Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 10 - Evidence - Meeting of April 14, 2005
OTTAWA, Thursday, April 14, 2005
The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:50 a.m. to examine and report on consumer issues arising in the financial services sector.
Senator Jerahmiel S. Grafstein (Chairman) in the chair.
[English]
The Chairman: Good morning, ladies and gentlemen. Welcome to our audience. We are on CPAC and on the World Wide Web and are delighted to continue the Standing Senate Committee on Banking, Trade and Commerce's study on consumer protection issues within the financial sector.
We are delighted to have esteemed witnesses from the Investment Dealers Association of Canada, the Mutual Fund Dealers Association of Canada and the Investment Funds Institute of Canada.
I want to pay particular note to a former parliamentary colleague, Mr. Tom Hockin. Not only was he a distinguished member of Parliament but also a Privy Councillor.
Senator Angus: What party was he in?
The Chairman: He was in the Progressive Conservative party, but all that pales in significance, because both Mr. Hockin and I came from London, Ontario and went to the University of Western Ontario; small boys from small towns rise to high occasions. I am delighted to have you here Mr. Hockin.
Mr. Joseph J. Oliver, President and Chief Executive Officer, Investment Dealers Association of Canada: I am the President and CEO of the Investment Dealers Association of Canada, which regulates all 212 investment dealers operating in Canada and their 25,000 registered employees.
[Translation]
I appreciate the opportunity to address this committee on subjects that are central to the IDA mandate: investor protection and consumer redress.
[English]
Clients of IDA member firms have a range of options that are as comprehensive and robust as any in the world. An investor who believes he or she has been subject to unfair or improper business conduct is encouraged to send a written report to the association.
We work hard to ensure our complaint process is easily accessible and that means letting the public know about it. An IDA brochure contains information on making a complaint to the IDA; the independent arbitration services; the Ombudsman for Banking Services and Investments; and, the mediation service offered by the Autorité des marchés financiers.
[Translation]
Investors can call our bilingual toll-free information/complaint line for help in making a complaint or to request a customer complaint form. Last year our customer complaint officers responded to inquiries and requests for assistance from some 1,900 investors. At least 22,000 investors visited our online member firm/registrant information service to learn what type of registration an individual has, what products he or she is licensed to sell, and whether there are any conditions on the registration, such as the requirement that they be supervised. The public can also find out if a firm or advisor has any disciplinary history with the IDA.
[English]
Mr. Oliver: Member firms and registrants must co-operate fully and in a timely manner with the IDA complaint investigations or we will ban them for life. Member firms must report all client complaints and disciplinary matters including internal investigations, disciplinary actions, settlements and civil, criminal or regulatory actions against the firm or its registered employees. ComSet, an online database, receives these reports. Last year, the firm reported almost 1,900 ComSet events. IDA staff monitors ComSet daily.
In the past three years, the IDA conducted 173 disciplinary hearings and fined firms a total of $46 million and individuals $11.4 million, including disgorgements and costs. We suspended 19 individuals, banned for life 32 individuals and terminated the licences of three firms. I have filed a written submission that contains additional details and information.
I will now move from regulation to consumer redress or financial restitution. The IDA's arbitration program is a prompt, inexpensive and independent process for disputes of up to $100,000. Essentially, this program was established for claims that are too small to make recourse to courts economic. Arbitration is more formal, less adversarial, and cheaper and much faster than the courts. Many investors also value its confidentiality.
[Translation]
If a client chooses arbitration, the firm must participate. Our bylaws require that firms distribute an IDA-approved brochure to all new clients and, more importantly, when they receive a written complaint. In the past five years, the three independent agencies have adjudicated a total of 279 cases.
[English]
Mr. Oliver: Participation in the arbitration program has declined dramatically since creation of OBSI, reflecting the fact that the ombudservice is free and non-binding, the obvious first choice for an aggrieved investor.
In conclusion the IDA's regulatory and quasi-judicial process enhances investor protection by dealing with infractions through tough, but fair penalties. The redress process provides restitution through an array of user-friendly alternatives. Combined, we provide a fair and robust system that protects investors and bolsters public confidence in the capital markets.
Thank you and I look forward to you are questions.
Mr. Larry M. Waite, President and Chief Executive Officer, Mutual Fund Dealers Association of Canada: Good morning, I am the President and CEO of the Mutual Fund Dealers Association of Canada, which is a national self- regulatory organization for mutual fund dealers. Prior to joining the MFDA in 1998, I was with the Ontario Securities Commission for twenty years. I thank the committee for inviting the MFDA to be here this morning.
The MFDA is a relatively young regulator of financial services in Canada, having been formally recognized by the various commissions in 2001. The impetus for the establishment of the MFDA was the recognition among regulators that the regulatory framework for the mutual fund distribution in Canada was inadequate. The deficiency was identified in Ms. Stromberg's 1995 report, which identified concerns that in the wake of the years of explosive growth of mutual funds in Canada, the regulations had fallen far behind the growth.
The Mutual Fund Dealers Association of Canada is now operational with 100 staff in Toronto, Calgary and Vancouver. Our investor compensation fund is awaiting formal approval by the regulators and should be offering coverage in July.
The MFDA of Canada has 181 members with approximately 70,000 approved persons. Collectively, the MFDA members have responsibility for $250 billion in client assets. The MFDA has a single-purpose mandate to regulate the activities of mutual fund dealers and their approved persons. Investor protection and the public interest are central to the MFDA. The public-interest orientation is strongly reflected in the MFDA governance structure.
The 13-person MFDA board is comprised of six public and six industry members and the president. The chair is presently a public director and public directors chair all five MFDA board committees. The regulatory responsibilities encompass the areas of compliance, enforcement and policy development.
I will now illustrate the manner in which our regulatory activities are aligned with investor protection and the public interest.
The initial development of the MFDA rulebook aimed at filling gaps in the regulatory framework respecting mutual fund dealers. It introduced many new and stringent requirements for members and approved persons not previously specified in securities law.
Compliance activities at the MFDA are guided by investor protection and the public interest. Compliance staff is active in conducting on-site reviews of member head office and branch locations. To date, reviews have been conducted at 140 members. We expect to complete full compliance reviews of all members by the end of 2005. This is a very important achievement as most of the dealers have never been subject to a review by any regulator prior to the establishment of the MFDA. The MFDA enforcement department became operational in early 2004. It has adopted a proactive approach to reviewing circumstances of non-compliance. For example, where the MFDA identifies misconduct by an approved person we look further into the case to identify root causes, such as a lack of adequate procedures and/or supervision.
Enforcement and compliance work together on cases where compliance examinations identify material breaches of members or approved persons. In the area of client complains, the MFDA rule book requires members to respond to client complaints promptly and fairly. The rule book also requires members to report serious complaints to the MFDA. The enforcement compliance departments are vigilant in monitoring compliance with those requirements.
