Here is a story from my investment-adviser days. In our office, there was a young guy — I’ll call him Jason — who participated in my former employer’s developing investment advisor program. Jason’s star rose sharply. Just a few months out of the program, everyone had been talking about Jason’s $1.2 million net on the commission run for the past year or so. What no one could figure out was how Jason could generate $1.2 million when he had barely $14 million in client assets under management.
As it turned out, Jason was churning trades in his client accounts like no tomorrow. He was buying and selling not only without complying with suitability rules, but without his clients’ knowledge.
Of course, his play was discovered relatively quickly. He was fired, his branch manager was demoted, and Jason’s clients ended up with me. And while I would have jumped at a $14 million hassle-free book under any other circumstances, Jason’s clients were anything but hassle-free.
Once they discovered what happened, they were outraged; and rightfully so. They all demanded trade reversals (solicited or not), commissions’ charges reversals, and a lot of handholding — all in return for signing a standard release form. My employer obliged, covering all charges, penalizing people who were supposed to be watchdogs, and reviewing its compliance and supervisory system of new brokers, all while making quite extensive changes in the process. In any event, it was all for nothing, since many of the clients chose to leave my firm anyway.
Too bad all of this has happened before Canadian securities markets introduced the office of the ombudsman, a sort of a central place where Canadian investors can go and request help if they suspect wrongdoing from investment professionals.
Last year, the ombudsman’s office ploughed through 126 complaints, of which 67 were in the investing industry and 59 were in banking. In 51% of cases, perpetrators of a violation were demanded to pay compensation and damages. More specifically, it seems that CIBC’s banking and investing sectors had the highest number of complaints. Why exactly that is, I do not know.
In 84% of all complaints in the banking sector last year, the ombudsman’s office has upheld the bank’s side. This means that banks were doing much better jobs for their clients. On the other hand, in the investing sector, things were not so rosy. Clients most often complained about excessive trading and not meeting a client’s investment objectives and risk tolerance.
Although I’m sure Canada’s financial-complaint system could be even better and more efficient, it’s a good thing it’s at least there in some shape or form at all. So if you had been wronged, don’t take it lying down. Instead, stand up and fight! There are numerous organizations out there to help you along the way.