It’s All Over For Fair Finance, Tim Durham; 13,000+ Claims To Be Filed - Representing Investors - Blog Archive

From investorprotection .com

PONZI SCHEMES DEFY REGULATORS

Another financial debacle fleecing investors of $200 million! Listing loans as assets gave investors a false impression of company worth. No outside auditor. Loans to Tim Durham's family and friends.
Regulators are unable to stop frauds and scams from happening, so what is the answer. The perpetrators must be made paupers. They should not be allowed to accumulate until they have repaid every cent. Allowing people to declare bankruptcy and start over is providing a licence to steal.

Transcript of Harper's YouTube interview - The Globe and Mail

Transcript of Harper's YouTube interview - The Globe and Mail

Congratulations Prime Minister Harper. It is always a challenge to respond to the public in real time.

What is really important is the empowerment of the people that is provided by the internet. Communication is improving by leaps and bounds. Awareness of the issues is growing at an ever increasing pace.

More and more investors are learning that many mutual funds are simply not good investments as indicated by the statistics on mutual fund sales versus ETF sales.

SIPA's website established ten years ago has two objectives: 1. To provide a tool for members and a source for links for investment information, and 2. To raise public awareness of the issues investors face.

SIPA also has a blog and participates in Newsvine and Twitter, both of which provide good summaries of news and events.

Newly formed Norshield Victims Committee

The regulators are failing to protect investors and more and more investors are banding together to take action to achieve restitution. Chris Ouslis has recently formed the Norshield Victims Committee and has issued the following news realease.

OSC releases final decision and findings on Norshield Asset Management (Olympus
United Funds) and the breaches of key staff members

Toronto, Canada, March 10, 2010

The Ontario Securities Commission released their decision on Norshield Asset Management (NAM) and the Olympus Hedge Funds. The three key staff members, CEO John Xanthoudakis, President Dale Smith, and Advising Officer and Portfolio Manager Peter Kefalas, were found to be in breach of Ontario securities laws and acted contrary to the public interest. The OSC indicated that NAM lost $159 million invested by 1900 retail investors in Canada. Hundreds of millions more were invested by an unknown number of Institutional Investors in Canada which implies that even more Canadians have been affected, but are unaware.

The OSC Reasons and Decision document is available as:
http://www.osc.gov.on.ca/documents/en/rad_20100308_rev-norshield.pdf

More information is available on the blog web page which can be viewed as:
http://www.norshieldvictims.blogspot.com/

For additional information contact:

Chris Ouslis - tel: 416.708.4931 - e-mail: Norshield.Victims@gmail.com

Investors who lost in 2008 can lose again

Many investors lost money in 2008. If it was due to wrongdoing they may have cause for civil action. However the statute of limitations has been reduced from six years to two years in most provinces. Therefore many vicitms of wrongdoing could be statute barred if they fail to take action within the two years from the cause of the loss.

If you try to resolve your dispute by dealing with the industry complaint handling process you could spend considerable time, and risk being statute barred from taking civil action should you be unable to satisfactorily resolve your dispute. SIPA continues to advise members to seek legal advice prior to taking any action to resolve a dispute with industry and regulators.

If you lost money in 2008 you could be reaching the end of your limitation period. You will need several months to initiate a civil action, so don't wait until near the end of your two year period.

For additional information on limitation periods and getting your complaint resolved visit SIPA's website at http://www.sipa.ca/.

World MoneyShow Toronto - October 20-22

SIPA has entered into an agreement with the World MoneyShow for their show in Toronto October 20-22, 2009. It is a multi-day event for private investors and traders. The show will feature many of the individuals who appear on BNN, media people including Bill Carrigan and Jonathan Chevreau, also Warren MacKenzie and Gail Bebe who recently authored books on investing.

It will be an interesting few days and SIPA is recommending that members take advantage and attend. We will be there and hope to have the opportunity of speaking with members who attend. Admission is free and an invitation will be going out to members September 9th.

Will The Expert Panel Final Report Impact Investor Protection?

