SIPA
Small Investor Protection Association
a voice for small investors
Voices from the SIPA FilesSIPA hears from many small investors and also from regulators and industry including ex-employees. From the many comments received significant portions have been extracted to help us to better understand what small investors are facing when they deal with the investment industry and the regulators to look after their savings. In 2004 SIPA published a report entitled “The Small Investors Perspective of Investor Protection in Canada”. This report included many quoted comments to illustrate the issues raised and comments made. We do not include names to protect the privacy of individuals but so indicate whether they are small investors or involved with the industry or regulators. The following abbreviations are used:
In accordance with SIPA policy not to disclose member’s names without prior approval, and in order to protect the privacy of individuals, names of investors, investment advisors and corporate identities have been removed. What We've Heard“I truly believe that the vast majority of people just are not aware of how unprotected we are. They falsely believe that our laws will protect them against criminals. On the other hand, people tend to be protective of their money. Their failing is their faith (in) people. They do not fall into traps because they are stupid. For example our group included university professors, an R.C.M.P. officer, businessmen and lawyers.” A small investor
“My broker was fired in January 1997. His boss, who happened to be a Director of the Investment Dealers Association and chairman already of the Discipline Committee, promised a “forensic investigation” the product of which has stalled ever since. I accused my then RR of churning $60,000 in commissions out of my account in 1996. I’m debating with myself whether to sue over that and a dozen items of damages. … I am retired; I practiced law for some 45 years and am now contemplating litigation.” A small investor
“I commend you on your perseverance and continuing to inform investors who believed in the faith of another person who regretfully suffers such a conflict of his interests in this life but who nonetheless betrays that belief and trust. You frequently recall dark days in your life, we know and we have been there. I know the private Hell of trying to sleep, (my wife) and I have both been suicidal, everyone will try to distract you with irrelevant issues in little hurtful but personally invasive comments shattering your confidence in your task, you will in your mind retrace everything you ever said or wrote, you will find yourself hurt, angry and down to the point you cannot think clearly and you will recall it as quite oppressive and next to Hell.” A small investor
“I was also talked into some stupid (I won’t call it investment) calls by [Dealer] “advisor”. … Small investors beware of anyone or anything claiming to be an “investment advisor”. There are plenty of alternatives out there for you to choose from when putting your hard earned money to work – investigate them all.” A small investor
“We should be hearing any day now as to whether our case has been committed to trial. The Crown and Police and OPP have indicated they think it will – but it will be nice to get the final word. … There is still so much dishonesty in the investment area and still so many victims.” A small investor
“It is my understanding that [Dealer] and my broker, [RR], have a fiduciary duty to their clients to ensure that their financial interests are fully safeguarded. [Dealer] and [RR] both failed in that duty. In addition to the loss of inheritance, I have spent to date $30,000 in legal fees.” A small investor
From a letter to a Dealer Without ever having talked to me, nor letting me explain – let alone having the decency to ask for my side of the story, you start off by dictating that it’s not your problem, but a ‘problem between [FundCo] and me’, that your Company’s only responsibility is to sell the shares …” A small investor
“I started investing with [RR] in 1986 when he was with [Dealer]. He changed brokerages several times. Each time that he changed brokerages he would send me new forms to fill out; I would always fill them out and send them back without question – He had my trust. [RR] was in a respected position of trust; first as Vice President of the company and secondly as my financial advisor. He abused this relationship. You would think that as Vice President of a company and financial advisor that he would have carried out the terms of “the [Dealer] Management Account”, which was to preserve my capital and income, in a more prudent manner. I am sure there are other investors that are having the same set of problems or did have the same problems. I am still wondering if [RR] actually retired or was forced out due to these looming problems, which seem to indicate mishandling or misappropriation of client funds. All the trades beginning in 1996 until he retired, are completely unsuitable and imprudent for my investment objectives; a severe breach of trust.” A small investor
