairness and accountability for Canadians…and James Moore claims to want to learn why there is added costs to Canadians…….:)
=============
My reply to him looks like this:
January 12, 2015
Mr. Moore,
I wish to thank you for your reply to my correspondence of December 9, 2014.
You mention that the Competition Bureau is an independent enforcement agency, and I was under the impression that is was an agency of the Government of Canada.
Would you please be so kind as to confirm this and if possible, tell me how the agency operates, who it reports to, and so on? I am sorry to trouble you but I am quite surprised and confused if I was mistaken about who they are and whose interest they may represent.
Thank you very much for your help.
Larry Elford
===========================
March 11, 2015, 9:14
Dear Mr. Elford:
Thank you for your follow-up emails of January 14 and February 4, 2015, seeking clarification on the nature of the Competition Bureau’s independence and its reporting obligations.
However, as a law enforcement agency with a statutory mandate, it is independent in its enforcement of the Competition Act so as to protect the integrity of investigations. Under the law, inquiries are carried out in private and information that the Bureau acquires is kept confidential, subject to listed exceptions.The Competition Bureau, headed by the Commissioner of Competition, is a federal government agency.
The Bureau is required to report annually to Parliament, through the Minister of Industry, on the operation of the Competition Act, and these annual reports are available on its website. The Bureau’s funding and financial reporting form part of Industry Canada’s program delivery. The most recent Departmental Performance Report, which includes financial and performance information related to competition law enforcement by the Bureau, is available on Industry Canada’s website.
I trust that this information is helpful. Please accept my best wishes.
Sincerely,
The Honourable James Moore, P.C., M.P.
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Re: Competition Bureau ignores Competition Act?
by admin » Mon Nov 24, 2014 3:16 pm
Update Nov 24, 2014
I have re-sent the criminal complaint of misrepresentation, fraud, abuse of market dominance and so on to the Competition Bureau of Canada today.
I had not heard anything by way of response from them to date, and it is (still) my belief that millions of Canadians are losing billions of dollars to these and other breaches of the Competition Act of Canada. This is abusive to the financial and social health of our country and I have witnessed it firsthand during my career. Sadly, I have also witnessed the reluctance of people and even authorities to step forward and speak out about clear cases of abusive behaviour, when that behaviour is being done by the very powerful.
Even though the Justice made reference to the word "fraud" 155 times in the Markarian v CIBC case alone, it still baffles me how authorities like the Competition Bureau are unable to take on issues such as this. I am under the impression that this falls directly in within their mandate and jurisdiction.
viewtopic.php?f=1&t=34&p=3778#p3778
The complaint is being updated almost weekly now, with articles written by journalists, bloggers and financial experts the world over. I anticipate that this agency or another will find the complaint to be valid and worthy of protecting Canadians from, if they are given enough time to do so.
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Re: Competition Bureau ignores Competition Act?
by admin » Sun Nov 02, 2014 8:31 am
In the Competition Bureau letter of complaint (following this post) this article from the Wall Street Journal Blog has been removed from the public record.
A copy is shown below in the interest of public financial safety:
By JASON ZWEIG
CONNECT
Associated Press
The New York Stock Exchange
Long ago, investors bought stocks from “customer’s men,” who then became “registered representatives,” who in turn morphed into “investment adviser representatives.” Financial planners, meanwhile, became “financial advisers” and even “wealth managers.”
Much like garbagemen rechristening themselves “sanitation engineers,” the folks who flog investments are tweaking their titles to make what they do seem fancier and more impressive than it is.
Stockbrokers and financial planners alike have been migrating, en masse, from the word “adviser” to the alternative, subtly-more-impressive spelling advisor. (When you type advisor in WordPress, as I just did, the software underlines it with red sawteeth, signaling that the word is misspelled. Most dictionaries say either spelling is acceptable.)
What’s remarkable about this is that the federal law that regulates the provision of financial advice is called the Investment Advisers Act of 1940, with an “E,” not an “O.” Both the Securities and Exchange Commission and the Financial Industry Regulatory Authority, which oversee how investments are sold to the public, call someone who gives financial advice an “adviser” – not an “advisor.”
Why, in a regulated industry, would you choose to be called something other than what the law that regulates you calls you?
Lexicographer Barry Popik tells me that a search of the Library of Congress’s site, Chronicling America, for the years 1836 to 1922 shows that the word “advisers” returns 875,830 hits, versus just 21,145 for “advisors.”
And the Corpus of Contemporary English, reports Popik, shows more than 5,200 citations for “advisers” but just under 2,000 for “advisors.”
On the other hand, search now at the U.S. Patent and Trademark Office and you will find more than 3,800 companies with “Advisors” in their name, vs. well under 300 that call themselves “Advisers.”
So, it seems, the written language overall has long appeared to favor “adviser” over “advisor,” but financial companies have a strong preference for calling themselves advisors.
Why?
There may be something about the “-or” suffix that lends it more gravitas than “-er.” A donor seems, somehow, more generous than a giver. An author is more dignified than a writer. An orator is more eloquent than a lecturer or speaker. When real-estate agents invented a moniker for themselves, they chose to become Realtors, not Realters.
Plus, if you are working on a master’s or doctorate, you will have an advisor for your thesis or dissertation, not an adviser. Many financial advisers crave the same kind of intellectual respectability – and marketability – that graduate degrees confer, which helps explain why they often collect professional designations enabling them to festoon their names with sets of initials.
We’ll know the field of financial advice has finally arrived as a profession when its practitioners accept how the law of the land says they should spell what they do – and when they stop trying to gussy it up with a spelling gimmick.
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Competition Bureau Ignoring Competition Act?
by admin » Thu Sep 18, 2014 8:40 am
Sept, 18th, 2014
To: Competition Bureau l Bureau de la concurrence
Competition Bureau Complaints
Place du Portage I
50 Victoria Street, Room C-114
Gatineau, Quebec
K1A 0C9
Mailed Sept 25th, 2014
Faxed Sept 25th, 2014 to 819-997-0324
Tweeted Sept 25th, 2104 to @CompBureau
From: The undersigned citizens who are concerned with misrepresentation, false pretense, etc., in the sale of financial (investment) products and services.
Re: Judge's comments about such common practices which go un-noticed by authorities: (there are 155 repetitions of the word "fraud" when it comes to the practices and misrepresentations of CIBC against an elderly couple, in this judgement by The Honorable Jean-Pierre Senécal, J.S.C. , Quebec Superior Court, District of Montreal) Found here: http://investorvoice.ca/Cases/Investor/Markarian/Markarian_v_CIBCWorldMarketsInc.htm
We, the undersigned, hereby request a full and complete investigation by the Competition Bureau of Canada, into misrepresentation, fraudulent misrepresentation, abuse of market dominance, and any other breaches of the Competition Act of Canada as they may see open to them with which to protect the citizens of Canada from financial abuse by financial professionals.
Further to previous correspondence with the Bureau, here, then is more specific and detailed comments from The Honorable Jean-Pierre Senécal, J.S.C. , Quebec Superior Court, that we feel cause this complaint to fit within the mandate of the Competition Act of Canada: (please note that this is just ONE case example, whilst the systemic deceptive practices involved are repeated thousands upon thousands of times in Canada upon ordinary Canadians)
All of the above criminal or civil violations of the public, are common, standard, and daily practices by the investment industry, upon millions of Canadians. It is a fundamental cause of severe economic and financial abuse of Canadians. It is ignored and accepted by captured and willfully blind regulators. We ask the Competition Bureau to not simply pass the buck on these important matters, to these very same industry-paid regulators, as it has tried to do in the past, but act in a professional and proper manner as provided in the Competition Act.
========================================================================================================================================
Preamble to an article describing the worlds largest bait and switch fraud:
The Grand Deception is named after the man who coined the term, Stan Buell. He is an engineer by profession, and old school gentleman and a victim of financial abuse by financial professionals.
He began the Small Investor Protection Association in 1998 after seeing a need for an organization which was not captured and beholden to the financial industry, and whose sole mandate was to protect the public from acts of financial predation by the financial industry.
He learned the hard way that the banking and brokerage industry of the 21st Century is not at all the same as it was in the 20th Century. It has morphed from an industry of trust and integrity to one of mistrust and addict-like behaviours to money. I have created a comparison in my mind between the complete "winner steal all" mentality of a Los Angeles riot (or some New Orlean's looters when given the opportunity) and the similar acts of bankers and brokers when it is learned that the "authorities" are nowhere in sight. I give my own long winded (15 minute) view of what this looks like, with this as the tag line:
The video is here for those who might wish to view it, http://youtu.be/EyAuod1QxhQ?list=UUy8dp ... JBa_l0w7AQ
You would think that there is nothing at all new under the sun, by this time. After all, I began with my Canadian Securities Course in 1980, stayed in the business from 1984 to 2004, and researched it like a man possessed from 2004 to 2014. But no, we find that the most important ingredients in making money the old fashioned way……those who do it by subterfuge and misdirection…..the most important ingredients are kept quite hidden and secret. They are the "tricks of the trade" if you will, and these are what this entire "flogg" (forum/blog) has been about since 2004. The hidden tricks of the trade.
What is wrong with having tricks of the trade? After all, every trade has their secrets, and their methods of getting the job done faster, easier, better, from mechanics to bricklayers. Well, my trade was a profession, and one where I was taught that my customer's best interests must come first, that I must not use my skill and knowledge to my own personal benefit, but rather to their sole benefit. Little did I realize until well into the game, that the game was changing, right under my feet. Those at the top of the financial and regulatory game were sick of putting clients first and making money the "old fashioned way". They could make it all in a few years, if they took a few shortcuts.
This flogg has been about those shortcuts that financial professionals now take to "get rich quick". It is about using the "trust and integrity" earned by bankers of the last century, and selling out this trust and integrity for faster and faster rewards. My financial industry has become identical to a friends house-sitter experience of late, where a young recovering addict stayed at his house, while he visited the other side of the country for a month, and upon his return, found his TV and his snowblower had been stolen and pawned to feed an addiction…….that is the investment banker of today. Some are literally closer to addicts than professionals. My proof of such a statement is found in the article at the end of this intro.
A professional who is willing to violate his own duty of loyalty and care to his clients, and to use a biblical phrase from Peter Benedek, CFA, blog "placing an obstacle before the blind". The investment industry, outside of those with a rare degree of personal and professional self respect, are today specialists in placing obstacles before the blind, of using their talent and skills to take advantage of their customers, rather than to help them.
Here is one of the best ways how, and Stan has called it the GRAND DECEPTION:
And here is the article itself:
SYSTEMIC INVESTMENT DECEPTION
“The FIDUCIARY standard of investment advice is clear, objective, and protective of the investor. The SUITABILITY standard of care is vague, undefinable and subjective. It allows investors to be sold nearly anything, as long as someone calls it an “investment". It can even mean selling the most expensive investment choice for compensation reasons. Nearly every “advisor” and sponsoring dealer are bound only by the “suitability” standard. This may be the greatest undisclosed risk facing investors today”
Just recently the creator of world famous DILBERT cartoons, Scott Adams, made this statement on CNBC about a risk ordinarily hidden from the public: “Beware financial advisors” is the tag line quoted from him. (video here: http://www.cnbc.com/id/101906843
I worked 20-plus years inside Canada’s top investment dealers and never was I able to hold a copy of my license or registration. This was always handled by the investment firm. I now better understand why, and I would like to share it with you.
First a warning: This article contains both facts and some of my own opinions. The facts are what they are, and many links are enclosed for readers to search, read and come to their own conclusions. My opinion is biased, and based on the following; I simply do not believe that professionals or persons who promise to act in a position of trust, should then be allowed to betray that trust, and take advantage of consumers. Please take whatever you can from this information and leave behind anything which you may not agree with. It is intended to create discussion.
Although rules and procedures about “client-first” behaviors seemed fairly clear cut, I also never found resolution to the question of whether sales came first, and trusted advice second, or the other way around. The deeds of the firms never quite matched the words or promises.
It was in 2013 when a conversation with Stan Buell, caused us both to step back and to question even our most basic beliefs about risks to investors financial health.
Stan was on the Investor Advisory Panel at the OSC (Ontario Securities Commission) and is the well respected founder of SIPA (Small Investors Protection Association of Canada 1998 http://www.sipa.ca )
Stan mentioned attending a gathering of regulators and overhearing two securities commission lawyers discuss spelling variations of “advisOR” verses “advisER”. This was years ago and it never occurred to either Stan or myself that something hidden in plain sight could form such a grand consumer deception. The thought of such simple trickery as spelling variations, was not something which had ever entered our minds for Canadian financial services providers.
