Friday, March 07, 2008

legal exemptions handed out by crown corp

How to exempt yourself from the law………and win!
Lately the Ferguson (RCMP officer tried three times) case and the motorcycle riding Sikh fellow who wished to be exempt from the law on wearing a helmet, were in the news. Most people I suspect are not well informed on how to obtain an exemption to the law. None, in fact can imagine asking the police for an exemption to, lets say, drive from Lethbridge to Calgary at 200 kilometers per hour, no matter how important your trip is.

What I found amazing, however, is that any bank, investment dealer or investment sponsor, is able to approach our provincial securities commission and apply for an exemption to the law. Want to sell house brand funds to all your clients? Apply for an exemption to the laws that protect them from such predatory practices. Need to give commission kickbacks to get clients to move to certain products? Get an exemption from the laws against commission rebating. Have a poorly selling income trust or other new issue? Apply for exemptive relief from the law so that the firm can use (or abuse) client’s mutual fund assets, and dump the offensive product into their funds without their knowledge. Want to change the title of thousands of licensed “salespersons” and make them instantly appear as “advisors”? Apply for an exemption to the laws against misuse of registration and license. Viola! Solve nearly any little problem with some paperwork and an application to the securities regulator.

It has all been done, and according to the largest database in Canada on the topic, done thousands of times in recent years. I had no idea that something like this was even possible. I suspect that clients are even less well informed.

How, you ask? Because investments are handled by another set of laws, called the Securities Act, and the police are not always informed of criminal violations in this other area. I have seen forgery brushed aside as “not always forgery”, fraud dismissed, breach of trust ignored. The police are assuming, perhaps incorrectly, that your provincial securities commission has matters in hand. Or they are never even notified.

The site that contains the most comprehensive data on exemptions to the law is found at:
http://www.osc.gov.on.ca/Regulation/Orders/2008/ord_2008_index.jsp or you can just go to the OSC (Ontario Securities Commission) site and look at the section on “orders, rulings and decisions”. It includes exemptions passed in Alberta and other provinces.

All of these exemptions were granted without public input. No involvement of a judge, no public notice, and no consumer representation in the decision making process. If you browse, you just may find an investment you own that was sold to you without this disclosure. You may be entitled to know why.The various Securities Commissions refuse to answer how some of these exemptions are in the public interest. They feel they do not have to tell you. Some have been badly abused to hurt the interests of consumers. In Alberta, our provincial commission, a crown corporation, which is responsible to the legislature, recently spent over $1 million dollars on legal fees to try and avoid public audit by the Alberta government auditor. It was discovered that they had something to hide. Yet this practice continues to this day.As a consumer you will get more notice if your neighbor plans to build a garage too close to your property, than you will get if your financial firm chooses to dump certain investment products on you using a legal exemption. Because of hidden legal games such as this, Canada is damaging its reputation by allowing the manufacture and sale to the public of known “tainted” or bad products. Former Bank of Canada governor David Dodge was quoted as saying that Canada has a “WILD WEST” reputation globally on matters relating to investments. Legal exemptions and self-regulation are two root causes. They are part of a flawed foundation upon which our system is built. Some folks think they have been gouged by electrical industry de-regulation. Just try and imagine what goes on behind the curtains in the financial industry where they are allowed to self-regulate? This is just part of many reasons why Canadians suffer from “One Million Frauds”, (Globe and Mail Oct 3, 2007) with only one person convicted until the end of 2007 (Canadian Business editorial Aug 13/27 2007). It also may help explain why ex RCMP IMET commercial crime experts say that Canada is a “A Good Country for Crooks”, (Canadian Business Sept 24, 2007) The United States is coming to grips with sub prime mortgages, mortgage fraud, Enron, WorldCom, Tyco, etc., which are repeatedly costing the United States more than the entire 1929 market crash and resulting depression. Similar investments, frauds, crimes, and damages reside here in Canada. The difference is that in Canada we have effectively no enforcement. What possible agency would there be to bring enforcement action, when our own securities commission is assisting firms to skirt the law? This is the ultimate example of having foxes guarding the henhouse. It is the ultimate example of self-regulation turned into “self serving”.Please ask your local MLA to show me where I may be wrong on these matters by bringing about a Provincial Inquiry, to see if these claims have merit? I can assure you that a Provincial Inquiry will turn up issues that are costing Albertan’s billions.
Larry Elford
Lethbridge

Thursday, February 28, 2008

busy busy busy

you might find me out of touch for lengthy periods.

