I am beginning to figure out (I think) the cause of what investor advocates find offensive inside the investment industry. The underlying causes are not limited to this industry only, but can be seen in many, many ethical failures. The tainted blood scnadal, accounting scandals, medical, phamacuetical, nuclear power, you name it. Lets take a look at the common themes.
Three essential ingredients and three separate crimes are typically found.
One ingredient is corporate and or personal greed. Found everywhere. Not difficult.
Second ingredient is beaurocratic indifference. Workers etc who just dont care enough to do their jobs correctly. Also fairly prevalent.
Third ingredient is regulatory failure, which may be related to number two above, but more likely is not just laziness. Most regulators find it difficult, if not impossible to admit large systemic problems exist under thier watch, so they become co-conspirators instead. They become part of the problem instead of part of the solution.
First crime is the actual abuse of trust, whether it be a financial advisor taking advantage of his client for personal gain,, child abuse, malpractice, embezlement, bribe, whatever.
Second crime is the cover up, involving individuals of considerable power or influence who were not involved personally in the initial wrongdoing, but whose sense of loyalty is stronger than their attachment to honesty and openness. Since exaggerated loyalty may be the very quality that gives such people power and influence (think Liberal party hacks and Adscam), it is hard to know what can be done about loyalty as self serving weakness.
Third crime is the hoodwinking of police and the public with false assurances that all is well.
(last three crimes taken from the book "DARK AGE AHEAD", by Jane Jacobs, from recommended reading list of Nick Murray, one of the self styled gurus of investment advisor behavior. The book points to the "failure of professionals to self regulate properly" as one of the five pandemic symptoms of a society that is in dangerous decline
Wednesday, September 28, 2005
From Wed, Sept, 28, 2005 Globe and Mail article titled, "Ontario ruling clears path for police-misconduct suits".
This article suggests that residents of Ontario can sue agencies for misconduct when substandard performance of important (police) duties. The ruling may have impact on various government agencies that have regulatory rules to follow, and have been accused of ignoring them in the name of convenience or other reasons.
Names that come to mind include the ASC, OSC, IDA, the Competition Bureau and I am sure others will come up over time. Any agency that has a mandate of protection of the public interest and following the rule of law, may be accused of regulatory failure if it is found that they did not follow their own process, or if they followed them arbitrarily and selectively. This story follows a recent news item of a citizen initiative to act as watchdog over police in Ontario, when complaints are made against them.
In the past the police were the ones responsible for investigating the police, and this was found to have some obvious conflicts of interest. In due time many are hoping that this same level of reason will be applied to the betterment of the investment industry reputation in Canada. So far, members of the Securities Enforcement Coalition are saddened to say that Canada is earning a well deserved reputation for being a buyer beware game, as far as consumers are concerned, and the United States is the only player that is enforcing ethical rules. They are even the only player enforcing the rules here in Canada, while we stand by and watch our rep go down the drain.
This article suggests that residents of Ontario can sue agencies for misconduct when substandard performance of important (police) duties. The ruling may have impact on various government agencies that have regulatory rules to follow, and have been accused of ignoring them in the name of convenience or other reasons.
Names that come to mind include the ASC, OSC, IDA, the Competition Bureau and I am sure others will come up over time. Any agency that has a mandate of protection of the public interest and following the rule of law, may be accused of regulatory failure if it is found that they did not follow their own process, or if they followed them arbitrarily and selectively. This story follows a recent news item of a citizen initiative to act as watchdog over police in Ontario, when complaints are made against them.
In the past the police were the ones responsible for investigating the police, and this was found to have some obvious conflicts of interest. In due time many are hoping that this same level of reason will be applied to the betterment of the investment industry reputation in Canada. So far, members of the Securities Enforcement Coalition are saddened to say that Canada is earning a well deserved reputation for being a buyer beware game, as far as consumers are concerned, and the United States is the only player that is enforcing ethical rules. They are even the only player enforcing the rules here in Canada, while we stand by and watch our rep go down the drain.
