Posts
Corruption and wrongdoing are key issues in Canada from which all else flows and should be paramount in our next Government's platform for election.
The Gomery Commission indicates that greed and corruption permeates our government and that TruthTellers are not protected.
Certainly heath care, education, and security are important, but how much money is robbed from Canadians citizens by white-collar criminals who escape punishment? Adscam represents only hundreds of millions, but the investment industry robbing Canadians represents 100's of billions. We estimate losses due to wrongdoing to be in excess of $1 billion each year and could be in the order of $20 billion per year.
Why is this covered up by the investment industry and the regulators. When SIPA asked the provincial regulators for facts, only the British Columbia Securities Commission provided any information regarding the extent of the problem. They estimated that reported investor losses due to wrongdoing were $100 million each year in B.C. Given that reported losses are only a small fraction of the actual losses and that B.C. is only one province, it is easy to extrapolate to $1 billion.
Given the size of the scandals and frauds that are currently being exposed it suggests that the number is more like $20 billion when some of the individual scams are in the order of $1 billion.
Canadians, particularly seniors and widows, are being robbed of their savings by robber barons who manipulate the public and encourage Canadians to place their trust in an industry that fosters scams like Bre-X, corporate shenanigans like Nortel, Livent, Corel, Eaton's, Air Canada and Stelco that cost Canadians their savings and pensions.
The Mutual Fund Market Timing scandal exposed last year when eight of our largest investment firms admitted to robbing investors to line their own pockets illustrates the cavalier attitude of the investment industry towards Canadians' savings. Of course they admitted no wrongdoing (Is robbing investors not wrong?) but agreed to pay $200 million for their involvement. There are a host of other firms that were not fingered. Canadians probably lost billions.
Then there are scams like Crocus, Portus and Norsheild that cost Canadians (over 50,000 of them) billions of dollars in lost savings.
Now there is the income trust debacle. The investment industry has been allowed to prey on the public and sell them products, that are not regulated in a meaningful way, and deceive seniors into thinking these products offer security of capital and a handsome rate of return. These same seniors who did not want to risk their money by buying equities were sold income trusts that have even more risk.
Many of the unsuitable income trusts have dropped in value virtually from the date of issue and had badly deteriorated before Goodale's September statement. This debacle should not have been allowed to happen. Many seniors will lose a major portion of their savings because they were deceived by an industry that is out of control. The following is list of a dozen of the worst. There are many others that will be revealed in the Accountability Research Report due for release Wednesday, November 23, 2005.
Bankrupt:
Heating Oil Partners BANKRUPT
Unit value drop this year (to November 18) :
Associated Brands 64%
Boyd Group 65%
CanWel Building Materials 65%
Chemtrade Logistics 58%
Connors Brothers 50%
Clean Power 41%
Clearwater Seafoods 59%
Entertainment One 66%
FMF Capital 87%
Menu Foods 77%
Tree Island Wire 47%
Canadians are being robbed of their savings by white collar criminals of the same breed as those who defrauded our Government in the sponsorship scandal. The loot is many billions of dollars each year and this ultimately is paid by the taxpayer.
It is time that Government makes the fight against crime and corruption a priority and mobilizes the Canadian public to help in that fight by introducing legislation that will enable all Canadians in every walk of life to come forward and tell the truth about those who are corrupt and scheme to rob Canadians. TruthTellers should not have to fear retribution.
Government employees lost their jobs when they came forward to tell the truth.
Alberta Securities Commission employees lost their jobs when they came forward to tell the truth.
Employees in the investment industry lost their jobs when they came forward to tell the truth.
Canadians need a Government that recognizes the extent of corruption in Canada and takes action to combat its spread and restore Canada's reputation to regain the trust of our citizens and the rest of the Global community.
Canadians should be protected from robbery and corruption, and be protected when they come forward with the truth.
Canadians should not have to live in fear.
Let us hope that our political representatives will hear this message.
The public must speak out and make their voices heard. Contact your political representative.
Tuesday, November 22, 2005
Saturday, November 12, 2005
Beware Structured Products
While income trusts are headline news, investors need to beware other structured products.
Keith Kalawsky writes "Painful lessons in structured products" in the Financial Post about Mulvihll Capital Management. It seems they sold $188,000 of Pro-AMS U.S. Trust to a small investor. The fund offered a 9% yield and a guarantee to repay the principal on maturity. All this sounds too good to be true.
After four monthly distribution payments they were cut in half, then cut again, and finally suspended. Now the investor realizes that the distributions were not guaranteed, and while there is a guarantee to repay 100% of the principal on maturity, there are currently no distributions, and if he wants to cash out he will receive only current value. The initial value was $25.00 but they now trade around $21.50.
Not such a good investment for a senior looking for security with income.
At issue here is that the industry is allowed to sell unsuitable products to seniors without disclosing the risks to the investor. The regulators are failing to provide any semblance of investor protection and the industry is wilfully taking advantage of the small investor.
Robert Goldin was on the money when he published "Investor Beware" in 1998.
The industry is not honouring its fiduciary duty and the regulatory system seems to acquiesce.
Keith Kalawsky writes "Painful lessons in structured products" in the Financial Post about Mulvihll Capital Management. It seems they sold $188,000 of Pro-AMS U.S. Trust to a small investor. The fund offered a 9% yield and a guarantee to repay the principal on maturity. All this sounds too good to be true.
After four monthly distribution payments they were cut in half, then cut again, and finally suspended. Now the investor realizes that the distributions were not guaranteed, and while there is a guarantee to repay 100% of the principal on maturity, there are currently no distributions, and if he wants to cash out he will receive only current value. The initial value was $25.00 but they now trade around $21.50.
Not such a good investment for a senior looking for security with income.
At issue here is that the industry is allowed to sell unsuitable products to seniors without disclosing the risks to the investor. The regulators are failing to provide any semblance of investor protection and the industry is wilfully taking advantage of the small investor.
Robert Goldin was on the money when he published "Investor Beware" in 1998.
The industry is not honouring its fiduciary duty and the regulatory system seems to acquiesce.
Big Bank Brokerage cheats employees
Jon Chevreau writes about a broker who was lied to by his employer and eventually moved to another firm and started civil action against his former employer.
It seems his wife was an active investor and did not require a full service broker. However the broker was told it was IDA policy that employees families must have their accounts with the firm. When the broker confronted the firm with the fact that it was not an IDA rule they informed him that it was now the firm's rule.
This did not sit well with the broker and he changed firms.
The important issue here is that the big bank brokerages will lie and cheat their employees as well as their clients. In the lawsuit they deny all the allegations as well as denying they had any fiduciary obligations.
It will be interesting to see how this plays out in court. It will be a big black eye for the bank.
It seems his wife was an active investor and did not require a full service broker. However the broker was told it was IDA policy that employees families must have their accounts with the firm. When the broker confronted the firm with the fact that it was not an IDA rule they informed him that it was now the firm's rule.
This did not sit well with the broker and he changed firms.
The important issue here is that the big bank brokerages will lie and cheat their employees as well as their clients. In the lawsuit they deny all the allegations as well as denying they had any fiduciary obligations.
It will be interesting to see how this plays out in court. It will be a big black eye for the bank.
The New Movement
There are many initiatives by investor advocates, shareholder activists and advocates of many interests. The issues are diverse and not everyone is on the same page.
For several years SIPA has actively communicated with individuals and groups with an objective to build a consensus on specific issues.
In 2004 SIPA believed the only salvation for retail investors would be a national agency with a mandate to provide investor protection and a means of restitution for victims of industry wrongdoing. SIPA partnered with Canada's Association for the Fifty Plus to prepare a report on Mutual Funds that recommended amongst other things the establishment of a national Investor Protection Agency.
In 2005 SIPA associated with CARP and the United Senior Citizens of Ontario (USCO) to pursue an initiative to have the Ontario Limitations Act amended to restore the six year limitation period.
SIPA networks with a number of investors advocates and is exploring co-operation with other organizations with similar interests to expand the fledgling working group.
For several years SIPA has actively communicated with individuals and groups with an objective to build a consensus on specific issues.
In 2004 SIPA believed the only salvation for retail investors would be a national agency with a mandate to provide investor protection and a means of restitution for victims of industry wrongdoing. SIPA partnered with Canada's Association for the Fifty Plus to prepare a report on Mutual Funds that recommended amongst other things the establishment of a national Investor Protection Agency.
In 2005 SIPA associated with CARP and the United Senior Citizens of Ontario (USCO) to pursue an initiative to have the Ontario Limitations Act amended to restore the six year limitation period.
SIPA networks with a number of investors advocates and is exploring co-operation with other organizations with similar interests to expand the fledgling working group.
Small Investor Protection Association New Web Address
The Small Investor Protection Association (SIPA) has a new website address www.sipa.ca. Last week the new address was activated but visitors to www.sipa.to will be re-directed to the new website.
There are a few changes including the addition of a webpage on Income Trusts to make investors aware of the risks associated with these products. It includes a number of media articles and comments dating back to 2003, as well as warnings regarding the risks of business income trusts.
The Income Trust issue is not new. It has received media prominence because of Goodale's comments. This should prove beneficial for investors long term provided they do not have all of their money in some of the worst and get caught in the downdraft.
Visit www.sipa.ca and click on Income Trusts on the home page.
There are a few changes including the addition of a webpage on Income Trusts to make investors aware of the risks associated with these products. It includes a number of media articles and comments dating back to 2003, as well as warnings regarding the risks of business income trusts.
The Income Trust issue is not new. It has received media prominence because of Goodale's comments. This should prove beneficial for investors long term provided they do not have all of their money in some of the worst and get caught in the downdraft.
Visit www.sipa.ca and click on Income Trusts on the home page.
Income Trusts - Friend or Foe?
Ralph Goodale is receiving lots of criticism from the industry and from the unknowing.
Industry makes a ton of money from new issues and that includes income trusts. Brokerage fees, lawyers fees, selling commissions and all from selling products without history and asking investors to trust the industry and buy!
Considering how many investors have lost their shirt by trusting the industry, it's time for retail investors to take a hard look at how they are being conned.
Heating Oil Partners is reported as the first income trust to declare bankruptcy. That means investors have lost all their investment.
Many other investors are more fortunate. The investors in Atlas Cold Storage have only lost half their money and the investors in Clearwater Seafoods have only lost 60%. The young lady was right when she said income trusts are good because many people make a living selling them and besides they are not as bad as some equities.
Thank you. It does not sound like where I want to invest.
To be fair some income trusts have performed well. Those that were based upon mature companies with consistent cash flow that could be maintained year after year perform as promised. The idea is to pay out pre-tax dollars rather than after tax dollars in dividends. Depending upon the investors tax situation they could be attractive.
However it seems the industry is never content with a good product that is good for investors and good for the industry. It seems they want to milk it so the industry has maximum benefit regardless of the impact on investors.
With a rash of new income trusts flooding the market Ralph Goodale said they would no longer pre-approve conversions until the situation was reviewed. Suddenly income trusts started to lose value on speculation that the tax benefit might be reduced.
The industry blamed the reduced values on Ralph Goodale. However, critics have been warning for some time that many of the business income trusts are not viable but are operating like a Ponzi scheme. The distribution is greater than the earnings and therefore investors are being paid with either their own capital or borrowed money.
Clearwater Seafoods had suspended distribution earlier this year and by the time Goodale made the news Clearwater units had already lost almost half their value.
Unfortunately business income trusts are being sold to retail investors, many of them seniors and widows, who are afraid to invest in equities because they perceive them as risky. They are persuaded that income trusts will provide returns much higher than GICs and government bonds but they are not made aware of the risks associated with these products.
The industry knowingly is selling inappropriate products to seniors and widows. They are leaving themselves open to massive lawsuits which will surely follow their cavalier approach to selling unsuitable product to unknowing investors.
As more information becomes available the business trusts will collapse and retail investors will lose tons of money. This will create business for lawyers but Bay Street may see their bonuses reduced. Already the reduction in new issues is effecting anticipated bonuses.
Retail investors need to be aware of the risks associated with income trusts, particularly business income trusts.
Investors should get a second independent opinion and decide what action they should take. If they were sold income trusts on the basis they were a secure investment that would provide a secure income, and it is nor performing as portrayed, they should speak with a good securities lawyer as soon as possible.
Keep in mind that in some provinces you have only two years from the cause of action to submit a civil claim.
Industry makes a ton of money from new issues and that includes income trusts. Brokerage fees, lawyers fees, selling commissions and all from selling products without history and asking investors to trust the industry and buy!
Considering how many investors have lost their shirt by trusting the industry, it's time for retail investors to take a hard look at how they are being conned.
Heating Oil Partners is reported as the first income trust to declare bankruptcy. That means investors have lost all their investment.
Many other investors are more fortunate. The investors in Atlas Cold Storage have only lost half their money and the investors in Clearwater Seafoods have only lost 60%. The young lady was right when she said income trusts are good because many people make a living selling them and besides they are not as bad as some equities.
Thank you. It does not sound like where I want to invest.
To be fair some income trusts have performed well. Those that were based upon mature companies with consistent cash flow that could be maintained year after year perform as promised. The idea is to pay out pre-tax dollars rather than after tax dollars in dividends. Depending upon the investors tax situation they could be attractive.
However it seems the industry is never content with a good product that is good for investors and good for the industry. It seems they want to milk it so the industry has maximum benefit regardless of the impact on investors.
With a rash of new income trusts flooding the market Ralph Goodale said they would no longer pre-approve conversions until the situation was reviewed. Suddenly income trusts started to lose value on speculation that the tax benefit might be reduced.
The industry blamed the reduced values on Ralph Goodale. However, critics have been warning for some time that many of the business income trusts are not viable but are operating like a Ponzi scheme. The distribution is greater than the earnings and therefore investors are being paid with either their own capital or borrowed money.
Clearwater Seafoods had suspended distribution earlier this year and by the time Goodale made the news Clearwater units had already lost almost half their value.
Unfortunately business income trusts are being sold to retail investors, many of them seniors and widows, who are afraid to invest in equities because they perceive them as risky. They are persuaded that income trusts will provide returns much higher than GICs and government bonds but they are not made aware of the risks associated with these products.
The industry knowingly is selling inappropriate products to seniors and widows. They are leaving themselves open to massive lawsuits which will surely follow their cavalier approach to selling unsuitable product to unknowing investors.
As more information becomes available the business trusts will collapse and retail investors will lose tons of money. This will create business for lawyers but Bay Street may see their bonuses reduced. Already the reduction in new issues is effecting anticipated bonuses.
Retail investors need to be aware of the risks associated with income trusts, particularly business income trusts.
