WHY YOUR FINANCIAL ADVISOR MAY BE RESPONSIBLE FOR CAUSING YOUR INVESTMENT LOSSES

Check to see if any of the things you feel your financial advisor did wrong is mentioned on this list. If it’s not listed (there are more to list) call us and let’s discuss it.

MacGold teaches you how to identify whether you have provable specific grounds for a successful investment loss recovery action against your financial advisor. Some of  these specific grounds are:

1. the lack of suitability of your investments.
2. failure to ensure that an investment, originally suitable remained suitable.
3. your financial advisors failure to construct an investment portfolio that mirrors your investment objectives and risk tolerance levels.
4. failure to learn the essential facts about you.
5. inserting incorrect information into your account opening application form that is filled out when you open up an account with your brokerage house (This is known as the Know Your Client Form or the KYC Form). The KYC is the contract between you and your brokerage house.
6. failure to conduct periodical or more ideally, annual reviews of your KYC form.
7. failure to update your KYC Form with new information such as changes in your personal, social, family or business circumstances resulting in possible new investment objectives and risk tolerance levels. These include marriage, divorce, retirement, disability, additional children, supporting elderly parents etc. 
8. over-concentration in single investments or in single industry sectors.
9. lack of diversification of your investments, over a number of different market sectors so as to limit your overall risk.
10. failure to monitor the performance of your portfolio and warn you of any possible dangers such as a potential market turndown, your investments about to tank and doing nothing to stop the slide, or letting you know of any changes both positive and negative in any of your securities i.e. giving you the bad news along with the good.
11. acting without your authority i.e. where your financial advisor has not been given any discretionary authority to make decisions on your behalf without first referring them to you for your approval.
12. failure to obtain annually a written renewal of your discretionary account.
13. failure to give effect to your instructions
14. failure to insure your investments against losses (Yes, you can insure your investments against losses ------ your financial advisor should know how. Investment insurance has been around for over 40 years and this option should have been offered to you to protect you against investment losses).
15. breach of trust.
16. breach of fiduciary duty.
17. breach of contract.
18. negligence.
19. negligent misrepresentation.
20. failure to manage your expectations.
21. failed in his/her duty of care to you.
22. failure to comply with statutory regulations, industry rules, and investment standards, as well the internal policies and procedures of your brokerage firm.
23. failure to consider and to act in your best interests.
24. failure to evaluate and assess your tolerance for risk in terms of affordability, reasonableness and ability to absorb and withstand declines in the value of your portfolio from risky investments.
25. failure to explain the risks and dangers of various investments recommended to you.
26. failure to act in good faith.
27. failure to exercise reasonable and proper care, skill and diligence as would be expected of those engaged in their profession.
28. failure to comply with their undertakings, or with their representations.
29. failure to provide conspicuous, full, and fair disclosure of all important facts.
30. recommending investments not commensurate with your financial needs (i.e. altering the accounts of seniors and other investors, requiring steady income, from dividend funds into riskier investments).
31. failure to explain to you the meaning of risk, which is “how much money are you prepared, or can afford to lose”
32. failure to ensure that you understood all the risks associated with any investment recommendation.
33. misrepresented the degree of risk involved in a recommended investment.
34. failure to exercise due diligence and thoroughness in making investment recommendations based on factors including your financial situation, investment knowledge, investment objectives and risk tolerance, as well as, having a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendation.
35. relying solely on representations from issuers and promoters of investment products, and not doing any due diligence themselves.
36. failure to monitor product risk.
37. failure to understand the features and risks of the investment recommended to you i.e. a breach of the “Know Your Product” rule. (This is more common than you think!)
38. looking only at statistical factors of an investment without considering other factors such as liquidity, transparency, use of leverage etc.
39. describing you as a sophisticated investor in the KYC Form when this may not be in accordance with your investment experience and knowledge.