“I suffered a loss of over a million dollars through the same financial advisor in two different companies. (FundCo) and (Dealer). An accountant’s analysis later revealed a large amount of money was never transferred from (FundCo) to (Dealer). I do not know how to proceed to recover this loss from a previous company. My advisory account held a mixture of stocks and mutual funds. My advisor failed to notify me of the use of a margin account to leverage high tech stocks mainly. He lied through omission most of the time. He failed to notify me of every transaction and misrepresented to me the extent of losses in 2000, 2001 whenever questioned. Tech stocks went down and he kept on buying more and more and every sale incurred a loss and he kept on using margin without my knowledge. Statements from (FundCo) and (Dealer) were extremely poor failing to give me a clue as to what I had in every statement. I questioned my advisor often but was given a cock and bull story. I was willing to go along with my advisor because I had no close friends or family to consult with. In 2000, I had surgery and relocated. I was preoccupied with running my apartment building and disposing of my property, but I had total trust in my advisor though I worried constantly. When I finally learned of my loss I felt devastated, especially after the death of my spouse. It was a terrible let down and breach of faith. I feel I cannot trust anyone in this industry anymore. It has had an adverse effect on my health since October 2001.” A small investor
“In 1995 a group in Port Elgin lost over $1.8 million. The process that we followed has led us down many roads but they all ended up in the same place. In front of a lawyer looking for $50,000 to even look at the case. I would like to help others to not fall for these unscrupulous scenarios where individuals lose their life savings to these people. We had one individual in the area lose $300,000, his entire life savings.” A small investor
“I would like to draw your attention to unethical trading practices, discretionary and unauthorized trades, and trades unsuited for my circumstances. [RR] was my consultant for over fifteen years. He moved to [Dealer] about a year and a half ago. They have a sales meeting every Monday morning, which pushes him into bizarre, inappropriate purchases. These were not only inappropriate, but also discretionary. I sent a letter to his branch manager who concluded “The information before me regarding your account does not lead me to conclude that [Dealer] can support your request for redress.” Thus I assume this is the way [Dealer] behaves with all of their accounts, and their purpose is to make money for themselves and lose money for the client.” A small investor
“I have spent 2½ years fighting this and I just seem to get stalled and put forward all the time. Thank God I did not hire a lawyer; I’m sure my legal fees would be astronomical. It is hard to fight on your own.” A small investor
“I had my accounts transferred to an account under his jurisdiction. This arrangement went all right for a while until he found he couldn’t contact me when he felt I should be making a trade because I was traveling most of the time. He then suggested I consider giving him authority to operate my account on a discretionary basis, which I did. I understood he would watch all the stocks, etc. that he got me into and make the trades he felt were timely, even taking a loss sometimes to get into something else. The discretionary account went on for quite some time and he would send a transaction slip each time he made a trade. Operating this way I had no knowledge of the stocks he purchased for me, but I trusted him. After a while I realized I wasn’t getting any transaction slips so I decided to take time off to go to his office to talk with him, because my portfolio had decreased from an originating value of approximately $150,000 to today’s value of approximately $25,000. I went into the office and asked for him and was told he was no longer an employee and that someone else would be looking after my account.” A small investor
“I have depended upon [Dealer] for investment advice and my account lost $20,000 plus from December 16, 1996 to May 5, 1997. The loss becomes even more significant when calculated on a percentage basis, predicated on total account dollar values. Amongst other things I believe [Dealer] have breached their fiduciary duty. At age 67, and retired, capital preservation is important for future security. Several complaints have been submitted to the compliance officer. The response did not provide a satisfactory resolution of my account.” A small investor
“As one who has experienced first hand the severe, well crafted, fraudulent schemes and activities of a major Canadian brokerage firm, and who has put a great deal of effort educating myself about what is going on in the investment industry and among the regulators (both Canada and the US) I have reached, sadly, the realistic conclusion that greed and fraud shall always be with us. Given that state of affairs, I feel it is important that investors, particularly new, first time investors, for example widows who suddenly have the responsibility of overseeing their husband's portfolio, etc. must simply recognize that this is a high risk, very corrupt industry throughout, and that it will never change. Therefore, it is in their personal best interest to put forth a great deal of effort and commitment to educate themselves. Investors should never trust an advisor or broker to tell them what is best for them. They should never act on an advisors advice without first thoroughly investigating the situation and demanding full disclosure. They should never allow themselves to be befriended by a broker or advisor but treat them simply as a sales person who has their own best interests in mind and in many cases, because the laws and regulators are essentially impotent, are not above lying and defrauding them using numerous, devious schemes, all carefully designed to separate them from their savings.” A small investor
