April 10, 2008
By Nirmala Menon of DOW JONES NEWSWIRES
OTTAWA -(Dow Jones)- A Canadian Parliamentary committee hearing on the
frozen C$33 billion asset-backed commercial paper market was told
Thursday that regulators and the financial industry had failed small
The House of Commons Finance Committee is holding a two-hour special
hearing to listen to complaints from retail investors and groups
Larry Elford of Lethbridge, Alta. said that, based on his 20 years
experience working in the financial industry, consumer trust is
misplaced. He said small investors tend to have faith in investment
providers who call themselves professional advisers.
"These people were duped, in my opinion," Elford said in the televised
He said one prominent firm that sold ABCP had several hundred employees,
99% of whom were registered and licensed as salespeople by provincial
securities commissions. All of them represented themselves to clients as
financial advisers. He showed the committee documents to back his claim.
Elford said the word "adviser" is a legal registration category with
securities commissions and it's illegal to misrepresent it. He said
Canadian consumers aren't aware of this.
"Every investment firm in Canada knows this and supports this
misrepresentation," Elford said. He alleged that securities commissions
also look the other way or grant exemptions to the law.
Elford was critical of self-regulation in the industry. He said self-
regulatory agencies and the Investment Dealers Association have rules
and regulations against misrepresenting titles and qualifications, but
that these bodies also turn a blind eye.
"Self-regulation in financial services is the greatest example I can
think of, of allowing foxes to guard the hen house," he said.
Elford said the ABCP crisis is "just the flavor of the month" and
"unless we address the underlying issues that allow these abuses, others
According to another witness, independent consulting analyst Diane
Urquhart, ABCP was sold "unlawfully" and in violation of provincial
"They stood by blindly while this continued to be sold into the market
unlawfully," she told the committee.
Murray Candlish said he and his wife had C$350,000 invested in ABCP when
the market was frozen last August.
"If the individual investors are guilty of anything, they're are guilty
of trusting the integrity of the Canadian banking industry," Candlish
-Nirmala Menon, Dow Jones Newswires; 613-237-0668; firstname.lastname@example.org
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