Criminal Provisions of Competition Act and Misleading Advertising May Apply

Guidelines
1. In order to proceed on a criminal track both of the following criteria must be satisfied:
(a) there must be clear and compelling evidence suggesting that the accused knowingly or recklessly made a false or misleading representation to the public. An example of such evidence is the continuation of a practice by the accused after complaints have been made by consumers directly to the accused; and

(b) if there is clear and compelling evidence that the accused knowingly or recklessly made a false or misleading representation to the public, and this evidence is available, the Bureau must also be satisfied that criminal prosecution would be in the public interest.
2. The factors to be taken into account in making this public interest determination will vary from case to case, and may include the seriousness of the alleged offence and mitigating factors.
3. The seriousness of the alleged offence will include a consideration of:
(a) whether there was substantial harm to consumers or competitors which could not be adequately dealt with by available civil remedies;
(b) whether the deceptive practices targeted or took unfair advantage of vulnerable groups (e.g., children and seniors);
(c) whether the persons involved failed to make timely and effective attempts to remedy the adverse effects of the conduct, or whether the conduct continued after corporate officials became aware of it;
(d) whether the conduct involved a failure to comply with a previous undertaking, a promised voluntary corrective action, or a prohibition order; and
(e) whether the persons had engaged in similar conduct in the past.
4. Mitigating factors will include a consideration of:
(a) whether the consequences of a prosecution or conviction would be disproportionately harsh or oppressive; and
(b) whether the company or entity has in place an effective compliance program.
5. If, on balance, the Bureau is satisfied that the circumstances of the case warrant criminal prosecution, a recommendation may be made to the Attorney General of Canada who will make the ultimate determination of whether to proceed.

One issue I can think of that the investment industry should start to worry about is the issue of claiming no duty of care, nor fiduciary duty to clients when the relevant Securities Acts of Canada expressly state that a fiduciary duty is owed to clients of investment firms.

Another misrepresentation is that of calling those persons legally registered under the Securities Act by a name that the securities act does not permit without further extensive qualifications. By way of example, although salespersons are only allowed to call themselves “salespersons” or, “registered representative”, they have since the market crash of 1987 begun changing the title of their business role in both advertising and business promotion materials to that of “investment advisor”. This forced the general public to fall into the misunderstanding that the large bank owned investment firms were in fact acting in the client best interest, when in fact, numerous industry statistics would indicate otherwise.

A third misrepresentation is to refuse to allow competitive pricing to be discussed publicly at the major firms. By way of example, although mutual fund commissions were deregulated and fully negotiable in about 1987, none of the advertising from any bank owned investment firm is found to have discussed or disclosed this fact. Further that there was in fact policy decisions made at firms to restrict or to disallow public advertising by any of it’s staff on the topic of deregulated mutual fund choices and methods of lowering investment costs to the public. This despite an industry promise to place the interests of the client “first”.

A fourth misrepresentation would be the act of placing the vast majority of mutual fund client investments into the highest compensating commission paying choice of funds according to industry statistics. With fully 80% of all mutual fund sales having been placed into the fund class that compensated investment advisors at the highest possible amount, it would appear again that the industry promise to place, “you first”, is not being met.

I would suggest that the criminal provisions of the competition act be looked into closely to determine where they apply to these practices. They can be found at http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/en/ct02868e.html#partVII.1
There seems to be a move afoot to uncover these issues and to force full true and plain disclosure into all things. I look forward to the increased benefit to the public interest when public inquiry is truly public, and large powerful vested interests are no longer able to silence thier stories of greed and corruption.
Alberta Securities Commission inquiry recently gagged is another example perhaps of the public interest being denied in the interest of whom? Stay tuned.