I have no problem with brokers on this myself..however the recent facts coming forth show allot of dirty hands in the pumping up of estimates. They may not just get away with it....
And I have no problem with getting behind that.JMO
In my last post I pointed out Mr. Roaches link. This financial post article shows his plight clearly. I was speaking to him over the net and he asked that I post the letter for him as he can't even afford cab fare let alone join SI. An infuriating reality for Mr Roache and good luck to him.
And I paste:
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Facing up to Goliath
Small investors are seeking compensation after suffering severe losses from portfolios managed by major brokerages
By PETER KUITENBROUWER
The Financial Post
Stan Buell is every inch a civil engineer quiet, methodical, unfazed by trouble. He has built airports in Africa, after all.
But one subject makes him thump his hand on the edge of the coffee table hard enough to rattle the cups. "I had worked for 25 years and this was my life's savings. We lost about $500,000.
"There was a sudden realization," says Buell, 61, mist dulling the sparkle in his eyes. "Instead of thinking about early retirement, you're going to be committed to working the rest of your life."
His loss came in 1987, the year the stock market crashed. At first, he blamed the crash. But as he dug deeper into the case over the past two years, he found evidence he says proves his broker and his brokerage, not the market, are to blame.
Buell and his wife Helen are suing his ex-broker and CIBC Wood Gundy Securities Inc. for $2.4 million.
Wood Gundy is defending the claim, saying in part, "the plaintiffs were at all time aware of the nature of the securities which were bought and sold in their account and actively followed their investments."
The Buells are among growing numbers of investors who say reliance on brokers has cost them their savings.
Another is Jim Roache, a retired civil servant who has set up a Web site featuring a red circle with a line through it, crossing out the logo of Nesbitt Burns Inc.
"I am one of a group of people in Ottawa who trusted in Nesbitt Burns Investment Research and deferred to their Financial Advisory Services," the Web site begins. "Don't make the same mistake we did!!! It ruined my finances, my retirement and my faith in Canada's major financial institutions."
Roache, 52, says he lost about $250,000 on Bre-X Minerals Ltd. and other speculative stocks. His group of 10 alleges in a $4-million suit Nesbitt Burns brokers induced them to borrow money to buy stocks in high-risk ventures and refused to sell those stocks when the clients told them to. They say Nesbitt breached its fiduciary duty to "invest their monies in a reasonable and prudent manner."
"First, I felt like I should be walking around Ottawa with a pair of Mickey Mouse ears on, like 'How could I be so stupid?,' " Roache says. "Then I went to a meeting and realized it's not just me. I'm not an idiot. All these other people have been taken advantage of too."
Nesbitt denies the claim, saying in its statement of defence, "in making their investment decisions, the plaintiffs relied upon their own business judgment and acumen developed over several years of investment experience. The defendants deny that they stood or stand in any fiduciary relationship with the plaintiffs."
Intense marketing by investment firms has brought huge numbers of new investors into the market. And more investors means more disputes.
Complaints to the Investment Dealers Association, the body through which brokers regulate themselves, have jumped. Last year, there were 548 complaints, mainly about brokers who traded without permission or put clients in unsuitable stocks, up from 354 in 1996. In 1997, the IDA started issuing reviews of each broker terminated with cause.
"There is a proliferation of disputes and complaints," says Toronto securities lawyer Darryl Mann, who says he makes a fine living both suing and defending brokers. "There are a myriad of negligence actions [against brokers] out there."
However, as Buell and others are finding out, unless you are a big, big fish, you don't have much recourse. Courts cost a lot. "If you're going to get screwed by a broker," says Kelly Rodgers, who helps match rich investors with financial managers, "you better make sure it's at least $250,000 and it's not your last $250,000."
Buell, the son of a Charlottetown mechanic, joined the army to pay for college. After graduating, he did well. By the early 1980s, while building the airport in Abu Dhabi, he met a broker from Wood Gundy and began investing seriously in the stock market.
When Buell moved to Toronto in 1984, his broker introduced him to Robert Stephens at Wood Gundy, who took over a portfolio then worth $414,616.
"This guy's on the 54th floor, big office, nice blue suit," Buell recalls. "I thought how lucky I am to have this broker look after my account."
In his statement of claim, Buell says since Wood Gundy served him well for six years, he trusted the new broker would continue to do so. But things began to change. His computerized monthly statements stopped and the broker began investing his money in securities he did not recognize.
Between frequent trips to Africa, Buell had little time for his portfolio, but he demanded monthly valuations. He got just five in 3 1/2 years typewritten, not printouts, and never at month's end. One 1986 report valued the account at $873,000.
Then in July 1987, Stephens left Wood Gundy for First Marathon Securities Ltd. Buell fought to have the accounts transferred with him; meanwhile, in October 1987 the market crashed.
To transfer the accounts, Wood Gundy asked for $60,000 in commissions and margin owed, which Buell paid.
"After the accounts were transferred, I was traumatized to learn that the joint account was worth less than $40,000," reads Buell's claim. "Our second account, which had been valued at $80,000, no longer existed."
