The OSC answers one town hall question, and raises more.

After the recent investor town hall meeting, the OSC invited questions, and promised to answer all. I aksed them about a topic I feel is not only misleading, but contrary to the law as provided by the Securities Act. I think the answer I got confirmed my belief but brushed aside any need for the OSC to do anything about it.
my question:
18. Why are investment salespeople who are officially registered as either "registered representatives", or as "salespeople", at the Securities Commission, allowed to represent themselves to the public as "investment advisors", indicating a different level of fiduciary duty to the public, when the Securities Act is clear on which titles are allowed and which are not?

OSC answer:
The OSC registers individuals in the categories of salesperson, officer, director or partner. These categories are then further designated as trading or advising. The firm can be registered as either a mutual fund dealer, an investment dealer, or as investment counsel or portfolio manager (ICPM). The latter ICPM category is what we refer to as an adviser (spelled “er”). While advisor (spelled “or”) is widely used in the industry to represent a salesperson or representative, it is not a registration category. The OSC does not register job titles.

Did I get the brush off? Any thoughts out there? I still remain convinced that the use of this title is an abuse of the Securities Act that the OSC would find it easier to overlook. From a client perspective however, it is very misleading to let them believe they are dealing with trusted and professional advisors, onlly to find when push comes to shove that it was not the case.

White Collar Crime in Canada Less Criminal......

White-collar criminals need own court: study
'Meaningful reform'
Theresa Tedesco, Chief Business Correspondent
June 15, 2005
Securities regulators should place greater emphasis on restitution for aggrieved investors and Canada should create specialized criminal courts specifically for white-collar crimes, concludes a study on capital market enforcement.According to the study, How Effective is Capital Market Enforcement in Canada?, the role of regulators needs to be re-evaluated because of a "disconnect" that exists between how they view their mandate and what investors expect."Securities regulators have historically interpreted their mandate as forward-looking and deterrence based," said associate law professor Poonam Puri during a presentation at the Joseph L. Rotman School of Management in Toronto yesterday. "On the other hand, individual investors who have lost their savings due to the misconduct of regulated market participants are most concerned about being compensated or made whole."


JEFF CHRISTENSEN / REUTERS
What if Martha Stewart had been prosecuted in Canada instead?
To bridge the gap, Prof. Puri recommended re-evaluating the role of securities regulators. "Moving forward, perhaps the securities regulator should act more as a facilitator or catalyst to assist investors in receiving compensation," she told the gathering of 200 investigators, lawyers and regulators.Among the findings in her discussion paper, Prof. Puri, who teaches at Osgoode Law School in Toronto, said securities regulators in Canada have historically been reluctant to pursue quasi-criminal sanctions through the courts - and that in turn has partially contributed to the lack of expertise among judges in dealing with white-collar cases.She referred to existing studies that indicate judges have historically imposed "disappointingly light" punishment on white-collar criminal offenders. According to Prof. Puri, these miscreants were less likely to be imprisoned, received lower average sentences and served less time than offenders involved in more traditional crimes.Although Prof. Puri argued many reasons explain the discrepancy, she suggested the main cause for this leniency is the lack of expertise among most Canadian judges to determine whether an offence adversely affects investor confidence or the stability of the Canadian economy."The Canadian judiciary needs to recognize not only the magnitude and impact of corporate misconduct on large segments of the population, but also the broader ramifications of corporate crime on the Canadian economy," she concluded.To that end, Prof. Puri advocated a two-pronged approach: "meaningful reform" for judges to help them better understand white-collar crimes, which should result in tougher financial penalties and imprisonment; and the creation of specialized criminal courts to deal exclusively with corporate and white-collar crime, similar to those that deal with young offenders and family law matters.Although Prof. Puri did not explicitly recommend the creation of a national securities regulator, she suggested the significant differences in enforcement trends among Canada's 13 provincial and territorial securities commissions "may have an adverse effect on enforcement."For example, Ontario is focused on registrant-related misconduct and prosecuting insider trading, while British Columbia has made it a priority to clamp down on the distribution of securities without a prospectus.At the same time, she said the commissions differ on how they dole out punishment at sentencing. To wit, Alberta does not take into account the personal circumstances of the person or company being disciplined, while regulators in Ontario, New Brunswick, Saskatchewan and Manitoba do make it a factor.As a result, the differences among the multiple provincial regulators "may lead to sub-optimal enforcement actions being taken on the whole, in contrast to a national or consolidated regulator, which would be more likely to act in the national interest," she said.As well, Prof. Puri said a national or consolidated regulator would enhance enforcement effectiveness in Canada because it would allow policies and priorities to be created at a national level and reduce costs to regulators and market participants.Not surprisingly, her paper reiterated the widely held view that when compared with their U.S. counterparts, Canadian regulators do not engage in enough enforcement activity and are less effective when they do.To support her assertion, Prof. Puri cited statistics that showed Canadian securities devote a smaller percentage of their total budget to enforcement than their U.S. counterparts. For example, the enforcement costs at the Securities & Exchange Commission represent 29% of the total budget. That compares with a range of 13% to 19% at each of the four major Canadian provincial securities commissions.As well, Prof. Puri found financial penalties are 10 times higher in the United States than the average Canadian fine.Furthermore, many of the high-profile white-collar cases in the U.S. have been pursued by attorneys general, such as Eliot Spitzer in New York - not the SEC. In Canada, Crown prosecutors have not embarked on a sweeping crackdown on corporate and white-collar crime.

