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To: Les H who wrote (49343)	5/4/2000 10:04:00 AM
From: Dan Hamilton	Respond to of 99985

Brokers on hook for lost nest egg Top court says firm took too many chances, owes client $2.3 million Janice Tibbetts The Ottawa Citizen An aging Quebec man wept tears of joy yesterday when the Supreme Court of Canada ordered a stock brokerage to pay him more than $2 million for taking too many chances with his retirement nest egg. The award is believed to be one of the largest ever paid to an individual Canadian whose stock portfolio tumbled in value because of bad advice and mismanagement. Armand Laflamme, 73, will receive almost $925,000 plus 12 years of interest, totalling an estimated $2.3 million, said his lawyer, Serge Letourneau. "He started to cry on the phone, he was so happy," said Mr. Letourneau. "He's now an old man. He worries for his nine children." The court ruled that Montreal-based Prudential-Bache Commodities Canada and stockbroker Jules Roy should compensate the Laflamme family for making high-risk investments and trading on a line of credit with the $2.2 million Mr. Laflamme earned from selling his door and window business. "The losses caused by the bad advice and grossly negligent management cannot be laid at (Mr. Laflamme's) doorstep," said Justice Charles Gonthier in a unanimous 7-0 ruling. The ruling declares that stockbrokers have a broad obligation toward clients who know little about the high-stakes stock market. The issue before the Supreme Court was not whether Mr. Roy and his firm should pay, but how much they owe Mr. Laflamme, who lives just outside Quebec City. The court overturned the Quebec Court of Appeal, which found Mr. Laflamme is owed only $70,000 because he should share the blame for failing to take action earlier to reduce his losses. The decision comes at a time when Canadians are increasingly playing the stock market and numerous brokers across the country face lawsuits that include allegations of mismanagement and even fraud. "The most important thing is for the first time the Supreme Court acknowledges the broker can act not only as an intermediary but a manager," Mr. Letourneau said. "It is the burden of the broker to reach a client's objectives and, if he does not do it correctly, he must be liable for that." Restoring a 1996 ruling from the Quebec Superior Court, the Supreme Court said Mr. Roy "failed to deal fairly and honestly" with Mr. Laflamme, who has only a Grade 4 education and placed all his trust in his stockbroker during a three-year business relationship that culminated in a lawsuit in 1990. "We should not forget the complexity of the situation facing the Laflamme family," said the judgment, which noted Mr. Roy broke eight Quebec rules governing stockbrokers in the province, such as making a large number of transactions to increase his commission and failing to be properly knowledgeable about his client or follow his objectives. The Supreme Court came down hard on brokers, saying that "professionals make their careers, and sometimes lose them, by their choice of timing of securities transactions." Among other investments on both the Canadian and American markets, Mr. Roy sank Mr. Laflamme's money into Campeau Corp., an Ottawa-based developer that was a stock market darling before real estate crashed in the late 1980s. The Supreme Court "broke new ground" by treating Mr. Roy like a portfolio manager instead of a simple broker, even though he had no contract with Mr. Laflamme to completely manage his portfolio instead of just acting on client instructions, said Mr. Roy's lawyer, Edward Aronoff. "What they're basically telling us is the client doesn't have a responsibility," Mr. Aronoff said. "When you determine that there is a management portfolio contract in the absence of a contract, it will make brokers very concerned." Mr. Roy, who now lives in Florida, will not personally pay Mr. Laflamme's award, which will be covered by Prudential. Mr. Letourneau said Mr. Laflamme will roughly break even on his losses after receiving his cheque. The Investment Dealers' Association, a national umbrella organization, is examining the ruling before commenting on its impact on the industry, a spokeswoman said.