Working on BREACH OF TRUST has taken some of my time. You will find a web site devoted to this project at web.mac.com/lelford
(just type it in like that and it will take you there)
Doc films take longer that one would think to prepare.

Another site with a few clips and a few questions the film will try and answer is found at http://www.breachoftrust.ca/

check them out and keep in touch

Four out of five financial advisors agree. "Screw the client"

From the Investment Funds Institute ( http://www.ific.ca/ ) we see that mutual fund wrap accounts consist of only 17% of total mutual fund industry assets. That makes sense since they are the new kid on the block, and most people have their money in tried and true, regular, independent mutual funds.

Recent sales statistics, however, indicate that 91% of today’s sales are moving client assets into wrap accounts……..presumably a large percentage of which consist of “house brand” or proprietary products. Are these the new fad, fashion, or are they a such a vast improvement over the old?

The answer is yes and no. No for clients. Yes for salespersons. The Ontario Securities Commission has produced studies which show that by advising clients to purchase the “house brand” fund, (wrap accounts included) the firm and the salesperson share in increased revenues of between twelve to twenty six times. (OSC Fair Dealing Model, Appendix F, on compensation bias in mutual fund sales)

If you have recently been "advised" by your financial professional to move your assets into a house branded product, you have to consider the conflicts they have lept over to get you there. One, they have placed themselves (not you) in a position where twelve to twenty six times more profit goes to them and their firm. Is this good for you? Maybe. Maybe not. Time will only tell. Is it good for them? You bet. 100% guaranteed for them.
Two, they have crossed the line from being your financial "doctor" who prescribes the best solution for you, and they have also become your financial "pharmacist", the person who dispenses the solution. When the doctor and the pharmacist start prescribing to you only house brand medicines, that they are mixing up in the back room, rather than independant products with proven track records, you can be sure your interests have "left the building". Unfortunately that may be what is happening today to 90% plus of Canadians. Time will tell.

Of course the industry made sure that the Fair Dealing Model was never put into place. It was felt that it was too…………..well um,………..fair.

It is factors such as this (among several others) which lead me to conclude that four out of five investment “advisors” are misrepresenting this title and are in fact acting with a selfish sales interest.

This misrepresentation is illegal, unethical, and not in the public interest. Further evidence to this argument can be found by searching for the exact registration category of each “advisor” registered in Canada. Four out of five of these will be found to be also using the “advisor” title improperly, and they are in fact licensed and legally registered in the category of “salesperson”.

Bank Robs Client! Gets permission from the law

If I rob a bank, I find myself in conflict with the criminal code of Canada.

If a bank or financial institution wishes to rob consumers in some way, they can go to our own Crown Corporation, The Alberta Securities Commission, and apply for an exemption to the law.
Why? Because investments are handled by another set of laws, called the Securities Act, and the police are not always informed of criminal violations in this “other” area. The police are assuming, perhaps incorrectly, that the provincial securities commission has matters in hand.

There were thousands of “exemptions to the law” granted in Alberta over recent years. Many of them involve investments you hold. Stocks, mutual funds, Royalty Trusts., etc. All of them granted without public input. No involvement of a judge, no public notice, and no consumer representation in the decision making process.

The Alberta Securities Commission refuses to answer how some exemptions are in the public interest. Some have truly hurt the interests of consumers. This same crown corporation, which is responsible to you, the taxpayer, and supposedly answerable to the legislature, recently spent over $1 million dollars on legal fees to try to avoid audit by the Alberta government’s auditor. It was discovered that they had something to hide.

As a consumer you will get more notice if your neighbor plans to build a garage too close to your property, than you will get if your financial advisory firm chooses to dump tainted products on you using a legal exemption. Because of legal tricks, Canada is in second place behind only China, in damaging its reputation by allowing the manufacture of known tainted products. Investment products are the tainted goods specialty of Canada. Legal exemptions and self-regulation are two major causes. (If you think you have been gouged by the electrical industry “de-regulation”, just try and imagine what goes on behind the curtains in your financial industry where they are allowed to “self-regulate”?) If you are having a hard time picturing it, just imagine the your money and the “honor system” handed to men like Conrad Black.)