SIPA made an unsolicited submission to the Expert Panel and subsequently appeared before them. We recognized their limited mandate which was to recommend the best approach to securities regulation as there are two schools, one recommedns a national securitites regulator, the other recommends retaining provincial control with harmonization.

Their mandate did not mention investor protection. Neverthless we made a submission which included recommendation for a national financial services regulator similar to the Quebec model, a national authority for investor protection with the power to order restitution, and an Investor Protection Fund to pay the restitution.

Few of the provinces order restitution and fewer still pay restitution.

The Expert Panel recommended a natioanl regulator with the power to order restitution, and an Investor Protection Fund to pay the restitution. I believe this is the first time that a committee has mad a recommendation for such a fund.

Investors Must Speak Out

Canadians are losing in excess of $20 billion per year due to fraud and wrongdoing. Studies in 2007 suggest the losses could be much higher. This problem is covered up so the public remains unaware of its magnitude. Many seniors have lost their life savings and are suffering in silence. Some victims have managed to recover a portion of their losses through civil litigation but are forced to sign gag orders and don't speak out.

Many investigative journalists have written about specific cases. The list is long from Bre-X to Berkshire's Thow. Crocus, Livent, Nortel, Portus ... An endless list.

Now CTV W5 is airing a program on April 26, 2008 at 7:00 p.m. which should prove interesting.

Would you consider it fraud?

The following case summary is posted on the MFDA website as part of their program of transparent regulation. However it was not alleged that the perpetrators of this scheme committed fraud and therefore the case was not reported to police.

From the information available it seems to us that if this is not considered fraud by the regulators then there is something seriously wrong with the regulatory system. If it also not considered fraud by the police then there is something seriously wrong with our justice system.

We invite your comment by e-mail to sipa@sipa.ca

CASE SUMMARY #200711
July 17, 2007
MFDA Case Summary
Enforcement
This case summary was prepared by Staff of the MFDA.

Hearing Panel approves Settlement Agreement with Altimum
Mutuals Inc.

Nature of Proceeding

A Hearing Panel of the Central Regional Council of the Mutual Fund Dealers Association of Canada (“MFDA”) has approved a Settlement Agreement between the MFDA and Altimum Mutuals Inc. (“Altimum”).

By-Laws, Rules, Policies Violated

The Hearing Panel considered the Settlement Agreement at a hearing held on June 15, 2007 in Toronto. Under the Settlement Agreement, Altimum admitted that it acted contrary to the public interest by contravening MFDA Rules 2.7.2 and 2.1.1(c) by distributing
misleading sales communications to clients.

Advertising and Sales Communications

MFDA Rule 2.7.2 states that:
No Member shall issue to the public, participate in or knowingly allow its name to be used in respect of any advertisement or sales communication in connection with its business which:
(a) contains any untrue statement or omission of a material fact or is otherwise false or misleading, including the use of a visual image such as a photograph, sketch, drawing, logo or graph which conveys a misleading impression;
(b) contains an unjustified promise of specific results;
(c) uses unrepresentative statistics to suggest unwarranted or exaggerated conclusions, or fails to identify the material assumptions made in arriving at these conclusions;
(d) contains any opinion or forecast of future events which is not clearly labeled as such;
(e) fails to fairly present the potential risks to the client;
(f) is detrimental to the interest of the public, the Corporation or its Members; or
(g) does not comply with any applicable legislation or the guidelines, policies or directives of any regulatory authority having jurisdiction over the Member.

Standard of Conduct

MFDA Rule 2.1.1 states that:
Each Member and each Approved Person of a Member shall:
(a) deal fairly, honestly and in good faith with its clients;
(b) observe high standard of ethics and conduct in the transaction of business;
(c) not engage in any business conduct or practice which is unbecoming or detrimental to the public interest; and
(d) be of such character and business repute and have such experience and training as is consistent with the standards described in this Rule 2.1.1, or as may be prescribed by the
Corporation.

Altimum paid a fine of $10,000, imposed pursuant to MFDA By-Law No. 1, Section 24.1.1(b).