40. marking trades “unsolicited” when they were in fact “solicited” by your financial advisor (unsolicited means that you recommended the investment to your financial investor, and solicited means that your financial advisor recommended the investment to you).
41. putting your financial advisors’ own interests before yours by choosing investments with greater commissions, or by trading more frequently than necessary, solely for the purpose of generating commissions for themselves ( known as churning) .
42. failure to monitor the performance of your investment portfolio, by giving you both the good and the bad news about particular investments.
43. failure to give you a balanced disclosure by emphasizing all the positive factors about a recommended investment, and de-emphasizing the negative ones.
44. failure to ensure that the order you phoned in, was within the bounds of good business practice, i.e. it was suitable for, you taking into account your personal circumstances.
45. failure to get a risk disclosure document signed when trading options, and a strip bond disclosure document signed when buying strip bonds, for your portfolio.
46. failure to take into account your tax situation, when making investment recommendations, i.e. if lower taxes were one of your investment objectives, then your financial advisor should have ensured that maximum advantage was taken of the dividend tax credit.
47. failure to warn you of the dangers and features of a margin account.
48. failure to consider whether your degree of leverage in margining your account was appropriate, keeping in mind your financial circumstances and the state of the market.
49. engaged in manipulative, fraudulent, dishonest or unethical trading practices.
50. failure to caution you when you suggested an unsuitable investment
51. failure to undertake a thorough and detailed quantitative and qualitative analysis of the investment recommended ensuring its suitability.
52. failure to take into account your investment horizon.
53. effected trades in your account on the instructions of a third party without having first received a power of attorney from you in favour of such third party. 
54. made an illegal representation to effect a trade.
55. used high pressure sales tactics in order to induce you to buy, sell or hold a security or other investment product (such tactics frequently feature an imparting of a sense of urgency in order not to miss out on an opportunity for profit i.e. buy now before its too late, veiled promises of significant and immediate returns, hints of insider information of upcoming deals or announcements from the company to be invested in.)
56. ( if applicable to you) taking advantage of your inability or incapacity to reasonably protect your interests because of some form of infirmity, ignorance, illiteracy, age or inability to understand the character, nature or language of any matter or inability to decide whether to buy, sell or hold a security or other investment product. 
57. giving you a guarantee as to the future market price of a security, future payments of dividends or interest of a security, your ability to  sell a security at a stated price in the future (other than in the case of a retractable or callable security) or the listing of a security on an exchange at a future date. 
58. allowed you to deal in securities which were not qualified for sale in the province in which you reside (unless such securities fall within an exemption).
59. making a statement to you which your financial advisor reasonably knew or should have known was false or misleading with the express purpose of inducing you to buy, sell or hold a security or other investment product.
60. if your investment contained bonds, failure to constantly watch the credit rating of the bond issuer, the length of time until your bond matures, the bonds interest yield in relation to prevailing interest rates, and their yield to maturity.
61. failure to avoid all personal financial dealings and in particular borrowing money from you without permission from your financial advisors employer. This could be construed as a conflict of interest since if you still had the money you could have conceivably invested it profitably elsewhere.
62. replaced your existing investment with other investments. Replacement should only take place if it is based upon the belief that your interests would be better served by the proposed new investment.  Your financial advisor must ensure that you are fully aware of all the financial implications and ramifications of such contemplated replacement.
63. leading you to believe that there was no risk or chance of you losing any money by purchasing a recommended investment.
64. telling you that a security will be listed on a stock exchange or that an application has been or will be made to list the security on a stock exchange – if this is not in fact true.
65. giving you an undertaking that he/she will at a later time, repurchase or refund any part of the purchase price of a security to you.
66. exceeding the trading limits laid down by your brokerage house for your investment account.
67. engaged in false advertising and misrepresentation. Your financial advisor must not use testimonials which include misleading statements about his/her other client’s investment experiences. Such testimonials must prominently disclose all the facts and circumstances as well as any compensation paid to the provider of the testimonial.