“In 1995 we liquidated our many diversified mutual fund accounts and opened an account with [Dealer] for their professional management skills. The initial “Wrap Fee” was 3.5% of gross market value. Their letter of January 20, 1995 welcomed us aboard, outlined how their “discretionary asset management” worked, and reiterated how they would trade within the recommended guidelines of our agreed investment strategy. Furthermore, we were promised periodic updates on strategic development, at all times initiated, as it turned out, by us. What communication transpired between [Dealer] and us was generally verbal over the telephone, rarely placed in writing nor related directly to the management of our accounts. On Friday, December 12, 1997, we reviewed [Dealer]’s performance with [RR] and [Manager], expressing our concern with the losses, despite a reduction of the management fee from 3.5% down to 2%. As it turned out by December 31st our total accounts had fallen to $250,137 from $501.367 twelve months earlier.” A small investor
“I have been seriously swindled, frauded and beguiled by [Dealer], Investment Counselor. Their wasting of the account is tantamount to a criminal act, in my regard. [Dealer] Counselor lied, and cheated my account while I was living out-of-country. I was never notified of trades and my account was unscrupulously involved in discretionary trading without my notification, permission, or my signature. I have requested compensation and total reimbursement. They refuse. They have no faults. I have full and accurate documentation of all events, as well as statements showing the depletion of the account from approximately $170,000 in early 1994 to almost zero.” A small investor
“He suggested that I sell three high interest yielding Canada Bonds held in my RRIF totaling $99,000 and in my cash account he suggested I sell 1500 Royal Bank 1st Preferred Series G shares and buy Nortel. Worse advice was never given – not only of the unforgivable loss of interest that ensued – but there is no possible way that he did not know about the (sell) recommendation since he was part and parcel of its preparation and he knows the status of every stock in the [Dealer] list of companies and most certainly whenever any change in a buy or sell recommendation is made. [RR] said he had 200 seniors in his file one as old as 99. I cannot help but wonder if any were as unfortunate as myself.” A small investor
“In April of 2000 my wife and I made a US$50,000 investment with our [FundCo] representative. There were no guarantees of returns but the worse case scenario was the return of our principal as our rep had the only signing authority. This assurance was key as the funds were earmarked for my eldest daughters education, a fact that our rep was aware of. We had bought into the [FundCo) mission statement on investing and were convinced that we should trust the rep sitting in our living room. Why shouldn't we trust him? [FundCo] had used our rep as the "face" of (Mutual fund Co.) reps everywhere that should be trusted in their national advertising campaign. In addition, numerous other [FundCo] staff and clients were involved which bolstered credibility. Needless to say the money disappeared and I reported the scam to the York Regional Police, the OSC and the IDA in August 2001.
Let me recap: I guess I was under the delusion that my investment would be backed up by [FundCo]. In reality a serious crime has been committed and it seems like the policing agencies don't care. Should someone not be doing their fiduciary duty or is the crime not important enough to be investigated?” A small investor
“We would like to inform you about a deplorable financial situation that exists for over two hundred people in Ontario. Upwards of half, many retirees or seniors, reside in North Bay, Sudbury or Sault Ste. Marie districts. A total of approximately $10,000,000 has been removed from the Ontario economy resulting from investments in partnerships. These investments were recommended and sold by our financial advisors as a secure risk free financial plan that had 100% liquidity redeemable in a period of thirty to ninety days’ written notice. This has proven to be untrue. Also, much of the assets have proved to be unrecoverable and a considerable amount used to pay fees to the principals and for lucrative commissions to the sales agents -financial advisor). As a result of the above, many investors, particularly those on fixed incomes, are now facing a very grim financial situation having lost part or all of their life savings and denied future income from these sources. Further, investors who transferred funds from their RRSPs are now potentially in danger of having to pay income tax since the investment has been deemed to be non-RRSP eligible. We, like other investors, believed our financial advisor had thoroughly investigated the security and creditability of these investments. We trusted our financial “advisor” and took his word that these investments were safe.” A small investor
“The IDA has finally granted me an interview, however, not until the week of January 14, 2002. I was hoping the IDA would be able to do this in less than 14 months after the initial complaint. Investment firms such as [Dealer] will fight the lonely investor even when this much evidence is stacked against them. One has to ask, “How can an investment firm let a broker get away with such conduct and then allow him to keep working?” This is much bigger than the Broker. The Branch Manager and the Compliance are implicated by letting this misconduct go on. This is more than just a case of discretionary trading and lack of suitability … we have evidence to prove that this guy traded for himself and then dumped the stock on clients like me when the stock price went in the other direction.” A small investor
From a letter to IDA I have received written statements reporting a gain of our investments for the period of May 1994 to February 1997 informing me that Senior Investment Executive, Associate Director has made between 19% and 20% gain in my wife’s RRSP and my RRSP. I question this statement and the real gain was less than 11%. I was informed by the office Manager that Senior Investment Executive made a minor calculating mistake. … I am requesting an investigation of business ethics of [Dealer] and [RR]’s personal portfolio.” A small investor
