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A report prepared for the Consumers Council of Canada for presentation to the Office of Consumer Affairs Industry Canada
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General: OSC Investor Advisory Panel
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An in-depth analysis by Dr. P. Reeve.
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Posted by root on Thursday, September 02 @ 00:00:00 EDT (0 reads)
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The core challenge is to what extent the industry is prepared to take hold of the matters
that require regulation and to operate a self-regulatory system that will deal effectively and
efficiently with the issues raised in this report and that will result in fair and equitable
treatment of investors.
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General: Mutual Fund Investors: Sharp Enough?
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Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved disclosure by the fund industry as a sufficient antidote. However, an extensive academic literature finds that fund investors are unaware of the basics of their funds, pay insufficient attention to fund costs, and chase past performance despite little evidence that high past fund returns predict future returns. These findings suggest that policymakers should rethink current regulatory policy. Disclosure may not be enough.
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Communication is important, especially at the outset of the relationship. The best thing people can do to protect themselves is make sure your objectives are clear in your own mind and clearly communicated to your advisor or broker. This will help avoid problems and complaints downstream.
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When you open an account with an investment dealer you have to provide personal details like your income, net worth, risk tolerance etc. This information, periodically updated, supports Know Your Client (KYC) rules that securities regulators have put in place. The theory holds that the more an adviser knows about a client ,the better he can serve them. The recommendations he makes must be “suitable” based on the KYC.
There is however no equivalent form for an investor to Know Your Advisor-KYA . Not knowing your advisor can lead to unsuitable investments, higher costs, loss of capital and even “misappropriation of assets” as regulators refer to theft. So, here`s a form you can use to keep track of your advisor
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General: Opening an Online Brokerage Account? Points to Consider
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On-line
accounts
are growing at a fast pace.Whether
its investment dealer shenanigans, incompetent advisers, high mutual
fund fees,/ trading commissions, the non-bank ABCP fiasco, poor fund
performance , the Earl Jones Ponzi debacle, or advisor fraud, retail
investors are looking at alternatives to the commission-driven
advisor channel.
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Posted by root on Saturday, March 20 @ 00:00:00 EDT (542 reads)
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All you have to do is enter the gross return of the fund (referred to as the Market Return which could be misunderstood as the benchmark index return), the annual fee, any applicable loads and the number of years.
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Legal: Markarian v. CIBC World Markets Inc.
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Markarian v. CIBC World Markets Inc.
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Posted by root on Saturday, September 12 @ 00:00:00 EDT (0 reads)
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SIPA Public Forum - Markham - 6 June, 1999 , STREETPROOFING FOR INVESTORS :STRATEGIES FOR MOVING BEYOND HOPE, GREED AND FEAR by Glorianne Stromberg
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While mutual funds help reduce issuer –specific risk through diversification, they introduce a plethora of new threats to satisfactory returns that are inherent in their legal / tax structure, fees/commissions and industry sales practices. These threats are not articulated in the fund prospectus. Subtle hazards specific to the fund include “soft “ dollars (brokerage business given to brokers in exchange for research but sometimes for other goodies-there’s a reason the word soft is used), and the hazards of style drift (consciously deviating from the fund’s stated investment policies, risk profile and objectives to boost returns).
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Over 10 million Canadians make investments in stocks, bonds, GIC’s and mutual funds. It’s a BIG business and highly profitable for the banks, fund companies, dealers and brokers. Mutual funds alone collect over $10 billion in fees each year. -the sales are commission based and include embedded sales commissions. When financially unsophisticated investors meet commission or quota- driven advisers, a toxic mixture can be created. So, it's not unnatural that problems will develop due to incompetence, greed, misrepresentation, or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses. A “Complaint” is defined to include any written or verbal statement of grievance from a client or any person acting on their behalf, former client or prospective client, alleging a grievance involving a firm or representative of a firm.
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While the Chairmen of provincial securities regulators publicize their wonderful contributions to regulation, investors suffered badly. Billions of dollars were lost to unsuitable investments, excessive fees and leveraging, misleading marketing, fraudulent funds and crooked advisers and brokers. Here’s a small sampling of the rattraps retail investors had to endure in 2008.
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“This latest financial crisis [ ABCP] should serve as a wake up call for Government to finally take action on reforming the regulatory system and providing investor protection that isn't dependent upon self regulation and the charity of an industry that has a history of creating structured investment vehicles that can't be understood by ordinary investors, and exemption orders to allow regulations to be ignored” –Stan Buell, President, Small Investor Protection Association, www.sipa.ca
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This Guide has one purpose: To assist your efforts at obtaining a restitution recommendation from OBSI.