We undertook over a year of research into those two key words, “advisor” and “adviser”, writing to, and getting clarification from U.S., as well as Canadian securities regulators. We learned that the difference in meaning is significant enough to cut the average investors retirement money by about half. The other half will be in the hands of the investment service provider.
Investors are being deceived and then shortchanged by the industry and regulatory blindness. Stan calls it The Grand Deception, and says he has never seen anything of quite this magnitude to harm investors in his two or more decades of investor protection work. And Stan has seen it all.
Most people would prefer to believe that "Adviser" and "Advisor" are simply spelling variations for the same word, with the same meaning. To imagine these tricks from some of the world’s most trusted financial institutions is simply too much for many to grasp. Cognitive dissonance is far preferable to such an ugly possibility.
The dictionary and some business newspapers help feed the myth (spelling differences, yet same meaning), but the question of whether or not they are identical “in law” remains hidden to investors.
The head of the SEC and the fine print at the CSA (Canadian Securities Administrators) is somewhat clearer on the facts, as this following example shows.
At this video link are 88 words in just over one minute from SEC Chair Mary Jo White, describing the differences in legal duties to clients between those legally registered as "adviser" and those who simply call themselves "advisor" (no legality, just an arbitrarily chosen “title”).
http://youtu.be/TqBSiR6VwP4?list=UUy8dpTRZHEz-0JBa_l0w7AQ
The following SEC INVESTOR BULLETIN came to me as I was writing this:
And then there is this from the CONSUMER FINANCIAL PROTECTION BUREAU, an official website of the United States Government. They say this
http://www.consumerfinance.gov/blog/financial-advisers-dont-take-their-credentials-at-face-value/?utm_content=buffer55ff0&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer
This is what the Canadian Securities Administrators (CSA) said recently when questioned:
Chris Besko Acting General Counsel & Acting Director for the CSA, Employed at the Manitoba Securities Commission
The comments in quotes above, seem to suggest both, that they do have rules...... and that they don’t follow those rules. Regulators in Canada seem quite blind to something as simple as deceit. Thankfully, civil courts are starting to recognize and award damages for this misrepresentation, but consumers should not be forced into civil court at a cost of hundreds of thousands of dollars and years out of their lives, to receive the industry required standards of “honesty, fairness, and good faith”.
Search the license or registration category of your “advice” giver here in Canada
CSA (Canada) https://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850 If it says “dealing representative” you have a “salesperson” according to the CSA and not someone registered or responsible to act as “adviser” or “advisor”.
Search the license or registration category of your “advice” giver here in the USA
FINRA for US “Broker” search: http://brokercheck.finra.org/Search/Search.aspx If it says “broker” then you have a salesperson, regardless of what they prefer to use on the business cards.
Stan and I learned that the the trickery is in regulators letting commission sales-persons promise or imply to the public that they are registered or licensed as "Financial Advisors". By using the spelling variation not used in the Securities Acts of Canada or the USA, they seem able to imply the responsibility of a professional fiduciary Adviser, while carrying only the responsibility of a commission sales person.
I call this the “World’s Greatest Bait and Switch”, and I made a video to this effect even before working with Stan on spelling tricks. If you have been taken in by deception, this video may help describe what has taken place and shows info that some investors have used to get their money back. http://youtu.be/KH6XMXlfdBw?list=UUy8dpTRZHEz-0JBa_l0w7AQ )
It (the Grand Deception) has less to do with spelling, and everything to do with what the spelling trick allows sellers and dealers to accomplish, namely the “implying” or “pretending” the attributes of a fiduciary (undivided professional loyalty to customer) whilst delivery of a “suitability” obligation only. (“suitable” is as vague and undefinable a standard as “edible”, “drinkable”, or “do-able”) See “suitability” loopholes explained here in a 2 minute video. http://youtu.be/aWulI3Kwi_A?list=UUy8dpTRZHEz-0JBa_l0w7AQ
Or even worse, as Goldman Sachs and others were found out doing, figuring out to make even MORE money by putting clients into bad investments, selling toxic junk, in other words, and perhaps even shorting, or placing bets that the junk they sold would then crash. Becoming specialists in "placing obstacles before the blind".
Neil Weinberg, former Editor in Chief of American Banker Mag puts it into his own words in this OCT 18, 2013 article in American Banker Magazine:
“Financial Advisor Chicanery: Imagine a two-tiered health care system in which some doctors were legally obligated to do what's right for their patients and others, like snake-oil salesmen of yore, could recommend whatever treatments made them the most money, as long as they didn't kill patients outright.”
“Now imagine that the shysters did all they could to blend in with the real doctors. That's effectively the type of system we have today among the people Americans count on to tell them how to invest their life's savings. Registered investment advisors must, by law, put clients' interests first. Many thousands of other "advisors" at places like Morgan Stanley, Merrill Lynch and smaller shops are held to a much lower "suitability" standard.”
“In essence, even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. Some do a great job serving their clients. Others don't. It's up to them. Under the law, as long as they avoid putting an 85-year-old widow into an exotic derivative with a 20-year lockup, they're bulletproof.”
“Few clients know this fiduciary-suitability gap exists. The suitability crowd has worked tirelessly to keep the standard low and the distinctions murky. The cost to the public is incalculable but huge.” Full article is found here:
http://www.americanbanker.com/bankthink ... 940-1.html
How much is the financial damage to the public? Billions of dollars can be garnered each year by those who purport to hold a professional license/registration while neither holding the license nor the professional duty implied. This occurs today despite rules, laws regulators, and authorities who should be applying those rules to protect the public.
This one minute commentary from a victim of financial abuse by financial professionals is candid and accurate, according to our findings: http://youtu.be/TYu_td_bvs8?list=UUy8dpTRZHEz-0JBa_l0w7AQ
One illustration of the harm done by deceit is shown in a study by pension expert Keith Ambachsteer at the University of Toronto. Keith points out that retail Canadian mutual fund investors (those typically served by the “salesperson-advisor”) are receiving a “haircut” by the industry of 3.8% per year on mutual funds alone. When the report was written in 2007 this amounted to $25 billion each year taken from investors. Today, with nearly one trillion in mutual fund assets, this amount could be closer to $40 billion taken out of the life savings of Canadians.
Link to U of T study “The $25 Billion Dollar Pension Haircut”, here:
https://docs.google.com/file/d/0BzE_LMPDi9UOYTJiY2NmMDEtM2Y4ZS00OTBjLWE3ZjUtNGYxODAzZjkyOTkw/edit
Whether you agree or not that a “spelling trick” is even possible in Canada and the U.S. is not the point of this article. The point is.......for investors to understand whether or not their financial “advice giver” has a FIDUCIARY duty to them, or the legally vague, undefined, and self-determined “SUITABILITY” obligation. The difference is enough to easily cut your retirement in half. That is the million dollar question for every investor, and in my opinion it is the greatest, and best concealed risk the retail investor faces today.
Divided (and non-disclosed) loyalties, first to the investment dealer, second to commissions, third, finally to the client (some good advisors struggle to avoid this but are marginalized) are an investment risk that the investment industry is not yet ready to tell customers about, despite the requirement of “fairness, honesty and good faith”.
Without sufficient time or space in this article to get into solutions needed to right these wrongs, I refer readers who wish to go further to find the flogg topic titled “Solutions, Self Defense and Best Practices “ at this site http://www.investoradvocates.ca .
I look forward to any readers joining me on Facebook or Twitter, where I try to use social media for social good.
Some well informed journalists and investment expert writings on this topic, for those who would like to obtain other perspectives:
Wall Street Journal
[url]viewtopic.php?f=1&t=34&p=3792#p3792[/url] (wall street journal Blog article)
American Banker Magazine
http://www.americanbanker.com/bankthink ... 940-1.html
Financial Times
http://www.ft.com/intl/cms/s/0/21b52478 ... al%20Times
New York Times
http://www.nytimes.com/2010/03/04/your- ... rk%20Times
Washington Post
http://www.washingtonpost.com/business/ ... ign=buffer
Wall Street Journal
http://blogs.wsj.com/experts/2014/10/09 ... d-brokers/
Ron Rhoades Asst. Professor, Program Chair, Financial Planning Program, Alfred State College, Alfred, NY;
http://scholarfp.blogspot.ca/2014/11/le ... ue-to.html
CFA Peter Benedek reviews "Is Your Advisor Deceiving You?"
http://retirementaction.com/2014/06/13/ ... e-16-2014/
Ron Rhoades Asst. Professor, Program Chair, Financial Planning Program, Alfred State College, Alfred, NY;
http://scholarfp.blogspot.ca/2014/10/i- ... lieve.html
Make advisors work for investors, Financial Post
Edward Waitzer article, Financial Post · Tuesday, Feb. 15, 2011) (Mr. Waitzer is a Bay Street Lawyer and former Securities Commission chair, and this quote ( by another person) appeared in his article.
[url]http://opinion.financialpost.com/2011/02/14/make-advisors-work-for-investors/
[/url]
Canada
Dr Jin Choi, Ph.D.
http://www.moneygeek.ca/weblog/2014/06/ ... iving-you/ Former Hedge fund employee, Ph.D, blog
Larry Elford is a former CFP, CIM, FCSI, Associate Portfolio Manager, retired from the financial services industry and lives in Alberta. He protects families and institutions from the hidden, systemic, risks of the financial industry.
[url] http://www.investment-bodyguard.com[/url]
Twitter: @RecoveredBroker
http://www.youtube.com/user/investoradvocate?feature=mhee
http://www.investoradvocates.ca
Signed:
Larry Elford, Founder and director Investor Advocates, Alberta http://www.investoradvocates.ca
Stan Buell, Founder and director Small Investor Protection Association of Canada 1998. http://www.sipa.ca
Alexander Clark, Private Investor, Okotoks Alberta
Garth Rustand, founder Investors-Aid, Vancouver, B.C. http://investors-aid.ca
Robert Pouliot, http://www.rcp-partners.com, Fiduciary rating of asset management companies, director of FAIR Canada
Ken Kivenko, P. Eng. Investment Industry Expert, Toronto
Keith Ambachtsheer, Director of the Rotman International Centre for Pension Management (ICPM), an Adjunct Professor of Finance, kpa-advisory.com
Dr. Jin Choi, Ph.D. in Applied Mathematics, specializing in Financial Mathematics, author of "The Short Book on Investments For Canadians" http://www.moneygeek.ca
David Stanley, PhD, Private Investor, Investment Commentator and Author, Rockwood, Ontario
Joe Killoran, 1979 Ivy MBA, Investment Industry Ethics Commentator since 1987, Kimberly, Ontario
Cory Lanterman, Private Investor, Calgary, Alberta
Murray Candlish, Private Investor, Daysland, Alberta
Diane Rowson, Private Investor
Don Stewart, Private Investor, Edmonton, Alberta
Andrew Teasdale, CFA, BA Hons Econ, Independent Consultant, Toronto, Ontario, blog.moneymanagedproperly.com, @depthdynamics
Mike McDonald, Private Investor, Lethbridge, Alberta
Peter Whitehouse, Private Investor, Mississauga, Ontario
William David Butts, Private Investor, Alberta
Don Logan, Private Investor, Edmonton, Alberta
Bruce Duckworth, Private Investor, Calgary, Alberta
Lor'e Arens, Private Investor
Debra McFadden, Private Investor, Windsor Ontario
Jim Herzberg, Private Investor, Winnipeg, Manitoba
Clayton Wilson, Private Investor, Nova Scotia
Reid Mosley, Private Investor, Alberta
Lorenzo D'Alesio, Private Investor, Montreal
Harrison Dollard, Private Investor, Alberta
Eric Clark, Private Investor, Ottawa
Reid Moseley, Private Investor, Alberta
Prem Sikka, Professor of Accounting, Centre for Global Accountability, Essex Business School, University of Essex, Colchester, UK
Layne Arthur, Private Investor, Sylvan Lake, Alberta
Brian Sexton, Private Investor, Alberta, Calgary
Derek McCardell, Private Investor, Edmonton Alberta
Lana Stewart, Private Investor, Edmonton Alberta
Ken Zilliox, Private Investor, Edmonton Alberta
Gary Logan, former Detective Sergeant- Corporate Section, Fraud Squad, Toronto Police Service
Peter Whitehouse, PLI Consulting, Mississauga, Ontario
Robb Engen, Money expert, blogger, bi-weekly column contributor to Toronto Star. http://www.boomerandecho.com
Alan Blanes, Kelowna, BC. Delegate to the 2014 Council of Canadians AGM in Hamilton
Jean Lespérance, blogger at Canadian Financial DIY
William D. Nichol, Director, Canadian Justice Review Board of Canada
Peter Benedek, RetirementAction.com
Peter Stack, Private Investor, Calgary, Alberta
Mildred Jagdeo, Private Investor, British Columbia
============
Canadian Finance Minister Joe Oliver correspondence Dec 4, 2014:
To: Competition Bureau l Bureau de la concurrence
Competition Bureau Complaints
Place du Portage I
50 Victoria Street, Room C-114
Gatineau, Quebec
K1A 0C9
Mailed Sept 25th, 2014
Faxed Sept 25th, 2014 to 819-997-0324
Tweeted Sept 25th, 2104 to @CompBureau
From: The undersigned citizens who are concerned with misrepresentation, false pretense, etc., in the sale of financial (investment) products and services.