Tuesday, September 27, 2005
Motley Fool a valuable Tool
I found this advice and commentary from the MOTLEY FOOL to be accurate. After many years inside the industry, I find myself agreeing with much of the comments they make.
read along and learn:
NEVER ACT ON RETIREMENT ADVICE FROM ANYONEWHO EARNS A COMMISSION AT YOUR EXPENSE!
Totally independent, practical, realistic help and advicefrom an honest, trustworthy -- if sometimes unpopular -- retirement authority.
Is there anybody out there that's not totally full of it? Not simply trying to put their hand in your wallet?
I understand that when it comes to planning and managing your retirement, you'd probably welcome some honest and authoritative help. After all, most people feel overwhelmed by the future and tend to get bogged down wondering what steps to take now so their retirement lives up to their dreams.
But, to whom dare you listen? Who the heck can you trust, given that the stakes are so high?
Stockbrokers? Ha! They wrecked more retirement plans than anybody when they pushed lousy stocks like Enron and WorldCom right up to the crash.
Financial planners? Estate planners? Nix that too! Most work for big banks and financial firms and are nothing more than insurance or annuity salesmen in disguise. They're after a fat commission that will come out of your pocket.
Your brother-in-law? Probably not! Let's face it -- to really be on top of everything that impacts how well you live in retirement, you'd need to be a tax expert... Medicare benefits guru... stock picker... economist... senior's law expert... and Social Security advisor all rolled into one.
In case you don't remember, while the financial world was trying to convince everyone that they needed help -- that managing a portfolio was more difficult than brain surgery -- we made ourselves thoroughly unpopular by proffering a shocking opinion: "You are the best person to manage your money."
In case you've forgotten, The Motley Fool derives its name from Elizabethan drama where...
Only the court Jester (the "Fool") could tell theKing the truth without getting his head lopped off.Granted, there are mutual fund managers... insurance agents... thousands of stock brokers... annuity peddlers... fancy estate planners... and big-fee financial consultants who would just as soon lop off our heads because we dare to question their results, integrity, ethics, and motives.
(advocate says:
Yes, I was once one, butI found myself not agreeing with so called advisors who took advantage of clients trust instead of respecting clients trust. I was not very welcome in my industry for my views and found myself drummed out of the business as a result.
I am suing RBC, my former employer for practices I found distastefull and not in keeping with their published codes of conduct, as well as for making my work life rather difficult and risky. So far they have not been able to answer the charges very well, and their strategy so often appears to be "drag it out with legal tactics". I will happily wait for my day in court, and find solace in the fact that each day they delay, only adds one more news story about greed, corruption, and irresponsible corporate behavior to the list.
read along and learn:
NEVER ACT ON RETIREMENT ADVICE FROM ANYONEWHO EARNS A COMMISSION AT YOUR EXPENSE!
Totally independent, practical, realistic help and advicefrom an honest, trustworthy -- if sometimes unpopular -- retirement authority.
Is there anybody out there that's not totally full of it? Not simply trying to put their hand in your wallet?
I understand that when it comes to planning and managing your retirement, you'd probably welcome some honest and authoritative help. After all, most people feel overwhelmed by the future and tend to get bogged down wondering what steps to take now so their retirement lives up to their dreams.
But, to whom dare you listen? Who the heck can you trust, given that the stakes are so high?
Stockbrokers? Ha! They wrecked more retirement plans than anybody when they pushed lousy stocks like Enron and WorldCom right up to the crash.
Financial planners? Estate planners? Nix that too! Most work for big banks and financial firms and are nothing more than insurance or annuity salesmen in disguise. They're after a fat commission that will come out of your pocket.
Your brother-in-law? Probably not! Let's face it -- to really be on top of everything that impacts how well you live in retirement, you'd need to be a tax expert... Medicare benefits guru... stock picker... economist... senior's law expert... and Social Security advisor all rolled into one.
In case you don't remember, while the financial world was trying to convince everyone that they needed help -- that managing a portfolio was more difficult than brain surgery -- we made ourselves thoroughly unpopular by proffering a shocking opinion: "You are the best person to manage your money."
In case you've forgotten, The Motley Fool derives its name from Elizabethan drama where...