Investors should get a second independent opinion and decide what action they should take. If they were sold income trusts on the basis they were a secure investment that would provide a secure income, and it is nor performing as portrayed, they should speak with a good securities lawyer as soon as possible.
Keep in mind that in some provinces you have only two years from the cause of action to submit a civil claim.
Friday, September 23, 2005
Bre-X Revisited - Justice System & Enforcement Failings
Several years ago two small investors took BMO Nesbitt Burns to court over Bre-X. Bre-X was billed as "Scam of the Century" and I predicted the trial would be media event of the century. The first day of the trial two Ottawa evening papers covered the trial. Fascinating reading.
The next day nothing appeared in the Toronto papers and then nothing further appeared in the Ottawa papers. The trial continued unreported. Who was responsible for the cover-up?
Most Canadians suffered some degree of loss from Bre-X through direct ownership or mutual funds, yet the media was strangely silent.
Eventually an out of court settlement was reached and the caper covered up.
A decade late the trial of Felderhof is getting more coverage. He is small fry. The banks however are not small fry. When RBC pays $2.6 billion to settle with U.S. regulators to cover up their wrongdoing, one can only wonder.
Now the OSC is concluding its case against Felderhoff. The charge is insider trading. Big Deal.
The Bre-X caper is fraud. This is criminal. The chief geologist doesn't know? He loots $90 million and investors are left holding the bag. Just who is providing investor protection. Ah yes, the Investment Dealers Association.
Canada's justice system and securities enforcement are a joke!
Felderhof faces a maximum of two years in jail and a fine that will pale in significance to the millions he made from this fraud.
At least they could do would be hand him a severe sentence a la Coffin. They could pair him with Coffin as a duo on a speaking tour to talk about ethics to business students. That would certainly teach them a lesson and encourage the next generation of financial predators.
We need to speak out about our inadequate enforcement that fails to deter crime, and our justice system that seems to reward white collar criminals by allowing them "to pay their debt to society" and enjoy the proceeds of their crimes while the victims are left to try to pick up the pieces of their shattered hopes and dreams.
These white collar predators are destroying the wealth and lives of small investors.
Bring back capital punishment and hang them.
The next day nothing appeared in the Toronto papers and then nothing further appeared in the Ottawa papers. The trial continued unreported. Who was responsible for the cover-up?
Most Canadians suffered some degree of loss from Bre-X through direct ownership or mutual funds, yet the media was strangely silent.
Eventually an out of court settlement was reached and the caper covered up.
A decade late the trial of Felderhof is getting more coverage. He is small fry. The banks however are not small fry. When RBC pays $2.6 billion to settle with U.S. regulators to cover up their wrongdoing, one can only wonder.
Now the OSC is concluding its case against Felderhoff. The charge is insider trading. Big Deal.
The Bre-X caper is fraud. This is criminal. The chief geologist doesn't know? He loots $90 million and investors are left holding the bag. Just who is providing investor protection. Ah yes, the Investment Dealers Association.
Canada's justice system and securities enforcement are a joke!
Felderhof faces a maximum of two years in jail and a fine that will pale in significance to the millions he made from this fraud.
At least they could do would be hand him a severe sentence a la Coffin. They could pair him with Coffin as a duo on a speaking tour to talk about ethics to business students. That would certainly teach them a lesson and encourage the next generation of financial predators.
We need to speak out about our inadequate enforcement that fails to deter crime, and our justice system that seems to reward white collar criminals by allowing them "to pay their debt to society" and enjoy the proceeds of their crimes while the victims are left to try to pick up the pieces of their shattered hopes and dreams.
These white collar predators are destroying the wealth and lives of small investors.
Bring back capital punishment and hang them.
Tuesday, September 20, 2005
Portus Bankruptcy?
Wojtek Dabrowski writes Portus "allegedly used $95.4-million of investors' money to pay its expense, referral fees to brokers and to fund the redemptions of other investors - similar to the notorious schemes operated by Charles Ponzi."
Portus had some 30,000 client accounts with over $800 million invested.
The regulators shut Portus down in February 2005. The RCMP is investigating and KPMG are reporting. KPMG suggests that bankruptcy should be declared.
It seems that our regulatory system is unable to prevent widespread wrongdoing and fraud from happening. The problem investors face is that there is no Authority that provides investor protection. Investors are left at the mercy of an industry that is robbing many investors of their life savings.
Victims only recourse is civil litigation, but that does not help if there are no resources to recover. There must be an investment fund to protect investors that is administered by an Authority with a mandate for investor protection.
At the same time, it seems that the investment industry has been able to get limitation periods reduced in several provinces, including Ontario, from six years to two years. This means that if victims are unable to start a civil action within two years of the action that caused the loss they will be statute barred from taking action.
Victims of Portus will have to move quickly if they plan to take civil action.
Portus had some 30,000 client accounts with over $800 million invested.
The regulators shut Portus down in February 2005. The RCMP is investigating and KPMG are reporting. KPMG suggests that bankruptcy should be declared.
It seems that our regulatory system is unable to prevent widespread wrongdoing and fraud from happening. The problem investors face is that there is no Authority that provides investor protection. Investors are left at the mercy of an industry that is robbing many investors of their life savings.
Victims only recourse is civil litigation, but that does not help if there are no resources to recover. There must be an investment fund to protect investors that is administered by an Authority with a mandate for investor protection.
At the same time, it seems that the investment industry has been able to get limitation periods reduced in several provinces, including Ontario, from six years to two years. This means that if victims are unable to start a civil action within two years of the action that caused the loss they will be statute barred from taking action.
Victims of Portus will have to move quickly if they plan to take civil action.
Crime and Punishment?
In the U.S. :
Justice Michael Obus sentenced former Tyco Chief Executive Dennis Kozlowski to 25 years in prison for larceny and defrauding investors.
Former WorldCom chairman Bernie Ebbers was sentenced to 25 years in prison for accounting fraud.
Adelphi Communications founder John Rigas was sentenced to 15 years in federal prison for fraud at the age of 80.
In Canada:
Paul Coffin, the first person charged in the $250 million federal sponsorship scandal pleaded guilty to 15 fraud counts and was sentenced to speak on ethics to business students!
What message are we trying to give to the next generation of business leaders?
You can be dishonest, live high by defrauding others, and the worst that can happen is you can be sent on speaking engagements!
As long as white collar crime pays in Canada it will continue unabated.
Justice Michael Obus sentenced former Tyco Chief Executive Dennis Kozlowski to 25 years in prison for larceny and defrauding investors.
Former WorldCom chairman Bernie Ebbers was sentenced to 25 years in prison for accounting fraud.
Adelphi Communications founder John Rigas was sentenced to 15 years in federal prison for fraud at the age of 80.
In Canada:
Paul Coffin, the first person charged in the $250 million federal sponsorship scandal pleaded guilty to 15 fraud counts and was sentenced to speak on ethics to business students!
What message are we trying to give to the next generation of business leaders?
You can be dishonest, live high by defrauding others, and the worst that can happen is you can be sent on speaking engagements!
As long as white collar crime pays in Canada it will continue unabated.
Thursday, July 21, 2005
INVESTOR ADVOCATE WEBSITE SHUT DOWN
Advisor.ca has posted an article entitled "Investor advocate in website battle" on July 21, 2005. Doug Watt writes "Investor advocate and regulatory crusader Robert Kyle's website has been shut down by his American service provider. The move follows legal threats from a Canadian law firm regarding some of the content on the site, Kyle has been told."
This is not the first time that investor advocate websites have been threatened.
Watt also writes "It's believed MacPherson, Leslie & Tyerman want all court documents related to legal claims involving advisor Brian Mallard and former employee Kent Shirley removed from the site since the matter is still before the courts. Kyle did take down those particular documents and has set them up on a separate server. Still, the U.S. provider, United Online Web Servers, refuses to restore the main site, which has been down since last Friday. ... Kyle's site contained hundreds of news articles, documents and court cases all related to self-regulatory organizations and the Canadian securities industry. "
Kyle's site has gained a reputation as a resource for journalists, investors and investor advocates. It was a valuable resource and provided an archives freely available to the public that is not available elsewhere.
It will be a pity if industry is allowed to run roughshod over investor advocates by using intimidation and the threat of lawsuits to force individuals to comply with their demands.
There is too much cover-up in the investment industry and it is high time that the federal government establishes an inquiry into the widespread wrongdoing that has been covered up for far too long.
The Senate Committee on Banking Trade & Commerce has only scratched the surface with its hearings but seem to be seeing through the industry subterfuge. The Committee has now extended the time to complete their report. It is hoped that the Senate Committees report will lead to some meaningful government action to provide meaningful investor protection.
Meanwhile SIPA has joined forces with CARP, Canada's Association for the Fifty Plus, and USCO, the United Senior Citizens of Ontario. This collective group represents over a half million seniors. This collective group is now supported by the Opposition Critic to the Attorney General, MPP Joe Tascona, who has prepared a Petition to the Government of Ontario to have an amendment to the recent Limitations Act to modify the limitation periods for small investors. The Act was pushed through in an Omnibus Bill and Members unwittingly voted for it without realizing the damaging impact on seniors who lose their life savings due to widespread industry wrongdoing.
Although the Attorney General at first refused to meet with a SIPA led delegation (the Attorney General's response is on the SIPA website at www.sipa.to), the Minister has now asked his staff to meet with SIPA. The meeting is expected to take place before mid August.
SIPA is also liaising with other groups with a view to collaborating to stand up for investors rights and address key issues that impact all investors.
This is not the first time that investor advocate websites have been threatened.
Watt also writes "It's believed MacPherson, Leslie & Tyerman want all court documents related to legal claims involving advisor Brian Mallard and former employee Kent Shirley removed from the site since the matter is still before the courts. Kyle did take down those particular documents and has set them up on a separate server. Still, the U.S. provider, United Online Web Servers, refuses to restore the main site, which has been down since last Friday. ... Kyle's site contained hundreds of news articles, documents and court cases all related to self-regulatory organizations and the Canadian securities industry. "
Kyle's site has gained a reputation as a resource for journalists, investors and investor advocates. It was a valuable resource and provided an archives freely available to the public that is not available elsewhere.
It will be a pity if industry is allowed to run roughshod over investor advocates by using intimidation and the threat of lawsuits to force individuals to comply with their demands.
There is too much cover-up in the investment industry and it is high time that the federal government establishes an inquiry into the widespread wrongdoing that has been covered up for far too long.
The Senate Committee on Banking Trade & Commerce has only scratched the surface with its hearings but seem to be seeing through the industry subterfuge. The Committee has now extended the time to complete their report. It is hoped that the Senate Committees report will lead to some meaningful government action to provide meaningful investor protection.
Meanwhile SIPA has joined forces with CARP, Canada's Association for the Fifty Plus, and USCO, the United Senior Citizens of Ontario. This collective group represents over a half million seniors. This collective group is now supported by the Opposition Critic to the Attorney General, MPP Joe Tascona, who has prepared a Petition to the Government of Ontario to have an amendment to the recent Limitations Act to modify the limitation periods for small investors. The Act was pushed through in an Omnibus Bill and Members unwittingly voted for it without realizing the damaging impact on seniors who lose their life savings due to widespread industry wrongdoing.
Although the Attorney General at first refused to meet with a SIPA led delegation (the Attorney General's response is on the SIPA website at www.sipa.to), the Minister has now asked his staff to meet with SIPA. The meeting is expected to take place before mid August.
SIPA is also liaising with other groups with a view to collaborating to stand up for investors rights and address key issues that impact all investors.
Sunday, July 17, 2005
RBC Dominion Securities Andrew Rankin found Guilty
Justice Ramez Khawley found RBC Dominion Securities executive Andrew Rankin guilty on ten counts of tipping. It is not unusual for the investment industry to disregard the rules and use our legal system to frustrate the regulators and try to escape justice.
However Justice Khawley's decision points up the deterioration of morality and ethics in our society that is creating an untenable situation for investors. Justice Khawley states that executives from RBC's investment banking arm are not very credible.
When our investment industry will not tell the truth to a judge in court, how can investors think that the investment advisors will tell them the truth. Almost every day we hear of situations where financial advisors, auditors and corporate executives are making misstatements, or if they are in court have selectively lost their memory of certain events.
How does RBC react to this? Moorcroft, a spokesman for RBC, said Justice Khawley's comments about DS witnesses is a "side issue" and "the credibility of individual witnesses are not on trial here". The industry apparently condones, if not demands, this behaviour.
Well, it's time that the credibility of the investment industry is put on trial.
Meanwhile, all investors should realize that with the lack of investor protection, the lack of enforcement, and the failure of the SROs to regulate their members, Canadian investors are in an INVESTOR BEWARE situation.
Investors must make themselves aware of how the industry operates with a cavalier attitude towards investors savings, and a callous attitude towards small investors. The industry is willing to engage in practices that will result in the decimation of life savings and disregard the needs of their clients. They will inappropriately place seniors and widows at risk that often results in the loss of their life savings, and then show no mercy and use the legal system to aggressively defend situations that appear indefensible.
Justice Kawley's remarks confirm that the industry will not only breach the rules in victimizing clients, but will also lie to circumvent the law.
INVESTOR BEWARE!
However Justice Khawley's decision points up the deterioration of morality and ethics in our society that is creating an untenable situation for investors. Justice Khawley states that executives from RBC's investment banking arm are not very credible.
When our investment industry will not tell the truth to a judge in court, how can investors think that the investment advisors will tell them the truth. Almost every day we hear of situations where financial advisors, auditors and corporate executives are making misstatements, or if they are in court have selectively lost their memory of certain events.
How does RBC react to this? Moorcroft, a spokesman for RBC, said Justice Khawley's comments about DS witnesses is a "side issue" and "the credibility of individual witnesses are not on trial here". The industry apparently condones, if not demands, this behaviour.
Well, it's time that the credibility of the investment industry is put on trial.
Meanwhile, all investors should realize that with the lack of investor protection, the lack of enforcement, and the failure of the SROs to regulate their members, Canadian investors are in an INVESTOR BEWARE situation.
Investors must make themselves aware of how the industry operates with a cavalier attitude towards investors savings, and a callous attitude towards small investors. The industry is willing to engage in practices that will result in the decimation of life savings and disregard the needs of their clients. They will inappropriately place seniors and widows at risk that often results in the loss of their life savings, and then show no mercy and use the legal system to aggressively defend situations that appear indefensible.
Justice Kawley's remarks confirm that the industry will not only breach the rules in victimizing clients, but will also lie to circumvent the law.
INVESTOR BEWARE!
Friday, July 08, 2005
Silencing Investor Advocates
The investment industry is successful in covering up widespread practices of wrongdoing. This is accomplished by failure to disclose and by intimidating those who would speak out.