Re: Judge's comments about such common practices which go un-noticed by authorities: (there are 155 repetitions of the word "fraud" when it comes to the practices and misrepresentations of CIBC against an elderly couple, in this judgement by The Honorable Jean-Pierre Senécal, J.S.C. , Quebec Superior Court, District of Montreal) Found here: http://investorvoice.ca/Cases/Investor/Markarian/Markarian_v_CIBCWorldMarketsInc.htm
We, the undersigned, hereby request a full and complete investigation by the Competition Bureau of Canada, into misrepresentation, fraudulent misrepresentation, abuse of market dominance, and any other breaches of the Competition Act of Canada as they may see open to them with which to protect the citizens of Canada from financial abuse by financial professionals.
Further to previous correspondence with the Bureau, here, then is more specific and detailed comments from The Honorable Jean-Pierre Senécal, J.S.C. , Quebec Superior Court, that we feel cause this complaint to fit within the mandate of the Competition Act of Canada: (please note that this is just ONE case example, whilst the systemic deceptive practices involved are repeated thousands upon thousands of times in Canada upon ordinary Canadians)
¶ 227 Migirdic obtained the Markarians' signatures on both P-6 and P-7 by means of lies, deceit and false representations, and on false pretexts.
231 The Bank did not properly fulfil its obligations toward Mr. Markarian
¶ 236 The Markarians were the victims of a veritable system of organized fraud from which it was very difficult to protect oneself because of the skill and knowledge of Migirdic, who was the Bank's only representative
246 Migirdic was presented to him from the start as someone "honest" and "knowledgeable", and, what is more, as a vice-president of CIBC Wood Gundy. That greatly impressed Mr. Markarian and reinforced his idea that his advisor was eminently worthy of his trust, particularly since that same Migirdic a few years later became a [TRANSLATION] "vice-president and director" of the firm, a "promotion" that could but confirm his merits. Later, we will see that those titles were actually only marketing tools and recognition for a large sales volume.
251 The Markarians were actually justified in trusting Migirdic and CIBC, because of the very context of confidence that prevails and must prevail in an investor-broker relationship and because of the broker's obligations toward clients (see paras. 481 to 506 below). The Court is of the opinion that the climate of trust is even greater in regard to a bank (see paras. 498 and 499 below)
¶ 253 Furthermore, the Bank failed to properly fulfil its obligations toward the Markarians, which contributed to their being fooled (that matter is examined beginning at para. 262 below).
¶ 254 Hence, it was in that climate of trust, in which the defendant and its representative had real duties and obligations and in which the plaintiffs knew them and could rely on them, that the fraud was committed and vitiated the plaintiffs' consent.
¶ 262 But there is more here. This is a case where the defendant can be held liable because of its own faults. It itself committed faults in the performance of its duties and the fulfilment of its responsibilities, including false representations about the quality of its representative
MISLEADING TITLES
¶ 263 The defendant attributed to Migirdic fake titles, i.e. "vice-president" and "vice-president and director", in addition to letting him use the title "specialist in retirement investments". Those titles were false representations that misled the plaintiffs, hid reality from them, disinformed them, comforted them in their confidence in Migirdic, reduced their distrust, and contributed to Migirdic's fraud. The defendant committed a fault in terms of its obligation to inform and advise, in addition to misleading the plaintiffs.
¶ 265 In the defendant's operations, these titles also have that meaning, but not that meaning alone! They are given as well to any representative (also called an "investment advisor" or previously a "financial consultant") who reaches a certain level of commissions in a given year, in short, who "sells" a lot and brings in a lot of commissions. A person is awarded the title essentially in "recognition" of work and as a marketing tool, as the president of CIBC Wood Gundy, Tom Monahan, acknowledged. However, to have the title of "vice-president" or "vice-president and director" adds no new responsibility or any management role. What is more, it testifies to neither greater competence nor more reliability.
¶ 266 In the defendant's operations, the titles are, in fact attributed to many people. In 1995, there were 206 vice-presidents and 44 vice-presidents and directors out of 556 representatives. In 1997, there were 217 vice-presidents and 109 vice-presidents and directors out of 612 representatives. In 1999, there were 197 vice-presidents and 101 vice-presidents and directors out of 725 representatives, the proportions were about the same in 2000. That year, about 300 of the 700 representatives had a title!
¶ 267 The problem is that clients do not know that these titles are simply marketing tools, i.e. a means to convince them that they have an excellent representative, and recognition for the volume of commissions. Clients therefore believe they have a "very special" and "eminently acknowledged" representative when the representative has the title of "vice-president" or "vice-president and director". That was what Mr. Markarian in fact believed, as he testified. Richard Papazian, another witness (and also a victim) thought the same thing. So the titles create a false feeling of trust, comfort and prestige, the role of which is not trivial in the commission of fraud.
¶ 268 The plaintiffs were the victims of these false representations by the defendant in their regard.
¶ 269 Migirdic received the title of vice-president in 1986, then vice-president and director in the early 1990s. He retained the titles until he left, because of the enormous volume of commissions he generated. In fact, the titles increased Mr. Markarian's trust in Migirdic and prompted him to guard against him and his actions even less. The defendant committed a fault in acting to ensure that.
¶ 270 The Court wholly subscribes to the comments of Mr. Justice Donald Gordon in Blackburn v. Midland Walwyn Capital inc. [See Note 19 below], a decision of the Ontario Superior Court of Justice:
Note 19: [2003] O.J. 621 (O.S.C.J.).
[121] Promoting George Georgiou to the position of vice-president was purely a marketing gimmick, an intentional misrepresentation to the public by Midland. The public would consider a vice-president to have special status, be more knowledgeable and influential.
[123] What is more problematic is the process. The promotion resulted from the influence of the National Sales Manager. This clearly demonstrates the high position sales had in the corporate structure and, conversely, the lack of importance allocated to compliance.
¶ 272 In the Court's opinion, the titles "vice-president" and "vice-president and director" have no place in the brokerage field when they apply to simple representatives. They then constitute a mere "marketing gimmick", to use Gordon J.'s words, just a misrepresentation contrary to the duty of a brokerage firm to seek to protect its clients and to inform them well. By continuing to use those titles, brokerage firms expose themselves to criticism, as in this case.
¶ 273 As for the title "specialist in retirement investments" or "retirement specialist", it was not a title given Migirdic by the defendant, but the defendant authorized him to use it (among others on his business cards). Once again, it was a way to instill trust in retirees and prompt them to rely on their representative in all confidence. In actuality, the title meant nothing more than that Migirdic had many retired clients, which did not make him more competent in that area and also did not make him a better representative for those people (much to the contrary, Migirdic exploited their greater vulnerability).
All of the above criminal or civil violations of the public, are common, standard, and daily practices by the investment industry, upon millions of Canadians. It is a fundamental cause of severe economic and financial abuse of Canadians. It is ignored and accepted by captured and willfully blind regulators. We ask the Competition Bureau to not simply pass the buck on these important matters, to these very same industry-paid regulators, as it has tried to do in the past, but act in a professional and proper manner as provided in the Competition Act.
========================================================================================================================================
Preamble to an article describing the worlds largest bait and switch fraud:
The Grand Deception is named after the man who coined the term, Stan Buell. He is an engineer by profession, and old school gentleman and a victim of financial abuse by financial professionals.
He began the Small Investor Protection Association in 1998 after seeing a need for an organization which was not captured and beholden to the financial industry, and whose sole mandate was to protect the public from acts of financial predation by the financial industry.
He learned the hard way that the banking and brokerage industry of the 21st Century is not at all the same as it was in the 20th Century. It has morphed from an industry of trust and integrity to one of mistrust and addict-like behaviours to money. I have created a comparison in my mind between the complete "winner steal all" mentality of a Los Angeles riot (or some New Orlean's looters when given the opportunity) and the similar acts of bankers and brokers when it is learned that the "authorities" are nowhere in sight. I give my own long winded (15 minute) view of what this looks like, with this as the tag line:
"former stockbroker, reveals a dozen "tricks of the trade" used to harm 30o million Canadians and Americans. Tricks by brokers, regulators, and others who claim to serve the public interest."
The video is here for those who might wish to view it, http://youtu.be/EyAuod1QxhQ?list=UUy8dp ... JBa_l0w7AQ
You would think that there is nothing at all new under the sun, by this time. After all, I began with my Canadian Securities Course in 1980, stayed in the business from 1984 to 2004, and researched it like a man possessed from 2004 to 2014. But no, we find that the most important ingredients in making money the old fashioned way……those who do it by subterfuge and misdirection…..the most important ingredients are kept quite hidden and secret. They are the "tricks of the trade" if you will, and these are what this entire "flogg" (forum/blog) has been about since 2004. The hidden tricks of the trade.
What is wrong with having tricks of the trade? After all, every trade has their secrets, and their methods of getting the job done faster, easier, better, from mechanics to bricklayers. Well, my trade was a profession, and one where I was taught that my customer's best interests must come first, that I must not use my skill and knowledge to my own personal benefit, but rather to their sole benefit. Little did I realize until well into the game, that the game was changing, right under my feet. Those at the top of the financial and regulatory game were sick of putting clients first and making money the "old fashioned way". They could make it all in a few years, if they took a few shortcuts.
This flogg has been about those shortcuts that financial professionals now take to "get rich quick". It is about using the "trust and integrity" earned by bankers of the last century, and selling out this trust and integrity for faster and faster rewards. My financial industry has become identical to a friends house-sitter experience of late, where a young recovering addict stayed at his house, while he visited the other side of the country for a month, and upon his return, found his TV and his snowblower had been stolen and pawned to feed an addiction…….that is the investment banker of today. Some are literally closer to addicts than professionals. My proof of such a statement is found in the article at the end of this intro.
A professional who is willing to violate his own duty of loyalty and care to his clients, and to use a biblical phrase from Peter Benedek, CFA, blog "placing an obstacle before the blind". The investment industry, outside of those with a rare degree of personal and professional self respect, are today specialists in placing obstacles before the blind, of using their talent and skills to take advantage of their customers, rather than to help them.
Here is one of the best ways how, and Stan has called it the GRAND DECEPTION:
And here is the article itself:
SYSTEMIC INVESTMENT DECEPTION
“The FIDUCIARY standard of investment advice is clear, objective, and protective of the investor. The SUITABILITY standard of care is vague, undefinable and subjective. It allows investors to be sold nearly anything, as long as someone calls it an “investment". It can even mean selling the most expensive investment choice for compensation reasons. Nearly every “advisor” and sponsoring dealer are bound only by the “suitability” standard. This may be the greatest undisclosed risk facing investors today”
Just recently the creator of world famous DILBERT cartoons, Scott Adams, made this statement on CNBC about a risk ordinarily hidden from the public: “Beware financial advisors” is the tag line quoted from him. (video here: http://www.cnbc.com/id/101906843
I worked 20-plus years inside Canada’s top investment dealers and never was I able to hold a copy of my license or registration. This was always handled by the investment firm. I now better understand why, and I would like to share it with you.
First a warning: This article contains both facts and some of my own opinions. The facts are what they are, and many links are enclosed for readers to search, read and come to their own conclusions. My opinion is biased, and based on the following; I simply do not believe that professionals or persons who promise to act in a position of trust, should then be allowed to betray that trust, and take advantage of consumers. Please take whatever you can from this information and leave behind anything which you may not agree with. It is intended to create discussion.
