Saturday, July 17, 2004
Three brokers barred in past month. Reader
complains adviser gave his daughter 'totally inappropriate' financial
What on earth is going on at CIBC World Markets?
In case you missed it, the company had yet another ex-broker barred for
life from the securities industry this week, one Robert Binnington of
Hamilton, Ont., for misappropriating $1.2 million (U.S.) and $410,000
Canadian from three clients.
For those keeping score, that's three lifetime bans in a month in three
different cities for CIBC, which must be some kind of record for a
Joining Mr. Binnington in the CIBC hall of shame are Alex Gurion of the
North York, Ont., branch, who cheated a 90-year-old customer out of
$350,000 before moving to Moscow in 2001, and Montreal's Harry Migirdic,
who had some of his clients guaranteeing the trading losses of complete
strangers (among them, Migirdic's 73-year-old uncle in Turkey) before
being terminated in 2001.
You really have to wonder what sort of internal supervision the CIBC has
- or had - for employees to feel they could get away with this sort of
If I was a client, I'd sure like to hear that measures have been taken
to tighten the auditing and ensure clients are better protected.
Unfortunately, the CIBC isn't talking. When invited to comment this week
by The Gazette, it declined.
Transgressions that lead to lifetime suspensions from the securities
industry clearly are an exception, but there's an awful lot of
supposedly by-the-book transacting that is also ethically questionable.
For instance, following The Gazette's report on Migirdic's lifetime ban
from the Investment Dealers Association of Canada, a semi-retired
businessman called to relate his experience with his brokerage.
It differed from the cases in the headlines because there was no actual
malfeasance, but it raises serious questions about whose interests
really are top priority.
In this particular case, the man, now 86, had structured a portfolio of
investments for a 58-year-old daughter living in another city. She'd
never shown any interest in finance and was prone to impulse spending,
Her nest egg, begun as a private pension plan, consisted entirely of
long-term bonds with staggered maturities totalling almost $500,000.
Because of his advanced age, the father decided it was time to fold the
plan and transfer the investments into her RRSP.
Shortly after, the broker who had been managing the account locally for
years called the daughter directly and convinced her it would be a good
idea to sell $100,000 worth of provincial bonds and buy mutual funds
instead. The bonds had an annual yield of more than five per cent.
Wonder if he mentioned the $5,000 commission on the sale, or the ongoing
"Financial advisers eat what they kill. There was no ongoing service fee
for the bonds," investor-rights advocate Joe Killoran observed when
apprised of the case.
Killoran wasn't surprised by the details. He said a lot goes on in the
financial-services industry that people never hear about; negotiated
settlements often come with a gag order that keeps things confidential.
"They don't want everyone to hear about it," he said. "It's just part of
the cost of doing business now. It's all dollars and cents today, not
quality of business."
The father who called The Gazette found out about the investment switch
only because the financial statements were mistakenly sent to his home.
Given his daughter's lack of investment knowledge and the risk attached
to mutual funds, they were "totally inappropriate" for her, he said, and
he'd said so to the broker before the purchase. "The idea was to ensure
her income. Now, she is gambling."
When he called the broker to complain, he said he was told it was her
account and that he no longer had power-of-attorney over it.
He's been worried sick about it since, and feels thoroughly betrayed by
the broker, someone he'd dealt for years.
What company does this broker work for? Guess.