Macquarie Private Wealth, OBSI spar over investor compensation

At the time of their complaint, Mr. and Ms. S were a married couple from Ottawa with three teenage children getting ready to attend university in the coming years (Mr. S has since passed away.) The other complainant, Mrs. M, was in her seventies, retired and living outside of Halifax.

OBSI says their advisors placed some or all of their portfolios in investments that were unsuitable given their personal and financial circumstances, investment objectives and/or risk tolerance.

OBSI recommends Ms. S receive $74,791 in compensation, and Mrs. M. receive $157,274.

The investors began investing with Yorkton Securities Inc., a predecessor in name to Macquarie Private Wealth Inc., in 2000. Yorkton’s name was changed twice between 2000 and April 2009. In 2002, Yorkton Securities Inc. became First Associates Inc. In 2005, First Associates Inc. changed its name to Blackmont Capital Corp. The changes in name did not affect any liability of the dealer to its clients, OBSI says.

In December 2009, the dealer firm was sold by its then owner, CI Financial Corp., to the Macquarie Banking Group, which changed the dealer’s name to MPW in February 2010.

In its statement, MPW says that if there is an obligation on any party to pay compensation to the investors, that obligation should rest with the corporate parent of Blackmont during the time of relevant events.

“OBSI ought to seek relief from parties that were actually involved in these cases, rather than to seek damaging publicity against Macquarie,” the statement says.

The statement says MPW is “falsely identified” as the firm at which the advisors were employed. It explains that the dealings in question happened at Blackmont Capital and its predecessor firms between 2000 and 2009, while MPW came to Canada through the acquisition of Blackmont in January 2010.

“At no point were these advisors employed by MPW. At no point were these clients of MPW,” the statement says.

In response to the MPW statement, OBSI issued an updated statement of its own, saying that when MPW acquired the dealer it became responsible for existing obligations, although the names and ownership of the firm have changed since the events occurred.

“The issue of the time of the advisors’ employment is irrelevant to the issue of the obligations of the dealer toward their former clients,” says OBSI’s statement. “These obligations do not disappear with a name change.”

OBSI says MPW was provided with an opportunity to comment on the investigation reports before they were publicly released if it felt there was an error.

MPW has stated that its vendor of the business agreed to indemnify it regarding the complaints, but has declined to fund the settlements recommended by OBSI. In OBSI’s view, MPW remains responsible for the advisors’ unsuitable recommendations that led to the complainants.

OBSI says its recommended compensation amounts in these two complaints were arrived at by first calculating the difference between the amount the investors’ accounts should have been worth had they been suitably invested and the actual value as of the date they removed their investments from the investment dealer. Interest was then added to compensate the investors for the loss of use of their money, calculated from the date they first complained to the firm.

MPW is the third firm that OBSI has publicly criticized for refusing to comply with its recommendations for investor compensation. Earlier this month, OBSI announced it was prepared to start “naming and shaming” firms that refuse to follow its recommendations. OBSI can’t require firms to go along with its decisions.