Although rules and procedures about “client-first” behaviors seemed fairly clear cut, I also never found resolution to the question of whether sales came first, and trusted advice second, or the other way around. The deeds of the firms never quite matched the words or promises.
It was in 2013 when a conversation with Stan Buell, caused us both to step back and to question even our most basic beliefs about risks to investors financial health.
Stan was on the Investor Advisory Panel at the OSC (Ontario Securities Commission) and is the well respected founder of SIPA (Small Investors Protection Association of Canada 1998 http://www.sipa.ca )
Stan mentioned attending a gathering of regulators and overhearing two securities commission lawyers discuss spelling variations of “advisOR” verses “advisER”. This was years ago and it never occurred to either Stan or myself that something hidden in plain sight could form such a grand consumer deception. The thought of such simple trickery as spelling variations, was not something which had ever entered our minds for Canadian financial services providers.
We undertook over a year of research into those two key words, “advisor” and “adviser”, writing to, and getting clarification from U.S., as well as Canadian securities regulators. We learned that the difference in meaning is significant enough to cut the average investors retirement money by about half. The other half will be in the hands of the investment service provider.
Investors are being deceived and then shortchanged by the industry and regulatory blindness. Stan calls it The Grand Deception, and says he has never seen anything of quite this magnitude to harm investors in his two or more decades of investor protection work. And Stan has seen it all.
Most people would prefer to believe that "Adviser" and "Advisor" are simply spelling variations for the same word, with the same meaning. To imagine these tricks from some of the world’s most trusted financial institutions is simply too much for many to grasp. Cognitive dissonance is far preferable to such an ugly possibility.
The dictionary and some business newspapers help feed the myth (spelling differences, yet same meaning), but the question of whether or not they are identical “in law” remains hidden to investors.
The head of the SEC and the fine print at the CSA (Canadian Securities Administrators) is somewhat clearer on the facts, as this following example shows.
At this video link are 88 words in just over one minute from SEC Chair Mary Jo White, describing the differences in legal duties to clients between those legally registered as "adviser" and those who simply call themselves "advisor" (no legality, just an arbitrarily chosen “title”).
http://youtu.be/TqBSiR6VwP4?list=UUy8dpTRZHEz-0JBa_l0w7AQ
The following SEC INVESTOR BULLETIN came to me as I was writing this:
http://www.sec.gov/investor/alerts/ib_making_sense.pdf"Financial professional titles and licenses are not the same."
And then there is this from the CONSUMER FINANCIAL PROTECTION BUREAU, an official website of the United States Government. They say this
""Financial advisers: don’t take their credentials at face value."
http://www.consumerfinance.gov/blog/financial-advisers-dont-take-their-credentials-at-face-value/?utm_content=buffer55ff0&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer
This is what the Canadian Securities Administrators (CSA) said recently when questioned:
“We do not prescribe specific titles to be used by those persons who are either dealing or advising in securities. Most securities legislation requires that an individual who holds themselves out as being registered to in fact be registered and to indicate the actual category of registration.”
Chris Besko Acting General Counsel & Acting Director for the CSA, Employed at the Manitoba Securities Commission
The comments in quotes above, seem to suggest both, that they do have rules...... and that they don’t follow those rules. Regulators in Canada seem quite blind to something as simple as deceit. Thankfully, civil courts are starting to recognize and award damages for this misrepresentation, but consumers should not be forced into civil court at a cost of hundreds of thousands of dollars and years out of their lives, to receive the industry required standards of “honesty, fairness, and good faith”.
Search the license or registration category of your “advice” giver here in Canada
CSA (Canada) https://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850 If it says “dealing representative” you have a “salesperson” according to the CSA and not someone registered or responsible to act as “adviser” or “advisor”.
Search the license or registration category of your “advice” giver here in the USA
FINRA for US “Broker” search: http://brokercheck.finra.org/Search/Search.aspx If it says “broker” then you have a salesperson, regardless of what they prefer to use on the business cards.
Stan and I learned that the the trickery is in regulators letting commission sales-persons promise or imply to the public that they are registered or licensed as "Financial Advisors". By using the spelling variation not used in the Securities Acts of Canada or the USA, they seem able to imply the responsibility of a professional fiduciary Adviser, while carrying only the responsibility of a commission sales person.
I call this the “World’s Greatest Bait and Switch”, and I made a video to this effect even before working with Stan on spelling tricks. If you have been taken in by deception, this video may help describe what has taken place and shows info that some investors have used to get their money back. http://youtu.be/KH6XMXlfdBw?list=UUy8dpTRZHEz-0JBa_l0w7AQ )
It (the Grand Deception) has less to do with spelling, and everything to do with what the spelling trick allows sellers and dealers to accomplish, namely the “implying” or “pretending” the attributes of a fiduciary (undivided professional loyalty to customer) whilst delivery of a “suitability” obligation only. (“suitable” is as vague and undefinable a standard as “edible”, “drinkable”, or “do-able”) See “suitability” loopholes explained here in a 2 minute video. http://youtu.be/aWulI3Kwi_A?list=UUy8dpTRZHEz-0JBa_l0w7AQ
Or even worse, as Goldman Sachs and others were found out doing, figuring out to make even MORE money by putting clients into bad investments, selling toxic junk, in other words, and perhaps even shorting, or placing bets that the junk they sold would then crash. Becoming specialists in "placing obstacles before the blind".
Neil Weinberg, former Editor in Chief of American Banker Mag puts it into his own words in this OCT 18, 2013 article in American Banker Magazine:
“Financial Advisor Chicanery: Imagine a two-tiered health care system in which some doctors were legally obligated to do what's right for their patients and others, like snake-oil salesmen of yore, could recommend whatever treatments made them the most money, as long as they didn't kill patients outright.”
“Now imagine that the shysters did all they could to blend in with the real doctors. That's effectively the type of system we have today among the people Americans count on to tell them how to invest their life's savings. Registered investment advisors must, by law, put clients' interests first. Many thousands of other "advisors" at places like Morgan Stanley, Merrill Lynch and smaller shops are held to a much lower "suitability" standard.”
“In essence, even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. Some do a great job serving their clients. Others don't. It's up to them. Under the law, as long as they avoid putting an 85-year-old widow into an exotic derivative with a 20-year lockup, they're bulletproof.”
“Few clients know this fiduciary-suitability gap exists. The suitability crowd has worked tirelessly to keep the standard low and the distinctions murky. The cost to the public is incalculable but huge.” Full article is found here:
http://www.americanbanker.com/bankthink ... 940-1.html
How much is the financial damage to the public? Billions of dollars can be garnered each year by those who purport to hold a professional license/registration while neither holding the license nor the professional duty implied. This occurs today despite rules, laws regulators, and authorities who should be applying those rules to protect the public.
This one minute commentary from a victim of financial abuse by financial professionals is candid and accurate, according to our findings: http://youtu.be/TYu_td_bvs8?list=UUy8dpTRZHEz-0JBa_l0w7AQ
One illustration of the harm done by deceit is shown in a study by pension expert Keith Ambachsteer at the University of Toronto. Keith points out that retail Canadian mutual fund investors (those typically served by the “salesperson-advisor”) are receiving a “haircut” by the industry of 3.8% per year on mutual funds alone. When the report was written in 2007 this amounted to $25 billion each year taken from investors. Today, with nearly one trillion in mutual fund assets, this amount could be closer to $40 billion taken out of the life savings of Canadians.
Link to U of T study “The $25 Billion Dollar Pension Haircut”, here:
https://docs.google.com/file/d/0BzE_LMPDi9UOYTJiY2NmMDEtM2Y4ZS00OTBjLWE3ZjUtNGYxODAzZjkyOTkw/edit
Whether you agree or not that a “spelling trick” is even possible in Canada and the U.S. is not the point of this article. The point is.......for investors to understand whether or not their financial “advice giver” has a FIDUCIARY duty to them, or the legally vague, undefined, and self-determined “SUITABILITY” obligation. The difference is enough to easily cut your retirement in half. That is the million dollar question for every investor, and in my opinion it is the greatest, and best concealed risk the retail investor faces today.
Divided (and non-disclosed) loyalties, first to the investment dealer, second to commissions, third, finally to the client (some good advisors struggle to avoid this but are marginalized) are an investment risk that the investment industry is not yet ready to tell customers about, despite the requirement of “fairness, honesty and good faith”.
Without sufficient time or space in this article to get into solutions needed to right these wrongs, I refer readers who wish to go further to find the flogg topic titled “Solutions, Self Defense and Best Practices “ at this site http://www.investoradvocates.ca .
I look forward to any readers joining me on Facebook or Twitter, where I try to use social media for social good.
Some well informed journalists and investment expert writings on this topic, for those who would like to obtain other perspectives:
Wall Street Journal
"Much like garbagemen rechristening themselves “sanitation engineers,” the folks who flog investments are tweaking their titles to make what they do seem fancier and more impressive than it is."
[url]viewtopic.php?f=1&t=34&p=3792#p3792[/url] (wall street journal Blog article)
American Banker Magazine
"even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. "
http://www.americanbanker.com/bankthink ... 940-1.html
Financial Times
"Trust me, I am a financial advisor" is not good enough...
http://www.ft.com/intl/cms/s/0/21b52478 ... al%20Times
New York Times
"“The S.E.C. has been studying issues related to investment-adviser and broker-dealer regulation and overall market conditions for over 10 years,”
“It’s puzzling to me why you would ask an agency to conduct a study when it is already an expert in the regulatory issues being discussed.”
http://www.nytimes.com/2010/03/04/your- ... rk%20Times
Washington Post
"...the SEC enforces the standards for fiduciaries — but brokers, aiming to head off more regulations, created the suitability rules themselves."
http://www.washingtonpost.com/business/ ... ign=buffer
Wall Street Journal
"...Most people do not realize that financial advisers (also known as financial planners, financial consultants, investment counselors, money managers, portfolio managers, wealth managers and other names) come in two flavours."
http://blogs.wsj.com/experts/2014/10/09 ... d-brokers/
Ron Rhoades Asst. Professor, Program Chair, Financial Planning Program, Alfred State College, Alfred, NY;
"As long as American consumers cannot discern between ethical actors (who adhere to a bona fide fiduciary standard at all times,…. and actors bound only by the weak suitability standard, the demand for financial planning and investment advice will stagnate. "
http://scholarfp.blogspot.ca/2014/11/le ... ue-to.html
CFA Peter Benedek reviews "Is Your Advisor Deceiving You?"
"The professional who is willing to violate his own duty of loyalty and care to his clients is "placing an obstacle before the blind".
http://retirementaction.com/2014/06/13/ ... e-16-2014/
Ron Rhoades Asst. Professor, Program Chair, Financial Planning Program, Alfred State College, Alfred, NY;
"I believe that holding yourself out as a trusted advisor, and not accepting fiduciary status and its burdens and restraints upon conduct, is tantamount to fraud."
http://scholarfp.blogspot.ca/2014/10/i- ... lieve.html
Make advisors work for investors, Financial Post
"Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying. "
Edward Waitzer article, Financial Post · Tuesday, Feb. 15, 2011) (Mr. Waitzer is a Bay Street Lawyer and former Securities Commission chair, and this quote ( by another person) appeared in his article.
[url]http://opinion.financialpost.com/2011/02/14/make-advisors-work-for-investors/
[/url]
Canada
Dr Jin Choi, Ph.D.
"...allows a financial advisor to say, with a straight face, that financial advisers are obligated by law to have their clients' best interest at heart, and at the same time sell products that line their own pockets at the expense of the client."
http://www.moneygeek.ca/weblog/2014/06/ ... iving-you/ Former Hedge fund employee, Ph.D, blog
Larry Elford is a former CFP, CIM, FCSI, Associate Portfolio Manager, retired from the financial services industry and lives in Alberta. He protects families and institutions from the hidden, systemic, risks of the financial industry.
