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The client, a novice investor in her 60s, was looking to invest $75,000 of an inheritance she received. This money was a significant portion of her net worth. With the help of a long-time friend, she opened a margin account with the firm. Through her friend, the client completed the account opening documentation. She never met with the advisor. In fact, they only spoke twice by phone when the client wanted to withdraw money from her account.
When the client met the advisor, she was 67 years of age, retired and recently divorced. The client could no longer work because of her failing health. For most of her adult life, she did not work outside the home. Her income consisted of Old Age Security, Canada Pension and $250 a month from her ex-husband.
A couple had been investing with their advisor for several years. The husband instructed the advisor to make a small change in one of his accounts. About a week later, both the husband and the wife received trade confirmation slips in the mail indicating that a large number of units of mutual fund A had been switched to mutual fund B in their accounts.
The client was a low-risk investor looking for safe, income-producing investments. He wanted to avoid the volatility of the stock market, although he would tolerate a small share of his portfolio in equities as an inflation hedge.
The client's investment advisor recommended an investment in Air Canada debentures, suggesting they were “not very risky." He failed, however, to share the prospectus for the debenture which contained rating agency descriptions ranging from “lower quality" to “speculative and non-investment grade." More than $43,000 of the client's money was invested in the debentures.
When this couple went to a new advisor in 1995, they were earning a combined income of about $55,000, had no debt and had accumulated about $300,000 in liquid and fixed assets.
A few years after immigrating to Canada, a middle-aged couple opened an account with a full service investment firm and deposited $80,000 from the sale of their home in the UK and the husband's severance pay.
Nearly three-quarters of a 91-year-old client's account at a full-service brokerage firm was invested in a bond mutual fund. The investment advisor convinced the client's son, who held Power of Attorney for the client, to switch the investment in the no-load bond fund to the back-end load version of the same fund. The mutual fund company paid the advisor and the brokerage firm a $30,500 commission for the switch.
Unsuitable investment recommendations were made for a client, for which her investment firm offered to compensate her $30,000. The client turned down the firm’s offer and appealed to OBSI. On closer scrutiny, however, OBSI concluded that the client should be compensated only $20,000.
The investor, a client of a full-service investment dealer, conducted more than 200 trades in an eight-month period. He then moved his account, claiming that he had suffered losses as a result of the advisor “churning" his account. (Churning is excessive trading by an advisor to maximize commissions.) The investor also said the stocks bought and sold were overly concentrated in the volatile high tech sector.
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