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I refer to the problem faced by the "Little" investor who,
when given bad advice by his/her Investment Advisor who works for a
large (Canadian) Investment/Banking Firm and suffers a substantial
financial loss, is forced to take the very expensive "Civil Court" route
to prove his/her case of bad management on the Investment Bank/Advisors
part.
I know that, presently, the Self Regulating Organizations are each
responsible for policing their own industry, and that the Individual
Securities Commissions in each Province have the responsibility and the
authority to investigate (and issue fines etc.) to individual Investment
Adviser(s) and the subject Firm, including costs: but where does that
leave the "Little" investor who brought the complaint forward to the
Commission in the first place?
Even if bad management practices are proven through the "Commissions"
investigation, and the individual and the Firm are eventually fined for
bad management practices or Breach of Regulations, the "little"
investor, after providing all the details of the case to the
"Commission", is still left out in the dark. Under the present
regulations, he/she still has no chance of recouping his/her losses
because the "Commission" has no teeth to order compensation directly to
the individual who provided all the pertinent information to prove the
case against the Advisor and the Firm. So, why provide the "Commission"
with the details of your complaint, when there is no chance of
compensation? The "little" investor's only recourse for compensation is
through a costly Civil Court case.
As you can see by now, I do not think that the present securities
regulatory structure enhances the "Effectiveness of the enforcement of
the regulations", because they appear to me to be heavily weighed in
favour of the "Self Regulating Organizations", the large investment
firms and their employees, allowing the Provincial Securities
Commissions" to police (self investigate) their own industry, with
little or no power given to Commissions to protect the "Little"
Investor's rights for compensation when the Investment Firms and their
employees are found guilty.
To answer your question - Are investigation and enforcement activities
undertaken in a manner which enhances investor confidence in market
integrity? I personally do not think so, at this time, because they are
too one-sided.
James Lambie
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