[url] http://www.investment-bodyguard.com[/url]
Twitter: @RecoveredBroker
http://www.youtube.com/user/investoradvocate?feature=mhee
http://www.investoradvocates.ca
Signed:
Larry Elford, Founder and director Investor Advocates, Alberta http://www.investoradvocates.ca
Stan Buell, Founder and director Small Investor Protection Association of Canada 1998. http://www.sipa.ca
Alexander Clark, Private Investor, Okotoks Alberta
Garth Rustand, founder Investors-Aid, Vancouver, B.C. http://investors-aid.ca
Robert Pouliot, http://www.rcp-partners.com, Fiduciary rating of asset management companies, director of FAIR Canada
Ken Kivenko, P. Eng. Investment Industry Expert, Toronto
Keith Ambachtsheer, Director of the Rotman International Centre for Pension Management (ICPM), an Adjunct Professor of Finance, kpa-advisory.com
Dr. Jin Choi, Ph.D. in Applied Mathematics, specializing in Financial Mathematics, author of "The Short Book on Investments For Canadians" http://www.moneygeek.ca
David Stanley, PhD, Private Investor, Investment Commentator and Author, Rockwood, Ontario
Joe Killoran, 1979 Ivy MBA, Investment Industry Ethics Commentator since 1987, Kimberly, Ontario
Cory Lanterman, Private Investor, Calgary, Alberta
Murray Candlish, Private Investor, Daysland, Alberta
Diane Rowson, Private Investor
Don Stewart, Private Investor, Edmonton, Alberta
Andrew Teasdale, CFA, BA Hons Econ, Independent Consultant, Toronto, Ontario, blog.moneymanagedproperly.com, @depthdynamics
Mike McDonald, Private Investor, Lethbridge, Alberta
Peter Whitehouse, Private Investor, Mississauga, Ontario
William David Butts, Private Investor, Alberta
Don Logan, Private Investor, Edmonton, Alberta
Bruce Duckworth, Private Investor, Calgary, Alberta
Lor'e Arens, Private Investor
Debra McFadden, Private Investor, Windsor Ontario
Jim Herzberg, Private Investor, Winnipeg, Manitoba
Clayton Wilson, Private Investor, Nova Scotia
Reid Mosley, Private Investor, Alberta
Lorenzo D'Alesio, Private Investor, Montreal
Harrison Dollard, Private Investor, Alberta
Eric Clark, Private Investor, Ottawa
Reid Moseley, Private Investor, Alberta
Prem Sikka, Professor of Accounting, Centre for Global Accountability, Essex Business School, University of Essex, Colchester, UK
Layne Arthur, Private Investor, Sylvan Lake, Alberta
Brian Sexton, Private Investor, Alberta, Calgary
Derek McCardell, Private Investor, Edmonton Alberta
Lana Stewart, Private Investor, Edmonton Alberta
Ken Zilliox, Private Investor, Edmonton Alberta
Gary Logan, former Detective Sergeant- Corporate Section, Fraud Squad, Toronto Police Service
Peter Whitehouse, PLI Consulting, Mississauga, Ontario
Robb Engen, Money expert, blogger, bi-weekly column contributor to Toronto Star. http://www.boomerandecho.com
Alan Blanes, Kelowna, BC. Delegate to the 2014 Council of Canadians AGM in Hamilton
Jean Lespérance, blogger at Canadian Financial DIY
William D. Nichol, Director, Canadian Justice Review Board of Canada
Peter Benedek, RetirementAction.com
Peter Stack, Private Investor, Calgary, Alberta
Mildred Jagdeo, Private Investor, British Columbia
============
Canadian Finance Minister Joe Oliver correspondence Dec 4, 2014:
"It is troubling to hear of the deceptions being perpetrated by advisors".
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Re: Competition Bureau negligence, enabler to "trusted" crim
by admin » Fri Mar 21, 2014 9:44 am
Jul 5, 2012 INVESTING Wall Street Journal
Should You Go to an Adviser or an Advisor?
By JASON ZWEIG
Associated Press The New York Stock Exchange
Long ago, investors bought stocks from "customer's men," who then became "registered representatives," who in turn morphed into "investment adviser representatives." Financial planners, meanwhile, became "financial advisers" and even "wealth managers."
Much like garbagemen rechristening themselves "sanitation engineers," the folks who flog investments are tweaking their titles to make what they do seem fancier and more impressive than it is.
Stockbrokers and financial planners alike have been migrating, en masse, from the word "adviser" to the alternative, subtly-more-impressive spelling advisor. (When you typeadvisor in WordPress, as I just did, the software underlines it with red sawteeth, signaling that the word is misspelled. Most dictionaries say either spelling is acceptable.)
What's remarkable about this is that the federal law that regulates the provision of financial advice is called the Investment Advisers Act of 1940, with an "E," not an "O." Both the Securities and Exchange Commission and the Financial Industry Regulatory Authority, which oversee how investments are sold to the public, call someone who gives financial advice an "adviser" - not an "advisor."
Why, in a regulated industry, would you choose to be called something other than what the law that regulates you calls you?
Lexicographer Barry Popik tells me that a search of the Library of Congress's site, Chronicling America, for the years 1836 to 1922 shows that the word "advisers" returns 875,830 hits, versus just 21,145 for "advisors."
And the Corpus of Contemporary English, reports Popik, shows more than 5,200 citations for "advisers" but just under 2,000 for "advisors."
On the other hand, search now at the U.S. Patent and Trademark Office and you will find more than 3,800 companies with "Advisors" in their name, vs. well under 300 that call themselves "Advisers."
So, it seems, the written language overall has long appeared to favor "adviser" over "advisor," but financial companies have a strong preference for calling themselves advisors.
Why?
There may be something about the "-or" suffix that lends it more gravitas than "-er." A donor seems, somehow, more generous than a giver. An author is more dignified than a writer. An orator is more eloquent than a lecturer or speaker. When real-estate agents invented a moniker for themselves, they chose to become Realtors, not Realters.
Plus, if you are working on a master's or doctorate, you will have an advisor for your thesis or dissertation, not an adviser. Many financial advisers crave the same kind of intellectual respectability - and marketability - that graduate degrees confer, which helps explain why they often collect professional designations enabling them to festoon their names with sets of initials.
We'll know the field of financial advice has finally arrived as a profession when its practitioners accept how the law of the land says they should spell what they do - and when they stop trying to gussy it up with a spelling gimmick.
=============
Advocate comments: To speak with the Competition Bureau of Canada is a disappointment of epic proportions. This blatant misrepresentation and subsequent cheating of consumers is one of the largest and most urgent matters facing North American society today.
========
Joe Killoran comments:
IF Canadian market registrants are not registered and / or licensed as "financial advisors" . . .
and
. . . when the words "salesperson" and "advisor" are not synonyms in any / every Thesaurus bible . . .
It's a black and white criminal misrepresentation under Section 52.1 of our GOC Competition Act when our "caveat emptor" CDN market registrants were licensed as "salespersons" until Sept 30, 2009,
. . . and then it was another black and white Criminal Code Section 122 Breach of Trust that was committed individually and collectively by our 13-CSA securities commissions who mysteriously re-registered / re-licensed our market registrants from coast to coast en masse as "dealing representatives"
. . . and then knowingly presented, marketed and misrepresented as a fiduciary sounding and odorously smelling "financial advisors" by our 13-CSA securities commissions, their SRO granted MFDA and IIROC industry association regulatory bodies + by our supposedly watchdog business press too . . . .
. . . and then by our Federal GOC Competition Bureau that knowingly will not do its job and investigate these blatant Criminal Misrepresentation practices !!!
Information Sheet on the Competition Bureau & Deceptive ...
http://www.competitionbureau.gc.ca/eic/ ... 03073.html
Jun 2, 2009 - Section 52.1 of the Competition Act, which is a criminal provision, ... and any other criminal misrepresentations are covered under section 52 of ...
http://www.investmentexecutive.com/-/cs ... newsletter
==============
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Re: Criminal Provisions of Competition Act apply to industry?
by admin » Thu Mar 10, 2011 8:50 am
Nine of the 16 markets surveyed by the CFA Institute said that financial advisors miss-selling products to generate commissions is the biggest ethical concern in their local markets. In Canada, concerns about advisors were cited as the top worry by 32% of respondents, double the next biggest concerns, market fraud,
misrepresentation as “advisers” Competition Bureau Section 52 Criminal Complaint.......completely ignored by the Competition Bureau of Canada
Misconduct by financial advisors the most serious ethical issue facing Canadian market: CFA Institute survey
Derivatives the most serious issue facing global financial markets
Tuesday, March 8, 2011
By James Langton
Misconduct by financial advisors is the most serious ethical issue facing the Canadian market, according to a recent global survey of CFA Institute members.
Nine of the 16 markets surveyed by the CFA Institute said that financial advisors miss-selling products to generate commissions is the biggest ethical concern in their local markets. In Canada, concerns about advisors were cited as the top worry by 32% of respondents, double the next biggest concerns, market fraud, and the use and disclosure of derivatives positions, which both garnered 16%.
The quality of financial reporting, market trading practices (such as high frequency trading) and investment management (the quality of service and cost/compensation models), received 14%, 12% and 9%, of Canadian responses, respectively.
In terms of global markets, both the survey overall, and Canadian respondents, ranked derivatives as the biggest ethical concern, followed by financial reporting and market fraud. Financial advisors only ranked fourth (in both Canada and globally), with trading practices and investment management rounding out the list.
Additionally, Canadian respondents ranked “improved enforcement of existing laws and regulations” first on the question about the sort of regulatory action they believe is most needed to improve market trust and integrity. This was also in line with the overall survey, which put improved enforcement first, improved regulation and oversight of global systemic risk second, and improved transparency of financial reporting and other corporate disclosures third.
The survey also found that 32% of CFA Institute members think the integrity of global capital markets will be better than 2010, 13% think it will be worse, and 55% said about the same (the breakdown was more or less the same in Canada, at 29%, 12%, and 58%, respectively).
“We created the Financial Market Integrity Outlook Survey as a way for CFA Institute members to help us assess the ethical framework of our profession and to identify any ‘hot spots’ facing the industry,” said Kurt Schacht, managing director of the Standards and Financial Market Integrity division at the CFA Institute.
“Sadly, only one-third of all respondents are optimistic that the integrity of capital markets will be better in 2011 than in 2010. A more optimistic view of financial market integrity will likely depend on increased global transparency of risk and risk-related instruments and better regulatory coordination of systemic risk detection and mitigation,” he added.
The survey was completed January 21, and carries a margin of error of ±1%.
IE
misrepresentation as “advisers” Competition Bureau Section 52 Criminal Complaint.......completely ignored by the Competition Bureau of Canada
Misconduct by financial advisors the most serious ethical issue facing Canadian market: CFA Institute survey
Derivatives the most serious issue facing global financial markets
Tuesday, March 8, 2011
By James Langton
Misconduct by financial advisors is the most serious ethical issue facing the Canadian market, according to a recent global survey of CFA Institute members.
Nine of the 16 markets surveyed by the CFA Institute said that financial advisors miss-selling products to generate commissions is the biggest ethical concern in their local markets. In Canada, concerns about advisors were cited as the top worry by 32% of respondents, double the next biggest concerns, market fraud, and the use and disclosure of derivatives positions, which both garnered 16%.
The quality of financial reporting, market trading practices (such as high frequency trading) and investment management (the quality of service and cost/compensation models), received 14%, 12% and 9%, of Canadian responses, respectively.
In terms of global markets, both the survey overall, and Canadian respondents, ranked derivatives as the biggest ethical concern, followed by financial reporting and market fraud. Financial advisors only ranked fourth (in both Canada and globally), with trading practices and investment management rounding out the list.
Additionally, Canadian respondents ranked “improved enforcement of existing laws and regulations” first on the question about the sort of regulatory action they believe is most needed to improve market trust and integrity. This was also in line with the overall survey, which put improved enforcement first, improved regulation and oversight of global systemic risk second, and improved transparency of financial reporting and other corporate disclosures third.
The survey also found that 32% of CFA Institute members think the integrity of global capital markets will be better than 2010, 13% think it will be worse, and 55% said about the same (the breakdown was more or less the same in Canada, at 29%, 12%, and 58%, respectively).
“We created the Financial Market Integrity Outlook Survey as a way for CFA Institute members to help us assess the ethical framework of our profession and to identify any ‘hot spots’ facing the industry,” said Kurt Schacht, managing director of the Standards and Financial Market Integrity division at the CFA Institute.
“Sadly, only one-third of all respondents are optimistic that the integrity of capital markets will be better in 2011 than in 2010. A more optimistic view of financial market integrity will likely depend on increased global transparency of risk and risk-related instruments and better regulatory coordination of systemic risk detection and mitigation,” he added.
The survey was completed January 21, and carries a margin of error of ±1%.