68. persuading you to buy stocks underwritten or specially promoted by your brokerage house, when they are not suitable for your portfolio.
69. switching and churning of mutual funds (very prevalent with DSC funds using the 10% annual redemption or when the penalty period expires.)
70. the failure of your financial advisor who took over your account from your previous financial advisor, to confirm the up-to-datedness of your previous KYC and /or to draw up a new KYC form reflecting your then current position.
71. failure to disclose all real and potential conflict of interests such as when your financial advisor or your brokerage house has a financial interest in a particular stock that is recommended to you.
72. failure to ensure that all orders executed on your behalf are within the bounds of good business practice.
73. failure to tell you what special features your bonds or preferred shares investment possesses i.e. whether you bonds are callable , extendable, retractable convertible etc. or whether your preferred shares are cumulative or not.
74. failure to inform you whether any rights have been declared on any of your investments and if so whether they should be exercised, whether there are any options or warrants about to expire or generally, any new corporate developments which may affect your investments.
75. failure to deliver, or to ensure that, a prospectus was delivered, when selling a mutual fund.
76. failure to inform you of your rights of withdrawal and rescission when buying mutual funds, for example: you have 48 hours after receiving a mutual fund prospectus to change your mind and ask for your money back. In essence this is a “cooling off period”. This is of importance to investors who were “talked into” buying mutual funds and want to get out quickly.
77. operating a “Ponzi” scheme
78. failure (where appropriate) to disclose whether your financial advisor would lose his/her commission if you sell an investment before the expiry of a certain period of time in circumstances where you wanted to sell the investment during such period and were talked out of it by your financial advisor, for those reasons.
79. engaging in fraudulent misrepresentation i.e., making a representation knowing it to be false or not caring whether it is true or false, and you act upon the truth of such representation to your financial disadvantage.
80. engage in concealment- your financial advisor must not conceal any information from you that is necessary to help you make an informed investment decision. 
81. giving you an undertaking that the securities commission has approved the investment merits of certain securities.
82. failure to get the necessary licence or registration to transact certain types of investments in your account e.g. options and commodities trading.
83. issued false or misleading sales communications, advertisements with the sale of mutual funds to you.
84. represented that a mutual fund’s or an investment’s past performance is indicative of its future performance.
85. gave you unrealistic expectations of future individual investment returns.
86. allowed you to have unrealistic expectations of the returns, your investment portfolio as a whole would generate.
87. failure to make full disclosure of a personal interest in a recommended investment.
88. in selecting investment for your managed accounts your portfolio manager’s failure to get your written consent in circumstances where there may have been a conflict of interest between your brokerage house and the investment/s selected for your managed account. i.e. your portfolio manager invested in the securities offered for sale by your brokerage house, or the securities of an issuer, that is related or connected to your brokerage house.
89. your mutual fund advisor failed, at least annually in writing, to request you to notify them, if the contents of your KYC form previously provided to your mutual fund advisor, or your financial or personal circumstances, have materially changed.
 
Your mutual fund advisor in an advertisement, client or sales communication:
90. used unrepresentative statistics to suggest unwarranted or exaggerated conclusions.
91. failed to identify the material assumptions made in arriving at these conclusions
92. contained any opinion or forecast of future events, which is not clearly labelled as such.
93. in a client communication used an image, such as a photograph, sketch, logo or graph which conveyed a misleading or untrue impression.
94. was inconsistent or confusing with any other communication that you may previously have received.
95. omitted facts, which were necessary to keep the communication from being misleading.
96. portrayed past income, gain or growth of assets that was not justified.
 
 
97. you suffered early redemption penalties to exit unsuitable investments.
98. charged you interest charges for unnecessary margin or loans.
99. charged you excessive sales commissions.
100. charged you excessive fees.
101. charged you excessive and unnecessary currency conversions.