The MFDA has introduced a requirement that all members must participate in the consumer dispute mechanism administered by the Ombudsman for Banking Services and Investments. The MFDA rules require that all clients receive information respecting the ombudsman when they open the account, and whenever a client brings any complaint to the attention of the members. There are two opportunities to be given any information. Failure by a member to cooperate with an OBSI renders the member subject to disciplinary appreciation.
The MFDA is open and transparent. We maintain a website that contains information relating to our regulatory requirements, information on how to make a complaint, information respecting OBSI and all hearing activities, and links to websites that provide investor protection information.
We are in the process of revamping and increasing the content of our website.
In conclusion, the MFDA is a young regulator and to date we have made significant impact on the industry from an investor protection perspective. Members are better aware of and are complying with their obligations and responsibilities to investors. For those members not in compliance, we actively enforce compliance. Members that fail to comply may be subject to termination of membership and loss of registration.
Member and public awareness of our role is key and while our efforts in this regard are not complete, we have made significant progress. I have more details in my written submission.
Mr. Tom Hockin, President, Investment Funds Institute of Canada: It is a pleasure for me to be here again in the nation's capital and with former parliamentary colleagues.
You have heard from the two self-regulatory organizations in the securities world. We are not a self-regulatory organization. We are a trade association, although I do sit on the MFDA board.
IFIC represents about 99 per cent of all the assets under management of the mutual fund industry. This includes the banks, the insurance companies, and the independent manufacturers and distributors who are members of Investment Funds Institute of Canada.
I thought you would like an update on the industry and especially developments that affect the end-unit holder.
The first important set of work is the work on the ``registration reform'' project by the CSA, the Canadian Securities Administrators. They have produced a direction document for the two SROs to put into rules. This is a pretty important document for clients. An account-opening working group is proposing a new form that each sales representative would have to have when opening an account with a client, and we remain vigilant that the document not be long and confusing.
There is also a personal performance reporting working group. I do not know if any of you own mutual funds, but your personal performance is not the same as the funds' performance because you buy the funds at different times of the year and in different amounts.
Investment Funds Institute of Canada has proposed using the modified Dietz performance method; it is a complicated formula, but it is the best. We recommend that the modified Dietz method for calculating and reporting personal performance be mandated across the industry.
There is also a working group on enhanced disclosure. What potential conflicts does your dealer have?
What is the representative and the dealer paid?
A working group reported and gave directions to the two SROs in this regard. We support clear and effective disclosure in not just mutual funds, but other products too. Mutual funds are the low hanging fruit, but all products should have the same level of disclosure, whether it is an insurance product, a collective investment insurance product, a ``wrap account'' or even a bond. We support that, but we would like to see it effective across the whole range of investment opportunities.
In terms of consumer complaints, both OBSI and CFSON, the other ombudsman groups, say that the mutual funds have a low incidence of complaints, about 3 per cent to 4 per cent of all their complaints.
As for the market timing problems that you may have read about in the newspapers, especially in the United States where there were serious mistakes made by mutual fund managers, you will want to know that IFIC is the trade association that produced a tool kit of recommended ways to handle this before the regulators came down with their settlements. The U.S. Securities and Exchange Commission, the British Financial Services Authority, and David Brown's latest comments as chair of the Ontario Securities Commission mirror our thinking. There has been no evidence of market timing since mid-2003.
As for protecting consumer interests at the management level of the mutual funds, we suspect soon a CSA final rule that will require mutual funds to have independent directors through independent review committees. Most major fund complexes now have independent directors, and so we have always supported this reform. Finally, all of you are interested in the overall regulatory framework. The good news is when it comes to the distribution of mutual funds we have a nation-wide consistent approach thanks to the two SROs sitting to my right, working with the authority in Quebec.
As for the regulation of the management of mutual funds, we are without a single regulator approach when it comes to interpreting the national instruments that are out there.
This industry is now a $513-billion industry. Not all the management companies are enjoying net sales. In March, only three of the big companies had net redemptions. The bank owned funds are now 44 per cent of the net sales in the industry. There are other collective investment products outside of IFIC that add up to about $70 billion. These are all very important for the average Canadian who is trying to save for retirement.
Finally, honourable senators would be interested to know that Canada's trade association, the Investment Funds Institute of Canada, was able to secure the secretariat for coordinating the International Investment Funds Association, the umbrella group that coordinates all the IFIC-like organizations around the world. There are about 40 countries with fund industries. It is now located in Montreal and run by Canadian staff. Therefore, Canada has an important window into the industry internationally.
The Chairman: We have a long line of senators. I would hope each senator will be precise as possible.
Senator Angus: Gentlemen, thank you very much. It is obvious that you have been following this review of the role of the consumer in our financial system in Canada. This is important to us because you will appreciate that in our role as senators, and particularly in the banking committee, when mergers and banks are not on the table, we tend to hear more from individual consumers, retail investors and retail clients of IDA members.
These questions may appear facile to you but they are reflective of the kind of inquiries, letters, and complaints I hear.
Mr. Oliver, I recognize that you and Mr. Waite are the CEOs of two self-regulating organizations, which of course the less fortunate well-heeled individuals out there find suspect. We hear: We cannot afford to deal with these people. They take advantage of us. Their members are the people our complaints are against, and we do not get a fair shake.
If I read your briefs carefully, you address those complaints.
Mr. Oliver, how does a retail investor end up losing his or her savings?
What has happened when an investor deals with one of your young sales persons, remunerated and compensated largely by volume and commissions, and suddenly finds himself wound up in unfamiliar stocks and getting contracts in the mail about three times a week.
I recognize you have done all these prosecutions, but is it a better environment today than heretofore for that type of individual, and what good news do you have for those kinds of people that are calling us?
I am certain that other senators get these calls.
Mr. Oliver: There has been a decline in complaints, which in the past year were some 1,300. We must put that 1,300 in the context of a capital market in which 50 per cent of the Canadian population participates directly and which generates some 35 million to 40 million transactions. That is not to condone wrongdoing. On the contrary, we pursue it rigorously, but it puts it in a context. The complainants are down from a peak of 1,800, and that flowed directly, in my opinion, from the ``tech bubble'' and the decline in markets and therefore the losses to individuals.
Investor protection is central to our mandate. Our goal is to protect investors and to enhance the efficiency, competitiveness, and integrity of markets. We do that through the regulatory stream and through the consumer redress stream.
In terms of regulation, we have very comprehensive compliance reviews of all our 212 firms, and we have taken rigorous enforcement action. We have imposed fines totalling $58 million against firms and individuals, and we have suspended or permanently barred 51 individuals over the past three years. Our focus is on protecting investors, particularly small investors and with an emphasis on seniors. Our record speaks for itself.