IE
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Re: Criminal Provisions of Competition Act apply to industry?
by admin » Mon Mar 07, 2011 6:01 pm
A friend of mine (see previous post) today spoke at length to an Adam Zimmerman from the Competition Bureau. (it has to be noted that the competition bureau also refused to put anything beyond this point in writing to my friend)
Despite billions of dollars at risk, despite misrepresentation that has cost our economy billions, despite this being a "foundational" issue for many, many forms of financial violence against the public, this agent of the competition bureau said they could not "see the risk" to the public and thus would not be acting on this matter.
I think I can translate this statement into english this way: "we cannot imagine taking on anything this difficult, nor opponents this strong......and thus we will not be taking any action".
During the conversation, this person repeated the "15,000 complaints" etc, and this may also form a partial reason for the non action by the Competition Bureau of Canada.
Here again, for the record, is the comment from Feb 15th National Post article, "As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying."
http://www.financialpost.com/news/Make+ ... story.html
It is the best scam in the country, it forms the foundation of most of the fraud and misrepresentation by the financial industry in Canada. Imagine, if your business could mislead your customers about what your license and qualifications were.......imagine being able to tell your customers that you are a professional engineer, doctor or lawyer, without having the license. Imagine how much money you could take. Now imagine that your Competition Bureau helps by looking the other way with the scam.
Despite billions of dollars at risk, despite misrepresentation that has cost our economy billions, despite this being a "foundational" issue for many, many forms of financial violence against the public, this agent of the competition bureau said they could not "see the risk" to the public and thus would not be acting on this matter.
I think I can translate this statement into english this way: "we cannot imagine taking on anything this difficult, nor opponents this strong......and thus we will not be taking any action".
During the conversation, this person repeated the "15,000 complaints" etc, and this may also form a partial reason for the non action by the Competition Bureau of Canada.
Here again, for the record, is the comment from Feb 15th National Post article, "As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying."
http://www.financialpost.com/news/Make+ ... story.html
It is the best scam in the country, it forms the foundation of most of the fraud and misrepresentation by the financial industry in Canada. Imagine, if your business could mislead your customers about what your license and qualifications were.......imagine being able to tell your customers that you are a professional engineer, doctor or lawyer, without having the license. Imagine how much money you could take. Now imagine that your Competition Bureau helps by looking the other way with the scam.
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Re: Criminal Provisions of Competition Act apply to industry?
by admin » Fri Mar 04, 2011 11:42 am
Crime really, really, REALLY pays well in Canada with government departments like this who either cannot recognize a crime when presented to them, cannot understand it, cannot find the courage to enforce it against powerful criminals, or simply do not have the resources to enforce the law...........see below letter from Comp Bureau brushing off an issue that they have pursued (misrepresentation) in other professions.......
March 3, 201 1
Dear Mr. Killoran:
Canada
Canada
Place du Portage I 50 Victoria Street Gatineau, Quebec K1A OC9
Telephone-Telephone (819) 997-1231 Facsimile-Telecopieur (819) 953-4792 E-Mail-Courriel: lisa.campbellQcb-bc.gc.ca
Thank you for your recent e-mails addressed to the Commissioner of Competition (the "Commissioner"), regarding your concerns with respect to the alleged deceiving misrepresentations in the Bay Street "advisor" practice. The Commissioner has asked me to respond to your concerns on her behalf.
The Competition Bureau (the "Bureau"), as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
It should be noted that the Bureau receives approximately 15,000 complaints each year. To that end, given the high volume of complaints, the Bureau has processes in place to ensure that they are dealt with in a fair and timely manner.
Following a preliminary review of your complaint, the alleged conduct described in your correspondence does not appear to raise an issue that could be pursued under the Competition Act (the "Act"). The Bureau will keep your correspondence in its database.
For future reference, please note that, should you believe that the Act has been or is about to be contravened, please submit your complaint directly to the Bureau's Information Centre through the following link at: h t t p : / / w w w . c o m p e t i t i o n b u r e a u . g c . c a ~ e i c / s i t e / c b - b c . n s f / f r m - e n G H % %C 3 8 9 T - 7 T D N A 5
Should you require additional information regarding the Bureau, I invite you to visit the Bureau's website at http:Nwww.competitionbureau.gc.ca.
I trust this information will be of assistance to you.
Yours truly,
Lisa Campbell
Deputy Commissioner Fair Business Practices B
March 3, 201 1
Dear Mr. Killoran:
Canada
Canada
Place du Portage I 50 Victoria Street Gatineau, Quebec K1A OC9
Telephone-Telephone (819) 997-1231 Facsimile-Telecopieur (819) 953-4792 E-Mail-Courriel: lisa.campbellQcb-bc.gc.ca
Thank you for your recent e-mails addressed to the Commissioner of Competition (the "Commissioner"), regarding your concerns with respect to the alleged deceiving misrepresentations in the Bay Street "advisor" practice. The Commissioner has asked me to respond to your concerns on her behalf.
The Competition Bureau (the "Bureau"), as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
It should be noted that the Bureau receives approximately 15,000 complaints each year. To that end, given the high volume of complaints, the Bureau has processes in place to ensure that they are dealt with in a fair and timely manner.
Following a preliminary review of your complaint, the alleged conduct described in your correspondence does not appear to raise an issue that could be pursued under the Competition Act (the "Act"). The Bureau will keep your correspondence in its database.
For future reference, please note that, should you believe that the Act has been or is about to be contravened, please submit your complaint directly to the Bureau's Information Centre through the following link at: h t t p : / / w w w . c o m p e t i t i o n b u r e a u . g c . c a ~ e i c / s i t e / c b - b c . n s f / f r m - e n G H % %C 3 8 9 T - 7 T D N A 5
Should you require additional information regarding the Bureau, I invite you to visit the Bureau's website at http:Nwww.competitionbureau.gc.ca.
I trust this information will be of assistance to you.
Yours truly,
Lisa Campbell
Deputy Commissioner Fair Business Practices B
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Re: Criminal Provisions of Competition Act apply to industry?
by admin » Thu Feb 17, 2011 9:28 am
Mr. Elford,
I acknowledge receipt of your complaint.
As I have noted in previous discussions with you, the matters enforced by the Criminal Matters Branch of the Competition Bureau deal with alleged offences under section 45 or section 47 of the Competition Act.
Your complaint concerns section 74 of the Competition Act and, consequently, it has been forwarded to the Fair Business Practices Branch.
Thank you for your attention to this matter.
Sincerely,
Valery Parkinson
Valery Parkinson
Competition Law Officer l Agente du droit de la concurrence
Criminal Matters Branch l Direction générale des affaires criminelles
Competition Bureau l Bureau de la concurrence
50, rue Victoria Street, Gatineau QC K1A 0C9
Government of Canada l Gouvernement du Canada
valery.parkinson@cb-bc.gc.ca
Téléphone | Telephone (819) 994-4042
Télécopieur | Facsimile (819) 997-3835
Ce message contient des renseignements qui pourraient être confidentiels, soustraits à la communication ou protégés par le secret professionnel de l'avocat ou du notaire. S'il ne vous est pas destiné, vous êtes priés de ne pas le lire, l'utiliser, le conserver ou le diffuser. Veuillez le supprimer ou le détruire sans tarder de même que toute copie de celui-ci, et communiquez avec l'expéditeur au 891-953-1610 ou à valery.parkinson@bc-cb.gc.ca . Merci de votre collaboration.
This communication contains information that may be confidential, exempt from disclosure, or subject to solicitor-client privilege, or in Quebec, professional secrecy of advocates and notaries. If you are not the intended recipient, you should not read, rely on, retain, or distribute it. Please delete or otherwise destroy all copies of this communication immediately, and contact the sender at 819-953-1610 or at valery.parkinson@bc-cb.gc.ca. Thank you.
I acknowledge receipt of your complaint.
As I have noted in previous discussions with you, the matters enforced by the Criminal Matters Branch of the Competition Bureau deal with alleged offences under section 45 or section 47 of the Competition Act.
Your complaint concerns section 74 of the Competition Act and, consequently, it has been forwarded to the Fair Business Practices Branch.
Thank you for your attention to this matter.
Sincerely,
Valery Parkinson
Valery Parkinson
Competition Law Officer l Agente du droit de la concurrence
Criminal Matters Branch l Direction générale des affaires criminelles
Competition Bureau l Bureau de la concurrence
50, rue Victoria Street, Gatineau QC K1A 0C9
Government of Canada l Gouvernement du Canada
valery.parkinson@cb-bc.gc.ca
Téléphone | Telephone (819) 994-4042
Télécopieur | Facsimile (819) 997-3835
Ce message contient des renseignements qui pourraient être confidentiels, soustraits à la communication ou protégés par le secret professionnel de l'avocat ou du notaire. S'il ne vous est pas destiné, vous êtes priés de ne pas le lire, l'utiliser, le conserver ou le diffuser. Veuillez le supprimer ou le détruire sans tarder de même que toute copie de celui-ci, et communiquez avec l'expéditeur au 891-953-1610 ou à valery.parkinson@bc-cb.gc.ca . Merci de votre collaboration.
This communication contains information that may be confidential, exempt from disclosure, or subject to solicitor-client privilege, or in Quebec, professional secrecy of advocates and notaries. If you are not the intended recipient, you should not read, rely on, retain, or distribute it. Please delete or otherwise destroy all copies of this communication immediately, and contact the sender at 819-953-1610 or at valery.parkinson@bc-cb.gc.ca. Thank you.
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Re: Criminal Provisions of Competition Act apply to industry?
by admin » Tue Feb 15, 2011 4:55 pm
On February 15, 2011, at 4:37 PM, larry elford wrote:
Feb 15th
to: Competition Bureau of Canada
Enclosed in order:
1) some enforcement matters relating to an investment person in Alberta
2) An article from Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011, suggesting that it is "fraud" to allow the misrepresentation that appears to be allowed by your agency (s)
3) An article from Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011, which appears to be written by another investment protection agency, seemingly in contrast to industry rules and supporting the misrepresentation or "fraud" against the public
4) Alberta Securities Commission Important definitions of the ASC’s Different Market Registrant Licenses from the ASC web site
5) "Misrepresentations to public" section 74.01 (1) A person ... who, for the purpose of promoting, ... the supply or use of a product or ... any business interest, by any means whatever, (a) makes a representation to the public that is false or misleading in a material respect.
It seems as if there may be a different answer to the difficult question of what is allowed and what is not, depending upon who is speaking. I write to you to see if you can clarify, on behalf of the public, the apparent misrepresentation of allowing persons licensed or registered in the category of "salesperson" (pre 2009) or "dealing representative" (post 2009) to call themselves anything and everything they wish to including such official license categories as "advisor", or non-official but equally misleading names such as "vice president", "wealth manager", "retirement advisor", "estate planner".
I realize in advance the difficulty that your organization may face in being truthful in this matter, but I urge you to please look past your immediate self interest, and look to the public interest instead. Millions of Canadians, friends and relatives of yourself, including your children, perhaps your children's children are at risk of being misrepresented by people who pose as professionals, without meeting the qualifications of having to act as professionals. This mistake should not be born on your head as well should it?
I thank you in advance for your reply with clarity so the public can be made aware in as simple and understandable terms as possible.
Larry Elford
lelford@shaw.ca
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enclosure #1
"Financial professionals and salespersons in Canada are allowed to call
themselves advisors, irrespective of their professional designation."
IIROC’s In the Matter of Dale Richard Wells – Penalty below that was released last week on February 11, 2011.
This timely IIROC Enforcement Notice Decision released last week suggests to me that not all / that some IIROC “Registered Representatives” are not registered—licensed in Alberta as “advisers / advisors”.
Does this IIROC Enforcement Notice decision last week definitively refute your statement in your FP Comment column today,
that “salespersons in Canada are allowed to call themselves advisors”?
Enforcement Notice
Decision
Please distribute internally to: Legal and Compliance
Contact:
Warren Funt
Vice President, Western Canada
604 331-4750
wfunt@iiroc.ca
Elsa Renzella
Director, Enforcement Litigation
416 943-5877
erenzella@iiroc.ca
11-0062
February 11, 2011
IN THE MATTER OF Dale Richard Wells – Penalty
Following a disciplinary hearing held on September 2, 2010, in Calgary, Alberta, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that Dale Richard Wells conducted his business in a manner contrary to IIROC Rules by providing advice in securities when he was not properly registered to conduct business of that nature.
Specifically, the hearing panel found Mr. Wells committed the following breach of the IIROC Rules:
During the period February 2006 to July 2008, he acted as an advisor, within the meaning of the Alberta Securities Act, without being registered as such, contrary to IIROC Dealer Member Rule 29.1.
