Choosing an individual working for a well-known bank or a registered brokerage firm to handle your investments should ensure that you are dealing with a legitimate company that has assets and insurance in case anything goes wrong. Nevertheless, there are rare cases where an investment advisor intentionally mismanages or even steals clients’ money. To protect your investments, you should communicate regularly with your advisor and ask questions if you have concerns.
What does registration mean?
When you deal with a registered investment advisor, you are working with an individual who is subject to regulatory oversight. Securities regulators set out the education, training, and experience an advisor must have to be registered. The registration process also includes bankruptcy and criminal record checks. Furthermore, an advisor’s registration is subject to them working for a regulated investment firm. Finally, registered advisors are required to follow certain practices and procedures when dealing with a client. You can do a search to see if an advisor is registered.
For more information on registration, visit our Work with an advisor section.
Illegal and unethical advisor conduct
Even though you depend on your financial advisor to help you make investment decisions, it is essential that you monitor your portfolio and keep an eye on their work. If you suspect that anything is wrong, ask questions. If the advisor does not give satisfactory answers, or you still have doubts, contact the firm or a securities regulator.
In 2007, a BCSC panel found that Ian Gregory Thow, a former mutual fund salesperson with Berkshire Investment Group Inc., perpetrated a multi-million dollar fraud. Later, Thow went to jail after being convicted of fraud.
There is more information about the Thow case on the BCSC website. There are also numerous media stories on the Thow case, you can find them by searching his name on internet.
Reading about this case and others, will give you a better understanding of how to identify advisor misconduct. You can also learn more about making a complaint about an advisor in our File a complaint section.
Know the warning signs
Protect yourself and your savings from an unscrupulous advisor by watching out for these warning signs:
- Offers of lucrative private deals: Some registered investment advisors can sell private placement investments. However, the advisor is required to sell suitable products to their clients, and the firm they are working for must approve the transaction. Registered advisors should not be selling or recommending ‘off-book’ or ‘secret’ deals to clients.
- High-pressure sales: Advisors suggest investment products and strategies, and you are supposed to make the final choice on how to proceed. If an advisor pressures you into buying an investment, or bullies you into an uncomfortable investment strategy, there may be something wrong.
- Giving money to an advisor: When you write a cheque for investment purposes, always make it out to the firm that holds your account, not the advisor or another company connected to your advisor. When an advisor asks you to write a cheque to anyone other than his or her employer, it could be a sign something is wrong.
- Errors on your statements: Check your monthly investment statements. When you see questionable investments, or you think there is money missing from your account, there could be something wrong. If your advisor can’t explain or fix it, or they deflect the issue, you need to speak with their employer immediately.
- Your statements don’t look right: Your investment statements are sent to you by the bank or investment firm that employs your advisor. Keep good records, and compare previous statements with the current one to ensure accuracy and authenticity. When there is a discrepancy, or something doesn’t look right, check into it right away.
Taking action against misconduct
Here are some suggestions on how you might approach a situation where you think your advisor has done something wrong:
- Draw up a list of questions: These will help you stick to key issues. An advisor who is doing something wrong may make excuses or offer to make things right.
- Make sure you document the answers: Email is an effective form of communication, as it creates a record of the conversation. When you cannot use email, or you don’t have access to it, take notes or record the conversation.
- Speak to the investment firm: Once you get the answers to your questions, talk to your investment firm, and possibly, a securities regulator.
- Make a complaint: Learn more about making a complaint about an advisor in our File a complaint section.
To learn more about advisor/client relationships, visit our Work with an advisor section. This section explains how to do background checks and what to look for when choosing and advisor. It also details the advisor-client relationship.
Report it and warn others
If you have been approached or know of an investment that fits the description above contact your provincial securities regulator immediately.
In BC, contact BCSC Inquiries. You can also anonymously report suspicious activity through InvestRight’s Report a scam webpage.
Residents from other Canadian provinces can find contact information for their provincial securities regulator at