Stan Buell knows all about the financial and emotional devastation investors feel when they're victimized by an unscrupulous adviser. In the mid-1980s, he lost about $1-million to a broker who engaged in fraud and unauthorized trading.
Learning that the adviser had previously been disciplined three times only added to Mr. Buell's suffering. After doggedly pursuing his case and recouping a portion of his money, he made a vow.
"When I got through it - and it took me years to get through it - I said, 'Okay, I'm going to devote some of the rest of my life to helping other people.' Because it's devastating, absolutely devastating," he says.
Now, as president of the Markham, Ont.-based non-profit Small Investor Protection Association ( sipa.ca), the retired engineer is making good on his promise. His volunteer-based organization helps investors navigate the often intimidating legal and regulatory maze they face when trying to recover losses.
If you believe you've been treated unfairly by an adviser and don't know where to turn, this Investor Clinic is for you. Based on conversations with Mr. Buell and fellow investor advocate Ken Kivenko, we offer some tips on how to fight back.
ASK FOR HELP
Fighting the powerful investment industry alone is like stepping into the mixed martial arts ring with no training: You are going to get killed. That's why it's critical to get advice from someone who knows the ropes and can determine whether you have a case.
"The main thing we do is try to provide some guidance because most people don't know what's going on. They have a problem and it takes them a while to find out where to go," Mr. Buell says.
For an annual membership fee of $20, SIPA provides resources including tips on where and how to file a complaint and a list of lawyers recommended by other members. In the future, it hopes to offer brief initial legal assessments so investors can decide whether it's worthwhile to make a claim.
For those who have suffered large losses, he believes that hiring a good lawyer - typical cost: $300 to $600 an hour - is critical. Make sure it's a securities litigator with a track record of winning cases, and ask to see a decision in one of those cases, he says. "You don't want to go cheap on a lawyer. You need a lawyer who can fight the battle," he says.
PREPARE YOUR COMPLAINT
Gather all of the following documents, if you have them. If you don't, ask your adviser's firm to provide them: The initial letter of engagement, new account application form, Know Your Client (KYC) form, account statements, transaction slips, records of any meetings or correspondence with your adviser, your investment policy statement, and any other materials you feel are relevant.
Mr. Kivenko recommends creating a time line of significant events, including noteworthy trades, discussions and e-mails. This will help you construct a chronology to use in your complaint letter, which will make it easier for the investigator to assess the merits of your case.
"You have to file a complaint properly. If you word it incorrectly or leave out an important fact, you could be devastated," he says. For tips on preparing a complaint, see the "Investors Guide to Effective Complaints" on Mr. Kivenko's website at canadianfundwatch.com. Also check out the website's many other useful articles on investor protection.
CONTACT THE FIRM
Ask the firm about its complaints process and send your letter to the appropriate person, which may be the adviser, compliance officer or branch manager. In your letter, "be clear about what went wrong and when. State the outcome you expect - for example, an apology, getting your account corrected or getting your money back," the Ontario Securities Commission advises in its brochure "Getting help with your complaint" (available at osc.gov.on.ca).
Mr. Buell recommends following up every two weeks and keeping a paper trail of all e-mails, letters and faxes. The firm should deal with your complaint within 90 days, he says. If you aren't satisfied with the outcome, or feel that your complaint won't be resolved within 90 days, you have other options.
The Ombudsman for Banking Services and Investments (obsi.ca) provides a free service for resolving banking and investment disputes. OBSI can recommend restitution of up to $350,000. You must contact OBSI within six months of receiving the firm's final response to your complaint.
If you're not happy with OBSI's recommendation and you haven't yet hired a lawyer, now may be a good time (your provincial law society can help you find one). Be mindful of your province's limitation period, which is the time you have to take legal action. In most provinces, it is two years from the time you discovered, or should have discovered, your loss, Mr. Buell says.
Clients of firms that belong to the Investment Industry Regulatory Organization of Canada can request arbitration. But because compensation is limited to $100,000 and the decision is binding, arbitration is used infrequently, Mr. Kivenko says.
If you try all of the above and are still unsatisfied, you can take your adviser to court. The good news is that more than half of all cases are resolved before it gets to this point, Mr. Buell says. Most settlements are for somewhere between 50 per cent and 75 per cent of the amount claimed, he says.
Some investors can't take the stress and abandon their claims before they are resolved. "Financial institutions rarely concede easily or promptly," Mr. Kivenko says. "Some may try to intimidate you by writing you a formal-looking letter summarily stating that you have no valid claim. ... It's part of the game. Expect a protracted, emotional and frustrating trip."
Which is all the more reason to reach out for the help that's available.
Writing an effective complaint letter
1. Keep it businesslike, courteous and professional. Avoid emotion and profanity.
2. Clearly state the problem, time lines, employee name, and specific reasons you believe you have a valid complaint.
3. State what restitution you want.
4. Set a deadline for a response.
5. Send a copy to the adviser's supervisor or branch manager.
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