Blaming the market crash, he sank into a deep depression. He quit engineering and began selling real estate with his wife to make ends meet. Nine years later, a broker he met suggested Buell's broker, not the market, was to blame.
After Wood Gundy rejected mediation, Buell went to court, alleging Stephens was not qualified to trade on Buell's behalf, that he misled Buell, and no one supervised his trading in Buell's account.
Wood Gundy sought to have the case thrown out, saying it happened too long ago. This July, Justice Donald Cameron in Ontario Court, general division, dismissed Wood Gundy's motion for summary judgment and ordered a trial.
In his judgment, Cameron wrote, in part, "if the defendant has knowingly or recklessly concealed that wrongdoing to prevent its detection, the period of limitation does not begin to run until the existence of the cause of action has become known to the plaintiff." He ordered the brokerage to pay the Buells $16,000 in costs.
Wood Gundy sought leave to appeal Cameron's order. On Monday, Justice James Southey of Divisional Court dismissed that application and ordered the brokerage to pay another $3,000 in costs to the Buells, and to pay the whole $19,000 "forthwith."
Wood Gundy's lawyer, Nigel Campbell of Blake Cassels & Graydon, will say only, "I cannot comment on these unproven allegations that are before the courts."
Stephens, meanwhile, has not defended the action and has been noted in default, meaning the court deems he admits what's in the statement of claim. He no longer works for a brokerage and is not in the phone book. Toronto real estate records show he and his wife, Joan, sold their "sophisticated home on a magnificent lot on the hill" for $1.2 million in 1996.
IDA president Joe Oliver insists the overwhelming majority of brokers in Canada play by the rules. "The retail investment advisers provide advice to the investing public in respect to securities. They are highly trained, they have to know their clients, do due diligence on their client's investment objectives and make recommendations which are suitable."
But others suggest a corollary to the much-vaunted "Know your client" rule "Know your broker."
"You have to be diligent over the activities in your account and who you choose to handle your moneys," says Mann.
Adds Fred Maefs, IDA director of enforcement: "Nobody should go along with a broker's recommendation just because a broker said it."
When clients feel brokers have misled them, they can complain to the brokerage or the IDA. In the U.S., British Columbia and in Quebec, they have another recourse: rules oblige brokers to attend binding arbitration in disputes with investors if the investor requests it. But despite a pledge to bring the system to the rest of Canada, the IDA has so far not done so.
"It took me three months to put an arbitration process together that's all," says Fernande Lacroix, Quebec regional director of the IDA. "I don't understand what's taking so long in Ontario."
Arbitration is needed, the IDA's Oliver agrees. "The courts are not particularly attractive for people who have lost less than $100,000." While "the bar is not particularly enthusiastic about it," he believes arbitration will come to the rest of Canada by the end of the year.
The IDA is also stepping up enforcement, and has 39 people in this area across Canada, up from 24 two years ago.
In 1996, regulators disciplined 30 individuals and nine member firms and imposed fines totalling $780,000. In 1997, the IDA disciplined 32 individuals and eight member firms for fines totalling $322,000. It also wrote about 40 warning letters each year.
But discipline is cold comfort for investors, since the IDA has no power to order brokers to reimburse their losses. So they go to court. The court process is long, arduous and brokerages "have deeper pockets than the clients. They try and impoverish the plaintiff," says Mann.
That's why some, like Roache, are venting their anger on the Internet. Roache says his broker "led him slowly to the slaughter," putting him gradually in increasingly high-risk investments. "The supervisor should say, 'This guy is retiring, what the hell are you doing putting him in Conquistador [Mines Ltd., a Vancouver gold mining firm]?' "
"Roache's Web site contains untrue statements," says Nesbitt spokesman Paul Gamel. "The differences between us and Mr. Roache will be dealt with in court."
In 1996, when Buell began digging into his broker's past, he discovered some troubling news. Stephens had been disciplined three times. In 1982, the Toronto Stock Exchange fined him $1,750 for trading in a client's account without permission. In 1987, it fined him $8,250 for a series of offences, including unauthorized trading. In 1989, the IDA fined him $15,200 for "unbecoming" business practices and other offences.
Back in the 1980s, Wood Gundy didn't tell Buell his broker was leaving the firm under a cloud of fines and investigations. He fought at the time to get his account transferred with Stephens, when, as he knows now, he should have been running the other way.
In 1987 when he lost it all, Buell's self-confidence vanished. He has slowly rebuilt it and made a good living selling real estate. Today, slugging it out with his former broker and brokerage has put new wind in his sails.
Next week, he heads to Zimbabwe to help set up a gold mine for Sika Gold Resources Ltd. He is also back investing in the stock market, but just blue chip stuff, thank you very much.
"Now every week I call up my discount broker and say, 'This is what I want to buy.' No advice, no nothing. I even overcame my prejudice [against CIBC Wood Gundy] and bought some CIBC shares this morning. They're at $30 and they're bound to go up."
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Here is the link to Mr Roaches web site again:
echelon.ca
Best Fishes,
FP |