From a letter to a Broker Ms. (small investor) opened an investment account with your firm on February 25, 1999. Up to October 14, 1999, within a time frame of less than 8 months, the value of Ms. (small investor)’s assets in her account dropped from the original of $50,000 to less than $10,000. Among the loss nearly $26,000 were taken as commission for over 350 transactions. Ms. (small investor)’s Account Opening Agreement indicated her annual income was below $20,000 and her total assets worth less than $70,000. If protecting clients’ interest was considered as part of responsibilities of your firm, wouldn’t your staff take at least some efforts to double-check with Ms. (small investor), who fell into the category of people with very low income while with her life-time savings being put at very high risk, about her understanding of the nature of margin account?” A small investor
“I have had a case pending with the IDA and have been in litigation for over one year. We have found out with our case there are at least three others with the same complaint about the same broker. It was very difficult to find out what to do, where to go, and who didn’t have a conflict of interest just to get the ball rolling. The brokers know this too! One thing I have found so far is that everything is stacked against you exactly as Rob Carrick said in the article. I hope that in numbers we can right this unjust situation.” A small investor
“Presently I am reviewing all reports and technical data concerning Bre-X I can put my hand on. If I found anyone’s negligence I could pursue in Quebec courts, I’d look for other investors with similar complaints I have to share the legal expenses. Otherwise I’d have to give up and get on with my life. My loss of $40,000 may not substantiate making an individual claim, as I believe the court expenses could exceed that amount.” A small investor
“I have a Financial Advisor who gave me totally inappropriate advice. It has cost me practically everything. The FA did not disclose the product he put me into, manipulated information to get the product, ignored my request to cancel the product four days later, changed the loan details twice, ignored my messages and cost me to date 50% of the small amount of savings I had. This FA needs to assume responsibility and accountability for his inappropriate actions. I would willingly let other people know so they don’t fall victim to these ruthless predators.” A small investor
“My wife and I were about to retire debt free when we got involved with bad advisors and bad investments. The current financial and legal systems left us battered and bruised. Nearly half our present income now goes to service the debt brought on us by these investments. We naively assumed we were dealing with people who were totally open, moral and ethical. We assumed that the accountants and lawyers involved would protect our interests and warn us of the pit-falls. After all, I was a busy preacher; my wife was a busy teacher. Our religion taught us to have faith and trust in people. I now know this is false teaching. We failed to do what is called in the trade “due-diligence”. At the time, we had not even heard of the term. There are other terms we have since learned: transparency, full-disclosure, reasonable profit, and others.” A small investor [A Reverend]
“I lost hundreds of thousands of dollars on two speculative mining stocks. The firm lent me the money, I’m finding out now, fifteen years later, that they had a position in the stock.” A small investor
“The broker that we moved to turned out to be almost as bad as our original lazy sloth and we had lots of sorting out to do. We have not decided on any action, it is quite a decision as to whether or not to get involved in a lawsuit, or even mediation. The more we find out about the intricacies and dirty dealings, the less we want to become more entangled.” A small investor
“Our problem with [Dealer] and [Bank] has been ongoing since August 1997 and we have our complaint spread throughout [Dealer], the bank ombudsman and the liaison officer who works on problems between [Bank] and [Dealer]. Our complaint is also with the IDA who has yet to assign our file to one of their people.” A small investor
From a letter to a Bank Ombudsman A small investor
“Interestingly, in Wednesday’s edition of the local news rag, there was an article about another area couple caught in a mirror image scam to ours out of North Bay. We are not alone. The frauds are very widespread, much more so than we know. Unfortunately, people are very reluctant to admit they have been taken, myself included, and most also do not want to make public their private lives and financial situations. However, as we progressed through our action, my attitude changed. I became aware that we are in very elite company … our group includes doctors, lawyers, other financial advisors, etc., all of whom were duped. That revelation allowed us and others in our group to get together, open up and take action.” A small investor
“I was an excellent housewife and mother but totally ignorant in finance. Since 1998 I have been on my own and couldn’t even read my statements. I had, after our home was sold, an investment account plus the RSP. Both of these accounts were managed for a fee by (Dealer). When we had started with them, they were highly recommended, but as time went by, only one person remained stable. At the time that the press was saying that techs were dangerous, they sold a bunch of stocks at the peak...gave me a huge tax bill (higher than my salary for the year)...and repurchased more tech stocks that promptly dropped. In Sept 2000 this account was at $532,000. By Sept 2001 this portfolio was worth $352,700. I became aware of a problem late in 2000 and moved my RSP. I didn’t know where to move the investment account, they lost $180,000. This is my retirement. I am now 60 yrs old. I was a financial ignorant. I can’t take any more lawyers or their costs. I am so exhausted.” A small investor
