Not fully knowledgeable about investing, most Canadians and must rely upon financial advisors. Regulators register these people as “sales representatives” while the industry provides them with titles of “financial consultant” or “investment advisor.” To the unwary it creates the impression that investors are assured of receiving competent, objective advice rather than just buying a product. Could this explain why so many investors buy unsuitable products such as allegedly deceptive investment trusts and ABCPs?
The financial industry is continually inventing new “structured products” to be sold to retail investors. Often these are designed to circumvent regulations. For example because of the degree of risk involved, hedge funds can be sold only to “accredited investors”, that is, individuals with an income of some $200,000 and assets in excess of $1 million. Why then have so many small investors and retirees been duped into buying questionable junk instead of the triple-rated securities to which they subscribed?
Many Canadians are waking up but unfortunately only after they, their families and/or their friends have become victims. In fall 2007 the Innovative Research Group study revealed that one million Canadians were victims of investment fraud.
The Canadian Business article “A good county for crooks,” by John Gray, Sept 24, 2007 provides insider police accounts that indicate enforcement is in serious disarray. The police are frustrated by unenforceable, outdated laws.
Help is on the way. CARP, Canada’s Association for the Fifty Plus, is jumping into the fray to stand up for the victims in this “David and Goliath” battle. See Investor alert at www.carp.ca
CARP applauds the Canaccord Capital” April 9, 2008 decision to repurchase most of its clients’ frozen asset-backed paper at par value as this will ease the concerns of its retail investors. Was it coincidence that this occurred just as investors were organizing across Canada for a better deal?
We welcome the Commons Finance Committee’s inquiry into the ABCP crisis. This preventable disaster should finally prompt politicians to undertake the appropriate regulatory reforms that are long overdue. The public is organized and will not tolerate another financial tsunami. We cannot afford to fall asleep again on the issue.
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