We also have a very user-friendly access to information. We require firms to distribute information about the arbitration system, the ombudsman, or the mediation system in Quebec any time they receive a complaint any time they open a new account. There have been over 5 million of those brochures ordered in the last four years. We also communicate through speeches and articles. We are reaching out to the Small Investors Protection Association and to CARP, which is a representative of seniors.
The nature of the heft on the regulatory side and the wide broad range of consumer redress mechanisms address that issue. On the consumer redress side, I do not believe that there is a jurisdiction in the world that has as comprehensive and robust a system of consumer redress as we do in Canada, and it is clearly far better than most, if not all.
Senator Angus: When this small, unsophisticated investor calls up one of your members, do you record the call?
Mr. Oliver: We do not record the phone calls; we record the information.
Senator Angus: There is not a tape going on the call with every one of your sales persons?
Mr. Oliver: There is not a tape. We take the information. We channel people into the process that is appropriate for them, and that process will take those complaints and deal with them through our complaint investigation and prosecution service. If it is more appropriate for them to go to the ombudsman, we refer them to the ombudsman. We will spend as much time as necessary to get the information and to guide the person in the direction that is appropriate.
At the end of the day, most people want their money back if they thought they were poorly treated, and that is why consumer redress is there because as an SRO we do not have the right to have people reimbursed. We have the right to fine up to $1 million per individual per offence and $5 million per firm, and we can impose triple disgorgement at the maximum. That stream relates to justice and keeping inappropriate people from preying on the public. The consumer redress system helps people to get their money back.
Senator Angus: This study is to ensure that the thrust of consumer protection in our financial markets and services sector and the implementation of the various protective mechanisms following its enactment are working, following Bill C-8.
Just to give one example on the retail stockbroker-type dealings, consumers complain about the enhanced ``know your client'' rule. They have to fill out forms that even a person with a Ph.D. in English literature could not understand. Frankly, it seems worse than it was before.
Is that an isolated case?
Mr. Oliver: I have not heard too many complaints about the complexity of the forms. I have heard complaints that people had not read the forms properly. I have heard that the advice, often based on poorly recorded information, was unsuitable. I have heard complaints that they had not signed the forms.
These are reasons to take regulatory action and to have people get their money back. Our complaint forms are quite simple. We have given you a mass of material, including that form.
Our info complaint line last year received 1,900 calls. Twenty-three thousand investors used the member firm and registration service and millions of those brochures are in circulation. We have a website with an investor corner. We have a glossary of terms. We have questions and answers. Our brochure Empowering Investors is very easy and accessible for people to understand and to access.
As I said, there were 1300 complaints, and a percentage of those complaints merit a full investigation, which they do get. We have benchmarks for dealing with complaints and investigations.
The Chairman: It would be useful for you to give us those forms.
Mr. Oliver: You have them.
Senator Massicotte: Some very informed opinions suggest that we are not doing our job concerning supervision or governance of all institutions affecting financial instruments. Is it because we are not infringing or contravening the rules in Canada, or are regulatory agencies not doing their job?
What is your opinion?
We hear more and more often that maybe we have got it wrong; the self-regulatory approach where people self- govern creates an obvious conflict.
Can you comment, Mr. Oliver or Mr. Waite?
Mr. Oliver: First of all, there are certain structural and legal differences between Canada and the United States. The U.S. has the Martin Act, which gives the New York Attorney General Spitzer powers that are unavailable in Canada. There are some clear differences in that regard on the prosecutorial side.
The Chairman: Have you done an analysis of the comparison between the two regulatory regimes as it relates to the Martin Act, and if you have, may we have a copy?
Mr. Oliver: I do not. The reason I do not is because it does not relate to self-regulation, but I can look into that issue.
The Chairman: Whatever you can do would be helpful. I think Senator Massicotte raises an issue that is a large question for us, and it is something that we obviously are going to look at.
Mr. Oliver: I am trying to answer the question broadly in a way that goes beyond our jurisdiction. In terms of our jurisdiction, while we are talking about the issue of powers, we have asked for enhanced enforcement powers that we think are necessary to enable us to do our job fully.
We are quite properly held to account on enforcement. Enforcement is the key. If you do not have strong enforcement, you do not have effective regulation. Strong enforcement is critical for maintaining investor confidence. People have to do the ``perp walk.'' There are criminal issues and regulatory issues.
In terms of the self-regulatory side, we need the ability to subpoena witnesses who are not employees, to subpoena documents, to continue to pursue employees who have left the industry, because only 20 per cent of our fines can be collected.
We need the power to appoint a monitor when a firm is close to but has not arrived at bankruptcy, because that is protective. There are some issues that should be addressed. No one has objected in principle, but we have been unable to get the provincial regulators to move forward.
As to your broad question relating to self-regulation, the rationale for self-regulation is that it brings to the development of policy the expertise of industry people who are close to the markets, who have the knowledge of how things work, who can provide practical solutions and achieve the regulatory purpose without undue cost and collateral damage. They can get the regulatory job done in a way that does not reduce our market's efficiency and competitiveness.
The industry can play a very important role in the development of policy and the self-regulatory organizations are the channel by which that is achieved. We believe that the track record is a very good one on the policy development side. It fact, it has been critical. Numerous examples of that never get into the press, but how policy is shaped and the ultimate result of the policy is a justification for the SROs.
As legislators, you know how your committee and other committees can influence policy development in a very positive way, but the public does not always hear the result. We are very much involved in that process, as we are, of course, in the development of our own rules involving the direct regulation of the member firms, their business conduct and their financial viability. It is prudential regulation and business conduct.
The issue is that self-regulation by its nature inherently has conflicts of interest. That is obvious. The question is, ``What checks and balances exist to ensure that public interest always takes precedence over the interest of members?''
Our track record has demonstrated that we do have a variety of checks and balances. We have public directors on our board and on our various governance committees, including our member regulation oversight committee. All our policies are reviewed by the public, and each one has to be approved by the regulators. There is a comprehensive and intensive oversight by four of the 13 commissions in the country who review us every three years, and sometimes their reviews last three years. It is a continuous process of oversight and review. It is that combination of checks and balances that assures the public that we keep the public interest first at all times.
Senator Fitzpatrick: Can you give us an idea on the cost of your self-regulatory process as opposed to an imposed regulatory process?
Obviously, one way or another, consumers or taxpayers would probably bear that cost. I would like to have an idea of your assessment of your self-regulatory governance in costs compared to regulatory governance.
Mr. Oliver: Our recently approved budget is $45 million, and that is for the 300 people operating in five offices across the country.
The Chairman: Is it dedicated to regulation?
Mr. Oliver: Eighty-five per cent to 90 per cent is directed to regulation. That has been a constant number ever since I have been involved with the IDA in 1995.
The Chairman: Can we have a breakdown of that budget and how it is allocated? It would be interesting for us to have a look at those figures. It must be a public budget.
Mr. Oliver: It is not a public budget, but I am happy to provide you with a copy.
The Chairman: Senator Fitzpatrick has raised an important policy point, which is the cost of regulation.