The industry lobbyists are publishing a story that is not entirely true. There is a failure to admit reality and a failure to reveal the extent of wrongdoing. The regulators are either not fully aware of the wrongdoing or are involved in the cover-up.
The OSC Town Hall Event attracted a crowd of 500 people. This was living proof that it is not only a dozen people complaining about the wrongdoing as claimed by industry. There are thousands of aggrieved investors and many are prepared to speak out. There are countless others who have been victimized by the industry and then intimidated into settling their dispute for pennies on the dollar and signing a gag order. The public may never hear from these victims.
The Internet is empowering. It enables people to speak out. There are websites springing up that reveal this wrongdoing. One of the websites that provided an incredible amount of information was www.regulators.itgo.com that provided an archives of information. Investor advocates, investors and journalists began to rely upon this website for information.
Now this valuable website has become inoperative. It appears it has been forced to close.
In the recent past http://www.gadsdencreative.com/news.html was also taken down. Stephen Gadsden had written an Open Letter to Canadians that spoke out about wrongdoing by the industry. It was unflattering to say the least, but seemed consistent with other sources and appeared to be based upon first hand knowledge. Over a period of a few weeks the letter disappeared and later the whole website was taken down.
There have been other websites including www.badbroker.com and Jim Roache's website that was focused on one of the major brokerages. Jim was able to maintain his website for many years but in the end his website also became history. Thankfully Jim is still alive and active and devoting his many talents to helping others.
Individuals are unable to withstand the onslaught of nuisance lawsuits that the industry employs to silence those who would speak out.
That is why Canadian investors need an Investor Protection Agency funded by the Federal Government with a mandate to protect investors. Such an agency would have a national register of white collar criminals that would be available to investors showing the details of the misdeeds.
It will only be when there is transparency and an openness that enables investors to learn the truth that investors may place their trust in an industry that is driven by greed and has a cavalier and callous attitude towards investors.
Industry's attempts to woo the public with public proclamations of good intentions and displays of codes of ethics are rather unconvincing when industry's actions show their behaviour.
The mutual fund market timing scandal in December, when eight of the largest financial institutions stated they did nothing wrong when they took from the investors to enrich themselves, illustrates an attitude of industry greed and a cavalier attitude towards investors and their life savings.
The Portus, Crocus, and Norshield scandals further illustrate the industry's intent to loot the small investors' savings to benefit the financial institutions.
The Alberta Securities Commission scandal suggests the industry attitude of supporting systemic wrongdoing may permeate the regulators. The Manitoba Securities Commission has been named as one of the defendants in a Class Action lawsuit. Investors need a national authority with a mandate to protect consumer/investor interests.
Now the move by provincial legislatures to reduce limitation periods for civil litigation from six years to two years indicates that not only small investors rights, but the rights of all Canadians are being eroded. Many victimized investors already found it difficult to commence civil action within the six year limitation period. The reduction to two years will deny many victims their right to take civil action.
It seems that investors will have to look after themselves and will not be able to depend on the regulators to provide appropriate safeguards.
All Canadians must speak out and contact their political representatives. If Canadians fail to speak out and hold our leaders accountable they will be contributing to the victimization of our widows and seniors and leaving a sorry state for our descendants.
Industry has shown they will silence those who speak out by using intimidation.
The industry lobbyists are publishing a story that is not entirely true. There is a failure to admit reality and a failure to reveal the extent of wrongdoing. The regulators are either not fully aware of the wrongdoing or are involved in the cover-up.
The OSC Town Hall Event attracted a crowd of 500 people. This was living proof that it is not only a dozen people complaining about the wrongdoing as claimed by industry. There are thousands of aggrieved investors and many are prepared to speak out. There are countless others who have been victimized by the industry and then intimidated into settling their dispute for pennies on the dollar and signing a gag order. The public may never hear from these victims.
The Internet is empowering. It enables people to speak out. There are websites springing up that reveal this wrongdoing. One of the websites that provided an incredible amount of information was www.regulators.itgo.com that provided an archives of information. Investor advocates, investors and journalists began to rely upon this website for information.
Now this valuable website has become inoperative. It appears it has been forced to close.
In the recent past http://www.gadsdencreative.com/news.html was also taken down. Stephen Gadsden had written an Open Letter to Canadians that spoke out about wrongdoing by the industry. It was unflattering to say the least, but seemed consistent with other sources and appeared to be based upon first hand knowledge. Over a period of a few weeks the letter disappeared and later the whole website was taken down.
There have been other websites including www.badbroker.com and Jim Roache's website that was focused on one of the major brokerages. Jim was able to maintain his website for many years but in the end his website also became history. Thankfully Jim is still alive and active and devoting his many talents to helping others.
Individuals are unable to withstand the onslaught of nuisance lawsuits that the industry employs to silence those who would speak out.
That is why Canadian investors need an Investor Protection Agency funded by the Federal Government with a mandate to protect investors. Such an agency would have a national register of white collar criminals that would be available to investors showing the details of the misdeeds.
It will only be when there is transparency and an openness that enables investors to learn the truth that investors may place their trust in an industry that is driven by greed and has a cavalier and callous attitude towards investors.
Industry's attempts to woo the public with public proclamations of good intentions and displays of codes of ethics are rather unconvincing when industry's actions show their behaviour.
The mutual fund market timing scandal in December, when eight of the largest financial institutions stated they did nothing wrong when they took from the investors to enrich themselves, illustrates an attitude of industry greed and a cavalier attitude towards investors and their life savings.
The Portus, Crocus, and Norshield scandals further illustrate the industry's intent to loot the small investors' savings to benefit the financial institutions.
The Alberta Securities Commission scandal suggests the industry attitude of supporting systemic wrongdoing may permeate the regulators. The Manitoba Securities Commission has been named as one of the defendants in a Class Action lawsuit. Investors need a national authority with a mandate to protect consumer/investor interests.
Now the move by provincial legislatures to reduce limitation periods for civil litigation from six years to two years indicates that not only small investors rights, but the rights of all Canadians are being eroded. Many victimized investors already found it difficult to commence civil action within the six year limitation period. The reduction to two years will deny many victims their right to take civil action.
It seems that investors will have to look after themselves and will not be able to depend on the regulators to provide appropriate safeguards.
All Canadians must speak out and contact their political representatives. If Canadians fail to speak out and hold our leaders accountable they will be contributing to the victimization of our widows and seniors and leaving a sorry state for our descendants.
Industry has shown they will silence those who speak out by using intimidation.
Labour-sponsored Funds
Buzz Hargrove, national president of the Canadian Auto Workers, writes in the National Post, page FP19, July 8th, 2005; "There are about 120 labour-sponsored funds in Canada. Two-thirds of them lost money over the past year (even as the TSX composite was gaining more than 20%). None of the 10 largest labour funds has generated a positive return over the last five years."
Hargrove supports government efforts to stimulate investment spending but says "labour funds are not the way to do it. They are wasteful, ineffective and damaging to the integrity of those unions that have involved themselves in them."
Crocus is recently the most prominent labour sponsored fund to encounter difficulty, but there are many others.
Small investors would be well advised to avoid investing in any investment products that they do not fully understand. Whether it is labour sponsored funds or guaranteed investments, investigate before you invest. Money lost is difficult to regain. Determine the risks related to the investments. If there is a guarantee determine what is the guarantee and who provides it? A guarantee to get all of your money back in ten years means you have given a ten year loan interest free.
Investors should be aware of the associated risks prior to investing in any product.
Hargrove supports government efforts to stimulate investment spending but says "labour funds are not the way to do it. They are wasteful, ineffective and damaging to the integrity of those unions that have involved themselves in them."
Crocus is recently the most prominent labour sponsored fund to encounter difficulty, but there are many others.
Small investors would be well advised to avoid investing in any investment products that they do not fully understand. Whether it is labour sponsored funds or guaranteed investments, investigate before you invest. Money lost is difficult to regain. Determine the risks related to the investments. If there is a guarantee determine what is the guarantee and who provides it? A guarantee to get all of your money back in ten years means you have given a ten year loan interest free.
Investors should be aware of the associated risks prior to investing in any product.
Thursday, June 23, 2005
"Mundane" crimes can still be devastating
Letters to the Editor – National Post June 22, 2005
Re: Statute of limitations may wipe 800 rapes from books, June 21
While noting that New York state is one of the few jurisdictions to have a statute of limitation on rape, this article notes that "Canada has long since abolished statute of limitations provisions for all but mundane crimes." The question is: How do you define “Mundane”?
Seniors and widows being robbed of their life savings is a life-altering event that is anything but mundane and also should have no statute of limitations yet it does. Some refer to financial predatory practices as financial rape or financial assault.
The victims are traumatized. Many suffer depression. Some commit suicide.
In Ontario, the reduction in the limitation period for taking civil action from six years to two years will no doubt result in many seniors and widows being deprived of the right to pursue redress through the courts. This is a great injustice.
Stan I. Buell
Small Investor Protection Association
Re: Statute of limitations may wipe 800 rapes from books, June 21
While noting that New York state is one of the few jurisdictions to have a statute of limitation on rape, this article notes that "Canada has long since abolished statute of limitations provisions for all but mundane crimes." The question is: How do you define “Mundane”?
Seniors and widows being robbed of their life savings is a life-altering event that is anything but mundane and also should have no statute of limitations yet it does. Some refer to financial predatory practices as financial rape or financial assault.
The victims are traumatized. Many suffer depression. Some commit suicide.
In Ontario, the reduction in the limitation period for taking civil action from six years to two years will no doubt result in many seniors and widows being deprived of the right to pursue redress through the courts. This is a great injustice.
Stan I. Buell
Small Investor Protection Association
Wednesday, June 22, 2005
New Chair for the OSC
There are no surprises here. Industry does not want to lose control. This proposed appointment reinforces the need for a national Investor Protection Agency to provide investor protection.
Industry and the regulators have failed to protect investors. They say that investor protection is important but they also claim their actions are preventative and not remedial. This is no help to the widows, seniors and other Canadians that lose their life savings due to wrongdoing and unsavoury sales practices of the investment industry at large.
It is not enough for the regulators to say these so-called investment advisors are registered as sales representatives and that they have no control over job titles such as investment advisor or consultant. This is misleading the public at best.
Is there no sense of honesty within the regulatory system? How can the regulators allow the industry to falsely advertise that they are providing advice and then deny responsibility by saying in reality the representatives are only salespeople without fiduciary obligations?
It is time to either hold the industry accountable, or to warn the public that the investment industry are robbers in white collars. Regulators must warn the public to be be wary in dealing with the investment industry. Regulators must disclose the wrongdoing that permeates the industry and creates so many victims each year.
Maybe with this new appointment the public will realize it is Caveat Investor!
Let the new chair show by his actions that he is not what he seems to be and that he is prepared to act as a regulator should to protect the public.
Industry and the regulators have failed to protect investors. They say that investor protection is important but they also claim their actions are preventative and not remedial. This is no help to the widows, seniors and other Canadians that lose their life savings due to wrongdoing and unsavoury sales practices of the investment industry at large.
It is not enough for the regulators to say these so-called investment advisors are registered as sales representatives and that they have no control over job titles such as investment advisor or consultant. This is misleading the public at best.
Is there no sense of honesty within the regulatory system? How can the regulators allow the industry to falsely advertise that they are providing advice and then deny responsibility by saying in reality the representatives are only salespeople without fiduciary obligations?
It is time to either hold the industry accountable, or to warn the public that the investment industry are robbers in white collars. Regulators must warn the public to be be wary in dealing with the investment industry. Regulators must disclose the wrongdoing that permeates the industry and creates so many victims each year.
Maybe with this new appointment the public will realize it is Caveat Investor!
Let the new chair show by his actions that he is not what he seems to be and that he is prepared to act as a regulator should to protect the public.
Tuesday, June 21, 2005
STATUTE OF LIMITATIONS MAY WIPE 800 RAPES FROM BOOKS
NEW YORK STATE SENATOR SEEKS TO OVERTURN LAW
The National post on June 21, 2005, carried Steven Edwards report from New York that city police are shelving more than 800 rape investigations because of an "outdated" law providing only a five year window for prosecuting sexual assault crimes.
Over the years this has allowed thousands of rapists to escape justice by beating the clock.
Every year thousands of Canadians including widows and seniors are suffering financial assault crimes when widespread investment industry wrongdoing robs them of their savings.
Most provinces have recently reduced the limitation period from six years to two years for civil actions. Most victims are unable to react in such a short time frame. This will mean that financial predators will escape justice by beating the clock and victims of white collar crime will be statute barred from taking legal action.
Where were the regulators and agencies that provide investor protection when this erosion of Canadian rights was being legislated.
Who is responsible for this irresponsible legislation.
Who will champion the need to eliminate limitation periods for white collar crime that robs widows and seniors of their life savings?
The National post on June 21, 2005, carried Steven Edwards report from New York that city police are shelving more than 800 rape investigations because of an "outdated" law providing only a five year window for prosecuting sexual assault crimes.
Over the years this has allowed thousands of rapists to escape justice by beating the clock.
Every year thousands of Canadians including widows and seniors are suffering financial assault crimes when widespread investment industry wrongdoing robs them of their savings.
Most provinces have recently reduced the limitation period from six years to two years for civil actions. Most victims are unable to react in such a short time frame. This will mean that financial predators will escape justice by beating the clock and victims of white collar crime will be statute barred from taking legal action.
Where were the regulators and agencies that provide investor protection when this erosion of Canadian rights was being legislated.
Who is responsible for this irresponsible legislation.
Who will champion the need to eliminate limitation periods for white collar crime that robs widows and seniors of their life savings?
SIPA WARNS INVESTORS RE LIMITATION PERIODS
SIPA issues Warning to Investors re limitation period The Small Investor Protection Association (SIPA) participated in the OSC Town Hall Event on May 31st, in Toronto. A crowd of over 500 turned out to voice their anger, discontent, and frustration with the widespread wrongdoing in the investment industry and the regulators’ failure to provide adequate investor protection and satisfactory means to resolve disputes.
This OSC Event confirmed that investor protection is lacking, and that there are no satisfactory means of resolving disputes except civil litigation. Now, that last bastion of help for investors is being threatened. Many investors are not aware that during the last two years limitation periods, the time period within which a legal action must be started after an event of wrongdoing, have been reduced from six years to two years in several provinces, including Ontario, Alberta, and Saskatchewan.
Investors are warned that reduction of the limitation period for taking civil action could have serious consequences if you have a complaint. SIPA recommends that aggrieved investors should speak immediately with a qualified securities litigation lawyer to determine how limitation periods could effect you, and determine an appropriate course of action prior to initiating any other complaint procedures.
