Another investment firm has refused the compensation recommendation of the Ombudsman for Banking Services and Investments (OBSI).
OBSI said Thursday that it recommended that Keybase Financial Group Inc. should compensate a retail investor to the tune of $73,884, after it found that the firm should be responsible for a portion of the losses suffered by an unsophisticated investor.
According to the investigation report released by OBSI, the case involves an advisor that put a client into two mortgage investments that were subsequently lost. It says the second investment was made without the client’s authorization.
However, OBSI also found that both investments were made without Keybase’s knowledge. “Despite this, our investigation found that the firm missed important red flags and had several opportunities to prevent both mortgage investments from ever happening,” OBSI said.
The report indicates that the firm maintains that the client was aware of the trades, understood the risks, and is responsible for the losses. Keybase also argues that, as the investments were made off-book, without the firm’s knowledge, it couldn’t supervise them.
OBSI disagrees, it says that its investigation found that the client trusted and relied heavily on her advisor, that she was unaware of the risks of the first investment, and didn’t know anything about the second one as the advisor redirected her account statements to his own postal box. It also says that the Ontario Securities Commission (OSC) imposed conditions on the advisor’s registration that required Keybase to closely supervise his activities.
As result, OBSI recommended that the firm is primarily responsible for the losses. However, it also said that the client bears some responsibility, as does another firm. It recommended that Keybase pay $73,884 to the investor, which represents 75% of one of the losses and 70% of the other. It ruled that the client bears 25% responsibility for the losses; and that a trust company, which it says relied on questionable signatures and failed to follow up when it became clear its records were not correct, were also part of the second loss, reducing Keybase’s responsibility for that loss by 30%.