Only the court Jester (the "Fool") could tell theKing the truth without getting his head lopped off.Granted, there are mutual fund managers... insurance agents... thousands of stock brokers... annuity peddlers... fancy estate planners... and big-fee financial consultants who would just as soon lop off our heads because we dare to question their results, integrity, ethics, and motives.
(advocate says:
Yes, I was once one, butI found myself not agreeing with so called advisors who took advantage of clients trust instead of respecting clients trust. I was not very welcome in my industry for my views and found myself drummed out of the business as a result.
I am suing RBC, my former employer for practices I found distastefull and not in keeping with their published codes of conduct, as well as for making my work life rather difficult and risky. So far they have not been able to answer the charges very well, and their strategy so often appears to be "drag it out with legal tactics". I will happily wait for my day in court, and find solace in the fact that each day they delay, only adds one more news story about greed, corruption, and irresponsible corporate behavior to the list.
Thursday, September 15, 2005
What is wrong with Securities Commission enforcement?
What is wrong with this picture?
NEWS RELEASE
[Print]
2005/51September 14, 2005
White Rock mutual fund salesperson who committed fraud in stealing clients’ money hit with maximum $250,000 penalty
Vancouver -- The British Columbia Securities Commission has issued the maximum penalty it can against a former White Rock, B.C.-based mutual fund salesperson who defrauded his clients of about $1.6-million during a six-year period.
Paul Robert Maudsley has been banned for life from trading securities, being a director or officer, and engaging in investor relations. He must also pay a $250,000 administrative penalty – the maximum fine the commission can impose on an individual -- as well as almost $60,000 in costs related to the hearing.
A commission panel found that Maudsley and his company, Shaylor Management Ltd. violated the Securities Act in committing fraud when Maudsley convinced 23 clients to redeem about $1.6-million in mutual fund holdings to invest in other securities. Maudsley did not invest any of the money, instead taking the clients’ money for his own use to fund his personal and lifestyle expenses, including, a self-admitted substance abuse problem described by a witness as “his cocaine and gambling habit and alcohol addiction.”
The panel also found that Maudsley failed to deal fairly, honestly and in good faith with his clients – nearly half of whom were elderly or vulnerable.
“He simply took their money, or caused Shaylor to do so – about as stark an instance of deceit as there can be,” said the panel.
“The evidence provides clear and convincing proof that Maudsley had subjective knowledge of the deceit, and that it would result in the deprivation of others.”
Maudsley committed his violations when he was a mutual fund salesperson at Investors Group Inc.’s South Surrey Regional Office in White Rock between 1996 and 2003. He was fired from the firm on Mar. 3, 2003.
The commission panel also permanently cease-traded Shaylor’s securities in the sanctions decision. The firm is permanently banned from trading securities and must also pay an administrative penalty of $500,000 -- the maximum that the commission can order against it. Shaylor must also pay costs of the hearing.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the decision on our website www.bcsc.bc.ca by typing in the search box, Paul Robert Maudsley or 2005 BCSECCOM 577. If you have questions, contact Andrew Poon, Media Relations, 604-899-6880.
© BC Securities Commission 2004
Here is what Ken K thinks is wrong:
Here's the point. He stole a lot of money and doesn't spend even 5 minutes in jail. Note the low limits on fines in BC.His employer isn't even sanctioned or given a wrist slap fine.Investors don't get a nickle back. Soon , abusive provincial limitations Acts will swing into action putting tight time pressures on investors for civil action.This is the kind of regulatory enforcement regime that simply does nothing to protect investors.ken kivenko http://www.bcsc.bc.ca/release.asp?id=2748
Here is what Larry thinks is wrong:
These Securities Commissions do nothing for investors, and white collar criminals have to practically kill their clients to get any sanctions whatsoever. The crimes described above are so very very obvious that third grade children could do an improved job of sanctioning them and providing some recourse to investors. Where the commissions fail is in the more subtle, more cleverly crafted methods of duping clients of their moneys, by "trained, trusted and professional", salespeople who take advantage of the clients faith and trust.
