November 25, 2004
It didn't take long Wednesday for a public hearing being conducted by the
Investment Dealers Association of Canada (IDA) into charges against a Saskatoon
financial adviser to end up behind closed doors.
The IDA called the hearing to look into charges related to the investment
portfolios set up for clients by former Matrix Financial Corp. partner and
financial adviser Wade MacBain. Among the IDA charges are allegations MacBain
set up investment portfolios that were far above the risks specified by his
Lawyer Shaunt Parthev, representing MacBain and three former Matrix officials,
told the chair of the IDA panel that he believes the panel could be prejudiced
because it has seen confidential information that came out of informal talks
that Parthev had with the IDA's lawyer about a possible settlement of the IDA
Parthev says he didn't want to discuss those matters in public with a
StarPhoenix reporter and Saskatoon lawyers Jay Watson and Grant Scharfstein
sitting in the same room.
Watson and Scharfstein, between them, represent about 150 former clients of
MacBain. In general, those clients are suing the former financial adviser for
inappropriately loading their investment portfolios with shares of the
Saskatchewan Wheat Pool. The grain trading company's shares now trade at less
than three per cent of their original issue price of $12.
Regina lawyer Garrett Wilson, who chaired the IDA panel in Saskatoon, agreed
with Parthev's request to go in camera.
Before that happened, Parthev says he was shocked to see the substance of
informal discussions with the IDA lawyer, conducted "without prejudice," had
ended up in an e-mail that had gone to the IDA panel members hearing the case.
Parthev says lawyers for either side in civil suits often discuss the possible
basis of out-of-court settlements "without prejudice," which means that should a
settlement not be reached anything discussed informally among lawyers is not to
be entered into evidence.
"You need to be able to discuss things fully and frankly with the other side,"
he told Wilson. "Now, the cat is out of the bag."
While the IDA hearing is part of the investment industry's self- regulatory
system and not part of the civil court process, Parthev pointed out that the
lawyers involved in the lawsuits against Matrix would have been interested in
hearing the substance of settlement discussions with the IDA lawyer.
Besides MacBain, the IDA has also laid disciplinary charges against former
Matrix compliance officers Karl Neufeld and Ian Frew, and former Matrix
president Fred Smith.
The charges allege the two former compliance officers should have flagged the
portfolios MacBain set up as inappropriate for his clients. Smith is named by
the IDA as the "ultimate designated person" at Matrix.
Matrix is no longer an active financial planning company in Saskatoon, although
its corporate assets sit in escrow. Smith is the only one of the four still
working as a financial adviser.