The Hearing Panel’s decision and reasons on the merits can be found at:
http://docs.iiroc.ca/DisplayDocument.as ... anguage=en
Following a penalty hearing held on February 1, 2011, the Hearing Panel imposed:
a $10,000 fine on Mr. Wells
and required him to pay Staff’s costs of $13,000. The Hearing Panel will issue its written reasons on the penalty on a later date, which will be made available atwww.iiroc.ca.
IIROC formally initiated the investigation into Mr. Wells’ conduct in March 2008. The violations occurred when he was a Registered Representative with the Lloydminster, Alberta Branch of First Financial Securities Inc., an IIROC-regulated firm. Mr. Wells continues to be employed as a Registered Representative with First Financial Securities Inc.
The Notice of Hearing is available at:
http://docs.iiroc.ca/DisplayDocument.as ... anguage=en
IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS), IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.
IIROC carries out its regulatory responsibility through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
enclosure # (2)
Make advisors work for investors
Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011
In January 2004, the Ontario Securities Commission released a concept paper advocating a "fair dealing model." The paper acknowledged that the regulatory regime -- regulating dealers and their representatives through the products they sell -- was based on the outdated assumption that transaction execution is the primary reason people seek financial services. Recognizing that most customers are seeking advice, the concept paper proposed changing the regulatory framework to focus on the advisory relationship.
Financial professionals and salespersons in Canada are allowed to call themselves advisors, irrespective of their professional designation. Few, however, are compensated directly for their advice. Instead, they are paid commissions to sell specific products. Addressing the conflicts of interest that result from commission-based compensation, the paper proposed that retail clients should be entitled to rely on objective advice that is in their best interest and, when there are conflicts of interest, they should be clearly disclosed so that the client can understand the conflicts and how they may affect the advice given.
In September 2004, the proposal was swept into a broader project of the Canadian Securities Administrators (CSA) and rebranded as the "client relationship model." Last month, the Investment Industry Regulatory Organization of Canada (IIROC) published its proposed reforms to establish requirements for the client relationship model. They specifically avoid imposing a duty on firms and their representatives to act in the best interest of clients, focussing instead on improving compliance with the existing "suitability" standard and improving disclosure with respect to conflicts of interest and performance reporting. IIROC noted that part of what influenced its thinking was an effort to harmonize with existing and proposed CSA standards (and other standards applicable to firms not under its jurisdiction).
To understand the difference between a "suitability" and "best-interest" standard, think of a student seeking advice at an electronics store about her need for a laptop. The salesperson recommends a highly priced unit with an expensive extended warranty -- all designed to generate the highest commission. The laptop is suitable--it will satisfy the student's needs. It clearly isn't the best solution and a disclosure obligation isn't likely to stand in the way of a motivated salesperson. If the salesperson had been bound by a "best-interest" standard, he would recommend a simpler, more reliable and affordable unit.
In the U.S., brokers and investment advisors are subject to different standards when providing investment advice. Many investors are unaware of these differences or their legal implications or find them confusing. In the wake of the global financial crisis, the Dodd-Frank Act required the Securities and Exchange Commission (SEC) to evaluate the effectiveness of existing legal or regulatory standards of care for providing personalized investment advice to retail customers. Five months later and with the benefit of over 3,500 comment letters as well as a survey conducted by the CFA Institute (which already requires both a suitability and best-interest standard of its members in order to use the Chartered Financial Analyst professional designation) SEC staff released its analysis and recommendations. It has proposed a uniform standard of conduct for all brokers, dealers and investment advisors providing personalized investment advice about securities to retail customers to act in the best interest of the customer.
The SEC staff study acknowledges that working through the details of such a standard so as to ensure it is practicable and cost effective will be complex. It does not propose a strict fiduciary duty, nor does it suggest rules to try to eliminate conflicts.
The U.K. Financial Services Authority (FSA) recently banned commissions for advised sales of retail investments and released proposals which would require advisors to explain why a product is better than a cheaper alternative. This and other more intrusive proposals are based on the FSA's realization that there are "fundamental reasons why financial services markets do not always work well for consumers."
The contrast in the direction, speed and intensity of regulatory reform between Canada and other major developed markets raises a number of questions and suggestions. Why did the OSC start down the path of a "best-interest" standard in 2004 and, while others (including the U.K., Europe and Australia) have caught up, we appear to have fallen back to where we started -- disclosure requirements and a relatively static "suitability" standard? To what extent is this a function of a fragmented regulatory framework suffering from bureaucratic inertia (and an industry suffering from regulatory fatigue)? What accountability mechanisms are required to motivate a more focussed and intense effort?
Why is it that Canadian regulators have shied away from proposing a "best-interest" standard? As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying." Many argue that it's the buyer's responsibility to do due diligence and shop around for the best price. But should caveat emptor apply when buyers think they are hiring a professional to do the shopping?
There may be light at the end of this tunnel. Hopefully, the robust regulatory reform efforts underway elsewhere will inform and impose some discipline on our own. The OSC has a new chair. It recently established a highly credible Investor Advisory Panel, which has added this issue to its list of initiatives. FAIR Canada, the Hennick Centre for Business and Law, and the Toronto CFA Society are convening a second annual symposium on the subject next week. Finance Minister Jim Flaherty has demonstrated genuine interest in investor protection -- most recently supporting a national strategy to strengthen financial literacy.
Canada takes justifiable pride in its financial institutions and infrastructure. In doing so we can ill afford to gloss over the nature of customer relationships or be perceived to lag other markets in our efforts to ensure fair dealing in financial markets.
- Edward Waitzer is a professor and director of the Hennick Centre for Business and Law at York University and a former chair of the Ontario Securities Commission.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
enclosure #3
INVESTING TODAY – SPECIAL SECTION
BUILDING TRUST
Searching for the right advisor
Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011
Over the course of a lifetime, the average Canadian makes some big expenditures -- such as housing, their children's education and eventually their retirement. The latter is especially important as government programs are inadequate for most Canadians and life spans have extended considerably.
But Canadians are too busy with job and family responsibilities and family life and lack the specialized expertise to manage their financial affairs as diligently as they need to be managed.
That is why most people need a trusted advisor to guide them through their financial decisions at every stage of their life.
A complex job requires professional commitment
Investment advice is a full-time job. This is not just because of the bewildering array of financial products and services, the incessant volatility of financial market asset prices, turbulence of the economy, expanding opportunities in a dynamic global marketplace and the importance of preserving capital given recent experience of unprecedented swings in financial markets and economic activity.
Financial management is a complex and full-time job because those assets selected to meet the return and risk objectives of the investor constantly change in value and risk, requiring corresponding portfolio adjustments to monitor the targeted risk-return investment objectives.
As well, investment objectives themselves change as investors move through their life-cycle, such as the shift from the goal of portfolio growth to income security as one approaches or enters retirement.
Where then do you find the right advisor? If the investor wants an advisor that can provide advice on the full array of financial products, including individual stocks and bonds, ETFs, mutual funds and privately managed funds, the starting point is to open an account with an IIROC-registered firm and an investment advisor employed by that firm.
The business activities of the IIROC-registered firm are subject to rules and oversight by the self-regulatory organization, the Investment Industry Regulatory Organization of Canada (IIROC).
An IIROC-registered broker meets high proficiency standards, duty of care to his or her client, rules governing the investment process and conduct of all client dealings, requirements for putting the client first in all transactions and ensuring best available price for purchased securities.
Moreover, IIROC-registered brokers are subject to high standards of supervision, regulatory oversight and audit. The IIROC-registered firm also meets rules and procedures for the safekeeping of client assets. It is no coincidence that the scandals that have beset the financial sector in recent years have occurred among firms outside the IIROC regulatory framework.
A good advisor must be more than someone able to give advice. The client must have confidence and trust in his or her advisor to forge a productive and successful working relationship.
The advisor, therefore, should have a good investment track-record, and provide clear financial statements to make all portfolio transactions, asset positions and performance understandable. The advisor must communicate frequently in terms comprehensible to the client, execute decisions in a thorough and diligent manner -- and charge reasonable fees for service. Further, an effective relationship is bolstered by the personal chemistry between the client and advisor.
The client should feel comfortable and open in dealing with his or her advisor and provide the personal financial information needed to make the appropriate investment decisions in line with portfolio objectives.
But all this comes back to the fundamental question. How does an individual find the right IIROC-registered Investment Advisor? Investors find advisors in many ways, through referrals from friends and family, from attending seminars hosted by an advisor, from advertisements in the media and from direct enquiries at IIROC registered firms.
Whatever the approach, it is important the client reserve judgment on his or her initial choice of advisor to ensure the right fit in terms of communication, quality of service and cost, and personal relationship. Investors should be prepared to shop around if they are less than satisfied with their initial choice. One wouldn't make any major decision without checking it out thoroughly. Choosing an investment advisor is one of the most important decisions you can make, and the potential benefits last a lifetime. A good advisor is well worth the time and effort of a thorough search.
-Ian Russell is president and CEO of the Investment Industry Association of Canada.
-----------------------------------------------------------------------------------------------------------------------------------------------
enclosure #4
Province of Alberta Securities Commission web site
http://www.albertasecurities.com/Inside ... tions.aspx
Important definitions of the ASC’s Different Market Registrant Licenses
Adviser
a person or company engaging in or holding out the person or company as engaging in the business of advising others with respect to investing in or the buying or selling of securities or exchange contracts (Examples: Portfolio Managers, Investment Counsel and Securities Advisers)
Dealer
a person or company that trades in securities or exchange contracts as principal or agent (Examples: Investment Dealers, Mutual Fund Dealers and Scholarship Plan Dealers)
Investment Counsel
an adviser who shall not instruct any trades in securities, or exchange contracts on behalf of any client without advising the client of the specific trade being proposed, and obtaining the approval of the client for that specific trade
Investment Dealer
a firm that is registered to trade, buy or sell all types of securities. The Investment Dealers Association (IDA) registers these firms on behalf of the ASC.
Investment Fund Manager (or “Fund Manager”)
a person or company who has the power to direct and exercises the responsibility of directing the affairs of an investment fund
Mutual Fund Dealer
a firm that is registered to trade, buy or sell mutual funds
Portfolio Manager
an adviser registered for the purpose of managing the investment portfolio of the adviser’s clients through discretionary authority granted by the clients
Registrant
a person or company registered or required to be registered under Alberta Securities Act or the regulations
Salesperson
an individual who is employed by a dealer for the purpose of making trades in securities or exchange contracts on behalf of that dealer
Securities Adviser
an adviser who provides advice to a non-specific client, for example a newsletter or magazine
enclosure #5
PART VII.1 DECEPTIVE MARKETING PRACTICES
Misrepresentations to public
74.01 (1) A person ... who, for the purpose of promoting, ... the supply or use of a product or ... any business interest, by any means whatever, (a) makes a representation to the public that is false or misleading in a material respect.
Feb 15th
to: Competition Bureau of Canada
Enclosed in order:
1) some enforcement matters relating to an investment person in Alberta
2) An article from Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011, suggesting that it is "fraud" to allow the misrepresentation that appears to be allowed by your agency (s)
3) An article from Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011, which appears to be written by another investment protection agency, seemingly in contrast to industry rules and supporting the misrepresentation or "fraud" against the public
4) Alberta Securities Commission Important definitions of the ASC’s Different Market Registrant Licenses from the ASC web site
5) "Misrepresentations to public" section 74.01 (1) A person ... who, for the purpose of promoting, ... the supply or use of a product or ... any business interest, by any means whatever, (a) makes a representation to the public that is false or misleading in a material respect.
It seems as if there may be a different answer to the difficult question of what is allowed and what is not, depending upon who is speaking. I write to you to see if you can clarify, on behalf of the public, the apparent misrepresentation of allowing persons licensed or registered in the category of "salesperson" (pre 2009) or "dealing representative" (post 2009) to call themselves anything and everything they wish to including such official license categories as "advisor", or non-official but equally misleading names such as "vice president", "wealth manager", "retirement advisor", "estate planner".
I realize in advance the difficulty that your organization may face in being truthful in this matter, but I urge you to please look past your immediate self interest, and look to the public interest instead. Millions of Canadians, friends and relatives of yourself, including your children, perhaps your children's children are at risk of being misrepresented by people who pose as professionals, without meeting the qualifications of having to act as professionals. This mistake should not be born on your head as well should it?
I thank you in advance for your reply with clarity so the public can be made aware in as simple and understandable terms as possible.