Perfect logic by financially abused client

Sandra Gibson
Financial Post
Monday, June 13, 2005
Your comments are grossly unfair -- my broker conducted 18 trades in February, 2003, which resulted in significant losses for me.
I had written to the broker in January, 2003, regarding a minor infraction and in that letter I stated that "no further transactions were to be conducted without my prior knowledge." That letter went to my broker's compliance department.
I was in Mexico when the 18 trades were conducted in February and did not learn of them until my return.
What more could I have done to protect myself? If, in fact, the industry operates on a "buyer beware" basis, then IDA, OSC, etc., should declare same. (Advocate comment, "I agree 100%, anything less is misleading the public")
Many investors are intimidated (no matter what their level of intelligence or education) by brokers who imply that their knowledge is so specialized that the client could not possibly apprehend enough info to make an independent decision. (advocate comment, "yet when called into court, many bank owned dealers claim "no duty of care" to the client on a technicality, saying, in effect that the client was responsible."
I would also remind you that, unlike you, most investors are focused on other areas of knowledge with which they earn their living and many simply do not have the time to gain the know-how to make a truly informed assessment.
Who was flogging Portus? Were they all "grey" and "white" hats who grabbed their 8% to 12% fees? The problem is that corruption is the norm, not the exception. "I will say for sure that self dealing is the norm, rather than putting client interest first, and if that is corruption, then she is calling a spade a spade.
How can an investor protect himself when we have such a lack of transparency in so many areas?
"The vast majority of advisors" are being instructed to sell in-house wrap funds etc., in order to meet their $500,000-per-year quotas, so how can they "try to align themselves with the needs of their clients"? Brokers are afraid to speak out. (Advocate comment with twenty years in, TRUE)
You belittle that which Stan Buell, Joe Killoran, Robert Kyle etc., have sacrificed so much of their personal lives to achieve.
Sandra Gibson, Toronto

Securities Regulators in Canada follow similar line

At most times, investors feel they are protected. At all times, provincial Securities Commissions say they are doing thier job. However many within the industry feel otherwise, that most investment abuses are slipping through the cracks and that regulators are mostly "posing".

The below article sheds some light on the kind of information the public needs to learn about, so that they can stop being misled into a false sense of security in matters if investment protection. The article pertains to RCMP investigations not having the people power to do the job, and most securities commissions use the same excuse when seriously questioned............they just dont portray this truth to the public.

http://www.fin.gc.ca/news05/05-041e.html

How ironic???

Sun, June 5, 2005
Dirty money tips ignored
Mounties fail to pursue one-third of financial sleuths' files, report says

By DEAN BEEBY, CP

The RCMP did not pursue more than a third of the money-laundering tips passed on by Canada's financial sleuthing agency, largely because the force lacked the manpower, says a newly released report.
The Mounties did not open investigations on 45 files turned over to them by the Financial Transactions and Reports Analysis Centre of Canada, better known as Fintrac, says the document.
The agency was established in 2000 to gather financial intelligence from banks and other institutions on potential money-laundering schemes. After careful analysis, Fintrac forwards information on the most suspicious transactions to the RCMP and other police forces. The agency also monitors terrorist financing.
'LIMITED RESOURCES'
An internal Fintrac report, obtained under the Access to Information Act, found the Mounties did not chase 45 of the 131 high-quality tips the agency had produced to the end of 2003. Virtually all of the cases not pursued were suspected schemes in Vancouver, Toronto and Montreal, where the force places most of its proceeds-of-crime investigators.
And about three-quarters of the abandoned tips were not investigated simply because the RCMP had "limited resources."
"There is no shortage of evidence against these individuals committing crime, just a shortage of investigators to bring all the criminals to justice," says the 31-page report from 2004.
The findings suggest the extent of money-laundering in Canada, most of which stems from drug trafficking, far exceeds the ability of the RCMP to investigate.
Fintrac found that the Mounties were abandoning almost half of the tips they were given in Canada's three biggest cities.
The report also showed that cases were much more likely to be followed up if the suspects' names were already in the Canadian Police Information Centre database, which contains criminal records of known offenders.
The value of the suspected money-laundering schemes appeared to have no bearing on whether the tip would be followed up. Six of the abandoned files were worth more than $5 million.
CRIMES UNKNOWN
The Mounties also tended to avoid files where the original crime that produced the allegedly laundered money was not known.
A spokeswoman for the Mounties said even though some disclosures from Fintrac are set aside, the information may still be useful at some future date.