SIPA is seeking to clarify this issue with governments and regulators across Canada, and will be issuing an interim report on the limitation period issue later in June that includes responses from governments and regulators. Regulators are reacting to SIPA’s concerns and are investigating. David Brown, Chair of the Ontario Securities Commission, yesterday told the Senate Banking Committee this limit may need to be reviewed and changed. Brown has also spoken with the Ontario Attorney General on this matter.
This OSC Event confirmed that investor protection is lacking, and that there are no satisfactory means of resolving disputes except civil litigation. Now, that last bastion of help for investors is being threatened. Many investors are not aware that during the last two years limitation periods, the time period within which a legal action must be started after an event of wrongdoing, have been reduced from six years to two years in several provinces, including Ontario, Alberta, and Saskatchewan.
Investors are warned that reduction of the limitation period for taking civil action could have serious consequences if you have a complaint. SIPA recommends that aggrieved investors should speak immediately with a qualified securities litigation lawyer to determine how limitation periods could effect you, and determine an appropriate course of action prior to initiating any other complaint procedures.
SIPA is seeking to clarify this issue with governments and regulators across Canada, and will be issuing an interim report on the limitation period issue later in June that includes responses from governments and regulators. Regulators are reacting to SIPA’s concerns and are investigating. David Brown, Chair of the Ontario Securities Commission, yesterday told the Senate Banking Committee this limit may need to be reviewed and changed. Brown has also spoken with the Ontario Attorney General on this matter.
Saturday, June 04, 2005
INVESTOR BEWARE - Investor protection is being eroded
The OSC Investor Town Hall Event has not received the media coverage that is due. The Event is probably the most important event for investors and investor protection ever. This was the first time that the regulatory leaders came face to face with small investors in the public eye.
There were issues brought up by investor advocates that deserve public airing. These are on the public record and the OSC has undertaken to respond to all of the questions submitted through SIPA during the month preceding the event.
Initial estimates of attendance were in the 100 to 200 range, so 200 seats were ordered for a space that could accommodate 500. As many people began to pre-register for the event it was obvious additional seats would be needed so the
OSC ordered more seats.
By the day of the event over 400 had already registered. A decision was made that priority would be given to questions from the audience, and the OSC undertook to provide responses to all questions submitted through SIPA at a later date.
That evening of May 31st the CBC Atrium was filled. There was no lack of questions and comments. There was emotion. Some anger. Some grief.
The meeting ran overtime. Still there were hands going up and line-ups at the two floor microphones when the meeting was closed.
The small investor situation was summed up by a brave lady who admitted they had lost their life savings of $170,000 and finally settled with the bank owned brokerage for $30,000 in returned fees, and signed a gag order to protect the bank from being exposed. They did not know where to turn and asked if there was anything that can be done. The regulators said too bad. It's too late. You settled and signed a gag. A cold, hard hearted, insensitive response. It's time for a better system.
Ken Kivenko raised the issue of limitation periods and the fact that Ontario reduced the six year period to two years. Most people are not aware that there is a limitation period for taking legal action from the time that you become aware or should have come aware of a problem.
Many victims of financial crime have trouble meeting the six year requirement. CARP and SIPA had requested that the six year limitation period be increased to seven years.
Now Ontario has reduced it to two.
SIPA will pursue this issue by every avenue available as we believe it is the single most important issue for investors. The industry and the regulatory system has failed to provide adequate investor protection. Investors are losing billions of dollars each year due to wrongdoing. Their only safeguard has been the right to take civil action. Now this right is being eroded by reducing limitation periods.
It seems we have come full circle and we are now back to "INVESTOR BEWARE"!
There were issues brought up by investor advocates that deserve public airing. These are on the public record and the OSC has undertaken to respond to all of the questions submitted through SIPA during the month preceding the event.
Initial estimates of attendance were in the 100 to 200 range, so 200 seats were ordered for a space that could accommodate 500. As many people began to pre-register for the event it was obvious additional seats would be needed so the
OSC ordered more seats.
By the day of the event over 400 had already registered. A decision was made that priority would be given to questions from the audience, and the OSC undertook to provide responses to all questions submitted through SIPA at a later date.
That evening of May 31st the CBC Atrium was filled. There was no lack of questions and comments. There was emotion. Some anger. Some grief.
The meeting ran overtime. Still there were hands going up and line-ups at the two floor microphones when the meeting was closed.
The small investor situation was summed up by a brave lady who admitted they had lost their life savings of $170,000 and finally settled with the bank owned brokerage for $30,000 in returned fees, and signed a gag order to protect the bank from being exposed. They did not know where to turn and asked if there was anything that can be done. The regulators said too bad. It's too late. You settled and signed a gag. A cold, hard hearted, insensitive response. It's time for a better system.
Ken Kivenko raised the issue of limitation periods and the fact that Ontario reduced the six year period to two years. Most people are not aware that there is a limitation period for taking legal action from the time that you become aware or should have come aware of a problem.
Many victims of financial crime have trouble meeting the six year requirement. CARP and SIPA had requested that the six year limitation period be increased to seven years.
Now Ontario has reduced it to two.
SIPA will pursue this issue by every avenue available as we believe it is the single most important issue for investors. The industry and the regulatory system has failed to provide adequate investor protection. Investors are losing billions of dollars each year due to wrongdoing. Their only safeguard has been the right to take civil action. Now this right is being eroded by reducing limitation periods.
It seems we have come full circle and we are now back to "INVESTOR BEWARE"!
Monday, May 02, 2005
Investment Industry Cover-up, Gag Orders & Threats
Although some of our regulatory leaders say they believe in transparency, nothing is being done about the industry practice of covering up widespread wrongdoing and then settling with plaintiffs by paying pennies on the dollar and covering up with gag orders.
The industry also gags registered representatives from speaking out with the threat of expulsion, not just from their jobs but the industry. Most either stay and remain silent or quietly change careers. The few that speak out are ostracized and persecuted with lawsuits and Anton Pillar orders.
Kent Shirley attempted to speak out but was slapped with an Anton Pillar order preventing him from speaking out and the confiscation of his computer. The issue remains unresolved. Joe Killoran has picked up the torch from Kent Shirley and now faces legal action. Stephen Gadsden was convinced to take down his open letter to Canadians. Jonathan Chevreau's article was not published.
The media also seems to be muffled by industry. The Bre-X stifling is an excellent example; the Toronto papers did not print a word of the case in Ottawa, and the Ottawa press was strangely silent the second day. Scam of the century became secret of the century.
The industry approach of intimidation and threats is illustrated by the ASC's firing of one of those who came forward to tell the truth. The ASC has called them cowardly for acting anonymously and then demonstrates what will happen if they are identified.
We need TruthTeller legislation to protect the many who will come forward. As long as we allow the industry to continue to cover-up with lack of disclosure, gag orders and threats to employees, small investors will remain at risk and it really is an "Investor Beware" situation, as Robert Goldin so aptly named his book published six years ago.
It is time for an Inquiry Commission into widespread industry wrongdoing, industry cover-up, and regulatory failure to provide investor protection. That is why SIPA is calling for an inquiry in our submission to the Senate Standing Committee on Banking Trade and Commerce
The allegations by 35 members of the Alberta Securities Commission staff suggest that industry corruption may even permeate the regulators
The industry also gags registered representatives from speaking out with the threat of expulsion, not just from their jobs but the industry. Most either stay and remain silent or quietly change careers. The few that speak out are ostracized and persecuted with lawsuits and Anton Pillar orders.
Kent Shirley attempted to speak out but was slapped with an Anton Pillar order preventing him from speaking out and the confiscation of his computer. The issue remains unresolved. Joe Killoran has picked up the torch from Kent Shirley and now faces legal action. Stephen Gadsden was convinced to take down his open letter to Canadians. Jonathan Chevreau's article was not published.
The media also seems to be muffled by industry. The Bre-X stifling is an excellent example; the Toronto papers did not print a word of the case in Ottawa, and the Ottawa press was strangely silent the second day. Scam of the century became secret of the century.
The industry approach of intimidation and threats is illustrated by the ASC's firing of one of those who came forward to tell the truth. The ASC has called them cowardly for acting anonymously and then demonstrates what will happen if they are identified.
We need TruthTeller legislation to protect the many who will come forward. As long as we allow the industry to continue to cover-up with lack of disclosure, gag orders and threats to employees, small investors will remain at risk and it really is an "Investor Beware" situation, as Robert Goldin so aptly named his book published six years ago.
It is time for an Inquiry Commission into widespread industry wrongdoing, industry cover-up, and regulatory failure to provide investor protection. That is why SIPA is calling for an inquiry in our submission to the Senate Standing Committee on Banking Trade and Commerce
The allegations by 35 members of the Alberta Securities Commission staff suggest that industry corruption may even permeate the regulators
Sunday, May 01, 2005
Toronto Investor Town Hall Meeting - May 31st, 2005
May 31, 2005 - Town Hall Meeting - Toronto - FREE ADMISSION
Information booths and refreshments. An educational evening. Ask questions directly to the top regulators. This is the first time top regulators have met with the public in Toronto. Most people pay hundreds of dollars to hear the regulators. This event if FREE for investors.
Pre-register for Investor Town Hall
The Ontario Securities Commission Town Hall Meeting is scheduled for Tuesday, May 31st at 6:30pm at the Canadian Broadcasting Centre, 250 Front Street, Toronto. This will be an opportunity for investors to ask questions to a panel of the top regulators in Ontario including the Ontario Securities commission (OSC), Investment Dealers Association (IDA) the Mutual Fund Dealers Association and the Ombudsman for Banking Services and Investments (OBSI).
The five person panel will feature:
David A. Brown, Q.C., Chair OSC
Stan I. Buell, P.Eng., President SIPA
Michael Lauber, FCA, Ombudsman & CEO OBSI
Joseph J. Oliver, President & CEO IDA
Larry M. Waite, President & CEO MFDA
Mike Hornbrook of CBC Radio will be the moderator and present questions received to the panel for response.
Linda Leatherdale, money editor for the Toronto Sun and host of Linda's Moneyshow, and James Daw, columnist with the Toronto Star, will be inviting questions from those in attendance.
CARP is participating in this event and will have copies of their report "CARP's fight against scams and frauds" and other material available for investors.
The regulators will have booths with free documentation available for investors.
Anyone who is unable to attend the meeting may submit questions to the OSC at Telephone: 416-593-7744, Toll Free: 1-800-465-9670 or send by e-mail to: townhall@osc.gov.on.ca.
Members and others may also submit their questions to the Small Investor Protection Association by e-mail to sipa@sipa.to or by post to: SIPA, P.O.Box 325, Markham, ON, L6B 1A8. Questions will be given to the moderator for presentation to the panel.
You can register at the door, or register in advance by calling the OSC at 416-593-7744 or e-mail the OSC at townhall@osc.gov.on.ca. Seating is available for 500 so pre-register and arrive early for the best seats.
For more information and to register online, click on the Investor Town Hall.
Bring your friends, sit back and listen to a question and answer session. The moderators will ask the questions that are sent in and will take questions from the audience.
Information booths and refreshments. An educational evening. Ask questions directly to the top regulators. This is the first time top regulators have met with the public in Toronto. Most people pay hundreds of dollars to hear the regulators. This event if FREE for investors.
Pre-register for Investor Town Hall
The Ontario Securities Commission Town Hall Meeting is scheduled for Tuesday, May 31st at 6:30pm at the Canadian Broadcasting Centre, 250 Front Street, Toronto. This will be an opportunity for investors to ask questions to a panel of the top regulators in Ontario including the Ontario Securities commission (OSC), Investment Dealers Association (IDA) the Mutual Fund Dealers Association and the Ombudsman for Banking Services and Investments (OBSI).
The five person panel will feature:
David A. Brown, Q.C., Chair OSC
Stan I. Buell, P.Eng., President SIPA
Michael Lauber, FCA, Ombudsman & CEO OBSI
Joseph J. Oliver, President & CEO IDA
Larry M. Waite, President & CEO MFDA
Mike Hornbrook of CBC Radio will be the moderator and present questions received to the panel for response.
Linda Leatherdale, money editor for the Toronto Sun and host of Linda's Moneyshow, and James Daw, columnist with the Toronto Star, will be inviting questions from those in attendance.
CARP is participating in this event and will have copies of their report "CARP's fight against scams and frauds" and other material available for investors.
The regulators will have booths with free documentation available for investors.
Anyone who is unable to attend the meeting may submit questions to the OSC at Telephone: 416-593-7744, Toll Free: 1-800-465-9670 or send by e-mail to: townhall@osc.gov.on.ca.
Members and others may also submit their questions to the Small Investor Protection Association by e-mail to sipa@sipa.to or by post to: SIPA, P.O.Box 325, Markham, ON, L6B 1A8. Questions will be given to the moderator for presentation to the panel.
You can register at the door, or register in advance by calling the OSC at 416-593-7744 or e-mail the OSC at townhall@osc.gov.on.ca. Seating is available for 500 so pre-register and arrive early for the best seats.
For more information and to register online, click on the Investor Town Hall.
Bring your friends, sit back and listen to a question and answer session. The moderators will ask the questions that are sent in and will take questions from the audience.
OPEN LETTER TO JACK LAYTON, NDP LEADER
April 30, 2005 by e-mail to: Layton.J@parl.gc.ca
Mr. Jack Layton, Leader of the NDP
New Democratic Party of Canada300 - 279 Laurier West, Ottawa, Ontario, K1P 5J9
Sir:
The Toronto Star quotes you as saying “My blood just boils because there is misery in this country”. I agree there is misery in this country.
Your definition is “You have to pull a blanket over your head over a heating grate on University Avenue because there is no place to go.” This is certainly a very visible problem that needs attention.
My definition is “Seniors and widows after spending a lifetime of hard work, being robbed of their life savings by the white collar criminals of the financial services industry”. This is a huge problem covered up by industry.
We can help each other. You could support the need for remedial investor protection that also includes punitive damages that could be designated to caring for the homeless and other disadvantaged people in our society.
We wrote to you a year ago and received no response. We also sent an e-mail on the same date. A copy of the e-mail is appended. This letter will be posted on our new blog at www.smallinvestors.blogspot.com
We request a response.
At the same time we invite you to a Town Hall Meeting in Toronto on May 31st. David Brown, Chair OSC, Joe Oliver, President IDA, Larry Waite, President MFDA and Mike Lauber, Ombudsman & CEO OBSI will be panelists with moderator Mike Hornbrook. If you are unable to attend please send a delegate, I would be pleased to speak with you or your delegate at that time.
Sincerely
Stan I. Buell, P.Eng.