Senator Fitzpatrick: I take it you are not prepared to estimate the cost of government-provided regulatory costs or services?
Mr. Oliver: I could not do that, but there are two aspects to it. One is the financial cost of the commissions and their fees. Then, there is the intangible but greater cost of what the impact of a different regulatory result might be, and that is impossible to estimate.
Senator Massicotte: Mr. Hockin made a comment concerning the independent management of the funds in mutual companies. Mr. Waite, I want to confirm with you if that is indeed the case.
Is that a practice that your members will accept?
Mr. Waite: Our members are solely on the distribution side, so they are the dealers. Mr. Hockin was talking about the fund companies and those rules and guidelines are coming out. They are directly regulated by the securities commissions.
Mr. Hockin: The regulators regulate that.
Senator Massicotte: There is a strong argument that the bodies managing the monies should be separate from the board, which has a corporate interest.
Are we are going to see that soon?
Mr. Hockin: Yes, apparently. We have been in conversation for two or three years, the industry with regulators. We have been very supportive and in a few weeks, there is going to be a rule coming out requiring independent review committees on fund boards. Most of the large members have things like this, but this will put more detail around it. This will allow independent directors, people who are not affiliated in any way with the Bank of Montreal, or fund managers, or whatever, to ask questions on behalf of the unit holders. They have a fiduciary responsibility, but do not forget the managers have a fiduciary responsibility as well. There are two fiduciaries in this model and they will have to work together.
Senator Massicotte: I know both of your firms have a code of procedures to make sure consumers are protected. Can we get a copy of those codes?
Mr. Waite: Our code of ethics is really our rule book.
Senator Massicotte: If we can get a copy of your rule book, it would help us to understand what you expect of your members and what a consumer must have before executing orders or making commitments, and so on.
Mr. Waite: IOSCO, which is the International Organization of Securities Commissions, has just put out on their website best practices with respect to fund governance and the type of boards and oversight to which you refer. It is out for public comment. I will try and get that and make that available to this committee as well.
[Translation]
Senator Hervieux-Payette: We are also very interested in Quebec. In fact, I would greatly appreciate it if you could provide us with some type of consumer chart. The name of your association was changed in Quebec. It used to be called the Commission des valeurs mobilières. The name was changed and the mandate was broadened, but it remains the same organization. There is also the stock exchange and police forces.
To whom would a consumer make his first complaint if he feels he has been had? Who will investigate? What will the investigation lead to? What is the best way for the consumer to proceed? There are costs, there is an organization. The stock exchange must intervene when it realizes that a member is guilty of wrongdoing, and the same applies to the association if it is aware that the firm is lying to consumers. It is difficult for consumers to know whom to go to.
Take for instance my hairdresser who had invested half of her savings in Nortel and now has to work five years longer because she was advised to put 50 per cent of her portfolio in Nortel stock. Obviously, she followed developments at Nortel, financial statements rewritten 22 times. As a legislator, can I tell her that she is protected? What she knows for sure is that she will have to work five extra years to offset the amount lost through investments.
If there were a chart, people would be aware of the steps involved: who will be leading the investigation, what it will lead to and how to receive restitution when one has received bad advice. In this case, it is all well and good to say that you are investing $45 million in policing, but it seems many players are involved. How will the consumer get redress? You say there will be a fine, but the person will receive no money. That does not amount to much. The wrongdoer will stop causing damage, but the aggrieved investor should receive compensation.
How many brokerage firms that are independent from the major banks or large financial institutions exist in Canada? In other words, people who do not have any ties to financial institutions and who are completely independent when shares are issued. How many member firms do you have and how much of the market do they represent? There could be 50 members representing 3 per cent of the market. There are firms like Canaccord for instance. It is important to know who the main players are that are selling these products on the market.
[English]
How do we get the consumer to get redress?
[Translation]
Mr. Oliver: I will answer your second question first. We have seven firms representing approximately 65 per cent of the market. The others are independent. There are firms which belong to banks, large foreign undertakings, some firms specializing in retail, some institutional companies, and the others are firms that sell to individuals. This means that 30 per cent of the market is composed of small or medium-sized companies.
Your first question is very important. Investors need a simple and clear way of knowing what recourse is available to them. Obviously, they can call IDA and if we can do anything, we will. Otherwise, we will tell them to call the ombudsman. We will give them the brochure which outlines the options, either the courts, the ombudsman, arbitration — mediation in Quebec — but it always starts with a complaint made to the firm. It is not as complicated as it seems. If they call the ombudsman's office, we will direct them towards the person who is specialized in that matter.
[English]
A phone call to the ombudsman will not result in three more phone calls; it will result in a routing of their call to the appropriate person. The key is with one phone call, they will get where they need to be. They do not have to have expertise in the rather convoluted and arcane structure of securities regulation and redress in Canada, because it can be very complicated. If they call us, we will deal with it or we will get them to the place that does. It should not take more than two calls, and usually only one.
Having said that, they have a variety of recourses, which is a good thing. First they should go to their firm and try to settle. They can do that fairly quickly. If they are not satisfied, I advise that they go to the ombudsman because it is a free service. It is not binding, but no firm has ever refused the recommendation. It could happen, but it has not, because there is an obligation on the part of the ombudsman to publish. They can go to the ombudsman and if they are not happy, then they can go to the courts or they can go to arbitration. The alternatives are explained in the brochure.
[Translation]
Senator Plamondon: If a person is dissatisfied in the end, can he or she receive the investigative report in order to take legal action?
Mr. Oliver: If the person is dissatisfied with what exactly?
Senator Plamondon: First, there are two options. The first one is to fine the offending broker, but that does nothing for consumers and strictly cleans up the market. The second option would be a consumer complaining to the ombudsman's office.
In both cases, reports are produced. Can the consumer receive these reports to use them in initiating proceedings? Otherwise, there is no transparency.
Mr. Oliver: I do not think there is transparency. If there is a result, such as a fine or a suspension, it is completely transparent.
[English]
When we have our hearings, there is a notice of hearings with all the details and when there is a settlement all the details are out there in the settlement. If there is a penalty, it is on our record and on our website, and available for everyone to see.
[Translation]
Senator Plamondon: Can the consumer receive this detailed report?
Mr. Oliver: The consumer only receives the ruling.
Senator Plamondon: Why?
Mr. Oliver: Because that is the routine procedure for criminal cases, and the same applies to administrative cases.
Senator Plamondon: That does not help the consumer at all. It advances the industry's interest in general, but not the consumer's. If he wants to institute proceedings against the wrongdoer, why would he or she not have access to the file?
Mr. Oliver: Clearly, a disciplinary ruling is advantageous to the consumer.
Senator Plamondon: Apart from the ruling, what about everything that underlies it?
Mr. Oliver: In administrative or criminal cases, I do not think there are any exceptions. I do not think details are either published or disclosed.