Illegal in US, Standard Practice daily in Canada

NASD fines RBC in the United States $1.7 mil for mutual fund mishandling. Article from June 9, 2005 Financial Post describes the fine. The NASD web site is a wealth of information on investment abuses in the United States. Unfortunately, Canada's regulatory system still allows almost any and all abusive mutual fund practice to continue unchecked. I still do not understand how this occurs, but I am sure the class action lawyers will figure it out and eventually correct it in Canada. It is, after all, a multi billion dollar damage to clients if you look carefully at double dipping, triple dipping, churning DSC funds, moving clients to proprietary and higher comp funds, adding advisor fees to inactive accounts, prescribing the highest comp fund under the guise of "professional advice", etc., etc., etc.

ASC Hobbled, Edmonton Journal

Fixing the hobbled ASC should be a priority:Alberta's powerhouse economy deserves first-class watchdogEdmontonJournal Saturday, June 4, 2005 Page: F1 / FRONT Section: BusinessByline: Gary Lamphier Column: Gary Lamphier Source:

The Edmonton JournalIf the Alberta Securities Commission was a publicly traded company, theevents of the past six months would have been crippling. In alllikelihood, the ASC's share price would have tanked, its shareholderswould be in open revolt, lawsuits would be flying, senior execs would bejumping ship (as indeed some are), and company directors would benervously checking their liability insurance. An independent committeeof the board would likely have been struck to explore the damagingallegations against senior management, contained in a report presentedto the ASC board in February. In the brave new world of corporategovernance, this is called transparency and accountability. But the ASCisn't a public company. It's an arm of the Alberta government. And as such, it is neither transparent or accountable, in any meaningful way.It is, in fact, subject to all of the usual meddling and politicalsubterfuge that afflicts any government body, especially in a one-partystate like Alberta. Most of the time, this wouldn't matter much to manypeople. Most are simply too busy making a living to care much about thearcane goings-on at the provincial securities regulator. Besides,compared to the stench exposed daily by the Gomery Commission, thesleazy vote-buying antics of the federal Liberals, or the possibility ofsex-killer Karla Homolka moving into your neighbourhood next month, theongoing soap opera at the ASC might seem more cartoonish thancataclysmic. After all, Alberta's economy is on wheels, the oil and gassector is booming, everyone is making money, and business is good. Sowhat if some disgruntled ASC staffers claim former chairman StephenSibold and exec director David Linder ran the ASC like a private club (aclaim they deny)? And so what if the ASC was seen by 10, 20, or 30staffers (sorry, I've lostcount) as a bastion of favouritism, bullying, intimidation, sexistjokes, and lax enforcement practices? What's the big deal, you mightask. Even if (as some say) relations between staff and ASC bosses remainpoisonous under interim chairman Peter Valentine -- an ex-provincialauditor who was brought in when Sibold's five-year term ended in May --you might see this as much ado about nothing. Every company has unhappyemployees, you may say. The kind of rapid staff turnover we're seeing atthe ASC -- where four executive positions are now vacant, including thatof former legal services director Patty Johnston, who left Tuesday -- ishardly unique. So what if a few people get fired, a few self-styledwhistleblowers get exposed, and the remaining staff learn to shut up andtoe the line, you may ask. You might even agree when Alberta FinanceMinister Shirley McClellan, who oversees the ASC, calls this strictly aninternal matter. Well, I'm afraid I don't. There are big issues at playhere. Alberta is an economic powerhouse, with world-class companies thatcompete for international capital. We can't afford a securitiesregulator that's so badly impaired by internal strife that it can't doits job. This isn't merely a messy in-house personnel spat between ASCstaffers and management -- a dispute that was first uncovered byFinancial Post reporter Theresa Tedesco in March -- it's also areflection of Alberta's parochial view of how to regulate the capitalmarkets. Like many other provinces, Alberta has long opposed thecreation of a national securities regulator. Forget the fact that theASC, like other provincial regulators, has far fewer enforcement staff,per capita, on its payroll than the U.S. Securities and ExchangeCommission. Or that scams like Bre-X and YBM Magnex were born right herein Alberta. For the provincial government, any talk of a nationalregulator is a non-starter. "Maybe a national securities commissionwould be ineffective too," says Toronto forensic accountant Al Rosen, avocal critic of the current regime of provincial regulators. "But Ican't imagine it being worse than what we have now. I think in general,investors should be very concerned." Amen to that, Al.