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Escorted by police, financial adviser Earl Jones, centre, accompanied by his lawyer Jeffrey Boro (far left and looking at Jones), leaves an office tower in Montreal earlier today.Graham Hughes/The Canadian Press

Earl Jones concealed the handcuffs beneath the sleeves of his striped shirt, but the sight of two detectives hauling him to the station still consoled some of the investors he allegedly bilked.

"Oh my goodness, this is a satisfactory stage, isn't it," said Margaret Davis, a 78-year-old pensioner who has lost her $180,000 investment security blanket. "I didn't expect it so soon, but maybe now we can get some answers."

Detectives arrested Mr. Jones at his lawyer's office yesterday afternoon, ending the hunt for the Montreal financial adviser who shook small Quebec investors and provoked questions about lax oversight with the collapse of a $50-million pyramid.

Police refused to confirm the arrest, but Mr. Jones's lawyer did, adding he will appear in court Tuesday to face several counts of theft and fraud.

Experts had said the case, with thousands of transactions over 30 years involving some 200 clients, would take months to construct. Mr. Jones's lawyer, Jeffrey Boro, said his client was co-operating with police, suggesting a plea arrangement may be in the works.

Mr. Jones, 67, is being investigated on allegations that he embezzled millions of dollars from his Montreal asset-management firm. Court filings allege that he ran a Ponzi scheme, a scam where unknowing clients are paid with money from newly signed investors rather than from investment yields.

No one among his clients, their heirs, regulators or financial institutions raised red flags until the money ran out and cheques started to bounce earlier this month.

Mr. Jones's disappearance three weeks ago led to speculation he had fled to the U.S., Britain or the Caribbean.

"I could always reach him without making a long-distance phone call," Mr. Boro said.

Ms. Davis was among Mr. Jones's earliest clients. She met him around 1979 at a Westmount community centre financial course. Such seminars were a rich source of early clients for Mr. Jones.

Ms. Davis, whose husband died in the early 80s, laments never checking Mr. Jones's credentials. She now knows that Mr. Jones's "special" Royal Bank account - that supposedly garnered a 14 per cent interest rate in recent years - didn't exist.

"I never had any reason to complain, foolish me," she said.

Jerry Coughlan, the son of a senior whose life savings have vanished, says weak enforcement, feeble penalties and Canada's patchwork of provincial regulators leave investors vulnerable.

Mr. Coughlan is in a unique position to judge. Not only is his 77-year-old mother, Mary, among the alleged victims, Mr. Coughlan is a banker who helps handle billion-dollar personal fortunes.

The managing director of private wealth management at Deutsche Bank National Trust Company in Boston, Mr. Coughlan thinks Quebec should drop opposition to a national securities regulator, given the province's recent massive investment frauds, from Mount Real to Norbourg.

"It seems to me Quebec is emerging as a quasi Third World environment in terms of regulation," he said.

A province with a budget of $80-million and 100 investigators doesn't have the clout of a national body like the Securities and Exchange Commission in the U.S., with its billion-dollar budget, he said.

Sylvain Théberge, spokesman for L'Autorité des marchés financiers, admitted Quebec is getting a bad reputation. Mr. Jones didn't register with the AMF and operated outside any oversight.

Mr. Théberge said with no complaints, it was impossible for regulators to catch on.

"These cases give the impression Quebec's financial sector is contaminated, but with more than 90 per cent of the individuals registered at the AMF, there's no problem at all," said Mr. Théberge.

In addition to a weak regulatory regime, Canadian criminal law is not nearly tough enough on fraudsters, Mr. Coughlan added.

"I know the U.S. is not perfect, as Bernie Madoff illustrates, but at least there are real teeth," he said.

Mr. Coughlan feels guilty that his financial savvy couldn't protect the seven-figure estate that had kept his mother living well since his father died 30 years ago.

"You would have to know my mother. She's a very independent woman," he said.

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