Investment Dealers Association took too long: court

 

Murray Lyons

 

Wednesday, July 11, 2007

 

A former principal at Matrix Financial says he is pleased with a recent Saskatchewan Court of Appeal ruling that found the Investment Dealers Association of Canada (IDA) took too long to pursue disciplinary action against him.

The court ruled last month that Fred Smith of Saskatoon should have had a hearing long before seven years were up on the merits of whether he had failed to provide enough supervision to former colleague Wade MacBain, who is alleged to have overloaded his clients' portfolios with Saskatchewan Wheat Pool stock, causing some clients to lose tens of thousands of dollars of their retirement savings.

Smith was named in the IDA disciplinary action because he was designated as the "ultimate designated person" at Matrix in relation to MacBain between October, 1995, and June 1999. Smith is still an IDA member and has worked to rebuild his career at another financial services firm.

The court ruling stated the unfairness of the charges hanging over Smith's head for seven years were amplified because the lack of clarity in the IDA's own bylaws relating to former members meant MacBain himself could not be disciplined by the IDA.

Even though Smith is still an active IDA member, the court ruled the IDA cannot have an open-ended time frame for pursuing current members.

"The continuation of the prosecution for a period of seven years, and possibly several years more given the time needed for hearings and possible appeals, amounts in our view to an abuse of process," Justice Nicholas Sherstobitoff wrote for the court. "His (Smith's) reputation was harmed by the bad publicity in 2000 to the extent that his new business dwindled from $12 million (of client investments) annually to zero within two years."

Smith told the appeal court it took until 2004 before his business volume was restored to previous levels.

In an interview Tuesday, Smith said he is pleased the court acknowledged the extent to which the IDA investigation had affected his career and income as a financial adviser in the early part of this decade.

"As it said in the judgment, it did cost," Smith said. "I guess that's part of the regulatory process. It's nice that it's over and hopefully life can return back to normal."