Summary of Facts

Altimum is registered as a mutual fund dealer and a limited market dealer in Ontario. Altimum has been a Member of the MFDA since May 29, 2003.
On or about July 18, 2003, Altimum entered into a referral arrangement with Portus Alternative Asset Management Inc (“Portus”). The Agreement provided that Portus would pay Altimum’s referral fees based on the amount of assets invested by their clients in Portus securities.
Between December 2003 and January 2005, the Respondent received approximately $117,000 in referral fees from Portus under the terms of the agreement.
In February 2005, the Ontario Securities Commission issued orders requiring Portus and its affiliates to cease trading in securities because of apparent breaches of the Securities Act, R.S.O. 1990, c. S.5 as amended. Bankruptcy and enforcement proceedings were commenced against Portus.
Securities dealers that referred clients to Portus in Ontario, including Altimum voluntarily agreed to terms and conditions on their registration stipulating that the Ontario Dealers would repay clients all referral fees received from Portus. In January 2003, Altimum repaid
approximately $117,000 in referral fees to its clients.
In March 2004, Altimum produced two pamphlets for the purpose of soliciting investments by clients in Portus securities and similar exempt securities. The features attributed to the investments described in the pamphlets were based primarily upon Altimum’s understanding of Portus securities.
One of the pamphlets purported to promote an investment product referred to as the Retirement Security Investment Plan (“R.S.I.P.”).
Altimum had obtained a registered trademark for the term R.S.I.P. prior to publishing the pamphlet. The other pamphlet described and promoted the merits of what appeared to be a unique investment tool, software or methodology called the Portfolio navigator. Neither the
R.S.I.P nor the Portfolio Navigator investment process existed. Both concepts were the creation of Altimum designed to induce clients to invest in Portus securities. The pamphlets did not acknowledge that Portus was the issuer of the underlying investments being promoted.
The RSIP pamphlet constituted a misleading sales communication issued to the public because it contained untrue or misleading statements, contrary to MFDA Rule 2.7.2(a), as it stated or implied that an RSIP:
(a) “is the perfect Retirement Security Investment Plan”;
(b) “was created for those 55 years of age and older who want to stop taking so much risk with their retirement funds”;
(c) “was designed to replace G.I.C.’s in a portfolio”;
(d) features benefits such as positive and consistent returns and broad diversification; and
(e) operates such that an investor’s “$10,000 portfolio will be constructed in the same way as a $20,000,000 portfolio of a pension fund in Toronto if both are invested on the same day.
Both portfolios will hold exactly the same investments in exactly the same proportions and both investors will pay exactly the same fees.”
(f) is recognized by the Canadian government as an alternative to a Registered Retirement Savings Plan (“R.R.S.P.”) by:
i. expressly contrasting an R.S.I.P. to an R.R.S.P. in a manner that suggested both were retirement investment savings vehicles sanctioned by the government;
ii. making use of a similar acronym, accompanied in places by a red maple leaf;
iii. stating that the RSIP was designed for individuals investing for their retirement years and seeking a tax advantaged return; and
iv. including a maple leaf on the cover of the pamphlet in a manner which suggested that the R.S.I.P. was an investment product sanctioned by the government.
(g) is a unique investment product and the Respondent is one of a select group of investment dealers authorized to offer it to investors, and stated that “[a]n R.S.I.P. is not available from your local bank … credit union … trust company …[or] insurance agent” and “[m]any investment dealers are not yet authorized to offer an R.S.I.P.” because they have “to meet certain minimum standards” and “stringent requirements in terms of education, experience and amount of money under management” when in fact the pamphlet was a marketing tool to promote sales of Portus securities which were widely available for purchase from any one of the other sources referred to in the pamphlet and the Respondent had not satisfied any unique or stringent standards to become eligible
to offer Portus securities to its clients.
(h) The pamphlet contained unjustified promises of specific results, contrary to Rule 2.7.2(b), including “a nice, steady return of about 9% per year without a lot of volatility” and “steady growth higher than the rate of interest on G.I.C.’s”.
The RSIP Pamphlet failed to present the potential risks of investing in Portus securities, contrary to Rule 2.7.2 (e).
The Portfolio Navigator Pamphlet constituted a misleading sales communication that was issued to the public contrary to MFDA Rule 2.7.2 because:
(a) The pamphlet contained untrue or misleading statements, contrary to Rule 2.7.2(a), as it stated or implied that:
i. “[Our elite managers] can make money whether the market is going up or down….Your portfolio is managed to generate a smooth, reliable rate of return that is significantly higher than fixed income investments” when there was no reasonable basis for making such claims;
ii. “Portfolio Navigator” is a special tool, software or methodology that is used exclusively by the Respondent when, in fact, the term “Portfolio Navigator” was conceived of by the Respondent and incorporated into the Respondent’s marketing pamphlet to promote interest among the Respondent’s clients in securities issued by Portus which were widely available from other market participants;
iii. “We use something called Portfolio Navigator to tell us when to buy and sell. It is a process in which tools are applied to your portfolio on a daily basis, to make sure that you are investing only when the risk is low and that you are selling when the risk in the market is high” when no such tool was being applied to the Respondent’s client portfolios and there was no basis for describing the administration of Portus securities in that manner;
(b) The Respondent is registered as an IC/PM and actively manages the underlying investments as the Respondent is the only corporate entity referred to in the pamphlet and the pamphlet states among other things that:
i. “With Portfolio Navigator as a guide, we invest for you”; ii. includes frequent references to “Our elite managers” who make use of “technical analysis”, “short selling, leverage,
market timing and hedging” and “active, discretionary money management techniques, aiming to improve the performance of your portfolio while systematically reducing risk”; and
iii. “We don’t bother you with the day-to-day decisions. Our elite managers take whatever initiative is necessary and make all of the trading decisions for you;”
(c) The pamphlet makes no reference to any potential risks to a client who wishes to participate in the Portfolio Navigator investment strategy, contrary to Rule 2.7.2 (e).
The Respondent sent the RSIP Pamphlet and the Portfolio Navigator Pamphlet to approximately 150 clients and displayed the pamphlets in one of its offices and on its website, where clients or potential clients could obtain copies.
Of the total amount of $3.3 million invested in Portus securities by clients of the Respondent, more than $2,750,000 was invested by approximately 70 of the 150 clients to whom the Respondent mailed copies of the pamphlets.
The pamphlets remained on display and available on the Respondent’s website until MFDA Staff raised concerns about the pamphlets during a sales compliance review of the Respondent in February 2005. After being advised of MFDA Staff concerns, the Respondent voluntarily discontinued further distribution of the pamphlets.

