The Lethbridge HeraldFront, Friday, September 12, 2003, p. a1
Investment adviser sues RBC Dominion for $13 M
Gauthier, Gerald
By GERALD GAUTHIER
Lethbridge Herald
A local financial adviser, recognized for his business ethics, has filed a $13-million lawsuit alleging his former employer ignored its own ethical standards by secretly charging its clients millions in fees.
Larry Elford, an investment adviser in Lethbridge for 19 years, also alleges RBC Dominion Securities tried to muzzle him when he voiced concern to company management about the improper practices.
His refusal to be silenced, the suit claims, led to the company effectively firing him wrongfully last fall.
The information is contained in a statement of claim filed Aug. 26 with Lethbridge Court of Queen's Bench. Elford is seeking $13.1 million in damages, of which $10 million would be donated by the firm to a charity of his choice. Named as defendants in the lawsuit are RBC Dominion Securities Inc. and RBC Dominion Securities Ltd doing business as RBC Investments and RBC Financial.
The allegations have yet to be proven in court. The firm's Calgary lawyer, Jim Rooney, is preparing a statement of defence to be filed with the court later this month.
"This action will be defended, and we don't see merit in the claim," Rooney said. "It is ill-founded."
Lethbridge lawyer Jim Farrington is representing Elford in the suit.
Elford had been employed with the firm since 1986 when it was then known as Dominion Securities Pittfield. He left the firm Nov. 7, 2002 in what the suit refers to as a "constructive dismissal of the plaintiff which was wrongful" because of management's intimidation and harassment of Elford for raising ethical concerns and its refusal to approve his advertising and promotional materials.
In 2001, while with RBC Investments, Elford was one of two Lethbridge finalists named by the Better Business Bureau in its salute to ethics in business.
The lawsuit alleges the company repeatedly ignored the ethical concerns Elford raised about double dipping - the practice of charging clients transaction fees on top of flat fees when only one or the other should be charged. Those practices generated millions of dollars in transaction fees for the company, the suit alleges.
It also alleges the company and other investment advisers accepted inducements from mutual fund companies to place investments with those companies without notifying clients about those incentives - a practice which is illegal in Alberta.
"When (Elford) attempted to disseminate publicly the fact it was possible to purchase mutual funds without a sales fee, the defendant threatened the plaintiff with disciplinary action if he continued to make such disclosures," the suit alleges.
Failure to disclose such information to clients runs contrary to the company's own published ethical standards which state: "We must operate our business so that every transaction or activity that we are involved in will stand the test of complete and open public scrutiny," the suit alleges.
Also alleged is that the RBC's Lethbridge branch manager tried to intimidate Elford with two memos on May 29, 2002 which threatened sanctions as well as fines and revocation of his securities credentials.
Elford is seeking $3 million in general damages and $100,000 in special damages plus legal costs on top of $10 million in punitive damages, the last of which would be paid to a registered Canadian charity.
It's also alleged after he found employment elsewhere, RBC management and employees made false, derogatory remarks about the circumstances of his departure as well as his business practices.
Category: Front Page; NewsUniform subject(s): Financial products and servicesLenght: Medium, 453 words
© 2003 The Lethbridge Herald. All rights reserved.
Doc. : news·20030912·LH·0100903-Investment_1broker_1
Sunday, May 01, 2005
Advocate Ken Kivenko speaks to broker coverups
For investors who have legitimate complaints against their dealers/brokers, the IDA’s MR076 Notice to its Members offers limited comfort. It protects the ability of regulators to investigate cases of misconduct, but impairs other investors who have suffered at the hands of those same firms. The IDA does not condemn confidentiality - as long as it is immune from its effects. Fund dealers and brokerage firms can still concoct confidentiality provisions that prevent customers from sharing information with one another.
"After five years, I'm beaten into submission," one such investor told me this week. "I'm not allowed to disparage the bank at all. We're living in fear of the might of the bank closing down on us and suing for everything we've got." Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Thus by keeping settlements secret, other investors with the firm are in the dark even though the malfeasance and the resultant settlement may also be applicable to them and may still be occurring.
“The "financial euthanasia" of Canadian retirees is as important an election issue as health care, Gag orders would never be tolerated in the health care system -- the public has a right to know about the spread of SARS or other diseases. Investors should receive similar warnings of financial industry practices that threaten investors' financial well-being” –Investor advocate Joe Killoran Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Financial services firms aren’t the only one wanting to keep information confidential. Here’s the language from the current standard letter received by industry-sponsored OBSI www.obsi.ca clients.