“Throughout this whole ordeal at no time did I feel that the Bank was looking after the welfare of the client, nor was I getting proper independent or financial advice. … My wife and I do not have the further amount of $14,740 in our RIF account with your bank for our retirement as same was all taken by your bank to retire the RRSP loan. This loan repayment could have been done in an alternate manner without such punitive results to two elderly citizens who believed your firms’ advertising that by borrowing to top up your RRSP one could retire more comfortably in the future.” A small investor
“My wife and I decided about two years ago we should be a little more diversified in our investment goals and decided to have someone else handle some of our investments. We consulted with our local [Bank] and asked for a referral to someone good who could help. We were directed to [RR] at [Dealer]. After talking to him we thought he would do a good job for us as he had been around a long time in the investment business. Our instructions to him were, we would go along with his recommendations and he would try to make us a good return as well as provide us with an income of $500.00 a month from our total investment of $100,000. Fourteen months after his taking over the account $100,000 turned into $45,000 and no cash was available for the monthly payments. We only received four or five payments. I’m really disappointed in [Dealer], as you would think with the big commissions there would be some quality of service. I probably don’t have any legal right to pursue him but it would be nice if others were warned.” A small investor
“About 90 persons and two charitable organizations were defrauded of $2 million by an Ontario Securities Commission registered dealer. About $400,000 was held in self-directed RRSPs with [Bank]. The accounts and transfers were set up by [Dealer], an OSC authorized dealer. The [Dealer] and the [Bank] had a selling arrangement whereby the “investments” in RRSPs were sold exclusively through the Bank. The investors did not provide anyone with an authorization for the broker nor had they instructed the Bank to purchase the “securities”. The Bank will not provide the documentation showing on whose authority our funds were released for the purchase of the debentures.” A small investor
“We suffered a loss of approximately $15,000 as a result of our advisor failing to use due diligence in ensuring recommendations for our account were appropriate and in keeping with our investment objectives.” A small investor
“I opened an account on May 1993 and transferred in all my stocks. The amount was $42,555 worth of stocks. The broker told me my stocks were no good. He sold most of my stocks and bought some other ones. He got in touch with me for some trades but most I only found out when I got the monthly statements or the slips for bought and sold. I had to put more money into the account a few times, because he bought and sold within a few days for a loss. By January 1997 my account balance was $0.00. I talked to two or three people from [Dealer] and I got nowhere with them.” A small investor
“I’ve finally received the report from the IDA, the details of which are reported in Bulletin No. 2861. Paragraphs 4 and 5 refer to my accounts with [Dealer]. As you can see [RR] was found in breach of Association Regulation 1300.1(c), which means that he recommended securities that were speculative and not in keeping with my stated risk factors.” A small investor
From a letter to a Bank A small investor
“I spoke to an investigator with the IDA handling the investigation of my complaint against [Dealer] and [RR]. He informed me that [Dealer] still had not produced the necessary documents. He also told me that [RR] had been charged with fraud by the police. He also informed me that the compliance officer had left the firm and returned as a consultant. He also informed me that there were two other complaints against ([RR].” A small investor
“One big concern about the IDA other than them taking so long to do anything is the way they treat the victims. Updates by telephone calls or letters would be appreciated. All of us have left messages for the investigator but he rarely ever gets back to us. This is a common criticism of the IDA from the group that I am involved in.” A small investor
From a letter to a Dealer In May 1997 I sold my condo and received $45,000, which I decided to invest. At that time we emphasized that we did not want to risk this money. We lost interest in the stock market and desired an investment that was very low risk. We also wanted something short-term, for a 5-year horizon as we planned to purchase a house in the near future. We were sold the Polar Hedge Income Trust Fund. [RR] assured us it was low risk. I found out after the fact that it is actually a ten-year investment and Hedge Funds are indeed extremely risky. I lost approximately three quarters of my principal on an investment I feel was completely inappropriate given our explicit instructions. We have now found a firm and investment advisor who seem more concerned with the interests of their clients rather than recommending those investments that favour the firm with commissions and fees. However, even our attempts to exit are being manipulated by your firm. My husband’s account, quite sizeable has been stalled for almost two months.” A small investor