DM#115406v2

Snakes in Suits - from the Wealthy Boomer website

Snakes in suits -- from whom do small investors need protection?
Today's column in the paper is about an investing "victim who found a way to get even." I find the very name of SIPA -- the Small Investor Protection Association -- interesting. It begs the question "From whom do small investors need protection?"

The markets, perhaps? Or worse, from themselves?

It's true that do-it-yourself investors can often be their own worst enemies, buying high and selling low and chasing fads at the worst possible time. China, for example, seems to be the current mania that will end badly, based on pronouncements this week from Alan Greenspan and other dignitaries.

In theory, a good investment advisor should be the ultimate protector of the small investor. And often that is the case. Unfortunately, as books like The Naked Investor or Snakes in Suits make clear, there is a minority of unscruplous brokers and advisors out there who prey on investors. Stan Buell -- the founder of SIPA -- believes that between 5 and 12% of advisors are not acting in the best interests of clients.

In those cases, sadly, investors may need protection from the very financial institutions that should be acting as fiduciaries. And in Buell's experience, some of the worst offenders have risen to the very top of the big financial institutions that dominate the investing landscape.

There's a book that was published last year called Snakes in Suits. It describes a species of "corporate psychopath" that preys on small investors or even subordinates in the workplace.

Fortunately, Canada has several consumer advocates -- like Buell -- who are willing to stand up to these well-dressed snakes. See the SIPA web site at www.sipa.ca for more resources, including a discussion forum.

Canada is the Wild West of Investment Scams

Well said, Stan!

Canada is the Wild West of investment scams. Boiler rooms, stock promotions, you name it.