“..Neither you nor [name of FSP] will surrender any legal rights by participating in OBSI’s process. It is critical to the success of this process that both you and [name of FSP] are able to deal with OBSI in a complete and open manner without the risk that you may prejudice your legal rights. Thus by signing this letter, you and [name of FSP] agree that OBSI’s correspondence and discussions with you as part of this process, and OBSI’s files, are confidential. You and [name of FSP] agree that in the event of any subsequent legal or other proceedings neither of you will use that correspondence or information. In addition, neither you nor [name of FSP] will seek to compel OBSI to produce its files and records, or seek to compel the Ombudsman or any other OBSI staff member or advisor to give evidence or testify in any such proceeding….”
Ironically, a bigger threat to investors is the new Ontario Limitations Act which requires investors to file for legal action within 2 years of discovery. This actually encourages financial services firms to drag out the complaint process and make low -ball offers. You won’t have to worry about the gag order-there may be no settlement at all. Seniors, retirees and small investors are truly disadvantaged by this Act making the signing of oppressive “ boilerplate provisions ” now much more likely.
Since the primary role of regulators is protect investors and act in the Public interest, how about the following ?:
Ban confidentiality Agreements unless desired by the investor
If a outright ban is not practicable, define industry –standard language for such agreements approved by regulators
If a outright ban is not practicable, include a maximum hush period of 1 year
Bound the penalties for an investor breach to the amount of restitution and define the remedies available to investors for a firm’s breach
Publish periodic statistical summaries of the hushed cases with trends and commentary so other investors can learn what type of cases are being settled
As Louis Brandeis said: Sunlight is the best disinfectant. The financial services industry needs to Walk the Talk. It’s time to respect and honor investor protection.
Ken Kivenko P.Eng.
"After five years, I'm beaten into submission," one such investor told me this week. "I'm not allowed to disparage the bank at all. We're living in fear of the might of the bank closing down on us and suing for everything we've got." Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Thus by keeping settlements secret, other investors with the firm are in the dark even though the malfeasance and the resultant settlement may also be applicable to them and may still be occurring.
“The "financial euthanasia" of Canadian retirees is as important an election issue as health care, Gag orders would never be tolerated in the health care system -- the public has a right to know about the spread of SARS or other diseases. Investors should receive similar warnings of financial industry practices that threaten investors' financial well-being” –Investor advocate Joe Killoran Source: Jonathan Chevreau, “Grievances never see the light of day: Banks, brokerages use confidentiality pacts to great effect “, Financial Post, June 25, 2005
Financial services firms aren’t the only one wanting to keep information confidential. Here’s the language from the current standard letter received by industry-sponsored OBSI www.obsi.ca clients.
“..Neither you nor [name of FSP] will surrender any legal rights by participating in OBSI’s process. It is critical to the success of this process that both you and [name of FSP] are able to deal with OBSI in a complete and open manner without the risk that you may prejudice your legal rights. Thus by signing this letter, you and [name of FSP] agree that OBSI’s correspondence and discussions with you as part of this process, and OBSI’s files, are confidential. You and [name of FSP] agree that in the event of any subsequent legal or other proceedings neither of you will use that correspondence or information. In addition, neither you nor [name of FSP] will seek to compel OBSI to produce its files and records, or seek to compel the Ombudsman or any other OBSI staff member or advisor to give evidence or testify in any such proceeding….”
Ironically, a bigger threat to investors is the new Ontario Limitations Act which requires investors to file for legal action within 2 years of discovery. This actually encourages financial services firms to drag out the complaint process and make low -ball offers. You won’t have to worry about the gag order-there may be no settlement at all. Seniors, retirees and small investors are truly disadvantaged by this Act making the signing of oppressive “ boilerplate provisions ” now much more likely.
Since the primary role of regulators is protect investors and act in the Public interest, how about the following ?:
Ban confidentiality Agreements unless desired by the investor
If a outright ban is not practicable, define industry –standard language for such agreements approved by regulators
If a outright ban is not practicable, include a maximum hush period of 1 year
Bound the penalties for an investor breach to the amount of restitution and define the remedies available to investors for a firm’s breach
Publish periodic statistical summaries of the hushed cases with trends and commentary so other investors can learn what type of cases are being settled
As Louis Brandeis said: Sunlight is the best disinfectant. The financial services industry needs to Walk the Talk. It’s time to respect and honor investor protection.
Ken Kivenko P.Eng.
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