This is part of the many reasons why Canadians suffer from “One Million Frauds”, (Globe and Mail Oct 3, 2007) with only one person convicted until the end of last year (Canadian Business editorial Aug 13/27 2007). It also may help explain why ex RCMP IMET commercial crime experts say that Canada is a “A Good Country for Crooks”, (Canadian Business Sept 24, 2007)

The United States is coming to grips with subprime mortgages and mortgage fraud, Enrons, Worldcom, Tyco, etc., which are costing the United States more than the entire 1929 market crash and resulting depression. These investments, frauds, crimes, and damages are long infecting Canada as well. With no punishment here. Remember, we are on the “honor system”.

Will your new role government now help bring about a Provincial Inquiry into violations of the public trust by our Alberta Securities Commission, to see if these claims have merit? I can assure you that a Provincial Inquiry will turn up issues that are costing Albertan’s billions. I can also assure you that if you fail to call for an inquiry, that the conditions that allow this will live on.

From: Larry Elford, (former CFP CIM FCSI Associate Portfolio Manager, retired)
founder of http://www.investoradvocates.ca/ Representing the interests of several hundred ethically proven investment industry professionals, and several hundred thousand investment consumers.lelford@shaw.ca

Alberta Securities Commission helps out fraud?

Feb 25, 2008

Media Release and key question for Alberta Provincial Election Candidates

From: Larry Elford, founder of http://www.investoradvocates.ca/ Representing the interests of several hundred ethically proven investment industry professionals, and several hundred thousand investment consumers.

Fact #1 Financial industry dealers are allowed to self regulate (police themselves) in Alberta.

Fact #2 Financial industry participants are allowed direct access to the law and to the Alberta Securities Commission (the ASC). In contrast, consumers are directed to a non-government body.

Fact #3 If you were to approach the ASC with a complaint, you would be referred to “self-regulatory” agencies, which are private, funded, paid, and responsible only to the industry the consumer is complaining of. Consumers are not only denied access to the protection of Securities Law in Alberta, they are forced to report financial abuse directly to the association of dealers that they are complaining of.

Fact #4 If consumers wanted to rob a financial institution, they would not be allowed to alter the law to make their robbery “legal”. When financial institutions wish to rob consumers, they are allowed to go to the Alberta Securities Commission and apply for “exemptive relief” from the law. This makes anything they do to you, under this exemption “legal”.

Fact #5 There have been several thousand such exemptions to the law in Alberta over the years. All done with no public input, no involvement of a judge, no public notice, and no consumer representation in the actual decision making process. The Alberta Securities Commission refuses to provide reasons to show how those exemptions are in the public interest in any way. As a consumer you will get more notice of your neighbor’s plan to build a garage too close to your fence, than you will get if your financial advisory firm chooses to dump bad products on you using a legal exemption.

Fact #6 The Alberta Securities Commission is partially funded by financial dealers, and part time commissioners earn $180,000 per year. Top-level salaries at our ASC are above $500,000. Does this explain why our securities law gets “adjusted” for dealers?

Fact #7 Police are rarely invited to prosecute these kinds of financial crimes or frauds. Other criminal code violations get treated and handled by police agencies, while Securities Act violations are handled by an industry policy of letting the “financial industry look after the financial industry”. Fraud, forgery, breach of trust, etc., are among the types of illegal acts which fall under the “we look after ourselves” category. These acts will continue to occur unless we do something about it.

I ask candidates to call for a public inquiry under the Provincial Inquiries Act. An inquiry into failure to protect Albertans and failure to give the public access to the law. One case alone consists of an alleged $800 million dollar abuse of customers. Would you support such an initiative, and will you ask for public inquiry into these failures on behalf of all Albertan’s?


Larry Elford, (former CFP, CIM, FCSI, Associate Portfolio Manager, retired, 2004 after twenty years of trying without success to improve conditions in the industry)

lelford@shaw.ca