A similar situation at Southwest Gold (SWG) recently. Salted ore samples.......Still no action when this stuff occurs. Of course, stock drops like a rock. We call it the Canadian injustice system here on the west coast. The perps get the judges sympathy. Nod, nod, wink, wink.

Doubt Conrad would have been prosecuted in Canada. The U.S. makes an example of crooks. In Canada, well...you know the story.

Sooner or later the little guy will just give up on investing or shift their money and attention to better regulated markets. The investment community (big money) hasn't yet got it. You would think they would be worried, but times are still good for them.

Guess we can only warn people to be very careful.

e-mail received from Dr. G.

Canadian Regulatory Failure

If you didn't believe it before, believe it now. It really is Investor Beware!.

It took ten years for the OSC to investigate and arrive at a court decision. Felderhof, former Bre-X chief geologist and Vice Chairman, found not guilty on all charges.

The scam of the century. Salted core samples. Outright fraud. Yet no one has been jailed.

It seems ridiculous that the chief geologist would not be aware that the gold wasn't there. How could he support the outlandish claims of resources? Was it alluvial gold (from a riverbed) that was used to salt these core samples? A layman might not know the difference, but a seasoned geologist? It boggles the mind.

Wouldn't the chief geologist be responsible for establishing the drillin and sampling program? Wouldn't he also be responsible for ensuring the security of the samples so the testing results would be reliable?

As an officer (vice chairman) of the company wouldn't he want to be sure of this incredible gold find? Did he fulfill his responsibilities as chief geologist and company officer?

In any case he was an officer of the company that perpetrated the fraud labelled the scam of the century.

Whether he instigated it or not, he participated as chief geologist and a company officer. It makes no sense that he is allowed to escape with the loot ... some $90 million. How many small investors have lost their savings on Bre-X? How many widows and seniors have lost all of their savings? How many are still suffering?

The current regulatory system is failing to protect investors.

How can Government allow this to continue?

It's time to revamp the regulatory system and the justice system.

If anything positive came out of this regulatory fiasco it is this:
1. The public now knows with certainty that the Canadian Regulatory System is failing investors and does not provide investor protection either preventative or remedial.
2. The public now knows with certainty that the Canadian Justice System does not provide justice.

Unfortunately it also sends a message to the rest of the world that Canada really is the Wild West of investing without frontier justice.

At the same time it sends a message to prospective fraudsters that Canada is the place to be if their intent is to defraud the public.

Will this precipitate Government action? It should.

What can you do?

Write your Member of Provincial Parliament and your Member of Federal Parliament in Ottawa.

Do it for your children and their children.

Stan Buell

Common Front for Retirement Security

Earlier this year SIPA had discussions with Dan Braniff, founder of the National Front for Pension Splitting. The Common Front had experienced success in achieving their goal and were looking for a new single issue. Dan invited SIPA to meet with the Common Front in Collingwood to discuss SIPA's iniatives in their search for a new issue appropriate for the Common Front. It was decided that the new issue would be Retirement Security.

Retirement Security encompasses many of the issues that SIPA is pursuing. Certainly the loss of seniors' savings has an extreme effect on retirement security and that is SIPA's primary focus.

The new Common Front for Retirement Security (CFRS) founded by Dan Braniff already has fourteen organizations supporting this movement and represents millions of Canadian voters. This iniative will continue to grow under Dan's brilliant leadership.

A recent press release has generated media interest across Canada and internationally, and cannot escape Government and political party attention.

The CFRS has a new website under development that is being updated on a regular basis. It is available at http://www.retirementsecurity.ca/.

SIPA submission to Secretary of State for Seniors

A joint submission by SIPA, the United Senior Citizens of Ontario and the National Pensioners and Senior Citizens Federation was deflected by the Minister's staff to the Minister of Finance.

Assuming the Ministers' staff are not on the investment industry's payroll, it must be assumed that they are not aware of the magnitude of the issue of seniors losing their savings due to systemic investment industry wrongdoing.

One has only to read the many articles in the media and/or review some of the disciplinary actions of the IDA, that reveal industry behaviour, to realize that many Canadians are being deprived of their savings by unsavoury practices by the investment industry.

