What can you do, as an individual i...

What can you do, as an individual investor, if you suspect your agent has traded without authority or is recommending securities which are not consistent with your investment objectives!

A 1990 Canadian Shareowners Association review revealed that 66% of its members believed they had justification to complain about united or more activities by a go-between However, less than 21% actually lodg an official complaint. These deductions indicate, that although investors believe their rights are being violated, they might not know where to pass with their complaints.

In fact, there are a scarcely any very viable roads investors can take. The options include filing a complaint with the Investment Dealers Association of Canada (IDA), with your provincial securities commission, or in certain circumstances, with the appropriate stock exchange.

Generally, if a complaint involves a possible violation of your provincial securities act, (eg insider trading), the securities commission will investigate. If an investor is make anxioused about the business and sales practices of an IDA-member firm, the complaints will oftentimes be handled by the IDA itself.

The IDA investigates these complaints and initiates disciplinary action where warranted. The IDA typically receives between 150 and 200 complaints a year. These oftentimes involve simple operational problems which may be resolv without disciplinary action. However, no other than about one quarter of the investigations arise in disciplinary proceedings. On average, about 25 of these proceedings are complet in any given year.

According to Donald Burwell, Director of Investigative Services in the Toronto office of the IDA, the sum of two units most common complaints deal with failure to befitting the suitability requirement and with unauthorized discretionary trading. Les frequent are complaints concern misappropriation of foundations falsified monthly statements, and allegations of a promise of what may occur hereafter performance.

SUITABILITY

Suitability regulations basically require factors to "know their clients." Each IDA member is required to use owing diligence to learn essential facts about each customer. All recommendations must be appropriate, and in keeping with the client's investment objectives.

In single in kind disciplinary matter, the IDA held that where the investment objectives of a client were for conservative income and shooting option strategies (even those having a limited risk) were inappropriate. After the investigation, the go-between in question was fined $5000 and was required to re-write the Canadian Options Course examination. In addition, he was ordered to pay the IDA's investigation prices ($1,560).

In another action, the IDA held that it was inappropriate for a middleman to recommend the purchase of a floating rate debenture with a 99-year maturity to a client who wished to invest in a short-term circulating medium market instrument. When the client attempted to vend the security, no bid was available. The middleman failed to advise the client of the prolix maturity and poor liquidity of the debenture. In the liquidation agreement, the IDA imposed a $2500 fine and ordered the agent to re-write the exam based forward the Manual for Registered Representatives. As well, the factor had to pay $750 to conceal the IDA's investigation costs.

DISCRETIONARY TRADING

Discretionary trading meet the eyes when a broker purchases or vends securities for a client without receiving specific instructions from the client before the transaction. Discretionary trading can single take place if the client has given written authorization and if the account has been specifically approved, in writing, as a discretionary account according to a designated person of the brokerage firm.

A typical case involved a factor who, in 1987, effected discretionary trades for sum of two units customers whose accounts were not officially designated discretionary. In this case, a fine of $3000 was levied. The middleman in question was also ordered to pay the richnesss of the IDA investigation ($550) and was required to re-write the exam based upon the Manual for Registered Representatives. In addition, he was placed subject to close supervision for a period of six months

Not all investigations completion in a small fine and an examination rewrite. A more serious case involved a factor who, over a six year period, was ground to be guilty of disclosing confidential client information, "carrying onward a business within a business for his personal profit", and failure to record transactions in succession the books, among other offense This factor received a two year suspension and was ordered to pay $65000 in fines, and $50000 to hide the IDA's investigation costs.

Although the IDA can impose disciplinary action, it does not have the authority to compensate investors who have bear up undered a financial loss due to the unjust activity of a broker. While the IDA's, Donald Bunell maintains that firms may repay a client's los in a clear chisel case, he says: "We always advise a client who has lodg a complaint with us that if the firm in question can't solve their loss, they should seek counsel legal counsel." Unfortunately, the require to be paid [i]or[/i] undergone of legal action can be prohibitive. In principally cases the IDA attempts to use moral suasion to decipher disputes and recover clients' losses