Alberta Securities Commission questioned about practices

April 9, 2005


To: Mark Stott, CA
Forensic Accountant
Alberta Securities Commission
4th Floor, 300 – 5th Ave SW
Calgary, Alberta T2P 3C4
Sent by fax to 403-297-6156
Sent by e-mail to mark.stott@seccom.ab.ca


From: Larry Elford


Re: your file #I02028


My apologies for the delay in getting back to you. I have only now begun to understand, after some twenty years in the business, how the regulatory system operates in Canada. I am told there are some 43 regulators of the financial industry in Canada so perhaps you will forgive me for not getting it sooner.

I write in response to your reply to my complaint in file #I02028. In it you state that the complaint concerned “business issues”, and not violations of the securities act, and you referred me to the IDA with my complaint. I want to point out some oversights on the part of your commission that I hope you will take the time to now address.

In my complaint letter, which was also sent internally to RBC directors, was a complaint about an advisor who practices double dipping, or charging a fee based compensation model on top of mutual funds where a commission has already been earned. I see this as a direct violation of securities law or the securities act. There were other issues mentioned in the complaint as well.

The Securities Act states:

1. that investment recommendations must be suitable for each client
representatives have a primary obligation to act in the best interest of clients
2. that representatives have a fiduciary duty
3. that dealers must supervise representatives to ensure compliance with the above
4. that representatives have an obligation to act honestly, in good faith, and in the best interests of the security holder.

If I have any of the above wrong, please feel free to set me straight.

Causing a client to pay a fee based charge on top of already earning a commission on the same investment is to the advantage of the advisor only, (not the client) and it is a practice I now know for a fact was occurring at RBC as my original complaint suggested. I also now know that RBC misled the IDA when they told the IDA that an investigation into these allegations was undertaken at the time.

Similar behavior (unsuitable, not in client best interest, not meeting fiduciary duty transactions, even denying a fiduciary duty to clients) have been discovered through my research and through public court cases in Canada during the ensuing few years. This type of behavior has been found in several public securities cases in the States to be “unsuitable”, and “not in the best interest of clients”. In the reply to myself from Mr. Brian Peters of RBC, he says that double dipping is an unethical practice. RBC has since compounded the confusion by also stating that it is OK to charge a client an additional fee, “if they are given a deal”, on the additional fee. and finally by pointing to the fine print in their account opening documents that suggests they have every right to charge additional fees such as this on top of already paid commissions. I now do not know whether RBC is for, against, defending, or supporting the practice of charging clients fees on top of commissions paid. (Commonly referred to as the practice of double dipping) I would ask you to again consider whether your first reply to me was perhaps in error as to your obligation and the obligation to protect the public interest of Canadians by acting on the statutes, rules and policies of the Provincial Securities Act.

I also have a question of why my complaints were referred away from the Alberta Securities Commission (which appears to be charged with this responsibility) and referred to the Investment Dealers Association, when the IDA is not a government regulatory agency, but rather a self established industry trade association. I feel that by doing this you may have overlooked the mandate of your organization’s responsibilities and passed this to a group of people that not only have no legal mandate to deal with this in the proper manner, but that may actually wish to “not” deal with this in the proper manner. I would appreciate your thoughts on this or perhaps some correction if I am under the wrong impression. Otherwise I would need to take this matter up at another level.

The results of your failure to deal with this complaint have been rather predictable, now that we have the benefit of hindsight. The industry trade association (IDA) has stated (in writing) that no investigation was undertaken, contrary to what was reported by the firm in question in the press, as well as to courts in a civil action. I also find now that through my industry research on this matter, that this is typically the case. That complaints against the industry often get “brushed aside”, when given to the industry trade association (IDA). It seems obvious why this happens when you consider that you are asking the industry to investigate and police the industry. I will say it again for emphasis. You are asking the industry to investigate and police the industry. You must today answer the question of what specific legislation allows you to do this.

Are you the right people to be handling this? I am afraid it may have to be corrected through the court of public opinion, the political process, or a form of legal process that might hold government agencies such as your Commission to accountability. I am willing to ask the question once more, since it appears to indeed be an issue of securities act violations in contrast to your first letter. I am sorry it took me this long to find and understand the securities act. I was dealing with something I knew only to be unethical and immoral treatment of clients at the time, and I thought I was reporting it to the proper organization that knew the act and it’s responsibilities for the Securities Act.

I write this in the spirit of improving the industry that we work in, and maintaining the trust and the integrity of it by carefully questioning when indiscretions are suspected. I will not rest until this matter is properly, objectively and openly investigated to my satisfaction. It is in the public interest to do so.

I look forward to your reply.





Larry Elford
521 Fairmont Blvd S
Lethbridge, Alberta T1K 7G3

Cc: Alberta Finance Minister Shirley McLellan
Ralph Klein, Alberta Premier