“I went to the bank and had a cheque made out to [Dealer] in trust for the sum of $97,000. [RR] came to my house early that afternoon. He presented partly filled out forms with six funds written on it. He said they are good, solid financial companies. [RR] was talking about the global economy in general and assured me that he is an expert who is in business for fourteen years and makes between $12,000 and $14,000 a month. … He wanted me to sign some more blank forms. He assured me these were just for his files, and that once he had drawn up the proper documentation, he would review them with me and explain them before proceeding. … He told me that the way mutual funds work is very complicated – that I don’t have to understand it all. I just have to trust him. I said to him “that is the truth I don’t understand it at all. Whatever you do, I don’t want to lose a dime.” He told me that he would design the funds in a way that I won’t be at risk. Please understand that I am a simple woman who never invested in mutual funds. I came to Canada in 1984. I live by myself since my husband passed away four years ago. I work evenings from 4pm to 11pm in the housekeeping department. I also worked for Mr. (small investor) who was 79 years old from 8am to 3pm every day on a contract basis.” A small investor “Since I started with this [RR] one year ago I have lost over 30% of my account. When I spoke to him initially I advised him that I was unable to work due to the fact that I was losing my vision, my husband was retired and the dollars in our RRSP accounts represented our total savings. I was reluctant to buy mutual funds and he recommended buying Insured Segregated Funds to alleviate my fears. This fund is down at least 26% and falling. My meeting with the manager and [RR] was the end of August. On that day the manager stated he was sending the complaint to their compliance department. He further advised me that he sent the complaint to the Vice President District Compliance. After repeated non-productive contacts with the Manager I telephoned the Compliance Department of [Dealer] on October 12th and was advised by the Compliance Officer there was no record of the complaint on the computer. He agreed to accept a fax of my correspondence with the local manager and ensure I received a confirmation. On October 19th I telephoned the Compliance Officer who informed me that the file was in Ottawa with the Complex Issues Manager. She advised that she would get back to me within the week. I do not feel I can afford arbitration but I definitely will file a grievance with the Securities Commission. I feel these large companies are aware that on smaller accounts the legal costs for arbitration are prohibitive.” A small investor
“In the fall of 1994 we realized we were being taken. We tried to contact the OSC without success at that time. Next we tried going through our M.P.P. nothing. Again in 1996 we tried our second M.P.P. his reply was to give us the phone number of Consumer Affairs. They responded that it didn’t fall under their responsibilities. We then tried the Investment Dealers Association. Their rude reply was that they don’t deal with individual complaints from the public. Next was the Investment Funds Institute and they helped as a third party going between ourselves and the fund companies in obtaining copies of our investment transactions. Again we contacted the O.S.C. in February 1998 with a letter. The file was passed on to a couple of people. In December 1998 the O.S.C suggested if we want to recover any of our money we should seek legal assistance and that they would provide as much help to our lawyer as they could. We should also contact [Dealer]’s compliance Officer, which we did. He told us we should have complained while our advisor was still employed with them and they consider the file closed. I am a city bus driver and earn about $35,000 a year. My wife works at a store and earns about $18,000 a year. We are both in our fifties and our dreams of early retirement have been lost along with our faith in the system, whatever the system may be. Who can one trust? Our question to the O.S.C. is: Does [Dealer] not have a responsibility to their clients to see that their representatives act in the best interest of their clients? What kind of ethics does [Dealer] have?” A small investor
“I invested a large sum of money, $125,000 with a broker at [Dealer] and through mismanagement, inappropriate securities selections, not following directions, and various other infractions, he managed my portfolio in a matter of approximately 14 months down to a value of about $60,000.” A small investor
“After gaining my trust, [RR] filled out the client documentation and asked that I sign it. He advised me on the various percentages of allocation and assured me that he would closely monitor the stocks. He promised that if the stocks should fall by 10% he would sell but would hold if they go up. He explained that he personally knew the managers of these companies and that he made purchases of these stocks himself. He never mentioned that these stocks were very risky and that he was helping to raise capital for these companies. My cash account of approximately $45,000 with [Dealer] is worth less than $10,000.” A small investor
“With my father’s limited investment experience (until the above unfolded, he had never invested in mutual funds or the stock market) and limited education (grade 7), I tend to get called upon in times of financial or legal confusion, which is what my father did when he began to suspect that something wasn’t quite right. I firmly believe that [Dealer]’s actions were unprofessional, and very possibly illegal, but I’m frustrated at not knowing where to turn. I’ve thought about suing them, but neither I nor my father has the time or money to put into a court battle.” A small investor
From a letter to Compliance Officer, Mutual Fund Co. A small investor