[English]
The Chairman: We obviously have a different viewpoint. We bring it back to you, Senator Hervieux-Payette.
[Translation]
Senator Hervieux-Payette: Do you initiate investigations yourselves, not on issues you receive complaints about, but rather when your staff has noted worrisome activity on the market? If so, how often does that happen each year?
My second question is one that I was asked, and it is rather specific. A friend of mine who is a director of a company realized that some stock was being promoted with misleading information. Moreover, it sold very well; it went from $3 to $45 a share, but in the end everyone lost money on it. Several million dollars were invested based on misleading information.
I had recommended to this person that he complain to his broker, to the securities commission and to the stock exchange, regarding this misleading information. In the end, everyone lost the money invested in this stock. At the time, according to me — this was several years ago — we could have concluded that the person was swindling everyone who was buying the stock.
[English]
Mr. Oliver: Have we initiated cases beyond the complaints that we receive? Yes, we have. I do not know the percentage, but I can tell you the most recent example where the market timing cases resulted in fines of $42 million.
We did a two-year survey of the market, and based on the information we received, concluded that there were three firms that were engaged in market timing. We began our investigation and then proceeded to prosecution.
We will be aware of developments in the markets. We will see things in the newspaper. We will hear things from other regulators or self-regulators in Canada or the United States. We do extensive compliance reviews of the companies and we will uncover through that compliance process a variety of infractions. That happens all the time. I do not know what the percentage is, but it happens constantly. You know, if a firm does not have adequate capital, they will be suspended or expelled. If the sales compliance review reveals inappropriate behaviour or lack of supervision or lack of a supervisory culture, then we will take action, which we have done every year in dozens of cases.
The second matter that you mentioned relates to a variety of potential infractions, some of which are the responsibility of the securities commissions. If there is market manipulation of the market regulators, it is the responsibility of the stock exchange. To the extent that it relates to the distributor, the investment dealer and to sales conduct, then it is our responsibility. We examine whether the sales conduct is inappropriate, prejudicial and in conflict with our rules.
Senator Hervieux-Payette: Do you contact each other?
Mr. Oliver: Oh, yes.
Senator Hervieux-Payette: Does the information flow between you, the securities commission, and the stock exchange?
Mr. Oliver: I am sorry I missed the point. Yes, that is right. We are part of a committee with the police and the regulators, and we meet with the securities commissions constantly. We are on the phone with them daily. We are obliged to bring the essence of our enforcement cases to their attention. They are not surprised when we take action. They know about it, and they refer matters to us. We cooperate with other self-regulators in Canada and the United States, but mainly in Canada. There is constant communication in that regard.
[Translation]
Senator Plamondon: I have two further questions. When a broker sells investments, does he do so based on his own expertise or does he consult an analyst? And is the analyst with the same firm? If the consumer feels he has been swindled, whom could he sue? The analyst who informed the broker? The firm or the broker?
Second, do you think these funds should be sold to a category of insiders who are rather well-informed, or are the brochures clear enough so that consumers can follow their investments and make informed decisions?
Mr. Oliver: If I have understood your first question, the consumer or the investor can sue the company because the company has money and is liable. In that case, the broker and the analyst are both employees of the firm. However, usually, one would prosecute the firm.
Senator Plamondon: So the analyst actually belongs to the same firm as the broker? He is not independent?
[English]
Mr. Oliver: If the company relies on a third-party analyst, it is that company's responsibility. The company takes on the responsibility of making the recommendation suitable. If they were misled, that is their problem. The investor does not have to search where the analyst might have worked.
In most cases, it is not third-party research, but it can be. It is down to the broker level, and if the broker provides poor advice then the investor can sue the firm where the broker is working, and could sue the broker as well. The investor does not have to go after a third party who they might not have been aware of. It is where the advice comes from and who the person was working for that provided that advice.
[Translation]
Senator Plamondon: Following the MacKay report, there was a great deal said about clear contracts. Do you believe the brochures are clear enough to be understood by most Canadians?
Mr. Oliver: No.
Senator Plamondon: Thank you for your honesty.
[English]
Mr. Oliver: This is a big issue. I worked for a couple of years at the Ontario Securities Commission as the Executive Director. One of the frustrations was that because of the rules and because of a mind set, as long as you can get it on paper, you are fulfilling your disclosure obligation. The dirty little secret is that most people do not read prospectuses and even fewer can understand them.
The Chairman: Welcome to the club.
Mr. Oliver: We have to look at the issue of prospectus delivery, and get beyond the myth of communication, the theoretical communication versus effective communication. I really believe you could take a 150-page document and in two-and-a-half pages, give people 98 per cent of what they need. I do not care if it is a prospectus for a mutual fund or even an M&A transaction. The analyst who is going to pore over the 150-page document will need it, but the individual does not have to get the long document unless he or she asks for it, the two-and-a-half pages will do. A mutual fund can be summarized in a page. What people should know is the name, the investment objective, and the fees and the performance against a relevant index.
Mr. Hockin: Mr. Oliver is right, but the regulatory creed that liability lawyers force you to put into the document means it starts at two pages and it ends up at 202 pages. That is the problem we all face.
Senator Plamondon: If you had to explain that in an article in Reader's Digest, you would find words, so find words.
Mr. Oliver: A plain language initiative is really important. It is not one a front-burner issues but it should be considered. There was the Spruce Falls issue. Employees were ceding certain salary rights and employment rights to get the stock of the company without which it would not have made it. I thought if ever there is a case of vulnerability, this is one. They should understand what they are doing. We presented a short document and then the big document behind it. That short document really told them 95 per cent of what they needed to know. I had to get that because people want it all there just in case someone might look at it.
The Chairman: It is a question of liabilities.
Senator Moore: Mr. Oliver, on page 3 of your submission, you mentioned the disciplinary hearings and the various enforcements such as suspensions and terminations.
Are those decisions published publicly, or are they all just circulated within your organization?
Does the public know the details of the decisions you make, and what happens to people who violate your rules?
Mr. Oliver: Absolutely. There are press releases and public notices of hearings. When the decision is taken, the decision is made public. It is put on our website, and there are press releases. It is all public, and it remains on the record of the individual and the firm.
Senator Moore: Can the public attend the hearings?
Mr. Oliver: Yes.
Senator Moore: Yesterday, we heard from Equifax Canada and TransUnion of Canada and we learned from those companies that they store information on consumers and borrowers and that they use the Fair Isaac rating system to build risk models on these borrowers. They mentioned they could electronically move credit reports around within seconds.
From the consumer's point of view, is it possible to develop a comparable system whereby consumers and investors could call up a company's name in your database and obtain a rating of an investment company or mutual fund dealer company, showing its history, its record, and violations, and so on?
Mr. Oliver: Yes, and I will tell you what we do. We do not have ratings but we have records. The records will show if there are any disciplinary hearings against the individual or the firm.
