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Wealth Professional | 05 May 2015, 08:01 AM Agree 0
A veteran advisor is offering a controversial fix for SROs struggling to collect fines levied against banned players.
  • Ken MacCoy, CHS | 05 May 2015, 10:42 AM Agree 0
    Someone needs to pay...and it shouldn't be the form of increased fees downloaded to either the MFDA members and/or investors!
  • Mike Paugh CFP, CDFA | 05 May 2015, 11:51 AM Agree 0
    MacCoy makes a good point. Our firm spends a lot of money on compliance and it shows in our higher MERs. But they also settle with clients because its the right thing to do.

    If the MFDA can't collect the fines and can't compel member firms to pay restitution to clients they aren't much of an SRO.

    Meanwhile those of us who are honest have to pay fees to be a member of this SRO and I have no doubt that much of that money is spent on investigations.

    I wouldn't be surprised if those that are banned can go to work for a non-member firm or go on selling exempt securities as well.

    I wouldn't mind paying membership fees to two securities commissions, two insurance councils, one SRO and the FPSC if they could actually stop the bad behaviour and get clients their money back. Instead I just get told by the media that mutual fund fees are too high in Canada. I think they will stay that way until this mess gets sorted out.
  • Mike Paugh CFP, CDFA | 05 May 2015, 12:00 PM Agree 0
    I think MacCoy makes a good point. Our firm spends a lot of money on compliance and it shows in our higher MERs. But when someone causes a loss to the client the firm pays up.

    If the MFDA doesn't have the power to enforce the rules it sets then it needs to be able to delegate enforcement to some agency that can.

    I pay fees to two securities commissions, two insurance councils, one SRO and the FPSC. None of them can get the clients their money back if the advisor leaves the business. And I wouldn't be surprised if that same advisor could walk into a non-member firm in another province or an exempt market dealer and get hired again anyway.
  • Will Ashworth | 05 May 2015, 12:11 PM Agree 0
    Excellent points, Mike. Ineffective enforcement does little to lower those costs.
  • Bruce Palmer | 06 May 2015, 10:43 AM Agree 0
    Rather than make firms pay Advisor fines, why not follow Alberta's example and allow liens? Seems like an effective way of punishing the guilty (rather than everyone else left ion the industry) and still collecting the fines. And might even deter behaviour a but, which is not such a bad thing.
  • Ken MacCoy, CHS | 06 May 2015, 12:41 PM Agree 0
    I agree 100% Bruce, however as I posted at the link in the above article on 03-March-2105:

    "Large fines are NO deterrent for people who 'take the money and run' from the industry. If the MFDA is serious about their mandate, they need to get ALL provinces to follow Alberta's lead so they have a bigger bite as an SRO."

    Lack of action by the MFDA to rectify the problem & collect those cost/fines suggests they don't care about their mandate.

    If I was a MFDA member, I would be doing some real screaming. But, I'm not. I'm just an interested 3rd party.
  • Curtis Findlay, CFP | 06 May 2015, 05:36 PM Agree 0
    I can't agree. If the purpose of the fines is to deter others from doing similar actions, how does forcing the dealership to pay (and subsequently get reimbursed through advisor grid changes) accomplish the task? The guilty advisor leaves without making restitution and everyone else pays? Perhaps combine payment plans, liens for leverage, and claims against future earnings should be permitted? Perhaps a difference between collection processes for fines resulting from actions that harm investors directly versus purely administration errors should be considered.
  • Will Ashworth | 07 May 2015, 11:39 AM Agree 0
    Curtis, you make a reasonable point that any fines paid by the dealer will ultimately come from your future earnings. However, it seems that the MFDA has more control over fining firms than it does affecting legislative change in the other provinces to allow for liens, etc. I see where you're coming from but it seems crazy to fine two people $1 million as happened here in Ontario when the MFDA know with 100% certainty they're not going to recover the money. Those fines aren't worth the paper they're written on.
    Keep the good comments coming.
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