Perhaps you trusted your advisor and then they traded without your authorization, or bought you high-risk stocks when you requested low-to-medium risk. Perhaps they significantly misrepresented the risks of an investment, or even sent you false information that overstated your returns, or understated your losses. What would you do? What can you do? The regular options available to you aren’t all that great. Let’s have a look:
1) You could file a complaint with your brokerage firm, by contacting the manager of the branch you deal with. Already there is a fairly obvious conflict that presents itself: in order for your claim to be taken seriously, the manager may have to admit to a failure to supervise the activities of their broker, yet it is that same manager that is responsible for escalating the complaint. See the problem? If you are really fortunate, the firm may decide that you have a strong case and that it’s best to resolve the matter amicably with you, perhaps by offering you some or all of your losses back (if they do, it’s wise to seek external advice before agreeing). But what if they don’t? What recourse do you have then?
2) Your next potential avenue of complaint rests with the Ombudsman. In theory, this should be a viable option; someone whose role is to be an independent arbiter who can review your complaint and propose solutions. Unfortunately, this simply isn’t the case. The ombudsman process is broken. So broken that recently some of the largest investor advocacy groups in Canada have actually called on the Federal government to intervene! I could walk you through this process but it truly is a waste of time unless and until true reform is implemented. If and when that happens, we’ll update this post, but don’t hold your breath. Also, note that the OBSI is capped at a $350,000 limit, so if your losses are greater than this, the ombudsman isn’t for you.
3) You could complain to IIROC (Investment Industry Regulatory Organization of Canada. Rolls off the tongue, doesn’t it?), the Self-Regulating Organization (SRO) that regulates the brokerage firms. Unfortunately, there are a few problems with this process as well. First, there is the inherent conflict: IIROC is funded and overseen by the brokerage firms they regulate (that’s what the “Self” in Self-Regulating means). They also aren’t mandated to provide you with recourse, meaning that they can’t and don’t try to get you your money back. They can sanction the broker and their firm, they can fine them as well, but that doesn’t put money back in your pocket.
4) You could file a complaint with the provincial securities commission that regulates the brokers and their firms (such as the AMF or the OSC). This can be time-consuming and complicated, and generally any recourse you may be entitled to is limited. For instance, here in Quebec, the AMF is limited to seeking recourse of $200,000 or less. If your losses are greater than that, this isn’t a very good option.
5) You can seek legal recourse. If you have never been involved in litigation, be prepared for a long, costly, time-consuming and sometimes frustrating process. If you can’t handle that, litigation isn’t for you. Even if it is, you’re faced with some important hurdles. For instance, lawyers are expensive. Really, really expensive. A good one can easily run you $500 an hour or more. Considering litigation against a huge brokerage firm is no small task: they’ve got great lawyers on retainer, and have virtually unlimited financial resources. Bearing all that in mind, if you do sit down with a lawyer to discuss suing a brokerage firm, the first hurdle you’re going to have to get around is the conflict search. Banks and brokerage firms keep many law firms on retainer; those firms are highly unlikely to take your case. Once you pass the conflict search, you still need a firm that has the securities and capital markets expertise, and most that do already work with the banks! So you’re forced to seek out the much smaller subset of lawyers who are willing to take on the brokers and also have the proper expertise. Once you’ve found one, they will outline how much you’re likely to have to spend, at a minimum. It’s going to be a big number. If you’ve been thinking that the law firm might consider a contingency arrangement (where they don’t charge you but take a percentage of the damages you recover), you should temper your expectations. Most firms are loathe to accept such arrangements; at the very least, they will require an expert to review your claim first to ensure that it’s viable. That process in itself could cost you tens of thousands of dollars, and in the end, you might get an answer you don’t like! So what can you do?
Well, that’s where Damocles come in. We know how brokerage firms work, think and litigate, having been in the industry for a combined total of 50 years. We know what they’re afraid of, what they seek to avoid, and the methods they use to delay or derail a claim, so we can act accordingly. We can work on an hourly fee, but for cases that qualify, we offer a contingency-type arrangement, with a small upfront fee, that allows you to stand toe-to-toe against the brokerage firm. The law firms we work with have the needed expertise and aren’t conflicted, and they benefit from having us vet the claim in advance to make sure it’s solid, and you benefit from our expertise in a number of ways. First, we will review your claim free of charge. If we don’t think you have a solid case, we won’t waste any of your time or money, we’ll tell you right up front. If you do have a solid claim, we will help you resolve it directly with the firm, or, when necessary, work together with appropriate legal counsel and their team to come up with the best strategy to push your claim forward.
Before you hire an expert or give a lawyer a big retainer, you would do well to contact Damocles first. We’ll ask you to put together some documentation for us to review, and we will sit down with you and tell you what your options are, free of charge and with no commitment.