“In 1993 I was placed on long term disability. During this time when I was completely disabled a stockbroker from the firm [Dealer] traded in my account without my authority and my knowledge at all times. When this wrongdoing was discovered by a family member and friend I was shocked to find out what a poor state of affairs my investment account was in. I was advised to inform the manager of this brokerage firm what had happened; and when I did he said he would settle things. To date this has not occurred. Then I was advised to contact the Ontario Securities Commission and all they did was forward my letter of complaint to the Investment Dealers Association. The initial investigator indicated to me that there were problems with my account. My file is now in the hands of another investigator and nothing is being done. This has left me at my weakest, most vulnerable and depressing time of my life without proper funds. The Ontario Securities Commission and the Investment Dealers Association could not help which has further deepened my depression. When I tried to resolve this problem I was in pain, sick, low in funds and saw no way out. Suicide seemed to be my only solution. … As it stands now the brokerage firm and its agent denies all responsibility and admits to no wrongdoing saying the trading in my account while I was in and out of hospital and clinics was proper.” A small investor
“My wife and I own a medium to small sized business and have contributed to our RRSP portfolio for many years as a means to look after our retirement needs. Since the beginning of the 90’s we began to entrust a financial advisor to look after our portfolio. Many times we stressed the importance of low to medium risk in the choice of investments. This can be verified by the “know your client form” which we completed each year. Contrary to these investment objectives we believe that extremely high-risk investments were chosen on our behalf. Within a short time most of the investment money was lost.” A small investor
“I have been advised that [Dealer] has a terrible history of just keeping things in court until the victims’ can’t afford it anymore. I have been told that our complaint is almost exactly the same as the other victims. One of the main differences is that I am 41 and apparently a lot younger than the majority of [RR]’s targets. It appears the majority of the victims are well over 70 years old and one may be in his 90’s! My mother’s and my Know Your Client forms were jokes. He had wrong information on the forms; he changed our objectives from long term growth to high risk, my mother is a 71 year old widow living on a small pension, and increased both our net worth’s by $200,000 to $300,000. My sister-in-law, who is also a complainant, had the wrong places of employment for her and her husband on two successive KYC forms and their assets over stated by about $300,000.” A small investor
“They told me to get lost and get a lawyer. And then made the crack that they doubted any of the law firms would take them on because the law firms depended on them for business. I went through their ombudsman – a joke. I went through the IDA. I have an exchange of correspondence that is comical; I end up reciting the IDA By-laws to their staff because they don’t understand the significance. Then they admit there is a problem, but refuse to deal with it.” A small investor
“It (the financial loss) has caused much stress because of the way it has forced us to live both from the enjoyment of retirement plus ability to pay our bills. There is the constant mistrust of people with whom we deal, most of whom are probably honest and hard working but … I have always been cynical of government but my cynicism is now much more widespread and deep. We have developed a healthy total disrespect for lawyers and our legal/judicial system. I consider them leeches on society. I consider any financial investment or advisory agency totally incompetent, dishonest and self-serving. I consider any regulatory agency all of the above plus ineffective and toothless parasites – a total waste of money. Their very existence constitutes a false sense of security to investors.” A small investor
“My husband and I have lost over $250,000 after our broker advised us to enter high risk technology mutual funds and stocks. We lost about 45-50% of our portfolio and we are in our 50's, and had planned on retiring at 55. This goal was clearly stated to our broker. Our KYC forms were not filled out in our presence and were filled out by a person who at the time we had no direct contact with, yet he filled in our risk and investment objectives without ever talking to us about them. The forms also contain errors (e.g. overstating our net worth by $150,000, stating we had prior experience owning bonds, stating that the signed IA had personally met with us, etc.) I have spoken to a lawyer and he thinks our case is a strong one and he would be willing to take on a contingency basis. I am very cautious after our experience with our investments and I could not endure yet another round of betrayal and potential loss. My trust in many institutions has been severely challenged because of our ordeal.” A small investor
“My wife and I have suffered a 37% loss over one year from mutual fund investments managed by [RR] of [Dealer]. The money invested represents a major portion of our assets. They were supposed to be conservatively chosen to accept moderate risk and provide capital gain. But 5 of the six funds are seriously under performing their group averages. My wife and I have seen him about it over the year and each time he maintains they will perform in the longer term. He has done nothing to avoid further loss.” A small investor
From a letter to Parliamentary Assistant to the Minister of Finance A small investor
