Investors in New Brunswick complained to their provincial securities regulator about two key issues in 2009: illegal distributions and registrant misconduct, the New Brunswick Securities Commission revealed in early February.

“Predominantly, what we’ve seen has been related to telephone and Internet schemes,” says Rick Hancox, the NBSC’s executive director, of the illegal distribution complaints. “These are organizations that are setting out to defraud.”

Last year, the NBSC opened 75 new case files and launched 58 investigations. This compares with roughly 55 new cases and 45 investigations the year prior.

This growth, notes Hancox, could be the result of more fraud in the marketplace — or more people reporting the fraud. It appears to be the latter that’s happening in New Brunswick.

An NBSC survey conducted a few years ago found that only 15% of respondents said they would report an incidence of fraud. A recent followup survey saw this number jump to 70%. “That’s significant,” says Hancox.

Although reporting fraudulent activity is important, it will not necessarily lead to the outcome investors want. “The challenge with these scams is that they are outside the jurisdiction, and our ability to take direct intervention is limited,” he says.

Meanwhile, the other major source of complaints received by the NBSC in 2009 relates to registrant misconduct — and these are the types of complaints financial advisors are most likely to find themselves embroiled in.

Investors’ key complaints were that insufficient information was being provided, or that there was an inconsistency between what they thought they were buying and what they actually bought.

“Typically, the [complaints] were brought about because of the economic situation,” says Hancox. “People were looking at their statements and wondering why they were in this situation. They wanted to know if they were placed in the appropriate investments, given their risk profiles.”

Many of these situations are simple misunderstandings that can escalate. The confusion often arises when there is an information gap.

In order to avoid such complaints, Hancox says, advisors need to be proactive and ensure their clients’ risk profiles are updated regularly.

— DONALEE MOULTON