President
May 20, 2004 - e-mail to Jack Layton on NDP website
We do not see where you stand on some seniors' issues. Since 1998 SIPA has become aware that many seniors are losing their life savings due to placing their trust in financial advisors. Some of these are unregistered fraudsters and these have been disclosed in the media. However, many more are legitimate financial advisors who breach the rules with impunity and sometimes commit fraud. However the investment industry relies on self regulation and as an apparent result there is widespread abuse of seniors and loss of life savings.
Do you have a position on this issue?
If you would like more information we would be pleased to provide you with a copy of our 100 page report that was delivered to premiers and finance ministers across Canada.
We are trying to identify a leader who is aware of this problem and is prepared to do something about it.
You are quoted in the Toronto Star by Bruce Campion-Smith as saying "Together we can build a green and prosperous Canada where no one's left behind."
Right now many seniors who have lost their life savings are being left behind.
Yours truly
Stan Buell
President
Small Investor Protection Association
website: www.sipa.to
Mr. Jack Layton, Leader of the NDP
New Democratic Party of Canada300 - 279 Laurier West, Ottawa, Ontario, K1P 5J9
Sir:
The Toronto Star quotes you as saying “My blood just boils because there is misery in this country”. I agree there is misery in this country.
Your definition is “You have to pull a blanket over your head over a heating grate on University Avenue because there is no place to go.” This is certainly a very visible problem that needs attention.
My definition is “Seniors and widows after spending a lifetime of hard work, being robbed of their life savings by the white collar criminals of the financial services industry”. This is a huge problem covered up by industry.
We can help each other. You could support the need for remedial investor protection that also includes punitive damages that could be designated to caring for the homeless and other disadvantaged people in our society.
We wrote to you a year ago and received no response. We also sent an e-mail on the same date. A copy of the e-mail is appended. This letter will be posted on our new blog at www.smallinvestors.blogspot.com
We request a response.
At the same time we invite you to a Town Hall Meeting in Toronto on May 31st. David Brown, Chair OSC, Joe Oliver, President IDA, Larry Waite, President MFDA and Mike Lauber, Ombudsman & CEO OBSI will be panelists with moderator Mike Hornbrook. If you are unable to attend please send a delegate, I would be pleased to speak with you or your delegate at that time.
Sincerely
Stan I. Buell, P.Eng.
President
May 20, 2004 - e-mail to Jack Layton on NDP website
We do not see where you stand on some seniors' issues. Since 1998 SIPA has become aware that many seniors are losing their life savings due to placing their trust in financial advisors. Some of these are unregistered fraudsters and these have been disclosed in the media. However, many more are legitimate financial advisors who breach the rules with impunity and sometimes commit fraud. However the investment industry relies on self regulation and as an apparent result there is widespread abuse of seniors and loss of life savings.
Do you have a position on this issue?
If you would like more information we would be pleased to provide you with a copy of our 100 page report that was delivered to premiers and finance ministers across Canada.
We are trying to identify a leader who is aware of this problem and is prepared to do something about it.
You are quoted in the Toronto Star by Bruce Campion-Smith as saying "Together we can build a green and prosperous Canada where no one's left behind."
Right now many seniors who have lost their life savings are being left behind.
Yours truly
Stan Buell
President
Small Investor Protection Association
website: www.sipa.to
Sunday, April 24, 2005
Is ASC on witch hunt?
From Canadian Business
Alberta Securities Commission says it had just cause to fire employee
April 22, 2005
By DARCY HENTON
EDMONTON (CP) - The Alberta Securities Commission said Friday it can't be accused of firing a whistle-blower because it doesn't know who complained that there were improprieties at the provincial agency. Commission lawyer Brett Code said Grahame Newton was fired Thursday for cause and not for raising concerns about enforcement practices and the working environment at the offices of the securities regulator.
Code said Newton was dismissed because he tried to block a KPMG computer systems audit and later admitted that he had intercepted e-mails and passed them on to part-time commissioners who adjudicate Alberta Securities Act violations.
"Mr. Newton responded unco-operatively and . . . somewhat belligerently," Newton said. "His responsibility as a director was to assist KPMG in undertaking the investigation into the security and the confidentiality of the information system.
"I'm told that rather than do that he did the opposite," Code said. "He tried to stop the investigation and so basically refused to fulfil his duties."
Code denied allegations by Opposition Liberal Leader Kevin Taft that the ASC management was on a witch hunt to find out who had complained anonymously that their bosses were interfering with securities investigations.
"Whatever Mr. Taft is saying, we don't have the information to make that connection," Code said. "This person is not known to me or anyone else involved as a whistle-blower. He didn't admit to that. He didn't tell them: 'Listen, I am one of the whistle-blowers. You can't touch me.' "
A recent amendment to the Criminal Code makes it an offence - punishable by up to five years in prison - to try to muzzle or retaliate against whistle-blowers.
Code said the ASC can't be accused of doing that.
"If the violation requires that we're punishing or penalizing someone for whistle-blowing, I don't think that's what the commissioners have done."
Newton said Thursday he received a letter from the ASC advising him that he had been terminated. He has not said why he was let go.
He said he will seek legal advice before taking any action.
Investor advocate Diane Urquhart said Friday that the firing of Newton in the midst of the turmoil at the securities commission will not go over well with the investing public.
"If in fact someone has had a remedial termination because of an allegation of providing information . . . it's unacceptable and the investing public should be very concerned," she said.
Urquhart was skeptical of the timing of the KPMG audit.
"It's entirely reasonable for a forensic audit to occur . . . but right in the middle of a human-resources fiasco makes no sense from a management point of view. It's oil on a fire."
Newton was fired the same day Alberta Finance Minister Shirley McClellan told the legislature there was no witch hunt underway.
The firing appeared to surprise McClellan.
"The minister is very concerned about what happened and she is currently considering her options," said Tracy Balash, McClellan's communications director.
Balash said the minister would offer no further comment on the issue until she had a chance to talk with officials at the commission.
Taft reiterated his call Friday for the government to immediately launch an independent investigation into the matter to protect other ASC employees from losing their jobs.
"This witch hunt has already claimed its first victim and I fear it is not going to be the last," he said.
He said the commission's decision to hire KPMG to go through employees' computer hard drives is not protecting investors.
"If public confidence is lost in the Alberta Securities Commission, we'll see the value of companies decline and the economy of Alberta permanently damaged. In the end, that's my greatest fear."
Code said no more dismissals are expected.
The Alberta Securities Commission is still responsible for the Alberta Securities Act even though the Alberta Stock Exchange merged with the Vancouver Stock Exchange six years ago.
It is responsible for regulating all publicly traded companies registered in Alberta, including most of Canada's biggest oil and gas companies along with WestJet Airlines and CP Rail.
Last week, McClellan directed the provincial auditor general to investigate the ASC after a number of public complaints were made about the commission's enforcement of securities violations, and to issue a report by July.
McClellan said Wednesday that although an earlier probe by Calgary lawyer Perry Mack had cleared commission officials of any wrongdoing, the auditor general's review was needed to clear the air and help restore confidence in the agency.
Auditor general Fred Dunn said he will go back through the ASC case files as least three years and that he will look at management decisions.
In Mack's confidential probe, which McClellan has refused to release, commission staff reportedly complained that officials interfered with investigations, played favourites, and condoned a sexist and demeaning work atmosphere.
McClellan said that while Mack discovered some personnel issues, he found no evidence of regulatory interference.
Alberta Securities Commission says it had just cause to fire employee
April 22, 2005
By DARCY HENTON
EDMONTON (CP) - The Alberta Securities Commission said Friday it can't be accused of firing a whistle-blower because it doesn't know who complained that there were improprieties at the provincial agency. Commission lawyer Brett Code said Grahame Newton was fired Thursday for cause and not for raising concerns about enforcement practices and the working environment at the offices of the securities regulator.
Code said Newton was dismissed because he tried to block a KPMG computer systems audit and later admitted that he had intercepted e-mails and passed them on to part-time commissioners who adjudicate Alberta Securities Act violations.
"Mr. Newton responded unco-operatively and . . . somewhat belligerently," Newton said. "His responsibility as a director was to assist KPMG in undertaking the investigation into the security and the confidentiality of the information system.
"I'm told that rather than do that he did the opposite," Code said. "He tried to stop the investigation and so basically refused to fulfil his duties."
Code denied allegations by Opposition Liberal Leader Kevin Taft that the ASC management was on a witch hunt to find out who had complained anonymously that their bosses were interfering with securities investigations.
"Whatever Mr. Taft is saying, we don't have the information to make that connection," Code said. "This person is not known to me or anyone else involved as a whistle-blower. He didn't admit to that. He didn't tell them: 'Listen, I am one of the whistle-blowers. You can't touch me.' "
A recent amendment to the Criminal Code makes it an offence - punishable by up to five years in prison - to try to muzzle or retaliate against whistle-blowers.
Code said the ASC can't be accused of doing that.
"If the violation requires that we're punishing or penalizing someone for whistle-blowing, I don't think that's what the commissioners have done."
Newton said Thursday he received a letter from the ASC advising him that he had been terminated. He has not said why he was let go.
He said he will seek legal advice before taking any action.
Investor advocate Diane Urquhart said Friday that the firing of Newton in the midst of the turmoil at the securities commission will not go over well with the investing public.
"If in fact someone has had a remedial termination because of an allegation of providing information . . . it's unacceptable and the investing public should be very concerned," she said.
Urquhart was skeptical of the timing of the KPMG audit.
"It's entirely reasonable for a forensic audit to occur . . . but right in the middle of a human-resources fiasco makes no sense from a management point of view. It's oil on a fire."
Newton was fired the same day Alberta Finance Minister Shirley McClellan told the legislature there was no witch hunt underway.
The firing appeared to surprise McClellan.
"The minister is very concerned about what happened and she is currently considering her options," said Tracy Balash, McClellan's communications director.
Balash said the minister would offer no further comment on the issue until she had a chance to talk with officials at the commission.
Taft reiterated his call Friday for the government to immediately launch an independent investigation into the matter to protect other ASC employees from losing their jobs.
"This witch hunt has already claimed its first victim and I fear it is not going to be the last," he said.
He said the commission's decision to hire KPMG to go through employees' computer hard drives is not protecting investors.
"If public confidence is lost in the Alberta Securities Commission, we'll see the value of companies decline and the economy of Alberta permanently damaged. In the end, that's my greatest fear."
Code said no more dismissals are expected.
The Alberta Securities Commission is still responsible for the Alberta Securities Act even though the Alberta Stock Exchange merged with the Vancouver Stock Exchange six years ago.
It is responsible for regulating all publicly traded companies registered in Alberta, including most of Canada's biggest oil and gas companies along with WestJet Airlines and CP Rail.
Last week, McClellan directed the provincial auditor general to investigate the ASC after a number of public complaints were made about the commission's enforcement of securities violations, and to issue a report by July.
McClellan said Wednesday that although an earlier probe by Calgary lawyer Perry Mack had cleared commission officials of any wrongdoing, the auditor general's review was needed to clear the air and help restore confidence in the agency.
Auditor general Fred Dunn said he will go back through the ASC case files as least three years and that he will look at management decisions.
In Mack's confidential probe, which McClellan has refused to release, commission staff reportedly complained that officials interfered with investigations, played favourites, and condoned a sexist and demeaning work atmosphere.
McClellan said that while Mack discovered some personnel issues, he found no evidence of regulatory interference.
Wednesday, April 20, 2005
AG PROBE - Alberta Securities Commission
FROM THE EDMONTON JOURNAL
EDMONTON JOURNAL
Minister asks auditor general to probe ASC
Allegations of misconduct cited by complainants
By DARCY HENTON
The Canadian Press - Wednesday, April 20, 2005
EDMONTON (CP) - In the face of a flood of complaints, Alberta's finance minister has asked the provincial auditor general to investigate the embattled Alberta Securities Commission.Shirley McClellan sent a letter to auditor general Fred Dunn to request the investigation last week, finance department spokeswoman Tracy Balash revealed Tuesday. She said McClellan asked Dunn to report back as soon as possible.
"We would be looking at the process that occurs when there is an enforcement issue and how it is investigated and ensure those processes are being followed and whether or not improvements are required," Balash said.
McClellan had invited Albertans with "actual examples of enforcement issues" to come forward after Liberal leader Kevin Taft earlier this month called for an independent inquiry into the commission.The probe comes in the wake of allegations of misconduct and improprieties in the commission hierarchy.
Stan Buell, president of the Small Investors Protection Association, applauded the decision."I think it is fundamentally important nationally because the ASC is one of the largest security commissions in the country," he said.
Although the Alberta Stock Exchange merged with Vancouver Stock Exchange in March 1999 to form the CDNX Canadian Venture Exchange, the Alberta Securities Commission is still responsible for enforcing the Alberta Securities Act.
Edmonton businessman Jason Cowan, who is suing the commission for its handling of an alleged fraud, had called for the probe in a letter he sent to the minister Tuesday. He was excited by the news that an investigation is already underway.
"If they proceed the way they should proceed, I think everything will come to the surface," he said. "It will end eight years of fighting with a multitude of lawyers when the evidence has always been there."
Cowan claims he and his business partner were swindled out of $2.4 million on the defunct Alberta Stock Exchange in 1997 and are still waiting for action to be taken. Cowan, 68, and business partner Barb Trosin lost the money when they signed over their shares in Northside Minerals International, a company they set up to develop a piece of oilfield equipment.
Another Northside Minerals investor, Moe Siemieniuk, had also urged the minister in an April 7 letter to "investigate this outrageous situation." Siemieniuk, a chartered accountant in Thunder Bay, Ont., said many of his friends and relatives lost everything they invested in the project and neither the provincial regulator nor the police are doing anything about it.
A prototype of a blowout preventer was developed in Thunder Bay and still sits crated in an industrial yard ensnarled in legal tape. Siemieniuk said he found out only recently that Northside Minerals never did have legal possession of the technology."We've all got our money tied up in a company that was trading with no assets and we don't know how that happened and we want it investigated," he said.
James Denzine, of Thorp, Wis., who also invested in Northside, called the Alberta Securities investigation a "sham" and a "coverup" in a letter he sent McClellan last week. He said he and his son lost $35,000 US in Northside when it was the subject of a 1999 cease trading order. "When you get into the securities market you would expect the public would at least be given some protection - that to be allowed to trade on the Alberta Stock Exchange that company would have to go through some type of scrutiny," he said.
McClellan hired Calgary lawyer Perry Mack last January to investigate allegations from current and former securities commission employees that senior officials were interfering with enforcement activities, but his report dismissed the allegations.
Investor advocate Diane Urquhart has criticized that process and called for an independent investigation by a forensic accountant. Urquhart, who also wrote to McClellan April 11, said the situation cries out for creation of a national securities commission with a separate adjudication branch. She said provincial security commissions should be stripped of investigation powers and the RCMP should be given that role.