The current regulatory regime is failing to protect retail investors from this wrongdoing.

Since many of the victims are seniors, we are attempting to make the Secretary of State for Seniors aware of this issue so that Government may be encouraged to take action to ensure that seniors are not financially abused.

The following is our submission:

July 19, 2007

Hon. Marjory LeBreton
Secretary of State for Seniors
The Senate of Canada, Ottawa, ON, K1A 0A4

In January this year we wrote to you stating that “Government has failed to recognize that a senior losing their savings due to inappropriate action and outright wrongdoing by the investment industry is a serious issue. The extent of these losses has been covered up for far too long. Most citizens and probably most Government employees and politicians are not fully aware of the magnitude of this problem.” A copy of the joint CCSI letter signed by the United Senior Citizens of Ontario, the National Pensioners and Senior Citizens Federation and the Small Investor Protection Association is appended.

Your staff responded saying they were directing our letter to Minister Flaherty for response. The Honourable James Flaherty is taking action regarding securities regulation in Canada and is trying to get support for a national securities regulator to replace the fractured and ineffectual provincial system now in place. A national regulator was recommended by the Wise Persons Committee in December 2003 in their report “It’s Time”, as did many others before them. Yet this intelligent move is resisted.

Meanwhile, seniors are being robbed of their savings by an investment industry that continues to develop products to create the illusion of safe investments to entice seniors, but in reality their purpose is to access the great pool of seniors’ wealth.

The current provincial regulatory regime is controlled by the investment industry and fails to protect investors. We continually hear about new financial fiascos that impoverish seniors at an alarming rate. That is why we wrote to you hoping you would champion the rights of seniors. They should be able to trust that a government regulated financial services industry would not be able to deprive them of their life savings and destroy their hopes for a comfortable retirement.

Victims are left with the only recourse being civil litigation and that right is being eroded by reduced limitation periods in many provinces.

An article by Jane Sims of Sun Media on July 18, 2007 entitled “Cheated investors tell tragic tales of losses” gives some small indication of the scope of human tragedy that is being created by a wayward industry that is not effectively regulated, which enables them to prey upon an unsuspecting trusting senior population. The article quotes only a few of the 200 victim impact statements filed in the court:

“She was an elderly pensioner who had $120,000 in savings earmarked for retirement and her children's inheritance. Before she died, she put her trust in the ___________ investments, believing they would care for her money and pay out generous interest. Instead, she lost it all. "I thank God that shortly after this investment my mother developed Alzheimer's (which) did not allow her to know what became of her life savings," the woman's daughter wrote in one of 200 victim impact statements filed to the court.”

“One man, who lost $400,000, including half the value of his home, had to return to work at age 72. Others spoke of sleepless nights, nervous breakdowns and illness since losing their savings.”

"I believe my first reactions were shock, disbelief and denial, followed by rage, resentment, guilt and then depression," one woman wrote.

"I don't know if I'll ever be able to retire," said one man who lost $803,699. "I feel I have been living in hell for the last few years."

Another man described how long it took to save the money and how quickly it was gone. "To know these people used our hard-earned money -- they even took money so far back as when I was 12 years old on a paper route.”The pain and hurt and always thinking of what was done to you just doesn't go away," he wrote.

One man said he and his wife were using the $2,000 interest paid out monthly on their ______ investment to make a special vaccine from his wife's blood to fight her leukemia. But soon the payments dried up and the investment was gone. "We tried for as long as our finances would allow . . . the treatment. It was impossible to keep up financially," he wrote. His wife has since died.

Others spoke of lost opportunities and dreams that will go unfulfilled.

Protecting seniors is not the Finance Minister’s responsibility and it should not be a provincial jurisdiction. All Canadians should have the right to be protected against harm.

Unfortunately, the protection of investors has been abdicated to the industry that is literally robbing seniors of their savings.

We are asking for your help.