Senator Moore: Can a consumer go to the IDA site and find a list of all of your members and find out how long they have been there and what their performance has been and whether or not there have been sanctions against them?
Mr. Oliver: On the latter point, yes. There is a site with all of the relevant information about them and disciplinary action taken against them, but not their performance record, no.
Senator Moore: Everyone can learn whatever they want to know about the consumers, but the consumers who put trust in larger entities cannot obtain similar information about those entities. I do not know that is right. I think your organization should look at something like that.
Mr. Oliver: It is very difficult to evaluate a firm and look at its investment performance record. It is extraordinarily complex and fraught with legal liability, and it is not a regulatory function. An independent commercial firm could do that, and they would be free to do so.
The Chairman: You have to agree with Senator Moore, if the marketplace is to be equal, the marketplace is not equal when it comes to diffusion of the information related to security of the consumer on one hand, or flaws on the consumer on the other hand.
Mr. Oliver: Do we have a rating for retail clothing store? People look at the clothing and they decide whether they want to buy it or not. You want to know whether they act honestly and whether there have been any criminal actions against the firm or the individuals.
Senator Moore: No, not the same point. We are dealing with money. On those consumer reports it is about their ability to handle and manage their money, have they paid their bills, have they not paid their bills. That is the common denominator here, with all due respect. I do not think it is the same thing as rating clothing stores.
Mr. Oliver: We have certain powers and we need more powers and enforcement, but we have to be careful what it is appropriate to ask for.
Senator Moore: I understand that there have to be sensitivities, but I think more information could be made available to Joe Consumer so he can assess whether or not he should commence doing business, or carry on doing business with a company, and whether or not it is consumer friendly.
Senator Kelleher: How many complaints have been filed against your individuals in the last several years, and what percentage of those complaints found fault?
Mr. Oliver: Last year there were 1,254, the previous year 1,500, the previous year 1,073, and the year before that 1,100.
Senator Kelleher: What percentage found fault?
Mr. Oliver: If you go through from the complaint to the investigation to the successful prosecution, about 6 per cent found fault.
Senator Kelleher: Do we have any sort of idea as to the findings? In other words, was it a reprimand, a fine, a suspension, an expulsion?
Mr. Oliver: I have that information; it is part of the brief.
The Chairman: Is it extensive based on the questions the senator asked?
Mr. Oliver: There is that information, and I have information by region. In terms of the firms, I have information about the fines, costs, disgorgement, total decisions, average fine and average cost. Let me give you one number. Eighty-two individuals were suspended or received permanent bars in the last four years.
Last year there were $5.5 million in fines representing 64 individual decisions. We sent out 19 warning letters and seven suspensions. We imposed 37 conditions and 17 permanent bars. That information is on page 13 of our brochure.
Mr. Waite: That information is on page 9 of our brief. Our first year of taking complaints was 2004, so there is no historical data.
The Chairman: You have not given us the quantum of money your association expends. We have $45 million from Mr. Oliver's organization, what about yours, Mr. Waite.
Mr. Waite: Our budget last year was $18 million.
Senator Angus: Mr. Waite, you mentioned the independent members of your board. You indicated the chair is independent. Who is the chair?
Mr. Waite: The chair is Bob Wright, former chair of the Ontario Securities Commission. We went through adetailed corporate governance review. Our board was originally 21 members of which one-third was public. Now they are 50 per cent public and the committees are chaired by public directors.
Senator Angus: We are pleased to note that. Per force, we all have to look at the newspapers now and again. There was a period of five or six months where all we read about was the Putnam fund and other mutual funds in which this late market timing and late trading was going on. The media highlighted the small investor, the moms-and-pops, and their lost savings. That put a terrible smirch on your industry.
Mr. Waite: That is correct.
Senator Angus: I noted at the time that this was all post-Bill C-8 and the implementation of the consumer protection measures. We are here to see if they are working. I am glad we are doing this study because I want to ask how that could have happened.
Mr. Waite: The direct regulation of the fund companies and where you would identify market timing is with those various securities commissions. The IDA, the MFDA and the Ontario Securities Commission work together, but you have to identify the market timing at the fund company. As you drill down, you find there were dealers involved. We did the one market timing case and fined them $5.6 million. It really starts at the fund company. That was our first case in January of this year and was against Investors Group.
The Chairman: I want the public to know, we put in regulatory regime in some years ago. It took the first wave of Americans to happen, and it took to January of this year for it to protect Canadian consumers.
Senator Angus: In the post-Enron period, we were able to go down to the U.S. and meet Eliot Spitzer and the new chairman of the SEC and others involved in the regulatory world, all concerned with and mandated to restore investor confidence. That is what this is all about. We learned at the time through the Martin Act that Mr. Oliver referred to that they do not have nor did they have the legislative tools necessary, and there is a tremendous shortage of resources at the SEC.
I am not testifying, but I am reporting what we heard. Mr. Spitzer has enhanced his political campaign because he and his staff found this old 1929 statute called the Martin Act which somehow enabled him to get jurisdiction over head of the SEC and do his number in New York where on Wall Street all these bad things were happening.
Canada has been looking through the window, and our committee sees what lessons there are to learn to help restore the mutual fund reputation in the wake of WorldCom and the horrors that Mr. Spitzer has brought to the public attention, the last of which were the insurance company scandals.
Mr. Hockin: For the record, on the powers that Attorney General Spitzer has been pursuing, in Canada we have had no late trading and no insider market timing, which they had in the United States. Two of those horrors did not happen here, and it is because of the structure of our industry, which I can explain.
Market timing and short-term trading are not illegal in the U.S. The regulators had to find out when short-term trading is illegal, and do our best job to ensure the long-term investors are not hurt, and that is what led to the settlements. Only one of the three major complaints of Mr. Spitzer occurred here.
Senator Angus: It is very encouraging to hear you make that bald statement. Would it not be more accurate to say there were no charges of and/or prosecutions for illegal activity of that nature in Canada?
Market timing is legal in the U.S. The practice of not disclosing to the unit holders of these funds was abhorrent.
I am glad you are saying and I hope it is true. I am also of the view, until disabused of it, that we do not know for sure.
Mr. Hockin: I am quoting the regulators who said there is no late trading in Canada and no insider market timing.
On market timing, the fund companies that settled admitted that in retrospect, they did things to ensure the protection of long-term unit holders, but did not do enough. That is the way those settlements work.
The Chairman: I think Senator Angus raises the issue of split jurisdiction, and how can we be satisfied at the federal level, which you have agreed is the fragmented professional regulatory mechanism.
We might ask whether or not between cup and lip there is Niagara Falls?
[Translation]
Senator Massicotte: The Securities Commission is a national commission. Is that in the consumer's interest? Will that increase supervision and meet consumer needs? Is it positive and if so, why?