102. you suffered undue income tax liabilities as a result of churning or unsuitable investments.
103. your brokerage house unfairly attempted to reduce your claims by offsetting losses from unsuitable investments with gains from suitable investments.
104. your brokerage house, when you made a complaint failed to advise you of the availability of the OBSI dispute resolution service.
105. you were not advised of reduced sales commissions or discounts for large purchase/holdings.
106. unduly expensive funds were purchased without advising you of alternative equivalent, but lower MER funds.
107. your portfolio’s character and make-up was a significant departure from your historical, conservative investing pattern and/or risk tolerance.
108. made exaggerated or unsubstantiated claims about management skills, or techniques, characteristics of the fund or an investment security issued by such fund.
 
In a sales communication which made comparisons between funds, or between a fund and certain indicators such as the Consumer Price Index, stock , bond or other indexes guaranteed investments etc. the sales communications failed to:
109. include all fact which would materially alter the conclusions, a reader would draw from the comparisons.
110. present data from the same time period for each item being compared.
111. clearly, explain any factors necessary to make the comparison fair and not misleading.
112. made unwarranted or incompletely explained comparisons to other investment vehicles or indexes.
113. in the case of a benchmark used for comparison, used a benchmark that did not exist for all or part of the period under comparison.
114. acted as principal in effecting a trade when your financial advisor could have obtained a better price for you, as an agent.
115. recommended an investment of a speculative nature with limited liquidity or marketability, such as some limited partnerships, and did not disclose this fact to you, as well as the fact that it may be difficult to find a buyer, when you want to sell your investment.
116. failed to tell you that he/she have found themselves in a situation where there is an actual or potential conflict of interest situation (which might cause him/her to give you biased or tainted advice,) and failed to get your confirmation that you were fully informed of the conflict of interest, but are nevertheless prepared to continue dealing with your financial advisor as before.
117. failed to pre-determine whether your investment objectives would be compatible with the management style of the investment manager who was going to mange your portfolio.
118. failed to tell you that when you transferred shares or other securities into your RRSP, that you would have to pay a special capital gains tax on any increase in the value of such shares and securities at the time, they were transferred into your RRSP
119. failed to ensure that all your orders were executed at the best price available
120. taking instructions from one spouse in connection with  the other spouses investment portfolio without having first obtained the direct instruction or a signed trading authorization of the other spouse.
121. failed to notify you that he/she may be engaging in transactions on a principal basis.
122. purchased a security not registered or listed on any recognized exchange without notifying you.
123. passing on insider information, a rumour or a tip to you about an event which he/she states will be profitable and on that basis persuading you to buy such security, to your detriment.
124. failed to tell you that he/she was using another financial advisor on your behalf, and that the other financial advisor was paying a referral fee and that this could result in a higher commission, payable by you, on the trade because of the referral arrangement.
125. failure to tell you that you may have paid a lower commission had your financial advisor not decided to use the services of the other financial advisor.
126. failure to tell you, that the price that the other financial advisor could get you, may be higher than the securities normal price i.e. the price obtained by the other financial advisor may not be competitive.
127. failure to disclose whether he/she was acting as principal or agent.
128. failure to tell you that you were not an accredited investor, when selling you an investment that could only be bought by an accredited investor ( an accredited investor has to earn at least $200,000 taxable income per year, in the previous two years).
129. failure to tell you that the trailer fee charged in a mutual fund investment, was not in respect of a management fee, but was a continuing commission.
130. failure to tell you the hidden costs of short selling i.e. any interest or dividend earned by the security while it was borrowed, had to be paid by you.
131. failed to tell you that if you sell your Canada Savings Bonds at any time during a month, you do not receive the interest for the remaining part of that month. The worst case is selling them on the last day of a month, because then you do not get any interest for the whole of that month.
132. failure to tell you that he/she was using the cash content of your investment portfolio, to trade for himself/herself, and you suffered losses as a result thereof.