Yours truly




Stan Buell, President

Cc Rt Hon. Stephen Harper, Prime Minister of Canada
Hon. James Flaherty, Minister of Finance
Hon. Robert Nicholson, Minister of Justice; Attorney General of Canada
Mrs. Marie Smith, President United Senior Citizens of Ontario
Mrs. Judith Muzzi, Past President United Senior Citizens of Ontario
Mr. Art Field, President National Pensioners and Senior Citizens Federation

Joint N.P.S.C.F./SIPA/U.S.C.O. submission to FinanceMinister

For the last couple of years SIPA has worked closely with the United Senior Citizens of Ontario and the National Pensioners and Senior Citizens Federation to raise awareness of the issue of seniors losing their savings due to widespread investment industry wrongdoing.

Jointly our three organizations have made a number of submissions and presentations to government. The following is our submission to the Minister of Finance in June this year.

June 10, 2007 by e-mail to: Flaherty.J@parl.gc.ca

Honourable James Flaherty
Minister of Finance

Dear Minister;

In January we wrote to the Hon. Marjory LeBreton, Secretary of State for Seniors
stating that our organizations represent approximately one million seniors in Canada and that we are concerned that Government has failed to recognize that seniors losing their savings due to inappropriate action and outright wrongdoing by the investment industry is a serious issue.

We also said the recent income trust fiasco is only one of the many situations that vividly illustrate the propensity of the investment industry to develop innovative products that create the illusion of good investments. Small Investors, and in particular seniors, are being deceived and sold products that are eminently unsuitable for most of them.

In January we asked that the Honourable Le Breton meet with our delegation to discuss our concerns. We received a reply stating our request was forwarded to you.

Also in January this year we wrote to the Standing Committee on Finance stating “The Income Trust Probe should hear from organizations that represent the interests of seniors and other small investors as well as representatives of the investment industry. Our organizations represent about one million seniors and investors across Canada and we have affiliated to raise awareness of the issue of financial elder abuse. We have made presentations to the Standing Senate Committee on Banking Trade and Commerce, and the Ontario Standing Committee on Justice Policy. We have also participated in a Coalition for Investment Protection to make recommendations to the Quebec Government.”

It is unacceptable that the protection of investors is left in the hands of a regulatory regime that is controlled by the industry. This is a conflict of interest. Although securities regulation is a provincial responsibility it is time that Canada has a national regulator, but also time that our national Government takes action to protect all Canadian retail investors so that seniors will have retirement security.

With the trend moving away from defined benefits pension plans towards defined contributions plans, and the fact that many Canadians do not have any private pension plan and rely upon their Registered Retirement Savings Plans it is becoming imperative that investors are protected so they do not lose their savings due to widespread wrongdoing that appears systemic in the investment industry today.

In May 2005, the OSC held a Town Hall Event in downtown Toronto at 7:30pm anticipating that 100 to 150 people would turn out based upon the time and location and their knowledge of events. In fact about 500 people turned out to express their frustration and anger with the current state of affairs with regard to investment industry regulation and the lack of investor protection and adequate means to have their complaints addressed. A copy of the transcript of that event is appended for your staff to review and report to you.

In an Ottawa media conference on April 26, 2007, our three associations jointly requested a national inquiry on the malfunctioning of Canada's securities and accounting regulation and white collar crime enforcement system.

We support the campaign to tackle investor protection and unchecked white collar crime in Canada launched on May 24, 2007 by Judy Wasylycia-Leis, Federal NDP Finance Critic and Member of Parliament for Winnipeg North.

We are asking that all federal parties support immediate work on the creation of new federal legislation and agencies to protect investors and employee whistleblowers.

The retirement security of our members, and all Canadians, is at stake.

We ask that you meet with our delegation so that we may brief you on our concerns and learn what action you are taking to address this unacceptable situation.

Yours truly



Art Field, President National Pensioners and Senior Citizens Federation (N.P.S.C.F.)



Stan Buell, President Small Investor Protection Association (SIPA)



Marie Smith, President United Senior Citizens of Ontario (U.S.C.O.)


Cc Rt Hon. Stephen Harper, Prime Minister of Canada
Hon. Marjory LeBreton, Minister of State for Seniors

Election Issues & Platforms - Corruption & Wrongdoing

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.

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.

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.

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.

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.

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.