March 27, 2008, 6:00 PM
Canadian Politics, Litigation
estimated 1,500 individual and
corporate retail investors have been
left holding the bag on more than
$900 million worth of junk credit
they should never have been allowed
to buy in the first place if
Canada’s regulators, laws and
intermediaries had done a proper
Sumo wrestling or banking: a bully
is a bully.
total, $32-billion worth of this
stuff was exported by Wall Street to
Canadian individuals and
institutions, but the big banks and
brokers recently cut a deal and
threw the non-bank investors under
Crawford and the Bank of Canada put
together a package among the banks,
brokers and pension plans then
wrapped it in a ribbon by getting
bankruptcy protection. The smaller
players were denied a seat at the
table or opportunity to organize or
sue even though the deal benefits
big players but is ruinous for small
ones. (Crawford extended an olive
branch to small investors this week
but without details or helping them
CCAA [bankruptcy protection] does
not allow class action lawsuits
against the parties so the only way
we can get to a class action is to
defeat the proposal,” said investor,
Brian Hunter, a Calgary oil man
whose broker, Canaccord Capital
Inc., wiped out his $658,000 RRSP by
replacing legitimate corporate bonds
with worthless junk.
(Canaccord is protected under the
Crawford arrangement because it lost
money and is a signator but it
stranded its clients.)
Ottawa is a culprit
big chartered banks, to their
credit, looked after their clients
by taking back the junk, but
Canaccord and some credit unions
refuse to do so.
only “good” news is that the deal
can be defeated if 50% of these
small investors vote against it on
April 25. The bad news is they have
been denied a list of investors
which makes organizing and getting
legal advice impossible.
Frankly, Ottawa is also to blame.
fed’s bank regulator, the Office of
the Superintendent of Financial
Institutions, waived prospectus
requirements on the junk credits
because a third-rate credit rating
agency rated them as top quality. By
contrast, American and British
regulators required prospectuses.
broker told me it was GIC
compatible,” said Hunter. “You
couldn’t have known there were
high-risk derivatives behind this
without a prospectus.”
investors have been orphaned by the
government which should force all
regulated intermediaries to take
back this junk, as did the others.
Canaccord and the credit unions
should be stripped of their
protection under the deal.
big boys’ arrangement ruins small
investors but not big ones: the
Caisse or banks can protect their
balance sheets and recoup some of
the losses because losses will
shelter profits from taxation.
claim there will be a gray market
and somebody will buy it so they can
put it on their balance sheet at 80
cents on the dollar which nobody
will notice,” said Hunter.
Frankly, Crawford, the courts and
auditor should have looked after all
investors, not just the ones who
could pay the big legal fees.
The little guys weren’t even allowed
inside the tent. The big boys could
afford advice and got access to the
Ernst & Young distribution list so
that they could organize and lobby.
The little guys were not only denied
access but even their day in court.
(Brian Hunter is trying organize
victims and his phone number is 403
650 4960 and email is