Urquhart said provincial security commissions as they now function are accountable to no one except the chairman and the finance minister. "When the public makes a complaint, it goes into a black hole."
Former broker Larry Elford, of Lethbridge, Alta., called the Alberta Securities Commission "a dysfunctional organization." He is urging the finance minister to go one step further and immediately call a public inquiry.
EDMONTON JOURNAL
Minister asks auditor general to probe ASC
Allegations of misconduct cited by complainants
By DARCY HENTON
The Canadian Press - Wednesday, April 20, 2005
EDMONTON (CP) - In the face of a flood of complaints, Alberta's finance minister has asked the provincial auditor general to investigate the embattled Alberta Securities Commission.Shirley McClellan sent a letter to auditor general Fred Dunn to request the investigation last week, finance department spokeswoman Tracy Balash revealed Tuesday. She said McClellan asked Dunn to report back as soon as possible.
"We would be looking at the process that occurs when there is an enforcement issue and how it is investigated and ensure those processes are being followed and whether or not improvements are required," Balash said.
McClellan had invited Albertans with "actual examples of enforcement issues" to come forward after Liberal leader Kevin Taft earlier this month called for an independent inquiry into the commission.The probe comes in the wake of allegations of misconduct and improprieties in the commission hierarchy.
Stan Buell, president of the Small Investors Protection Association, applauded the decision."I think it is fundamentally important nationally because the ASC is one of the largest security commissions in the country," he said.
Although the Alberta Stock Exchange merged with Vancouver Stock Exchange in March 1999 to form the CDNX Canadian Venture Exchange, the Alberta Securities Commission is still responsible for enforcing the Alberta Securities Act.
Edmonton businessman Jason Cowan, who is suing the commission for its handling of an alleged fraud, had called for the probe in a letter he sent to the minister Tuesday. He was excited by the news that an investigation is already underway.
"If they proceed the way they should proceed, I think everything will come to the surface," he said. "It will end eight years of fighting with a multitude of lawyers when the evidence has always been there."
Cowan claims he and his business partner were swindled out of $2.4 million on the defunct Alberta Stock Exchange in 1997 and are still waiting for action to be taken. Cowan, 68, and business partner Barb Trosin lost the money when they signed over their shares in Northside Minerals International, a company they set up to develop a piece of oilfield equipment.
Another Northside Minerals investor, Moe Siemieniuk, had also urged the minister in an April 7 letter to "investigate this outrageous situation." Siemieniuk, a chartered accountant in Thunder Bay, Ont., said many of his friends and relatives lost everything they invested in the project and neither the provincial regulator nor the police are doing anything about it.
A prototype of a blowout preventer was developed in Thunder Bay and still sits crated in an industrial yard ensnarled in legal tape. Siemieniuk said he found out only recently that Northside Minerals never did have legal possession of the technology."We've all got our money tied up in a company that was trading with no assets and we don't know how that happened and we want it investigated," he said.
James Denzine, of Thorp, Wis., who also invested in Northside, called the Alberta Securities investigation a "sham" and a "coverup" in a letter he sent McClellan last week. He said he and his son lost $35,000 US in Northside when it was the subject of a 1999 cease trading order. "When you get into the securities market you would expect the public would at least be given some protection - that to be allowed to trade on the Alberta Stock Exchange that company would have to go through some type of scrutiny," he said.
McClellan hired Calgary lawyer Perry Mack last January to investigate allegations from current and former securities commission employees that senior officials were interfering with enforcement activities, but his report dismissed the allegations.
Investor advocate Diane Urquhart has criticized that process and called for an independent investigation by a forensic accountant. Urquhart, who also wrote to McClellan April 11, said the situation cries out for creation of a national securities commission with a separate adjudication branch. She said provincial security commissions should be stripped of investigation powers and the RCMP should be given that role.
Urquhart said provincial security commissions as they now function are accountable to no one except the chairman and the finance minister. "When the public makes a complaint, it goes into a black hole."
Former broker Larry Elford, of Lethbridge, Alta., called the Alberta Securities Commission "a dysfunctional organization." He is urging the finance minister to go one step further and immediately call a public inquiry.
Tuesday, April 12, 2005
Has corruption permeated the Regulators?
April 10, 2005 by e-mail to: drumheller.stettler@assemble.ab.ca
The Hon. Shirley McClellan
Minister of Finance Alberta
#224 Legislative Building
10800 – 97 Avenue
Edmonton, AB, T5K 2B6
Dear Minister McClellan,
Further to our letter dated March 25, 2005, we are writing today to advise you that we fully support the concerns expressed by Diane Urquhart regarding the ASC Commissioners Report in her e-mail to you dated April 10, 2005.
While we would like to have confidence in our provincial securities regulators, recent revelations including the Auditor General's Report, the Gomery Inquiry evidence and the recent allegations against the Alberta Securities Commission do little to inspire trust in the established authorities.
It seems that Elliot Spitzer using a fresh approach to investor protection, with his bureau for investment protection, has blown the lid off widespread wrongdoing and corruption. He was aided by TruthTellers to expose the wrongdoing.
In Canada we are fortunate to have individuals like the Hon. Sheila Fraser and Justice Gomery who are able to pursue the truth. We also have heroines like Ms. Bedard who are prepared to tell the truth despite attempts to intimidate her and destroy her credibility.
Now we have Mr. Jean Brault. Although we do not respect him for his participation in the wrongdoing, we do believe that he is showing courage to come forward and testify when so many others have appeared unwilling to tell the truth and even attempted to make a mockery of the inquiry.
Ms. Urquhart is a very capable and competent young lady who is dedicated to helping to make Canada a better place in which to live and invest. She has taken the time to investigate and expose some of the issues that are the root cause of many of the problems that investors face.
There is need for objective independent oversight of the investment industry and the regulators. Ms. Urquhart has provided knowledgeable comment. We fully support her views on this topic.
Further, we believe it is time that there is an inquiry into our regulatory system. It is no longer acceptable that we simply fiddle with the rules or the existing regulatory structure. There are industry accepted practices of wrongdoing that are costing Canadian taxpayers billions of dollars every year in lost savings.
There is cover-up so the public does not know. It is time to expose what is happening, and to make appropriate changes before Canada becomes entrenched as a nation that harbours corruption.
We trust that you will give Ms. Urquhart's submission your serious consideration and take appropriate action.
Yours truly
Stan I. Buell, P.Eng.President
cc. Hon Ralph Goodale – by e-mail to: goodar@parl.gc.ca
Hon Tony Ianno – by e-mail to: Ianno.T@parl.gc.ca
Hon David L. Emerson – by e-mail to: Minister.Industry@ic.gc.ca
Ms. Diane Urquhart – by e-mail to: urquhart@rogers.com
The Hon. Shirley McClellan
Minister of Finance Alberta
#224 Legislative Building
10800 – 97 Avenue
Edmonton, AB, T5K 2B6
Dear Minister McClellan,
Further to our letter dated March 25, 2005, we are writing today to advise you that we fully support the concerns expressed by Diane Urquhart regarding the ASC Commissioners Report in her e-mail to you dated April 10, 2005.
While we would like to have confidence in our provincial securities regulators, recent revelations including the Auditor General's Report, the Gomery Inquiry evidence and the recent allegations against the Alberta Securities Commission do little to inspire trust in the established authorities.
It seems that Elliot Spitzer using a fresh approach to investor protection, with his bureau for investment protection, has blown the lid off widespread wrongdoing and corruption. He was aided by TruthTellers to expose the wrongdoing.
In Canada we are fortunate to have individuals like the Hon. Sheila Fraser and Justice Gomery who are able to pursue the truth. We also have heroines like Ms. Bedard who are prepared to tell the truth despite attempts to intimidate her and destroy her credibility.
Now we have Mr. Jean Brault. Although we do not respect him for his participation in the wrongdoing, we do believe that he is showing courage to come forward and testify when so many others have appeared unwilling to tell the truth and even attempted to make a mockery of the inquiry.
Ms. Urquhart is a very capable and competent young lady who is dedicated to helping to make Canada a better place in which to live and invest. She has taken the time to investigate and expose some of the issues that are the root cause of many of the problems that investors face.
There is need for objective independent oversight of the investment industry and the regulators. Ms. Urquhart has provided knowledgeable comment. We fully support her views on this topic.
Further, we believe it is time that there is an inquiry into our regulatory system. It is no longer acceptable that we simply fiddle with the rules or the existing regulatory structure. There are industry accepted practices of wrongdoing that are costing Canadian taxpayers billions of dollars every year in lost savings.
There is cover-up so the public does not know. It is time to expose what is happening, and to make appropriate changes before Canada becomes entrenched as a nation that harbours corruption.
We trust that you will give Ms. Urquhart's submission your serious consideration and take appropriate action.
Yours truly
Stan I. Buell, P.Eng.President
cc. Hon Ralph Goodale – by e-mail to: goodar@parl.gc.ca
Hon Tony Ianno – by e-mail to: Ianno.T@parl.gc.ca
Hon David L. Emerson – by e-mail to: Minister.Industry@ic.gc.ca
Ms. Diane Urquhart – by e-mail to: urquhart@rogers.com
Sunday, April 10, 2005
Gomery Inquiry - Jean Brault
While we do not respect Jean Brault for his past actions we must respect that he has come before Justice Gomery with startling revelations. No real surprise except that someone is speaking out without the usual evasive tactics, refusal to co-operate and mockery that has been displayed by others.
In a letter to the Star on April 9, 2005, Anne Mitchell of Toronto said it very well:
"Come on , Canada. We can do better. Politicians, business people and criminals should not be allowed to grow rich at the expense of the Canadian taxpayer."
Edmonton MP David Kilgour is "disgusted at Gomery findings" according to the Star and "says he may quit". While it is disgusting to see that corruption is rampant in the investment investing and permeating the regulators and now revelations suggest even our Government. There is no surprise. We cannot quit. We must fight for right.
Finally, corruption is beginning to be exposed. Is it because of Spitzer's efforts? Is it because of the new communication via the Internet? Or is it because our morality is beginning to awake?
It really doesn't matter why it's happening, but it is. More and more people are becoming aware and they are disgusted. Next, they need to become enraged. They need to unite and work together to make things change.
We need to change our systems. We need to stop accepting the things we inherently know are wrong. We need to exercise our right to vote. We need to punish those who do wrong. Leaders must be held accountable.
Industry leaders who condone or allow wrongdoing must be punished along with the so-called "rogues". The perpetrators must not be allowed to benefit and escape unscathed. The same applies to our politicians. We must demand leaders who know what is right and what is wrong. We must accept nothing less than the best.
There are more good people than bad people. It is time for the good people to unite and fight for what is right. Voices must be heard. Votes must be counted.
In a letter to the Star on April 9, 2005, Anne Mitchell of Toronto said it very well:
"Come on , Canada. We can do better. Politicians, business people and criminals should not be allowed to grow rich at the expense of the Canadian taxpayer."
Edmonton MP David Kilgour is "disgusted at Gomery findings" according to the Star and "says he may quit". While it is disgusting to see that corruption is rampant in the investment investing and permeating the regulators and now revelations suggest even our Government. There is no surprise. We cannot quit. We must fight for right.
Finally, corruption is beginning to be exposed. Is it because of Spitzer's efforts? Is it because of the new communication via the Internet? Or is it because our morality is beginning to awake?
It really doesn't matter why it's happening, but it is. More and more people are becoming aware and they are disgusted. Next, they need to become enraged. They need to unite and work together to make things change.
We need to change our systems. We need to stop accepting the things we inherently know are wrong. We need to exercise our right to vote. We need to punish those who do wrong. Leaders must be held accountable.
Industry leaders who condone or allow wrongdoing must be punished along with the so-called "rogues". The perpetrators must not be allowed to benefit and escape unscathed. The same applies to our politicians. We must demand leaders who know what is right and what is wrong. We must accept nothing less than the best.
There are more good people than bad people. It is time for the good people to unite and fight for what is right. Voices must be heard. Votes must be counted.
Wednesday, April 06, 2005
Gomery Inquiry - Cover-Up
Is our Government guilty of cover-up?
Why does it take our friends in the United States to inform us of what is wrong in Canada?
At least some of our journalists try to keep us informed.
The following appeared today.
GOMERY INQUIRY
On-line journal provokes a firestorm
By JANE TABER
Tuesday, April 5, 2005
SENIOR POLITICAL WRITER
OTTAWA -- An unassuming 42-year-old call-centre manager and Star Trek fan from Minneapolis, Minn., has provoked a political firestorm in Canada.
Ed Morrissey -- Captain Ed to his friends -- published on the weekend what no Canadian is allowed to print or broadcast. On his Internet blog, he posted testimony before the Gomery commission that is subject to a publication ban.
Yesterday, after the story of his blogging exploits broke in the Canadian media, Mr. Morrissey saw the traffic on his website increase tenfold as Canadians clicked on to read the testimony from Quebec ad executive Jean Brault.
By midday, 131,000 people had visited the site. In just one hour before lunchtime, he had 26,000 hits and by the end of the day he estimated he was on track for about 300,000 hits, many from Canadians. He averages 22,000 visits a day.
Advertisements
"There's a lot of people coming to me through Google Canada," Mr. Morrissey said.
"Just taking a quick look here at the last 100 people who were on the site, which at this rate was in the last 10 seconds, there's a lot of Canadian servers on there."
As an American, Mr. Morrissey is not subject to the ban, and his publication of the details of the testimony has made the story accessible to all Canadians.
And he says he didn't go looking for the story. It found his right-wing blog, and he was happy to publish it. Mr. Morrissey, who describes himself as a libertarian, believes strongly in freedom of the press.
"Somebody contacted me through somebody I knew. I read a little bit more about it and then when I got the information I was able to fit it together and write the post."
He wouldn't say who his contact "may or may not be" but it is his understanding that there is someone in the Montreal room where the hearings are taking place who is giving the information to his contact, who is then passing it along to Mr. Morrissey.
Mr. Morrissey is not paying his contact for the information.
His contact could be anyone as the commission hearings are open to the public. Indeed, the Brault testimony is an open secret in political Ottawa. Ask any political staffer or MP and they seem to know some, if not all, of the details of the testimony. The television feed from the commission can be picked up in some Ottawa newsrooms, and other information is being passed through e-mails, transcripts and phone calls.
Political leaders are being kept abreast of the story, with the exception of Bloc Québécois Leader Gilles Duceppe who asked his staff not to tell him anything for fear he will divulge information and run afoul of the ban.