“As a result of the activities of this broker, I not only lost my entire life savings, I lost the savings of my company and I found myself in debt to the tune $1.8 million. I can tell you there was the day when I stood on the deck of my boat with a 50 pound weight tied around my waist because I had to put an end to it all, and it is only because of the intervention of my wife, a very timely intervention, and the subsequent support of my two children that I am here before you today.” A small investor
“THE REGULATORY BODIES DO NOT PROTECT THE INVESTOR.” A small investor
“I am not in the market at all. I have got into 90 day GICs a maximum 60 grand in each of four banks, and once a year I draw out all the interest, the trouble that banks and their brokerages are in I do not trust them” A small investor
“I took action by reporting the broker to the Chambre de la Securite Financiere. There were 10 charges. The broker lost his license for two consecutive months. Was expected to return to 'school', complete and pass the test. Had to pay all cost, on a monthly basis, to La Chambre. He had four fines, $800, $2000, $3000 and $1000. He had four reprimands. The broker forged my name -took my RRSP from one company had the cheque sent to his office, removed the documents and deposited the money with the bank where I was holding a leverage loan. I had received three notices from the bank re margin call. Upon my retirement I had a leverage loan at the bank on the recommendation of the broker -take out RRSP and the leverage loan would offset the withdrawal. As we all know the market dropped. To cover himself, the broker moved all cash into high tech -fortunately I spotted this moved my account to another firm. Lucky for me as within the next four months the bottom dropped out of the tech market -if I had not found this my house would have been sold to take care of the leverage loan. I sent to all the companies and got the histories of my accounts, a nightmare. The accounts were churned to the point that an expert could not figure all of it out. In French they called it taking soft corners. It really gets much more involved -the documentation I received from La Chambre is in French and I do not speak the language. There is another case pending against this broker with La Chambre.” A small investor
“The Ombudsman's Office seems to have sided with the I.A. on all matters. Regarding all the forged initials on my Application/Agreement, they say the I.A. said I them. Although I know the Assistant Ombudsman really knows they are not my initials, he is still saying "Prove it!" They seem to want me to go to a lawyer and they say it will be up to the I.A. to pay the damages if I win in court if the initials are proved to be forgeries. I just got off the phone. I am in shock that the Ombudsman/Bank will not listen to me or let me prove it to them. They are just concerned that the I.A. is working within the Rule Book of the IDA. I now need a "hand writing expert". I am supposed to be going to the Toronto Police to get them to look at the documents.” A small investor
“(Small investor) is disabled and is 59 years old. She lives on $1,000 a month in an apartment with her brother. She says she received about $120,000 as a result of her accident and invested with an investment advisor with [Bank] who came to her home. She told him that this was all she had and needed it to be secure. When she saw her investments declining she expressed concern and eventually cashed out. She made a complaint and ended up at the IDA but was unable to resolve the problem. She says she does not recall signing anything and still has the application marked with X’s where she was to sign.” Telephone call from small investor
“The pressure and the losses and uncertainty of the future were too much for us at the time. … The irrational and probably illegal handling of my portfolio has cost myself and my wife great damage financially and psychologically. I hope this can be taken into account somehow. … Unfortunately his irrational and illegal trading has pretty well ruined my life savings. I am now almost 46, basically unemployed with serious back problems. This is a very unfortunate circumstance that should never have happened. … I attempted to solve this problem by meeting with the firm. To say I was laughed out of the office would not be an over exaggeration. I realized at that time that I had been taken in and a large percentage of my life savings were gone for good. … The law is there to protect these people from doing this. It is small people like me who work and save and then are led to trust and believe that these pros will work to invest our savings for our best interests, not theirs. My wife and I have been through a terrible three years and have serious doubts about our future now.” A small investor
From a letter to Bank President and Chairman of Brokerage … What gets more interesting hereafter are incidences of breach of [Bank]’s own policy and the effect it had on such people as (small investor)’s minor children. … What I find interesting is that [RR]’s disregard for the future of these children, resulted in trusts which had been built for 15 years to be destroyed in a matter of months. … There is absolutely no doubt that the losses outlined in the attached schedule are as a direct result of the inactions and actions of both [Bank] and [RR]. You are in breach of the agreement between the parties. You are in breach of common decency and quite frankly, these damages are without equivocation resultant from the activities of your [RR] and yourselves. I find it extremely distressing that the bank’s customers have been so shabbily treated and so badly considered when they are both significant and have had such a long-term relationship with your institution.” Counsel for a small investor
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