October 28, 2004
A former investment adviser who is accused of loading up client portfolios with
Saskatchewan Wheat Pool shares in the late 1990s will be the subject of a
disciplinary hearing next month in Saskatoon.
Wade MacBain and three of his supervisors from the defunct Matrix Financial
Corp. are the subject of complaints by former clients. The complaints have been
investigated by the Investment Dealers Association of Canada (IDA).
The IDA hearing comes more than four years after the first civil suits were
filed against MacBain by individual clients. None of those civil suits, whose
claims against MacBain and Matrix total more than $5 million, have reached a
trial stage, says one of the lawyers involved.
The IDA is the self-governing disciplinary body for Canadians licensed to trade
securities. Its actions are independent of the lawsuits, said Gil Gauthier of
Calgary, a manager of investigations.
He says the IDA has set aside two weeks to conduct a disciplinary hearing into
the complaints. The hearings, which are open to the public, begin Nov. 8 at the
offices of C.V. Reporting Services Ltd. on Fourth Avenue South.
The three supervisors include Karl Neufeld, who was branch manager and
compliance officer at Matrix from September 1997 to June 1998, and Ian Frew, who
held the same position between June 1998 and February 2000.
A compliance officer's job is to ensure financial advisers working for a firm
are handling client portfolios in a manner that meets the client's stated risk
tolerance for investments.
The third is former Matrix partner Fred Smith, who is considered the "ultimate
designated person" in charge of MacBain at Matrix.
Some 29 clients, identified only by initials, have complained to the IDA that
MacBain caused them to update their investment objectives and risk tolerance
documents "to accord with trades which he had previously recommended to them
which were not in keeping with their previously documented investment objectives
and risk tolerance."
Smith and the two former compliance officers are included in the IDA action for
failing to provide effective supervision and control of MacBain's activities,
which the IDA alleges "were not within the bounds of good business practice."
The IDA is also investigating complaints from former MacBain clients from
British Columbia and the Northwest Territories. The IDA alleges MacBain was
never registered to do business in either jurisdiction.
Matrix Financial disappeared in February 2001. Many Matrix financial advisers,
including Smith, were offered positions at the Saskatoon offices of Raymond
James Financial Corp. Smith is still with the American-owned firm.
Matrix Financial still exists as a Saskatchewan corporation. In an interview
upon joining Raymond James in 2001, Smith explained that the share capital of
Matrix and other assets, such as its errors and omissions insurance, are being
held in escrow until the lawsuits are settled.
Saskatoon lawyer Grant Scharfstein, who represents about 100 of the former
Matrix clients who have filed suits against MacBain, says the IDA hearings may
help determine the outcome of the lawsuits. Several of Scharfstein's clients put
a large portion of their life savings into Wheat Pool stock on MacBain's advice
before the share price plummeted.
Scharfstein says he has reached the examination for discovery stage in at least
one test case and spent about seven days asking questions of MacBain.
If the IDA should find that MacBain and his supervisors committed offences under
IDA rules, that could help form the basis for a settlement in the civil cases,
The IDA's Gauthier says the timing of the IDA hearings is unrelated to civil
"It's been a fairly complicated case," Gauthier said in a phone interview
Wednesday. "It's not a routine file."
Saskatchewan Wheat Pool shares were flying high in the months after the
grain-trading giant converted itself from a farmer-owned co-operative to a
public company trading on the Toronto Stock Exchange in 1996.
Longtime Wheat Pool farmer members had their patronage dividends converted to
stock at an issue price of $12. The stock took off in the months afterwards,
reaching a high of $24.
However, many of the Wheat Pool's diversification investments and the level of
its corporate debt began dragging the company down about a year after it went
public. The grain company's shares trade at less than 40 cents. On Wednesday, it
announced its first annual profit in years.