The securities commissions cannot even make a dent into the various frauds, deceits, misrepresentations in 99% of cases. I feel they do not even have the will to do so, since it would reflect so badly on how they have run the system under their watch. It seems they can only stand by and watch now, while the smarter or more ethical among them are leaving.
Even if they had the ethics to address white collar frauds, they have nowhere near the strength. the RCMP is on record as saying they only have manpower to investigate 5% of the commercial crime reported to them, and I suspect the Securities Commissions are similar.
It is still "buyer beware" for clients and white collar crime heaven for fraudsters here in Canada.
NEWS RELEASE
[Print]
2005/51September 14, 2005
White Rock mutual fund salesperson who committed fraud in stealing clients’ money hit with maximum $250,000 penalty
Vancouver -- The British Columbia Securities Commission has issued the maximum penalty it can against a former White Rock, B.C.-based mutual fund salesperson who defrauded his clients of about $1.6-million during a six-year period.
Paul Robert Maudsley has been banned for life from trading securities, being a director or officer, and engaging in investor relations. He must also pay a $250,000 administrative penalty – the maximum fine the commission can impose on an individual -- as well as almost $60,000 in costs related to the hearing.
A commission panel found that Maudsley and his company, Shaylor Management Ltd. violated the Securities Act in committing fraud when Maudsley convinced 23 clients to redeem about $1.6-million in mutual fund holdings to invest in other securities. Maudsley did not invest any of the money, instead taking the clients’ money for his own use to fund his personal and lifestyle expenses, including, a self-admitted substance abuse problem described by a witness as “his cocaine and gambling habit and alcohol addiction.”
The panel also found that Maudsley failed to deal fairly, honestly and in good faith with his clients – nearly half of whom were elderly or vulnerable.
“He simply took their money, or caused Shaylor to do so – about as stark an instance of deceit as there can be,” said the panel.
“The evidence provides clear and convincing proof that Maudsley had subjective knowledge of the deceit, and that it would result in the deprivation of others.”
Maudsley committed his violations when he was a mutual fund salesperson at Investors Group Inc.’s South Surrey Regional Office in White Rock between 1996 and 2003. He was fired from the firm on Mar. 3, 2003.
The commission panel also permanently cease-traded Shaylor’s securities in the sanctions decision. The firm is permanently banned from trading securities and must also pay an administrative penalty of $500,000 -- the maximum that the commission can order against it. Shaylor must also pay costs of the hearing.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the decision on our website www.bcsc.bc.ca by typing in the search box, Paul Robert Maudsley or 2005 BCSECCOM 577. If you have questions, contact Andrew Poon, Media Relations, 604-899-6880.
© BC Securities Commission 2004
Here is what Ken K thinks is wrong:
Here's the point. He stole a lot of money and doesn't spend even 5 minutes in jail. Note the low limits on fines in BC.His employer isn't even sanctioned or given a wrist slap fine.Investors don't get a nickle back. Soon , abusive provincial limitations Acts will swing into action putting tight time pressures on investors for civil action.This is the kind of regulatory enforcement regime that simply does nothing to protect investors.ken kivenko http://www.bcsc.bc.ca/release.asp?id=2748
Here is what Larry thinks is wrong:
These Securities Commissions do nothing for investors, and white collar criminals have to practically kill their clients to get any sanctions whatsoever. The crimes described above are so very very obvious that third grade children could do an improved job of sanctioning them and providing some recourse to investors. Where the commissions fail is in the more subtle, more cleverly crafted methods of duping clients of their moneys, by "trained, trusted and professional", salespeople who take advantage of the clients faith and trust.
The securities commissions cannot even make a dent into the various frauds, deceits, misrepresentations in 99% of cases. I feel they do not even have the will to do so, since it would reflect so badly on how they have run the system under their watch. It seems they can only stand by and watch now, while the smarter or more ethical among them are leaving.
Even if they had the ethics to address white collar frauds, they have nowhere near the strength. the RCMP is on record as saying they only have manpower to investigate 5% of the commercial crime reported to them, and I suspect the Securities Commissions are similar.
