Charges laid against Alberta advisor

Charges laid against Alberta advisor

Charges laid against Alberta advisor An old-school case of an unlicensed player allegedly doctoring client files to cover losses is highlighting the merits of a one-stop-shop national registration that includes all licensed advisors no matter their specialty.

The observation comes on the heels of an OSC announcement this week that its Joint Serious Offences Team has moved to lay two charges under the Criminal Code of Canada against Michael Lee Hughes and Rivertree Financial Services Corporation.  The first alleges fraud over $5,000 contrary to section 380 of the code, with the second asserting forged document contrary to section 368.

Here’s where things get interesting.

Although Hughes isn’t registered by the OSC to advise or trade in securities, he managed a portfolio for an Ontario resident between 2008 and 2013. That’s problem number one.

The second fly in the ointment? Hughes lost a bunch of money on behalf of his client.

To make matters worse he’s alleged to have hidden this fact by forging his client’s statements to reflect a much healthier financial picture. Worse still, Hughes and Rivertree are also alleged to have continued charging investment management fees on this healthier, much higher dollar amount, resulting in a double whammy to the unsuspecting client.

Hughes, who now lives in Alberta, operates a website that touts Rivertree’s slogan, “Making your Financial Needs our #1 Priority.” Services offered according to Rivertree’s website include tax management, accounting services, financial planning, insurance, and investment management.

Hughes’ profile says he’s a CMA in Alberta; a quick search of the Certified Management Accountants of Alberta directory confirms he is indeed a member. However, a search of the CSA’s national registration search shows no record of a Michael Lee Hughes or Rivertree.

Financial advisors operating in Canada would be well advised to recommend to potential clients that they first do a search of the CSA registry to provide peace of mind about their advisor’s registration status.  
But the case may also recommend the kind of one-stop-shop national registration Advocis is calling for where all licensed advisors, no matter their specialty, are recorded.

Right now the protection provided clients by the big firms doesn’t necessarily protect investors across the board.

Harley Lockhart, an Advocis director, points out that “the CSA has no authority over life insurance. A life insurance license is required to sell segregated funds. It is possible to legally help clients with investments without being on the CSA list.”

As this case makes its way through the courts perhaps we’ll learn more about how investors can be protected when it comes to licensing, or the lack thereof.
 
3 Comments
  • larry elford 2015-01-13 7:41:36 PM
    The various ways that the investment industry can dupe, deceive and fool the public into a false sense of trust far exceeds that of a few bit players like Michael Lee Hughes. For example, when you (if you) get to the CSA registration search page, what you will NOT be told by any Canadian authority is that there MAY be a license or registration category for your financial person, but they will NOT be utilizing THEIR ACTUAL license or registration category with which to earn your trust. They will use a non-regulated title spelled "advisor", which according the Chris Besko, legal rep for the CSA, is a "title" and not a registration category. ("Adviser" is the legal classification for those who owe a specific protective duty of care to their customers)

    If you are confused, "welcome to my parlour….said the investment industry to the customer." His comments as well as an explanation of why and how deception and tricks like this are an industry standard practice are found here: http://www.investoradvocates.ca/viewtopic.php?f=1&t=193#p3775

    I am happy to follow up with more details to anyone who would like more information about how investment professionals deceive to defraud their customers of significant amounts of their rightful investment returns. Join me at Investment System Fraud on Facebook, or @RecoveredBroker on Twitter. Cheers.
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  • WealthAdviser 2015-01-14 12:48:52 PM
    The title of the article does not appear to match the content.

    Based on the title, I initially thought the article was about a financial advisor defrauding the public.

    I don't think he was.

    Perhaps to be a bit clearer, the article might have read: Charges laid against Alberta certified accountant.

    Even another poster in his comments assumed the article was about an advisor therefore using the term "advisor" in the headline is confusing to WP readers.

    It seems plain to me that the perpetrator that was charged was not a licensed financial advisor but a certified accountant (CMA) that was pretending to be an advisor.

    That is why he didn't turn up on the Canadian Securities Administration listing - wrong list! Likely, the perpetrator would not show up on the provincial securities regulator's list either.

    Perhaps the author of the original article could clarify further, but in re-reading the article, it seems to me that the unfortunate story is about someone, possibly an accountant, who defrauded the public by either impersonating a financial adviser or supplying investment services to the public while not being licensed to do so.
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  • Will Ashworth 2015-01-15 3:19:09 PM
    WealthAdviser.

    These are great comments.

    I used the term "advisor" because Hughes' website refers to segregated funds. That suggests he's providing investment advice in some form.

    In the end, I believe your last point is the most likely:
    it seems to me that the unfortunate story is about someone, possibly an accountant, who defrauded the public by either impersonating a financial adviser or supplying investment services to the public while not being licensed to do so.

    A national registry might not eliminate problems like this but at least it would recognize that if you give advice you must be licensed in one form or another.
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