Last week, the NDP dispatched their man, Pierre Ducasse, to the hearings when the publication ban was imposed. He reports the testimony back to the senior staff. Party leader Jack Layton, however, is briefed only on the "gist" of the information, his spokesman, Karl Bélanger, says. Again, it is to ensure that he doesn't let details slip.
Mr. Morrissey is a California native who has lived in Minnesota for nearly eight years. He started the blog 18 months ago when he found himself close to home after his wife, Marsha, suffered from a serious kidney ailment.
The Captain Ed nickname comes as a result of a gift from an old girlfriend. Twenty years ago, Mr. Morrissey was a huge Star Trek fan. So his girlfriend bought him a personalized licence plate that said "Captain Ed."
Living just a few hours from the Canadian border, Mr. Morrissey says he follows Canadian politics but has always been hesitant to write about Canada.
"I know Canadians are sensitive about Americans being arrogant about their politics. So I don't write a lot about Canadian politics."
But he is continuing to follow and post articles about the inquiry.
"It's an interesting story. It's a fascinating story," he said. "The one thing that was concerning was that the Liberal Party could call a snap election before this came out."
Why does it take our friends in the United States to inform us of what is wrong in Canada?
At least some of our journalists try to keep us informed.
The following appeared today.
GOMERY INQUIRY
On-line journal provokes a firestorm
By JANE TABER
Tuesday, April 5, 2005
SENIOR POLITICAL WRITER
OTTAWA -- An unassuming 42-year-old call-centre manager and Star Trek fan from Minneapolis, Minn., has provoked a political firestorm in Canada.
Ed Morrissey -- Captain Ed to his friends -- published on the weekend what no Canadian is allowed to print or broadcast. On his Internet blog, he posted testimony before the Gomery commission that is subject to a publication ban.
Yesterday, after the story of his blogging exploits broke in the Canadian media, Mr. Morrissey saw the traffic on his website increase tenfold as Canadians clicked on to read the testimony from Quebec ad executive Jean Brault.
By midday, 131,000 people had visited the site. In just one hour before lunchtime, he had 26,000 hits and by the end of the day he estimated he was on track for about 300,000 hits, many from Canadians. He averages 22,000 visits a day.
Advertisements
"There's a lot of people coming to me through Google Canada," Mr. Morrissey said.
"Just taking a quick look here at the last 100 people who were on the site, which at this rate was in the last 10 seconds, there's a lot of Canadian servers on there."
As an American, Mr. Morrissey is not subject to the ban, and his publication of the details of the testimony has made the story accessible to all Canadians.
And he says he didn't go looking for the story. It found his right-wing blog, and he was happy to publish it. Mr. Morrissey, who describes himself as a libertarian, believes strongly in freedom of the press.
"Somebody contacted me through somebody I knew. I read a little bit more about it and then when I got the information I was able to fit it together and write the post."
He wouldn't say who his contact "may or may not be" but it is his understanding that there is someone in the Montreal room where the hearings are taking place who is giving the information to his contact, who is then passing it along to Mr. Morrissey.
Mr. Morrissey is not paying his contact for the information.
His contact could be anyone as the commission hearings are open to the public. Indeed, the Brault testimony is an open secret in political Ottawa. Ask any political staffer or MP and they seem to know some, if not all, of the details of the testimony. The television feed from the commission can be picked up in some Ottawa newsrooms, and other information is being passed through e-mails, transcripts and phone calls.
Political leaders are being kept abreast of the story, with the exception of Bloc Québécois Leader Gilles Duceppe who asked his staff not to tell him anything for fear he will divulge information and run afoul of the ban.
Last week, the NDP dispatched their man, Pierre Ducasse, to the hearings when the publication ban was imposed. He reports the testimony back to the senior staff. Party leader Jack Layton, however, is briefed only on the "gist" of the information, his spokesman, Karl Bélanger, says. Again, it is to ensure that he doesn't let details slip.
Mr. Morrissey is a California native who has lived in Minnesota for nearly eight years. He started the blog 18 months ago when he found himself close to home after his wife, Marsha, suffered from a serious kidney ailment.
The Captain Ed nickname comes as a result of a gift from an old girlfriend. Twenty years ago, Mr. Morrissey was a huge Star Trek fan. So his girlfriend bought him a personalized licence plate that said "Captain Ed."
Living just a few hours from the Canadian border, Mr. Morrissey says he follows Canadian politics but has always been hesitant to write about Canada.
"I know Canadians are sensitive about Americans being arrogant about their politics. So I don't write a lot about Canadian politics."
But he is continuing to follow and post articles about the inquiry.
"It's an interesting story. It's a fascinating story," he said. "The one thing that was concerning was that the Liberal Party could call a snap election before this came out."
Thursday, March 24, 2005
Town Hall Meeting for Investors
The Ontario Securities Commission is planning a Town Hall Meeting in Toronto at the CBC Atrium for May 31st, 2005. It will be held in the evening at a time to be established.
This will be an opportunity for investors to ask questions to a panel of the top regulators in Ontario including the Ontario Securities commission (OSC), Investment Dealers Association (IDA) and the Ombudsman for Banking Services and Investments (OBSI).
Investors who have a beef with the way the regulatory system functions, or with the way they have been treated by the industry or regulators should speak up.
It will be a four person panel with a moderator yet to be named. The panel mambers will be:
This will be an opportunity for investors to ask questions to a panel of the top regulators in Ontario including the Ontario Securities commission (OSC), Investment Dealers Association (IDA) and the Ombudsman for Banking Services and Investments (OBSI).
Investors who have a beef with the way the regulatory system functions, or with the way they have been treated by the industry or regulators should speak up.
It will be a four person panel with a moderator yet to be named. The panel mambers will be:
- David A. Brown, Q.C., ChairOSC
- Joseph J. Oliver, President & CEO IDA
- Michael Lauber, FCA, Ombudsman & CEO OBSI
- Stan I. Buell, P.Eng., President SIPA
Thursday, March 17, 2005
Will Canada provide justice for Bre-X's Felderhof?
Well, it looks like Felderhof was convinced by two events to return to Canada "to clear his family name".
In the U.S. Ebbers was found guilty on all counts within weeks, and faces up to 85 years in prison. Not the kind of justice white collar criminals like to see. It just could have some impact on corporate governance and industry culture ... in the U.S. The financial predators who have a choice will certainly opt for Canadian justice.
Here in Canada we see the Air Canada 20 year investigation and trial resulting in the accused being declared innocent. This has raised an outcry from ordinary citizens. The TV media coverage causes one to suspect our justice system.
Our white collar criminals who simply rob people of their savings are seldom imprisoned, unless they are small fry, and then rarely for more than a year. They may be sentenced to longer terms and be required to spend some time in minimum security facilities like the Gravenhurst Country Club for white collar criminals, but they are soon released because they are considered non-violent and no longer a risk to society.
It is not unusual for the perpetrators to resume their old practices when they realize that the worst that can happen is they have a years holiday with all expense paid. They can catch up on their reading, improve their strategies for defrauding Canadians and at the same time polish up their tennis game.
Does anyone know how many seniors and widows have lost their savings when they trusted their advisors who put them into Bre-X?
Does anyone remember that our Toronto media failed to carry any coverage when two small investors took Nesbitt to court over Bre-X?
Does anyone remember that the two Ottawa evening papers provided coverage the first day of the trial and then fell strangely silent?
Does the media really think that Canadians were not interested in the "scam of the century" that effected almost every investor? When Diane Francis wrote her column six months before the trial it seemed that there would be interest across Canada.
Is the investment industry so strong and powerful that they are able to muzzle Canada's media?
Yet, we allow extremists freedom of speech that threatens many in our society.
Maybe Canada will summon some courage to cover the Bre-X situation with some detail now that Felderhof has returned to "clear his name", and we are once again embarrassed by U.S. Justice showing how white collar criminals should be treated.
In the U.S. even Martha Stewart was sentenced to six months and her offence was nothing like what we see in Canada on a regular basis, without any incarceration. Why do we accept that the perpetrators are let off by agreeing to pay insignificant fines with other peoples money?
Are we really still the wild west as some Europeans think?
In the U.S. Ebbers was found guilty on all counts within weeks, and faces up to 85 years in prison. Not the kind of justice white collar criminals like to see. It just could have some impact on corporate governance and industry culture ... in the U.S. The financial predators who have a choice will certainly opt for Canadian justice.
Here in Canada we see the Air Canada 20 year investigation and trial resulting in the accused being declared innocent. This has raised an outcry from ordinary citizens. The TV media coverage causes one to suspect our justice system.
Our white collar criminals who simply rob people of their savings are seldom imprisoned, unless they are small fry, and then rarely for more than a year. They may be sentenced to longer terms and be required to spend some time in minimum security facilities like the Gravenhurst Country Club for white collar criminals, but they are soon released because they are considered non-violent and no longer a risk to society.
It is not unusual for the perpetrators to resume their old practices when they realize that the worst that can happen is they have a years holiday with all expense paid. They can catch up on their reading, improve their strategies for defrauding Canadians and at the same time polish up their tennis game.
Does anyone know how many seniors and widows have lost their savings when they trusted their advisors who put them into Bre-X?
Does anyone remember that our Toronto media failed to carry any coverage when two small investors took Nesbitt to court over Bre-X?
Does anyone remember that the two Ottawa evening papers provided coverage the first day of the trial and then fell strangely silent?
Does the media really think that Canadians were not interested in the "scam of the century" that effected almost every investor? When Diane Francis wrote her column six months before the trial it seemed that there would be interest across Canada.
Is the investment industry so strong and powerful that they are able to muzzle Canada's media?
Yet, we allow extremists freedom of speech that threatens many in our society.
Maybe Canada will summon some courage to cover the Bre-X situation with some detail now that Felderhof has returned to "clear his name", and we are once again embarrassed by U.S. Justice showing how white collar criminals should be treated.
In the U.S. even Martha Stewart was sentenced to six months and her offence was nothing like what we see in Canada on a regular basis, without any incarceration. Why do we accept that the perpetrators are let off by agreeing to pay insignificant fines with other peoples money?
Are we really still the wild west as some Europeans think?
Wednesday, March 16, 2005
How many investors have lost their savings?
Just today (March 15, 2005), we received a letter from a member saying:
I have a friend who I have known for several years.
I was discussing SIPA with her and she said they are just now "recovering" from bad advice. He still works (70 years old).
I never knew this! How many more are there out there that don't discuss their losses?
We have heard from hundreds of investors who have lost significant portions of their life savings, and sometimes more than all. They trusted their advisors completely. Busy with their own professions and family responsibilities they relied upon their advisor for the management of their investments. They followed the advice provided.
There are widespread practices in the industry that often result in the depletion of investors' savings. Many have lost their savings investing in mutual funds. These investors believed mutual funds offered diversification and safety for their savings.
Some mutual fund dealers offer leveraged investment with a 2 for 1 plan or other leveraging scheme. The plan is fine for the dealer - it results in double the amount of assets under management, and for the registered representative - he earns double the commissions. The friendly bank who provides the loan is happy - more loans at high rates and guaranteed by the investor's assets with the dealer authorized to sell out the investor before there is any risk to the bank.
For investors it is a different story. It's fine if the market goes up strongly and generates a return greater than the cost of borrowing. If the market goes down, it's a different story.
To illustrate the point, one of our members, a widow in her sixties, living modestly and still working with a modest income, inherited $100,000. Her only investments had been bonds and GICs, and her savings were modest enough not to attract financial predators. She was encouraged to invest her newfound wealth. She invested in mutual funds with an advisor. At first she accepted to invest only in money market funds. Over a period of six months her advisor gained her confidence and he persuaded her to invbest in equity funds, and also arranged a loan from the friendly bank as approved in the account opening form. The widow says she was not awareof this clause when she signed.
Now she has $200,000 invested and a loan of $100,000. Over the next few months the account grows (negatively) to $170,000. She realizes she still must repay the bank - they are taking monthly payments - and she is down $30,000. This is more than her annual salary and more than she could save the rest of her life. She does not want to risk losing more of her nestegg and asks her advisor to get her out of these mutual funds.
Her advisor, who receives trailer fees for holding clients in, then tells her if she wants out there is a 7% redemption fee that applies not only to her initial $100,000 or the current amount of $170,000 but to the total of $200,000. This means a redemption fee of $14,000.
The widow is then faced with escaping from her mutual fund experience with $56,000. In less than two years her loss is 44% when she has placed her trust in her advisor and the mutual fund industry.
Is this fair?
How many more widows and seniors have received the same treatment?
I have a friend who I have known for several years.
I was discussing SIPA with her and she said they are just now "recovering" from bad advice. He still works (70 years old).
I never knew this! How many more are there out there that don't discuss their losses?
We have heard from hundreds of investors who have lost significant portions of their life savings, and sometimes more than all. They trusted their advisors completely. Busy with their own professions and family responsibilities they relied upon their advisor for the management of their investments. They followed the advice provided.
There are widespread practices in the industry that often result in the depletion of investors' savings. Many have lost their savings investing in mutual funds. These investors believed mutual funds offered diversification and safety for their savings.
Some mutual fund dealers offer leveraged investment with a 2 for 1 plan or other leveraging scheme. The plan is fine for the dealer - it results in double the amount of assets under management, and for the registered representative - he earns double the commissions. The friendly bank who provides the loan is happy - more loans at high rates and guaranteed by the investor's assets with the dealer authorized to sell out the investor before there is any risk to the bank.
For investors it is a different story. It's fine if the market goes up strongly and generates a return greater than the cost of borrowing. If the market goes down, it's a different story.
To illustrate the point, one of our members, a widow in her sixties, living modestly and still working with a modest income, inherited $100,000. Her only investments had been bonds and GICs, and her savings were modest enough not to attract financial predators. She was encouraged to invest her newfound wealth. She invested in mutual funds with an advisor. At first she accepted to invest only in money market funds. Over a period of six months her advisor gained her confidence and he persuaded her to invbest in equity funds, and also arranged a loan from the friendly bank as approved in the account opening form. The widow says she was not awareof this clause when she signed.
Now she has $200,000 invested and a loan of $100,000. Over the next few months the account grows (negatively) to $170,000. She realizes she still must repay the bank - they are taking monthly payments - and she is down $30,000. This is more than her annual salary and more than she could save the rest of her life. She does not want to risk losing more of her nestegg and asks her advisor to get her out of these mutual funds.
Her advisor, who receives trailer fees for holding clients in, then tells her if she wants out there is a 7% redemption fee that applies not only to her initial $100,000 or the current amount of $170,000 but to the total of $200,000. This means a redemption fee of $14,000.
The widow is then faced with escaping from her mutual fund experience with $56,000. In less than two years her loss is 44% when she has placed her trust in her advisor and the mutual fund industry.
Is this fair?