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INVESTMENT FUNDS IN CANADA AND CONSUMER PROTECTION
STRATEGIES FOR THE MILLENNIUM
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“.. Mr. Diekmeyer, 73, says he lost $800,000 - his life's savings - when Bre-X collapsed. He also saw his personal friend and stock broker kill himself in 1997, riddled with guilt about his clients' losses."I survived with great difficulty and a friend of mine committed suicide over it," says Mr. Diekmeyer, who lives in a modest apartment in Beaconsfield, west of Montreal. "I only know this story. I'm fairly certain there are others that are equally disastrous…"
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Fed up with dealing with the
salesperson who can only sell you mutual funds? Want to get away from
high MER’s? Concerned about the mutual fund trading abuse scandals?
Want more flexibility on when you can buy or sell units? Do you like
the idea of limit orders and stop loss orders? Feel comfortable with
making investments on your own? Looking for a different asset class?
Exchange traded closed- end funds (CEF’s) may have a role to play in
your portfolio.
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Securities rules (National
Instrument NI81-102) require that a money market mutual fund have all
its assets invested in cash (or cash equivalents) and debt instruments
that have a remaining term to maturity of not more than 365 days and
that have an average term to maturity of not more than 90 days.
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No one it seems actually obtains the wonderful mutual fund pre-tax returns
so prominently displayed in newspaper ads during RSP season. Why is this so?
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From time to time we hear the
term "Beta" on ROBtv, CNBC, in fund literature and in the press. What
exactly is it and how can it be helpful in decision-making?
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At 50, most seniors know how much
money they have saved, can estimate how much more will be saved/earned
before retirement and have a pretty good idea of how much will be
needed on a monthly/annual basis to support their desired retirement
lifestyle, “the golden years”.
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Asset allocation is traditionally
defined as the process of determining how your investment portfolio
should be invested (asset classes selected and mix of asset classes
selected ) among the different asset classes based on your financial
goals, time horizon and risk tolerance. Risk is often defined as "the
probability that a plan will not meet its long-term objectives. The key
risk factors to consider are inflation, interest rate, economic, market
and specific risk. Asset allocation reduces portfolio volatility and
risk. ( In statistical terms, you're looking for a combined standard
deviation that's low, relative to the standard deviations of the
individual securities. The result should give you a high average rate
of return, with less of the harmful fluctuations.) Other portfolio
design considerations include how much you want to pass on to heirs,
your future income stability-employment et al and professional or
business ownership .In the latter case, a Seg fund, not considered a
security from a regulatory context, might make sense to achieve
creditor protection and some growth.
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There are dozens if not hundreds of web sites related to mutual fund investing. The list below should just about cover every possible need for a serious Canadian mutual fund investor. Educational articles, Prospectuses/Annual Reports fees, performance, prices, impact calculators, checklists, mathematical formulas, regulatory issues and warnings/pitfalls are all available on-line mostly for free. The sites have been chosen based on their quality, usefulness, accuracy and industry- independent viewpoint.
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An exemption order is basically a decision of a provincial securities Regulatory Commission that says that a specific part of the Securities Act, regulations or rules relating to the trading of securities in that province does not apply under certain conditions. (or that the part can be amended under specified conditions) Often this relief allows a mutual fund company to avoid compliance with some sections of the official requirements or to modify the original requirements with the blessing of the applicable provincial securities regulator(s). For mutual fund investors the main documents of interest are NI81-101 Mutual fund prospectus requirements, NI81-102 Mutual funds and NI81-105 Mutual Fund sales practices. It’s up to the securities commissioners hearing the relief application to consider the possible “public interest” implications of a proposed exemption, and to apply this test on a case-by-case basis. Although mentioned frequently, the concept of the “public interest” isn’t well defined in the legislation; it is typically interpreted as a regulatory commission’s general obligation to balance investor protection with fair and efficient capital markets.
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The Canadian pension landscape has changed dramatically over the last decade. Your pension plan may have changed along with it to reduce costs and future financial obligations to employers. Many companies have switched from traditional defined benefit pension plans to Defined Contribution pension Plans. Employers generally prefer them because it means they're not responsible for funding benefits when pension fund investments perform poorly. Employers, facing global competition, have become less generous than they had been in the past with pension benefits. Corporate restructurings have left many people working for smaller businesses which usually don't offer generous pensions. It is also simpler for companies to plan and meet contribution obligations since they are generally predictable fixed amounts. Yet, on the one hand, employees are expected to work harder, longer and smarter while on the other hand are expected to put more effort into financial decision-making.
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Complaint resolution is one of the most recognized and pressing issues for consumers of the financial services industry. Anyone who has tried to navigate the complaint resolution system will attest to that. The journey is complex, long, distressing, frustrating and seemingly unfair.
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General: When To Sell A Mutual Fund
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A periodic reassessment of your goals and a review of your fund investments is an integral part of sound investment management. Selling (redeeming) a mutual fund doesn't necessarily mean it's a loser.
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With interest rates at 30 year lows, income investors such as seniors, retirees and others are attracted to income trusts.
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Pablum versions of the strategy have caused many an investor to sub-optimize his returns or incur loss of capital. The investment industry has a natural bias towards Buy (or hold as well in the case of mutual funds) as opposed to sell, so it’s important investors have a thorough understanding of investing strategies designed to support their lifestyle and retirement.
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