Investors Scrutinizing the Regulators

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Securities Regulation In CanadA


Fox Guarding the Hen House

   

 

Investment Dealers Association of Canada's ComSet

(Complaints and Settlement  Reporting System)

 

"He uses statistics as a drunken man uses lamp-posts...

for support rather than illumination."

-- Andrew Lang (1844-1912)

 

The IDA removed this PowerPoint Presentation from their website on  Fri. Jan. 26, 2007.    It had been posted since September 2005.  However, it was not easily accessible and not meant for public viewing.  Within the powerpoint presentation is a chart which was created by data from an excel spread sheet.

IDA PowerPoint Presentation

In order to extract the excel spread sheet you must first have the Microsoft PowerPoint and Excel programs.  Go to page 34 of the powerpoint presentation and double-click on the graph.  If you have Excel, the spread sheets will appear within a few seconds.

Here is the data in a more readable format.   (Excel Spread sheet with Filters)

 FORMATTED Excel Spreadsheet

I have tried not to make any errors, please cross check all data against the original in the PowerPoint presentation above before relying upon it. 

Thank you.

 

What is the purpose of ComSet?

"The IDA requires its members under IDA Policy 8 to use ComSet to report the following types of matters referred to as "EVENTS";

  • Customer complaints that are not service related

  • Securities-related civil claims and arbitration notices;

  • Internal disciplinary actions;

  • Internal investigations as it relates to theft, fraud, misappropriation of funds or securities, forgery, money laundering, market manipulation, insider trading, misrepresentation or unauthorized trading;

  • Criminal offences;

  • Denial of registration or approval by any regulatory or self-regulatory organization, professional licensing or registration body;

  • Proceedings or disciplinary actions regarding the contravention of bylaws, regulations, rules, rulings or policies of any regulatory or self-regulatory organization, professional licensing or registration body."

 

Advocate flouts regulator

12 February 2007


Clients deserve a know-your-broker rule

20 February 2007


"The IDA argues it would be unfair to identify brokers named in ComSet, because many complaints involve minor matters such as delayed cheques, and almost all have not been proven."

I would contend that 'delayed cheques' are service related.  IDA Policy 8  negates the possibility of these type of minor complaints being entered into ComSet.  See condition #1 of Policy 8 above.

"You must immediately remove from your website the information relating to IDA members and brokers," the letter declared, warning that the association will hold Kyle "responsible for any loss or damages" arising from the release of the data.

That's not a direct threat of legal action, Popovic said in an interview, but he acknowledged that the IDA itself might face litigation from people named on the previously confidential list, though "actually there's been not very many calls, to date."

IDA's "not a direct threat of legal action" from outside legal counsel

02 February 2007


IDA Caught in Privacy Breach

09 February 2007


The RRSP gravy train

09 February 2007


Confidential data mistakenly posted online is exposed

08 February 2007


Remove complaint data from website, IDA asks

08 February 2007

Lawyers for the Investment Dealers Association of Canada have sent a letter to investor advocate Robert Kyle asking him to remove confidential information from his website about investment advisers who have been the subject of customer complaints.

...

Mr. Kyle said yesterday he will not remove the information until he speaks to his lawyer. But he questioned whether the IDA has any legal status to prevent him from publishing the names.

Jeff Kehoe, IDA director of enforcement litigation, said yesterday he could not discuss the IDA's legal options in the matter, but warned "anybody can launch a suit in court in Ontario."


IDA defends removal of complaint list

31 January 2007

Alex Popovic

VP Enforcement

"The Investment Dealers Association of Canada yesterday defended its decision to pull from its Web site details of complaints against more than 2,000 brokers that were inadvertently posted, even though such information is regularly available in the United States.


"People are supposed to be innocent until proven guilty, but [anyone who saw the leaked documents] might jump to a different conclusion," said Alex Popovic, the IDA's vice-president of enforcement.

"It was never our intent to provide that information.""


Presumed innocent until proven guilty - absolutely - but it doesn't detract from the number of "events" lodged.   Nor does it detract from the number of external disciplinary actions reported in ComSet as these are actions - not allegations.  I would also contend that internal disciplinary actions are also actions - not allegations, albeit investors will never have any proof that what was reported was ever actually done.

Canadians  still cherish the words "presumed innocent until proven guilty" but they also recognize that these words are premised on a full and impartial investigation and adjudication of the matter by way of open, transparent and lawful means.

Late morning of Mon., Jan. 29th the IDA announced that a hearing date would be set for Bertrand Trudel who is reported as the broker with 45 Customer Complaints (that are not service related - according to Policy 8) and 14 Civil Claims against him ranking him at the top of the IDA ComSet list.

Keep in mind that this database only covers the period from October 15, 2002 until June 30, 2005. (2 years and 8 months). 

Also keep in mind that this data base is 18 months old as of January 2007.

What has the IDA been doing for the last 18 months?

Have the individuals attracted more "events" over the past 18 months?


Quebec investment adviser faces allegations

31 January 2007


IDA leaks confidential broker data

30 January 2007

"The allegations against Trudel, who was working at the Joliette, Que., branch of Levesque Beaubien Inc. at the time (now part of National Bank Financial Inc.), include making transactions without authorization, making recommendations that were unsuitable to certain clients, and failing to report a personal interest in a company in which his clients were investing. They stem from about eight or nine clients of Trudel's, Kehoe said.

Alex Popovic, the IDA's vice-president of enforcement, said the allegations are coming out now, after an attempt at settlement and scheduling hearings."