Mr. Oliver: The Investment Dealers Association of Canada's position on a national commission is that according to us, there are two ways of improving regulations in Canada: the current system — but much more harmonized — or a national system that recognizes regional markets. Each market must be represented by a national commission. So, we encourage both sides to do something in order to improve regulations in Canada.
[English]
We have talked many times about the need to make regulation in Canada more efficient and to increase harmonization across the country, because we are suffering from a competitive disadvantage. We are in a unique position of being the only developed capital market in the world without a national regulator. You can deal with that by ensuring the current system is highly harmonized. There has been a lot of progress, but much more needs to be done and quickly, or you go to a national commission that is sensitive to regional issues.
Our position reflects the two views, because we are a national organization. What is not acceptable is to be against a national commission and not be prepared to improve the current situation.
[Translation]
If I understand the reports and look at the efforts made to date, there is talk of effectiveness and the need for convergence between various provincial commissions. That is, the effectiveness of members and of those who issue stock. For consumers, and in terms of supervision and governance, is it desirable to have a national commission or not?
Mr. Oliver: The current system could be adequate for consumers if there is improved cooperation and better harmonization of rules.
Senator Massicotte: I have a final question. Your association also speaks for your members in various circumstances. We see this in newspapers and elsewhere, and it is one of your official roles. Meanwhile, you are responsible for protecting all interests, those of all stakeholders doing business in the industry. Is there a conflict between these two roles? On the one hand, we see that you support the opinions of your members, and on the other hand, you are also there to protect those who put their trust in your members.
[English]
Mr. Oliver: The first point of course is that we have to be judge by our record. Have we always put the client interest, the public interest, first? Everything else that I say is secondary to the fact that we think we have done that.
In our view, there has been an advantage in having those two roles, because it brings the industry into greater involvement in public policy and the development of regulatory policy.
However, we do not believe that the additional role in any meaningful way exacerbates the conflict that already exists that I referred to earlier which is the conflict inherent in self-regulation. Eighty-five per cent of our activities are related solely to regulation.
Therefore, much of what we do on the lobbying side has nothing to do with regulation. We will speak to the Bank of Canada on monetary policy. We will comment on the federal budget on fiscal policy. We will talk to governments about their economic performance around the country. There is no conflict, because it is not regulatory.
To the extent members get involved in regulatory policy, they would in any event in a pure SRO because that is what you want. A self regulator has to have some self in it. It has to get the advice of the members. We do not see that as exacerbating the conflict. It is a perception issue, rather than a substantive issue.
The Chairman: I have allowed this to go on longer than I should. I have a number of questions and I will make them succinct.
First, do all of your members' websites tie into your central website when it comes to the question of consumer protection?
In other words, is my local broker tied to your website to make it easier for the consumer?
Mr. Oliver: I am not certain I have not answered that. Our website does to theirs and does to the entire consumer. I know what you are asking me.
The Chairman: It is the reverse of that. Please give us that in writing and let us know.
Second, back to the question of transparency of hearings, is there any reason why your hearings cannot be broadcast on the web. You can do this very simply now, very cost effectively. Back to Senator Plamondon's point, it is important if the public is allowed at a hearing there is no reason it should not be on the website so that across the country can know what is going on.
Mr. Oliver: I will look into that.
The Chairman: You raised recommendations with respect to more powers and we would like to know the cost and the efficiency of those recommendations. That refers to Mr. Oliver and Mr. Waite and if you Mr. Hockin want to weigh in, that is fine.
Coming to a fundamental point, we are presented with a fragmented asymmetrical regulatory system where it comes to protecting public monies, and private monies essential to the consumer. We all are skirting around this problem. This has been an on going debate in Ottawa since I first came here in 1965. I initiated one of the first studies on a single regulatory mechanism and we have not made any progress since, although we have harmonized.
Is there a way to overcome that problem, because I do not see it happening in my lifetime?
Is there a way of following the American model and passing a federal act that is comparable to the Martin Act that would allow a federal regulator powers in a central way?
Is there objection to having a strong federal regulator armed with criminal powers similar to the Martin Act?
Senator Angus: It is a statement.
The Chairman: I understand that. This committee is a banking trade and commerce committee. I am talking about the constitutional foundation for interprovincial commerce.
If you cannot answer that briefly, would you give it some thought and get back to us with, because it may be a way to forcing harmonization through more questioning and at the same time protect the consumer.
Mr. Hockin: Ms. Glorianne Stromberg and Mr. Robert Leckey, a brilliant former clerk of the Supreme Court, wrote separate articles arguing that there could be a federal statute under the trade and commerce clause to have a statute on mutual funds. I am not speaking for the rest of the securities world.
The Chairman: I read that article and other articles that say the same thing. It might be something for all of you to take a look at. It may be a step forward and in turn, force provinces to come together and if not by regulation, at least by sanctions and the federal criminal power. Even though it is a state piece of legislation in the United States, criminal power is at the state level and in the federal government there has never been question anywhere across the country, and this would be a utilization of criminal power.
We are concerned that there are serious problems within the industry. We commend your efforts and thank you very much for bringing forth your representations. We know it is a work-in-progress and we are working towards the same goal to make the consumer very comfortable and happy in this country and we do not believe that is the case.
Thank you.
Our next witnesses this afternoon are Mr. Claude Gingras, Mr. Stan Buell and Mr. Bill Gleberzon. I hope that you will be brief in your presentations.
As you noted earlier, the senators are interested in consumer protection issues, so we would like to spend as much time as possible questioning you, as opposed to listening to your briefs, which we have in front of us.
Mr. Claude Gingras, Legal Advisor, retired, as an individual:
Thank you, Mr. Chairman, for allowing me to address your committee. In fact, I was responding to an appeal you made when the representative from finance appeared before you on November 28. At the end of his appearance, you asked if there was any legislation that could be improved in the regulatory regime to protect financial consumers. You said this was at the core of the mandate of your committee.
I could not resist this appeal, and I wrote to you to bring to you a subject that is dear to my heart, as a retiree and as a long-time member of the life insurance industry. This is the protection of the rights and interests of life insurance policyholders.
The Chairman: We are most interested in the subject, because that is within our ambit of consideration.
Mr. Gingras: Let us first deal with the question of jurisdiction. I am sure that you know that much of the protection of policyholders is a question of market conduct, and therefore, it falls under provincial jurisdiction.
This is only a very small part of the truth. If you look at life insurance policies, it takes about two weeks to sell the policy, to gather the medical information and issue the policy. At the other end of the policy, to pay a death claim, let us say it takes three months.
In between, there may be 20 years, 40 years, or a lifetime under which the policy is being administered by the company, and the policyholders need protection. That is strictly federal jurisdiction when the company is incorporated at the federal level, which is the case in most instances.
Unfortunately, there is not an agency in Ottawa that protects the interests of life insurance policyholders, who are, in fact, small investors. They do not have the money in case of untimely death to support their family, so they invest in insurance.