It is still "buyer beware" for clients and white collar crime heaven for fraudsters here in Canada.
Tuesday, September 13, 2005
Mutual Fund Industry Sales Practices Study
Canadians tired of high fees, lack of transparency in investment industry, survey finds
Sep 8, 2005 - Canada Newswire
Investors seeking low fees, transparent pricing, unbiased advisors
TORONTO, Sept. 8 /CNW/ - Canadian investors believe they are paying too much in fees to those who manage their money, and many find the complex fee structures of the investment industry confusing, according to a new survey by Decima Research.
The survey, commissioned by Stratos Wealth Management (Stratos), a division of MD Management Limited, reveals a troubling picture of frustration and dissatisfaction among Canadian investors when it comes to understanding and receiving value for the fees they pay for investment products and services. Stratos is a new business venture from the MD Financial Group, one of Canada's largest independent financial services organizations.
The survey also reveals that while many feel the investment industry lacks clarity and transparency in disclosing the fees investors pay, many have little or no idea what they pay - leaving a large proportion of investors in the dark when it comes to their personal financial management.
"It's clear that investors are dissatisfied with the fees they pay - and those who aren't should be, given the negative effect high fees have on investment returns," says Sandy Wilson, chief operating officer for CMA Holdings, the parent company of both MD Management and Stratos Wealth Management. "Canadians are looking for clear, competitive and transparent pricing - with no hidden fees."
Here are some key findings of the survey:
Investors tired of high fees, low transparency
- 48% of Canadian investors believe they are paying too much in fees, compared with just 40% who are comfortable with the fees they pay. A further 12% don't know one way or the other. Of those who offered an opinion, therefore, 55% believe they are paying too much.
- A surprising number of investors - 43% - believe that the investment industry lacks clarity and transparency in disclosing the fees investors pay.
Investors in the dark
- It seems that the information provided by investment firms is not doing the job. 44% have only "a vague idea" or "no idea" of the fees they pay on the management, purchase and sale of investments by their fund managers, securities dealers or investment advisors.
- Of those who do know what they are paying, 43% report paying 3% or more of their total investment portfolio in fees. Of that number, an incredible 6% claim they pay more than 10% in fees. This contrasts with data from Investor Economics, which show that, on average, Canadians pay between 2.2% and 2.8% of their portfolios in fees(x).
- Individual financial advisors seem to get a passing grade: 67% agree that their advisor or investment company has taken the time to provide information on fees. Still, almost one-third (31%) disagree, notwithstanding regulatory efforts to improve disclosure of fees.
Stratos Wealth Management is modeled on its highly successful parent company, MD Management Limited, part of the MD Financial Group, which manages more than $19 billion in assets. The company plans to leverage this experience by providing wealth management to all busy professionals seeking more customized, comprehensive and cost-effective services.
Stratos is based on a simple idea: offering quality investment products and ongoing financial advice and service - all for a low fee. The new company offers one other point of differentiation: its unbiased financial advisors are measured and rewarded based on client satisfaction - not sales commissions.
About the survey
This telephone survey was conducted with 376 Canadian investors between the ages of 25 and 64 between August 18 and August 21, 2005. It was conducted by Decima Research Inc., on behalf of Stratos Wealth Management. Results to the survey can be considered accurate to within plus or minus 3.1 percent, 19 times out of 20.
About Stratos Wealth Management (www.stratoswealth.com)
Based in Toronto, Stratos Wealth Management is a division of MD Management Limited, one of Canada's largest and most respected independent investment companies. With more than $19 billion in assets under management, MD Management has been serving members of the Canadian medical profession and their families for more than 35 years.
About MD Financial Group
MD Financial Group(TM), refers to various CMA Holdings Incorporated companies offering financial planning through MD Management Limited, mutual funds by MD Funds Management Inc. and MD Private Trust Company, discretionary investment counselling and portfolio management services through MD Private Investment Management Inc., executor and trustee services through MD Private Trust Company, banking referral services in collaboration and through National Bank and insurance products by MD Life Insurance Company and Lancet Insurance Agency Limited.