133. failure to establish whether a day trading account is appropriate for you, prior to the account being opened.
134. failure to warn you of the risks of day trading.
135. by words and/or conduct, he/she deceived you as to the nature of any transaction or as to the price or value of a security. 
136. Prevented, inhibited or intimidated you from doing what you have a right to do, including raising complaints, or filing a civil court action (while you still had time).
137. failure to tell you that he/she was not allowed to solicit a discretionary account from you.
138. failed to notify you of the specific risks of investing in: options, commodities, forex, leveraged ETFs, wraps, principal protected notes, strip bonds, income trusts, hedge funds, inverse funds and segregated funds.
139. persuading you to enter into a private deal and getting you to accept his/her guarantee, that he/she will personally reimburse you for any losses, caused by his/her mistakes or misconduct, or getting you to give an undertaking that you will not file a complaint with your brokerage house against your financial advisor. This could give rise to the defence of ratification against you, if you later decide to sue for the recovery of your investment losses.
140. failed to disclose market risk, currency risk and volatility (high standard deviations and betas are indicators of excessive risk).
141. failed to tell you that leveraged ETF’s should only be invested in by experienced investors who (A) want to use the funds on a short term basis, (B) understand the risks associated with leverage, (C) understand the consequences of seeking daily leveraged investment results, (D) understand the risks of selling short, (E) intend to actively monitor and manage their investment on a daily basis, (F) are aware that the prices of leveraged ETFs fluctuate much more widely than the prices of regular ETFs, (G) are aware that the MERs are much higher than regular ETFs (they could be almost 7 times as much.)
142. failed to return your numerous telephone messages, when you wanted to give instructions to buy or sell certain securities, and by the time he/she called back it was too late. The securities you wanted sold, had dropped in value, and/or the securities you wanted bought, had gone up in value.
143. failed to tell you that wrap accounts can cost you an extra level of commissions or service fees, since you are now paying for an extra level of management.
 
The following indiscretions by your financial advisor may be difficult to prove, but nevertheless are wrongful acts. They may have contributed to your investment losses.
144. created or attempted to create a false or misleading appearance of active public trading in a security.
145. entering or attempting to enter into any scheme or arrangement to sell and repurchase a security in an effort to manipulate the market.
146. causing the last sale or last bid or offer for the day in a security, to be higher or lower than warranted by the prevailing circumstances, with the intent to manipulate closing price quotations.
147. making a practice directly or indirectly, of taking the side of the market, opposite to the side taken by you.
148. scalping: undisclosed selling of a security and simultaneously recommending that you buy the security.
149. bucketing: confirming a transaction where no trade has been executed.
150. arranging for a personal order or for the order of another member of your brokerage house, to rank in front of your order for the same security, at the same time, at the same price.
151. wash trade: making a transaction in which there is really no real change of ownership, but creating a false impression of trading activity.
152. withholding: buying Initial Public Offerings securities and only offering them to you when the security’s price had risen.
153. front-running: trading ahead of you ( and pushing up the security’s price) when he/she knew that you were going to place a big buy order for the security.
154. bunch trading: where a money manager buys a large block of shares and allocates different prices for the same investment among different clients, and you pay more than you should.
155. secret profits: if your financial advisor puts themselves in a position where their self interest and their duty to you conflict, they could become liable to you to account for any secret profits made, regardless of whether you suffered any loss or not.
156. delaying the posting of trades i.e. your financial advisor buys securities in advance of an expected news release that he/she feels will positively affect the company’s share price, but does not document the trade till later. If, when the announcement is made, the stock’s price goes up, he/she allocates such trades to those discretionary accounts that he/she manages, which generate the most income and business referrals. (his/her most favoured clients). However if the announcement has a negative effect on the stock and its price goes down, he/she allocates the  “losing” trades to his smaller discretionary clients, who generate less income and fewer business referrals. (his/her less favoured clients).