Larry Elford
lelford@shaw.ca
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
enclosure #1
"Financial professionals and salespersons in Canada are allowed to call
themselves advisors, irrespective of their professional designation."
IIROC’s In the Matter of Dale Richard Wells – Penalty below that was released last week on February 11, 2011.
This timely IIROC Enforcement Notice Decision released last week suggests to me that not all / that some IIROC “Registered Representatives” are not registered—licensed in Alberta as “advisers / advisors”.
Does this IIROC Enforcement Notice decision last week definitively refute your statement in your FP Comment column today,
that “salespersons in Canada are allowed to call themselves advisors”?
Enforcement Notice
Decision
Please distribute internally to: Legal and Compliance
Contact:
Warren Funt
Vice President, Western Canada
604 331-4750
wfunt@iiroc.ca
Elsa Renzella
Director, Enforcement Litigation
416 943-5877
erenzella@iiroc.ca
11-0062
February 11, 2011
IN THE MATTER OF Dale Richard Wells – Penalty
Following a disciplinary hearing held on September 2, 2010, in Calgary, Alberta, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (IIROC) has found that Dale Richard Wells conducted his business in a manner contrary to IIROC Rules by providing advice in securities when he was not properly registered to conduct business of that nature.
Specifically, the hearing panel found Mr. Wells committed the following breach of the IIROC Rules:
During the period February 2006 to July 2008, he acted as an advisor, within the meaning of the Alberta Securities Act, without being registered as such, contrary to IIROC Dealer Member Rule 29.1.
The Hearing Panel’s decision and reasons on the merits can be found at:
http://docs.iiroc.ca/DisplayDocument.as ... anguage=en
Following a penalty hearing held on February 1, 2011, the Hearing Panel imposed:
a $10,000 fine on Mr. Wells
and required him to pay Staff’s costs of $13,000. The Hearing Panel will issue its written reasons on the penalty on a later date, which will be made available atwww.iiroc.ca.
IIROC formally initiated the investigation into Mr. Wells’ conduct in March 2008. The violations occurred when he was a Registered Representative with the Lloydminster, Alberta Branch of First Financial Securities Inc., an IIROC-regulated firm. Mr. Wells continues to be employed as a Registered Representative with First Financial Securities Inc.
The Notice of Hearing is available at:
http://docs.iiroc.ca/DisplayDocument.as ... anguage=en
IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS), IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.
IIROC carries out its regulatory responsibility through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
enclosure # (2)
Make advisors work for investors
Edward Waitzer, Financial Post · Tuesday, Feb. 15, 2011
In January 2004, the Ontario Securities Commission released a concept paper advocating a "fair dealing model." The paper acknowledged that the regulatory regime -- regulating dealers and their representatives through the products they sell -- was based on the outdated assumption that transaction execution is the primary reason people seek financial services. Recognizing that most customers are seeking advice, the concept paper proposed changing the regulatory framework to focus on the advisory relationship.
Financial professionals and salespersons in Canada are allowed to call themselves advisors, irrespective of their professional designation. Few, however, are compensated directly for their advice. Instead, they are paid commissions to sell specific products. Addressing the conflicts of interest that result from commission-based compensation, the paper proposed that retail clients should be entitled to rely on objective advice that is in their best interest and, when there are conflicts of interest, they should be clearly disclosed so that the client can understand the conflicts and how they may affect the advice given.
In September 2004, the proposal was swept into a broader project of the Canadian Securities Administrators (CSA) and rebranded as the "client relationship model." Last month, the Investment Industry Regulatory Organization of Canada (IIROC) published its proposed reforms to establish requirements for the client relationship model. They specifically avoid imposing a duty on firms and their representatives to act in the best interest of clients, focussing instead on improving compliance with the existing "suitability" standard and improving disclosure with respect to conflicts of interest and performance reporting. IIROC noted that part of what influenced its thinking was an effort to harmonize with existing and proposed CSA standards (and other standards applicable to firms not under its jurisdiction).
To understand the difference between a "suitability" and "best-interest" standard, think of a student seeking advice at an electronics store about her need for a laptop. The salesperson recommends a highly priced unit with an expensive extended warranty -- all designed to generate the highest commission. The laptop is suitable--it will satisfy the student's needs. It clearly isn't the best solution and a disclosure obligation isn't likely to stand in the way of a motivated salesperson. If the salesperson had been bound by a "best-interest" standard, he would recommend a simpler, more reliable and affordable unit.
In the U.S., brokers and investment advisors are subject to different standards when providing investment advice. Many investors are unaware of these differences or their legal implications or find them confusing. In the wake of the global financial crisis, the Dodd-Frank Act required the Securities and Exchange Commission (SEC) to evaluate the effectiveness of existing legal or regulatory standards of care for providing personalized investment advice to retail customers. Five months later and with the benefit of over 3,500 comment letters as well as a survey conducted by the CFA Institute (which already requires both a suitability and best-interest standard of its members in order to use the Chartered Financial Analyst professional designation) SEC staff released its analysis and recommendations. It has proposed a uniform standard of conduct for all brokers, dealers and investment advisors providing personalized investment advice about securities to retail customers to act in the best interest of the customer.
The SEC staff study acknowledges that working through the details of such a standard so as to ensure it is practicable and cost effective will be complex. It does not propose a strict fiduciary duty, nor does it suggest rules to try to eliminate conflicts.
The U.K. Financial Services Authority (FSA) recently banned commissions for advised sales of retail investments and released proposals which would require advisors to explain why a product is better than a cheaper alternative. This and other more intrusive proposals are based on the FSA's realization that there are "fundamental reasons why financial services markets do not always work well for consumers."
The contrast in the direction, speed and intensity of regulatory reform between Canada and other major developed markets raises a number of questions and suggestions. Why did the OSC start down the path of a "best-interest" standard in 2004 and, while others (including the U.K., Europe and Australia) have caught up, we appear to have fallen back to where we started -- disclosure requirements and a relatively static "suitability" standard? To what extent is this a function of a fragmented regulatory framework suffering from bureaucratic inertia (and an industry suffering from regulatory fatigue)? What accountability mechanisms are required to motivate a more focussed and intense effort?
Why is it that Canadian regulators have shied away from proposing a "best-interest" standard? As one commentator to the SEC staff's study noted, "If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying." Many argue that it's the buyer's responsibility to do due diligence and shop around for the best price. But should caveat emptor apply when buyers think they are hiring a professional to do the shopping?
There may be light at the end of this tunnel. Hopefully, the robust regulatory reform efforts underway elsewhere will inform and impose some discipline on our own. The OSC has a new chair. It recently established a highly credible Investor Advisory Panel, which has added this issue to its list of initiatives. FAIR Canada, the Hennick Centre for Business and Law, and the Toronto CFA Society are convening a second annual symposium on the subject next week. Finance Minister Jim Flaherty has demonstrated genuine interest in investor protection -- most recently supporting a national strategy to strengthen financial literacy.
Canada takes justifiable pride in its financial institutions and infrastructure. In doing so we can ill afford to gloss over the nature of customer relationships or be perceived to lag other markets in our efforts to ensure fair dealing in financial markets.
- Edward Waitzer is a professor and director of the Hennick Centre for Business and Law at York University and a former chair of the Ontario Securities Commission.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
enclosure #3
INVESTING TODAY – SPECIAL SECTION
BUILDING TRUST
Searching for the right advisor
Ian C.W. Russell, Special to the Financial Post · Tuesday, Feb. 8, 2011
Over the course of a lifetime, the average Canadian makes some big expenditures -- such as housing, their children's education and eventually their retirement. The latter is especially important as government programs are inadequate for most Canadians and life spans have extended considerably.
But Canadians are too busy with job and family responsibilities and family life and lack the specialized expertise to manage their financial affairs as diligently as they need to be managed.
That is why most people need a trusted advisor to guide them through their financial decisions at every stage of their life.
A complex job requires professional commitment
Investment advice is a full-time job. This is not just because of the bewildering array of financial products and services, the incessant volatility of financial market asset prices, turbulence of the economy, expanding opportunities in a dynamic global marketplace and the importance of preserving capital given recent experience of unprecedented swings in financial markets and economic activity.
Financial management is a complex and full-time job because those assets selected to meet the return and risk objectives of the investor constantly change in value and risk, requiring corresponding portfolio adjustments to monitor the targeted risk-return investment objectives.
As well, investment objectives themselves change as investors move through their life-cycle, such as the shift from the goal of portfolio growth to income security as one approaches or enters retirement.
Where then do you find the right advisor? If the investor wants an advisor that can provide advice on the full array of financial products, including individual stocks and bonds, ETFs, mutual funds and privately managed funds, the starting point is to open an account with an IIROC-registered firm and an investment advisor employed by that firm.
The business activities of the IIROC-registered firm are subject to rules and oversight by the self-regulatory organization, the Investment Industry Regulatory Organization of Canada (IIROC).
An IIROC-registered broker meets high proficiency standards, duty of care to his or her client, rules governing the investment process and conduct of all client dealings, requirements for putting the client first in all transactions and ensuring best available price for purchased securities.
Moreover, IIROC-registered brokers are subject to high standards of supervision, regulatory oversight and audit. The IIROC-registered firm also meets rules and procedures for the safekeeping of client assets. It is no coincidence that the scandals that have beset the financial sector in recent years have occurred among firms outside the IIROC regulatory framework.
A good advisor must be more than someone able to give advice. The client must have confidence and trust in his or her advisor to forge a productive and successful working relationship.
The advisor, therefore, should have a good investment track-record, and provide clear financial statements to make all portfolio transactions, asset positions and performance understandable. The advisor must communicate frequently in terms comprehensible to the client, execute decisions in a thorough and diligent manner -- and charge reasonable fees for service. Further, an effective relationship is bolstered by the personal chemistry between the client and advisor.
The client should feel comfortable and open in dealing with his or her advisor and provide the personal financial information needed to make the appropriate investment decisions in line with portfolio objectives.
But all this comes back to the fundamental question. How does an individual find the right IIROC-registered Investment Advisor? Investors find advisors in many ways, through referrals from friends and family, from attending seminars hosted by an advisor, from advertisements in the media and from direct enquiries at IIROC registered firms.
Whatever the approach, it is important the client reserve judgment on his or her initial choice of advisor to ensure the right fit in terms of communication, quality of service and cost, and personal relationship. Investors should be prepared to shop around if they are less than satisfied with their initial choice. One wouldn't make any major decision without checking it out thoroughly. Choosing an investment advisor is one of the most important decisions you can make, and the potential benefits last a lifetime. A good advisor is well worth the time and effort of a thorough search.
-Ian Russell is president and CEO of the Investment Industry Association of Canada.
-----------------------------------------------------------------------------------------------------------------------------------------------
enclosure #4
Province of Alberta Securities Commission web site
http://www.albertasecurities.com/Inside ... tions.aspx
Important definitions of the ASC’s Different Market Registrant Licenses
Adviser
a person or company engaging in or holding out the person or company as engaging in the business of advising others with respect to investing in or the buying or selling of securities or exchange contracts (Examples: Portfolio Managers, Investment Counsel and Securities Advisers)
Dealer
a person or company that trades in securities or exchange contracts as principal or agent (Examples: Investment Dealers, Mutual Fund Dealers and Scholarship Plan Dealers)
Investment Counsel
an adviser who shall not instruct any trades in securities, or exchange contracts on behalf of any client without advising the client of the specific trade being proposed, and obtaining the approval of the client for that specific trade
Investment Dealer
a firm that is registered to trade, buy or sell all types of securities. The Investment Dealers Association (IDA) registers these firms on behalf of the ASC.
Investment Fund Manager (or “Fund Manager”)
a person or company who has the power to direct and exercises the responsibility of directing the affairs of an investment fund
Mutual Fund Dealer
a firm that is registered to trade, buy or sell mutual funds
Portfolio Manager
an adviser registered for the purpose of managing the investment portfolio of the adviser’s clients through discretionary authority granted by the clients
Registrant
a person or company registered or required to be registered under Alberta Securities Act or the regulations
Salesperson
an individual who is employed by a dealer for the purpose of making trades in securities or exchange contracts on behalf of that dealer
Securities Adviser
an adviser who provides advice to a non-specific client, for example a newsletter or magazine
enclosure #5
PART VII.1 DECEPTIVE MARKETING PRACTICES
Misrepresentations to public
74.01 (1) A person ... who, for the purpose of promoting, ... the supply or use of a product or ... any business interest, by any means whatever, (a) makes a representation to the public that is false or misleading in a material respect.
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