(x) For Canadian industry wrap products, "The Fee-Based Report," Investor Economics, Winter 2005, p. 87.
Sep 8, 2005 - Canada Newswire
Investors seeking low fees, transparent pricing, unbiased advisors
TORONTO, Sept. 8 /CNW/ - Canadian investors believe they are paying too much in fees to those who manage their money, and many find the complex fee structures of the investment industry confusing, according to a new survey by Decima Research.
The survey, commissioned by Stratos Wealth Management (Stratos), a division of MD Management Limited, reveals a troubling picture of frustration and dissatisfaction among Canadian investors when it comes to understanding and receiving value for the fees they pay for investment products and services. Stratos is a new business venture from the MD Financial Group, one of Canada's largest independent financial services organizations.
The survey also reveals that while many feel the investment industry lacks clarity and transparency in disclosing the fees investors pay, many have little or no idea what they pay - leaving a large proportion of investors in the dark when it comes to their personal financial management.
"It's clear that investors are dissatisfied with the fees they pay - and those who aren't should be, given the negative effect high fees have on investment returns," says Sandy Wilson, chief operating officer for CMA Holdings, the parent company of both MD Management and Stratos Wealth Management. "Canadians are looking for clear, competitive and transparent pricing - with no hidden fees."
Here are some key findings of the survey:
Investors tired of high fees, low transparency
- 48% of Canadian investors believe they are paying too much in fees, compared with just 40% who are comfortable with the fees they pay. A further 12% don't know one way or the other. Of those who offered an opinion, therefore, 55% believe they are paying too much.
- A surprising number of investors - 43% - believe that the investment industry lacks clarity and transparency in disclosing the fees investors pay.
Investors in the dark
- It seems that the information provided by investment firms is not doing the job. 44% have only "a vague idea" or "no idea" of the fees they pay on the management, purchase and sale of investments by their fund managers, securities dealers or investment advisors.
- Of those who do know what they are paying, 43% report paying 3% or more of their total investment portfolio in fees. Of that number, an incredible 6% claim they pay more than 10% in fees. This contrasts with data from Investor Economics, which show that, on average, Canadians pay between 2.2% and 2.8% of their portfolios in fees(x).
- Individual financial advisors seem to get a passing grade: 67% agree that their advisor or investment company has taken the time to provide information on fees. Still, almost one-third (31%) disagree, notwithstanding regulatory efforts to improve disclosure of fees.
Stratos Wealth Management is modeled on its highly successful parent company, MD Management Limited, part of the MD Financial Group, which manages more than $19 billion in assets. The company plans to leverage this experience by providing wealth management to all busy professionals seeking more customized, comprehensive and cost-effective services.
Stratos is based on a simple idea: offering quality investment products and ongoing financial advice and service - all for a low fee. The new company offers one other point of differentiation: its unbiased financial advisors are measured and rewarded based on client satisfaction - not sales commissions.
About the survey
This telephone survey was conducted with 376 Canadian investors between the ages of 25 and 64 between August 18 and August 21, 2005. It was conducted by Decima Research Inc., on behalf of Stratos Wealth Management. Results to the survey can be considered accurate to within plus or minus 3.1 percent, 19 times out of 20.
About Stratos Wealth Management (www.stratoswealth.com)
Based in Toronto, Stratos Wealth Management is a division of MD Management Limited, one of Canada's largest and most respected independent investment companies. With more than $19 billion in assets under management, MD Management has been serving members of the Canadian medical profession and their families for more than 35 years.
About MD Financial Group
MD Financial Group(TM), refers to various CMA Holdings Incorporated companies offering financial planning through MD Management Limited, mutual funds by MD Funds Management Inc. and MD Private Trust Company, discretionary investment counselling and portfolio management services through MD Private Investment Management Inc., executor and trustee services through MD Private Trust Company, banking referral services in collaboration and through National Bank and insurance products by MD Life Insurance Company and Lancet Insurance Agency Limited.
(x) For Canadian industry wrap products, "The Fee-Based Report," Investor Economics, Winter 2005, p. 87.
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