How many more widows and seniors have received the same treatment?
Monday, March 14, 2005
Will Government create a federal regulator?
SIPA Inc Five Year Review ~ the Small Investors' Perspective of Investor Protection in Canada
Executive Summary
Until recently the public perception was that the investment industry is well regulated and the regulators provide investor protection that will protect the small investor from wrongdoing. More recently the public is becoming aware of widespread industry practices of wrongdoing that are creating a negative impact on all investors.
The small investor voices included in this report are excerpts from the many communications received since SIPA was founded in mid 1998. These voices are representative of the hundreds of voices that have been heard and come from all walks of life including doctors, lawyers, health care workers, teachers, widows, and seniors. From all these voices a composite small investor perception of the investment industry has evolved.
Regulators are challenged to balance the needs of investor protection with the need to promote market efficiency, but the Canadian public does not understand how the regulatory system works. There is great disparity across the country and amongst the dealers, mutual fund companies, insurance companies and banks. There is pervasive non-compliance with the rules. Regulators appear largely ineffective in dealing with those engaged in wrongdoing. Investors do not know where to turn. The Wise Persons Committee Report issued in December 2003 calls for a Canadian Securities Commission to provide consistent regulation for all Canadians and a united Canadian voice in the global marketplace.
The lack of investor awareness is acknowledged. Attempts at investor education will not resolve the underlying problem, of investor losses due to industry wrongdoing, faced by small investors. The small investor needs to become more aware of how the industry operates and is regulated. However, Canadians are busy with earning a living and participating in family life. The investor trusts his advisor and trusts our Government to provide industry regulation and control. Government has a responsibility to protect small investors as consumers and that responsibility can no longer be deferred.
The investment industry tends to follow widespread practices that are contrary to the rules and regulations and not in the best interests of small investors. Some of these practices are being exposed in the United States. Canadian investors are becoming aware that these same issues are prevalent in Canada. There is an appalling abuse of small investors who are financially uneducated. The leaders of the industry should have at least some knowledge of the cavalier attitude towards small investor life savings. It is irresponsible to ignore this situation or worse to condone it. Our Canadian society is based on trust and that trust is being betrayed by the investment industry.
The primary complaint of the small investor is that he is encouraged to place his trust in his advisor but his advisor often seems more motivated by commission generation than providing a capable professional service to the clients depending on him. Fiduciary duty is breached on an alarmingly regular basis and sometimes fraud is an issue. This results in the serious degradation of small investor savings with the resultant negative impact on lifestyle. The regulators receive large numbers of complaints but are reluctant to reveal information. The public has a right to know when this information could help them to ward off destruction of their life savings.
Investors have found it takes time to determine how complaints are dealt with, and it is difficult to get an appropriate response from industry participants. Industry sponsored dispute resolution mechanisms do not provide appropriate means for small investors to have their disputes resolved. Investors who make a complaint are stalled and encounter delaying tactics. Ultimately, they find that civil litigation is the only viable alternative and often this is not an option possible for the small investor who has lost everything. Most seniors do not have the requisite resources of money, physical and mental stamina, and time to pursue lengthy legal battles.
Investor losses are estimated to amount to billions of dollars. The BCSC alone estimates $100 million annually in ‘reported losses’ in British Columbia. Many small investors are not even aware when they have had a negative experience as a direct result of industry wrongdoing. Industry has failed to provide all investors with meaningful statements on a timely basis. Many that are aware of a problem are reluctant to proceed with a complaint. Often, they are misled when industry participants provide false or misleading information.
The impact on victims of investor losses due to wrongdoing can be devastating. It is not only the financial loss; it is the sense of betrayal the victim feels when his trusted advisor has caused the loss of life savings. The victims lose their money, their hope, and their future. Many suffer from Post Traumatic Stress Disorder. They experience depression, difficulty sleeping, stress on relationships, loss of trust in others, loss of hope, and too often thoughts of suicide.
Small investors need regulators to provide investor protection that is fair and available to all Canadians. History shows that self-regulation has failed to provide adequate investor protection. Industry sponsored agencies or agencies that employ mainly industry staff will not provide fair and objective investor protection. The Government must now act to afford consumer protection for the small investor. Government should heed the call for a Canadian Securities Commission and a Canada Securities Act; and enact legislation for a national authority to provide investor protection for all Canadians. As the Wise Persons Committee Report states and is so aptly named “It’s Time”.
Executive Summary
Until recently the public perception was that the investment industry is well regulated and the regulators provide investor protection that will protect the small investor from wrongdoing. More recently the public is becoming aware of widespread industry practices of wrongdoing that are creating a negative impact on all investors.
The small investor voices included in this report are excerpts from the many communications received since SIPA was founded in mid 1998. These voices are representative of the hundreds of voices that have been heard and come from all walks of life including doctors, lawyers, health care workers, teachers, widows, and seniors. From all these voices a composite small investor perception of the investment industry has evolved.
Regulators are challenged to balance the needs of investor protection with the need to promote market efficiency, but the Canadian public does not understand how the regulatory system works. There is great disparity across the country and amongst the dealers, mutual fund companies, insurance companies and banks. There is pervasive non-compliance with the rules. Regulators appear largely ineffective in dealing with those engaged in wrongdoing. Investors do not know where to turn. The Wise Persons Committee Report issued in December 2003 calls for a Canadian Securities Commission to provide consistent regulation for all Canadians and a united Canadian voice in the global marketplace.
The lack of investor awareness is acknowledged. Attempts at investor education will not resolve the underlying problem, of investor losses due to industry wrongdoing, faced by small investors. The small investor needs to become more aware of how the industry operates and is regulated. However, Canadians are busy with earning a living and participating in family life. The investor trusts his advisor and trusts our Government to provide industry regulation and control. Government has a responsibility to protect small investors as consumers and that responsibility can no longer be deferred.
The investment industry tends to follow widespread practices that are contrary to the rules and regulations and not in the best interests of small investors. Some of these practices are being exposed in the United States. Canadian investors are becoming aware that these same issues are prevalent in Canada. There is an appalling abuse of small investors who are financially uneducated. The leaders of the industry should have at least some knowledge of the cavalier attitude towards small investor life savings. It is irresponsible to ignore this situation or worse to condone it. Our Canadian society is based on trust and that trust is being betrayed by the investment industry.
The primary complaint of the small investor is that he is encouraged to place his trust in his advisor but his advisor often seems more motivated by commission generation than providing a capable professional service to the clients depending on him. Fiduciary duty is breached on an alarmingly regular basis and sometimes fraud is an issue. This results in the serious degradation of small investor savings with the resultant negative impact on lifestyle. The regulators receive large numbers of complaints but are reluctant to reveal information. The public has a right to know when this information could help them to ward off destruction of their life savings.
Investors have found it takes time to determine how complaints are dealt with, and it is difficult to get an appropriate response from industry participants. Industry sponsored dispute resolution mechanisms do not provide appropriate means for small investors to have their disputes resolved. Investors who make a complaint are stalled and encounter delaying tactics. Ultimately, they find that civil litigation is the only viable alternative and often this is not an option possible for the small investor who has lost everything. Most seniors do not have the requisite resources of money, physical and mental stamina, and time to pursue lengthy legal battles.
Investor losses are estimated to amount to billions of dollars. The BCSC alone estimates $100 million annually in ‘reported losses’ in British Columbia. Many small investors are not even aware when they have had a negative experience as a direct result of industry wrongdoing. Industry has failed to provide all investors with meaningful statements on a timely basis. Many that are aware of a problem are reluctant to proceed with a complaint. Often, they are misled when industry participants provide false or misleading information.
The impact on victims of investor losses due to wrongdoing can be devastating. It is not only the financial loss; it is the sense of betrayal the victim feels when his trusted advisor has caused the loss of life savings. The victims lose their money, their hope, and their future. Many suffer from Post Traumatic Stress Disorder. They experience depression, difficulty sleeping, stress on relationships, loss of trust in others, loss of hope, and too often thoughts of suicide.
Small investors need regulators to provide investor protection that is fair and available to all Canadians. History shows that self-regulation has failed to provide adequate investor protection. Industry sponsored agencies or agencies that employ mainly industry staff will not provide fair and objective investor protection. The Government must now act to afford consumer protection for the small investor. Government should heed the call for a Canadian Securities Commission and a Canada Securities Act; and enact legislation for a national authority to provide investor protection for all Canadians. As the Wise Persons Committee Report states and is so aptly named “It’s Time”.
GOVERNMENT MUST ACT!
On January 26, 2004, the following e-mail was sent to Prime Minister Martin:
Dear Prime Minister
The investment industry, the regulators, and the government have failed the small investor.
Small investors have placed their trust in the industry and that trust has been betrayed. Many small investors have lost all of their life savings. They have also lost their hope for the future and their trust in our society.
Is Canada no longer a just society?
There are fundamental issues that have not been acted upon. There have been numerous studies, task forces and reports. Yet investor protection is lacking.
The Industry Canada sponsored 1998 Stromberg Report “Investment Funds in Canada and Consumer Protection” identified issues and proposed solutions. Industry and regulators failed to act.
The Wise Persons Committee Report of December 2003 “It’s Time” reviews securities regulation and strongly recommends action. IT IS TIME for government to act because industry and regulators have failed to respond. Canadians need investor protection. The present regulatory system fails to protect the small investor.
An article in the New York Post January 25th, 2004 has captured the situation in the United States and this applies equally to Canada:
Spitzer's great concern, he said, is the fundamental effectiveness of how Wall Street polices itself for the benefit of investors.
"The major failure has been at the SRO (self-regulatory organization) level," Spitzer told The Post.
"Whether you are talking about research or mutual funds or specialists, there has been a failure to properly question behavior that they know about before anyone else. Everyone of those issues was understood by the industry and not responded to."
Spitzer, 43, a graduate of Princeton University and Harvard Law School, where he was editor of the Law review, sees the solution in leadership.
"I don't pretend to have any answers beyond the platitudinous observation that those who are in charge of the SROs have to be willing to rock the boat and have to be willing to play the role of prosecutor or the system will fail," he said.
This is a message our leaders in Canada need to hear.
Dear Prime Minister
The investment industry, the regulators, and the government have failed the small investor.
Small investors have placed their trust in the industry and that trust has been betrayed. Many small investors have lost all of their life savings. They have also lost their hope for the future and their trust in our society.
Is Canada no longer a just society?
There are fundamental issues that have not been acted upon. There have been numerous studies, task forces and reports. Yet investor protection is lacking.
The Industry Canada sponsored 1998 Stromberg Report “Investment Funds in Canada and Consumer Protection” identified issues and proposed solutions. Industry and regulators failed to act.
The Wise Persons Committee Report of December 2003 “It’s Time” reviews securities regulation and strongly recommends action. IT IS TIME for government to act because industry and regulators have failed to respond. Canadians need investor protection. The present regulatory system fails to protect the small investor.
An article in the New York Post January 25th, 2004 has captured the situation in the United States and this applies equally to Canada:
Spitzer's great concern, he said, is the fundamental effectiveness of how Wall Street polices itself for the benefit of investors.
"The major failure has been at the SRO (self-regulatory organization) level," Spitzer told The Post.
"Whether you are talking about research or mutual funds or specialists, there has been a failure to properly question behavior that they know about before anyone else. Everyone of those issues was understood by the industry and not responded to."
Spitzer, 43, a graduate of Princeton University and Harvard Law School, where he was editor of the Law review, sees the solution in leadership.
"I don't pretend to have any answers beyond the platitudinous observation that those who are in charge of the SROs have to be willing to rock the boat and have to be willing to play the role of prosecutor or the system will fail," he said.
This is a message our leaders in Canada need to hear.
Will regulators follow Quebec's lead?
On February 1, 2004, Quebec unveiled a new Authority that reports to the Minister of Finance and is responsible for investment regulation in Quebec. The CVMQ (Quebec Securities Commission) is integrated into this new authority. The authority has a Claims Section to which investors can submit claims. They also have a Fund, Fonds d’indemnisation des services financiers (FISF), that enables restitution to be paid to small investors with certain limitations.
These two initiatives are of primary importance for small investors and these changes are consistent with what SIPA has been requesting from our regulatory system. Investor protection by the SROs does not work and the initiative by the Quebec government in establishing this new authority should propel the rest of Canada to take similar action.
What is covered by the Fonds d’indemnisation des services financiers (FISF)?
The FISF covers three specific acts in eight specific sectors. It is important to carefully distinguish acts that qualify for indemnification by the FISF from those that are not.
The role of the Fonds d’indemnisation des services financiers is to provide financial compensation to any person who is the victim of fraudulent acts, deceptive practices, or embezzlement. FISF compensation is designed to cover these three categories of acts within the scope of the eight sectors regulated by the Act respecting the distribution of financial products and services:
1. Insurance of persons (life, health, disability, etc.)
2. Group insurance of persons (insurance offered in the workplace)
3. Damage insurance (liability, auto, home insurance, etc.)
4. Claims adjustment
5. Financial planning
6. Group savings plan brokerage (mutual funds)
7. Investment contract brokerage
8. Scholarship plan brokerage.
In order for claims to be eligible, the person to whom sums of money are remitted and who committed the fraud must also hold a valid right of practice at the time of this action.
For additional information, contact the Information and Referral Centre:
Tel: 1 866 338-FOND (3663) e-mail: info@fisf.qc.ca
These two initiatives are of primary importance for small investors and these changes are consistent with what SIPA has been requesting from our regulatory system. Investor protection by the SROs does not work and the initiative by the Quebec government in establishing this new authority should propel the rest of Canada to take similar action.
What is covered by the Fonds d’indemnisation des services financiers (FISF)?
The FISF covers three specific acts in eight specific sectors. It is important to carefully distinguish acts that qualify for indemnification by the FISF from those that are not.
The role of the Fonds d’indemnisation des services financiers is to provide financial compensation to any person who is the victim of fraudulent acts, deceptive practices, or embezzlement. FISF compensation is designed to cover these three categories of acts within the scope of the eight sectors regulated by the Act respecting the distribution of financial products and services:
1. Insurance of persons (life, health, disability, etc.)
2. Group insurance of persons (insurance offered in the workplace)
3. Damage insurance (liability, auto, home insurance, etc.)
4. Claims adjustment
5. Financial planning
6. Group savings plan brokerage (mutual funds)
7. Investment contract brokerage
8. Scholarship plan brokerage.
In order for claims to be eligible, the person to whom sums of money are remitted and who committed the fraud must also hold a valid right of practice at the time of this action.
For additional information, contact the Information and Referral Centre:
Tel: 1 866 338-FOND (3663) e-mail: info@fisf.qc.ca
Subscribe to:
Posts (Atom)