Wednesday, April 13, 2005

Are 99% of consumer complaints to ASC delegated to the Industry trade Association??

Enquiring minds want to know!

I certainly think so. It has been my experience with provincial Securities Commissions that they totally abrogate responsibility by delegating it down to a self regulatory agency, who in the case of the largest investment firms in the country, happen to be the IDA. (for a hint as to who they represent, think, "dealers association")

I found a quote about how SRO's, to earn the privilege of being self regulating, have to enforce rules equal to "or stricter" than those granted the provinces by law.

Page 33, of the Canadian Securities Institute Textbook, titled, CONDUCT AND PRACTICES HANDBOOK COURSE.

It is something every registered rep in Canada must study and pass an exam on in order to receive a licence to sell.

The full paragraph reads as follows:

As mentioned above, Self Regulatory Organizations (SRO's) are industry organizations that have the privilege of regulating their own members, whether as officially recognized "SROs" or under the "stock exchange" portions of their provincial Acts. SRO's are responsible for enforcement of their members conformity with securities legislation and have the power to prescribe their own rules of conduct and financial requirements for their members. The majority of participants in the Canadian securities industry are members of an exchange and/or the Investment Dealers Association, which are all SROs.

Self regulation is a privilege, not a right. SROs are delegated regulatory functions by the Administrators, adn SRO by-laws and rules are designed to uphold the principles of securities legislation. The commissions monitor the conduct of the SROs as the SROs carry out this regulatory function, and review the rules of the SROs in the province to ensure that the SRO rules do not conflict with securities legislation and are in the public interest.

SRO rules must set a standard equal to or higher than those imposed by the provinces.

I am of the opinion that this system of trusting the industry to police itself is not working in the public interests. It is, however, working very well in the interests of the industry. I will place a bet that when ASC complaint files are opened to an objective public inquiry, they will show that most (99%) of all complaints about the large IDA investment firms are simply referred to the industry, with little or no follow up to ensure the law is adhered to.

What do investors do, when they have written to the large investment dealer, written to the government agency responsible, and also written to the Industry Trade Association, and each response is to refer the client away from the law, and toward the fox on guard of the henhouse?