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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.
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