THE LIABILITY OF YOUR BROKERAGE HOUSE TO YOU
Besides your financial advisor being liable and responsible to you for all your investment losses, your brokerage house is also liable to you if they:
- Failed to properly monitor and supervise the activities of your financial advisor, and uncover your financial advisor’s wrongful activities, for example, churning your account
AND/OR - Failed to notice any unsuitable investments made by your financial advisor in your portfolio (the brokerage house also has a copy of your KYC Form that you signed with your financial advisor and its easy for them to check to see if your investments are suitable and in accordance with your investment objectives and risk levels) and if they did find unsuitable investments in your portfolio they,
- Failed to instruct your financial advisor to get rid of all such unsuitable investments immediately.
THE OMBUDSMAN PROCEDURE
In theory the ombudsman process is a wonderful way of resolving investment disputes. In practice it does have many problems, and investors have to circumvent such problems to use the service effectively.
If not handled properly, referring your claim to the bank ombudsman or OBSI could prejudice and may even destroy your claim in a subsequent arbitration or court case. The interviewers at the bank ombudsman or OBSI are highly trained and skilled specialists and you must be careful not to say anything that you don’t mean, or allow words to be put into your mouth or to say anything that could have a hidden or double meaning or be taken out of context, or say anything that could prejudice you.
If the brokerage house that you are claiming against is owned by a bank, you first have to refer your claim to the bank’s internal ombudsman, before referring your claim to OBSI (if your brokerage house is NOT owned by a bank then you can refer your claim directly to OBSI).
You must remember that the ombudsman is not your friend. The bank ombudsman works for the bank that owns your brokerage house, that you may at a later stage be suing. OBSI is funded by the Securities Industry of which your brokerage house is part of. There is therefore, in our opinion, the potential for a conflict of interest situation to exist between the ombudsman and yourself.
The interview with the bank ombudsman may not be without prejudice (i.e. anything you say at the interview could be used against you at a subsequent arbitration or court case). There is however a way to get around this. Attending an interview with the bank ombudsman, who works for the bank that owns the brokerage house that you are claiming against, or OBSI without being represented by legal counsel or by a representative, is obviously not a good idea. Investors should be prepped and prepared for the interview and ideally they should be represented at the interview to protect them from leading and intimidating questioning.
The ombudsman cannot make a recommendation that is binding upon you. Often the settlement recommended falls short of expectations. At this stage you can negotiate with the ombudsman, and your brokerage house to increase the suggested offer of settlement. We teach you negotiating skills, and if required we can negotiate on your behalf.
To use the ombudsman process effectively, you have to get it to work in your favour. If after all your efforts, you still can’t get a satisfactory settlement, we can tell you what other remedies are available to you to recover your investment losses.
Here are some excerpts from a communication from Kenmar Associates, dealing with referrals of complaints to OBSI.
Kenmar Associates
Investor Education and Protection
ALERT ALERT ALERT September 3, 2009
The Ombudsman for Banking Services and Investments
To: Retail Investors
Widows and widowers
Seniors
Retirees and pensioners
The infirm
“ Many investors believe that the Ombudsman for Banking Services and Investments (OBSI) is a government agency. It is not. OBSI is an industry sponsored and industry funded entity.
…………………………………………………………………………………………………………………………………………………………………………
We have recently received a growing number of questions and complaints about this organization. Here are a few cautionary tips, should you have occasion to bring your complaints to them for resolution.
A. Direct dealings
1. Never attend an interview ( aka interrogation) with OBSI without being prepped by a professional.
2. Don’t allow them to put words in your mouth-ask if conversation is being taped.
3. Don’t let then cross-examine you- always have a witness with you.
4. Don’t think that they are your friend, and get lulled into a false sense of security- they are financed by the securities industry.
5. Make a list of everything you want to say and make sure you say it whether you are asked or not.
6. Do not volunteer information and do not answer questions you do not believe are relevant to your case. Assume anything you say can and will be used against you.
B. Statute of Limitations
Every province in Canada has a statute of limitation. This is the time period in which you have to take civil action. In Ontario the time spent with OBSI stops the limitation time clock {the limitation time period in Ontario is a short two years}… In other provinces be sure to check what the time period is, otherwise you may find that the time taken dealing with the firm and the time taken dealing with OBSI may use up all the available time. Once the limitation period is consumed, civil action cannot be taken .OBSI have a target of completing 80 percent of their files within 180 days. Some files can take longer, a year or more.
C. Consent for release is one-way.
When OBSI undertakes to investigate your complaint, they send you a letter asking you to sign a Consent for the release of your personal information, by your brokerage house to them. In the letter to you, OBSI say that they may also request you to provide them with certain documents related to your complaint, and “We may discuss your complaint with (firm name) and we may exchange information or documents between you and ( firm name) . We also may need to provide information or documents to advisors outside of OBSI who we consult about your complaint. “ it is significant to note that although OBSI may provide your brokerage house with the information or documents that you have provided to them, there is no corresponding obligation on their part to furnish you with copies of any information or documents that your brokerage house may have provided to them, in the course of OBSI’s investigations. These documents may be of great importance to you to help you make an informed decision as to whether to accept or reject any recommendation OBSI may make to you, with regard to a possible settlement of your complaint.
D. Right to inform police and regulators
We have come across yet another issue with OBSI. Specifically, it appears that their new standard Consent letter has language that may prohibit you turning over their recommendation Report to police or securities regulators even if you believe it could help your case in the event fraud or other illegal act is suspected. The Form’s language is set out below:
“..The success of our process depends on both you and (firm name) dealing with OBSI in a frank and open manner. By signing this letter you and (firm name) agree that OBSI’s correspondence, files and any discussions we have during our review are confidential. You and (firm name) agree that if there are subsequent legal or other proceedings you will not use any correspondence or information from our process. Neither you nor (firm name) will try to compel OBSI to produce its files or records. Nor will you try to have the Ombudsman, any OBSI staff member or advisor give evidence or testify…..”
|
|