 

The Notice of Hearing posted on the IDA web site on January 29, 2007 regarding Bertrand Trudel states the following:

PARTICULARS

TAKE FURTHER NOTICE that the following is a summary of the facts alleged and to be relied upon by the Association at the hearing:

1. The Association initiated an investigation into the conduct of the Respondent following the receipt of the Uniform Termination Notice (“UTN”) received by the Montreal Exchange on December 9, 2002 and a later amended version received on December 10, 2002.

2. The Montreal Exchange initiated the investigation before being transferred to the IDA.

 

"The allegations stem from incidents that are alleged to have happened in 2002 and 2003, said Kehoe. He said the notice was not released because the ComSet data became public, adding that the timing was "coincidental.""

 

It took the IDA over 4 years to attempt a settlement and schedule a hearing.


Here is an excerpt from the OSC Investor Town Hall Questions and Answers dated 14 June 2005

Question 45, page 16

J. Oliver (EX-IDA President & CEO) stated at OSC conference in November that the average complaint is investigated and resolved in 90 days.  I submitted mine in April 2003 and still waiting.  How come?

Answer (in part):

We have no investigations on our books that are older than 2 years.  This means that we have completed all the stages of evaluating the complaint, conducting an investigation and either issuing a notice for a public disciplinary hearing or closing the file.

(This is, obviously, not accurate...so why does the IDA make such claims?)


Canadian Broker Group Inadvertently Posts Complaints List

30 January 2007

"We've had no complaints, the information is typical of the type of information that's available in the U.S.'' on the Central Registration Depository, Popovic said today in an interview. "The reason we took it off the site is we feel this type of information can be easily misinterpreted.''

How do you misinterpret the number of criminal charges, civil claims, internal disciplinary actions, internal investigations, external disciplinary actions, denials of registration, etc....?

Should Canadians receive less transparency from a Canadian SRO, that purports to protect Canadian investors, than Americans from a U.S. government regulator ?

Are you suggesting that Canadian investors are not able to interpret information as well as American investors?

Canadians still cherish the words 'presumed innocent until proven guilty' and can be trusted to know the difference.

"The association posted the information on its Web site in September 2005 and removed the list of brokers' names on Jan. 26/07 after an IDA employee discovered the oversight, said Alex Popovic, vice president of enforcement."

The public presentation was posted at the following web site address from September 2005 to January 26, 2007.

http://www.ida.ca/Files/Compliance/MembRegUpdatePres_en.ppt

The IDA employee "discovered the oversight" after he was made aware of it by the press.

The data has been lodged in the Toronto Superior Court of Justice since January 24, 2007. 

A copy of the data can be obtained from the Courthouse at 393 University Ave. Toronto, Ontario for the payment of $32.

 

See Real Time Investor Protection Act passed IN THE SENATE OF THE UNITED STATES on April 7, 2005

See NASD BrokerCheck


“We operate in the sunshine,” said Linda Fienberg, president NASD dispute resolution, adding she can’t imagine why a self-regulatory organization would not make that information available to the public.

“We want investors to review that kind of information before they deal with brokers so they can ensure themselves the person is reputable.”

Linda Fienberg, President, NASD Dispute Resolution,

Investor group calls for less secrecy, National Post, 06 October 2001


New, improved NASD BrokerCheck goes live online

20 March 2007

 


Comset Data

 

(As per Slide 32 of Presentation)

 

 

Add up each of the event types from page 32  of the PowerPoint presentation (above) and then compare it to the actual database.

October 15, 2002 -

June 30, 2005

Totals from

pg. 32 of

powerpoint

presentation

 

Actual

ComSet

Data

(registrants only)

 

What

are

these

events ?

Civil Claims

1,451

-

729

=

722

Criminal Charges

27

-

25

=

**2

Customer Complaints

(not service related)

(does not include those rec'd directly by IDA)

4,316

-

3,705

=

611

Denial of Registration or Approval

4

-

3

=

1

External Disciplinary Actions

(does not include the IDA)

50

-

37

=

13

Internal Disciplinary Actions

(by the member firm)

98

-

96

=

**2

Internal Investigations

(by the member firm)

144

-

137

=

**7

Totals

6,090

-

4,732*

=

1,358

 

Total reported by the IDA for slide 32 of PowerPoint Presentation

6,090

Excel spread sheet data per ComSet slide 34

4,732

Difference (22%

1,358

* This number also includes three Complaints attributable to "N/A"

and one Internal Investigation attributable to

Wolverton Securities which appears in the database. See below.

 

There are actually 2,883 registrant names in the database.  According to slide 2 of the Power Point presentation the IDA regulates 24,852 registrants.

2,883 / 24,852 = 12 %

Since the IDA does not enter complaints that it receives directly from the public (see Research Study below), as opposed to going through a member, there are 5,234 complaints received between 2002 and 2005 which have not been included in ComSet.

2,883 + 5,234 = 9,117

9,117 / 24,852 = 33 % 

If all of the 5,234 complaints filed directly with the IDA were against different registrants -

the chances of getting a broker with previous complaints is 1 in 3.

 But how is this possible???


"We know from the analysis of client complaints reported to the IDA on ComSet that 93% of all registrants have no complaints made against them."

Paul Bourque, SVP Member Regulation, IDA

 

Regulation of Relationships – the Role of Self-Regulation in Building Trust, May 30, 2005,  pg. 1 (Footnote)

 

Please keep in mind that

ComSet does not include those events filed directly with the IDA

The following are the yearly totals as per the Research Study.

2002

1,073

2003

1,575

2004

1,315

2005

1,271

Task Force to Modernize Securities Legislation in Canada

The Role of Compliance in Securities Regulatory Enforcement

Mary Condon, Poonam Puri

June 28, 2006

page 20.

 

What are the other 5,234 events not included in Comset?

 

Conclusion