The Financial Consumer Agency of Canada has only one item under its jurisdiction respecting life insurance. It is the disclosure of policy loan interest. In 40 years in the business, I have never heard of a problem about policy loan interest, because technically they are not loans. You do not have to pay them back. It is never a real problem.
For more than 100 years, OSFI defended the rights and interests of policyholders. In the last few decades, it seems to have completely abandoned this role. In fact, when the Superintendent of Financial Institutions appeared before you on February 8, he did not talk about the rights of policyholders. He talked about solvency, but he did not talk about the protection of rights and interests of policyholders.
The OSFI Act states clearly:
In pursuing its objectives, the Office shall strive to protect the rights and interests of policyholders.
This is not happening. They concentrate on solvency, and so does the CDIC and the Bank of Canada for that matter.
If you present a proposal to OSFI about policyholders' protection, they tell you they are not interested. I am also not sure that OSFI insists much on compliance of the law when it comes to policyholders' rights and interests.
I wish to give as an example the vanishing premium mess. You all remember when those policies were sold at the beginning of the 1980s with very generous projections that within 10 years the policy would be paid off automatically. That was, of course, a question of misrepresentation, which falls under provincial jurisdiction.
However, for 10 years of administration, those policies were never looked at and the policyholders were never informed. Suddenly, one morning, they woke up and had to pay premiums for the rest of their lives. What could they do? They had to pay them. Obviously, if there had been more disclosure, there would not have been a problem. Policyholders had to resort to court, and tremendous fees were paid to the legal profession under class action suits that were mostly settled out of court. Ironically, I understand that the policyholders had to pay the legal fees.
Here is another example that is still before the courts. In the purchase of this company, a good part of the financing of the purchase price came from the par account by a very ingenious way of selling the present value of future expense savings to the par account. Obviously, this contravenes section 462 of the act, which limits what can be brought from the par account to the shareholders.
The lack of supervision is one thing, but there are other reasons for you to increase the protection of the rights and interests of policyholders. Five years ago, there was a major demutualization exercise in Canada. Before that, four mutual companies controlled 55 per cent of the retail life insurance market. Now that competition has disappeared. These mutual companies did not have shareholders to care for. They cared only about policyholders, so they forced the stock companies to treat their policyholders in a competitive way. Now that competition is gone. Stock companies sell more than 95 per cent of the retail life insurance market.
The third reason is that companies operate in a state of secrecy. The policyholders do not even know what is going on with their policy during the 20 years, 40 years, or lifetime they hold that policy. There was a requirement in 1992 that companies publish a policyholders' dividend policy. If you look at these dividend policies, it is meaningless. It was supposed to give information on how the company managed the par account and how much of the profit they distribute to policyholders. Right now, these dividend policies says nothing, and OSFI allows that to exist.
There are huge surpluses being accumulated in par accounts. The State of New York limits the surplus to 10 per cent of liabilities. Companies are selling less and less par policies. They prefer to sell adjustable policies. Of course, adjustable policies give the company a lot of discretion. They may change the premium. They may change the face amount. They may change the value of the policy. They are some sort of ``trust me'' contracts. It is advantageous for the companies to sell the adjustable policies because they are not constrained to maintain a par account. They do not have to keep the money separate. All the profits flow to the shareholders, and they have complete discretion to do whatever they want, including changing the premiums.
We have policyholders' directors in companies selling par policies. Those directors, according to the law, cannot hold shares in the company because their interests should be aligned with those of policyholders, not of the shareholders. This law has been in place from the time of incorporation of the companies some 130 years ago. They do an end run to this; policyholders' directors hold shares in the holding company. In other words, they do indirectly what they cannot do directly, and OSFI does nothing about this.
Finally, there is a fourth reason why you should intervene. Nothing in the act requires directors and officers to treat policyholders in a fair and equitable manner. Other jurisdictions have moved quickly on this one, and they have imposed standards to directors and officers to treat policyholders fairly. Our legislation is falling behind other countries on this point. England, for example, had a long inquiry on with-profit products, the equivalent of par products. They had seven consultation papers. They have principles that state you must be fair and equitable to policyholders. They added requirements for disclosure.
The Tiner reforms under the SFA are continuing. Each company must issue a statement of practices and policies concerning its financial management of the insurance fund. That is very detailed, and it is available to policyholders. We have nothing of that sort here.
Australia had a massive demutualization before 1995. Three large mutual companies dominated the market. In 1995, the Life Insurance Act was amended to require the management and the directors to give priority to the interests of policyholders when there is a conflict between the interests of policyholders and those of shareholders. This is going far beyond anything that has been proposed here in Canada.
Fifteen years ago in the state of New York, they saw those adjustable policies coming up, and they required that there be disclosure. The directors must approve the criteria upon which those adjustments are made. There must be disclosure, and there is a requirement that those adjustments should be fair, equitable and reasonable.
The point is that in the countries we like to compare ourselves to, when there was a major change in their life insurance market, they acted. Here in Canada, we are still waiting for the legislation. To be convinced that we have one of the best financial systems in the world, I think at least three things should be done.
The first one would be to impose a standard of fairness on officers and directors when they deal with policyholders' matters inside the company, that is, the management of par accounts, the declaration of dividends, policyholders' dividends and adjustment to policies. They must be required to act fairly and equitably.
The second is that there must be measures of disclosure so that policyholders know how their money is administered. Right now there is no such thing. As I said, the dividend policy says nothing.
Finally, the boards should be required to form a policyholder affairs committee. Our policyholders' directors could be the majority on that committee. We need to have a committee to assist the board in fulfilling its duty toward the policyholders. Let us make use of the policyholder directors. There are complex matters such as intergenerational equity, for example. It is important that there is a build up of knowledge at the level of the board in those companies if we want to protect life insurance policyholders.
The last measure is to clarify that they have a duty to protect the rights and interests of policyholders. To me it is clear, and it is in the OSFI Act, but it does not seem to be clear for everyone.
Mr. Stan I. Buell, Founder and President, Small Investor Protection Association: I have provided my opening comments to the stenographer, so you can read those at leisure.
A number of years ago, I became aware of the widow Shirley and her case. In a period of three years, her husband was diagnosed with cancer, they sold the family business they had operated for 25 years and they sold the family house. On his death she placed the last of her savings, $160,000, with her broker. They had placed nearly $1 million in assets with this broker. Three years later she was on holiday, she came back and was invited into the broker's office and the lawyers told her all her savings were gone. The $1 million should have allowed her to retire in comfort. Instead, she had to fight a long legal battle to get restitution.
The problems I hear today are no different. As you indicated earlier, you have been fighting this battle for a long time, and nothing has changed.
We suggest that we need a federal agency that is responsible for consumer protection; such an agency would lead to an improved regulatory system. The agency could be either a national agency or a harmonized agency. We feel there is a dire need for a federal authority to look after the consumer investor.
Mr. Bill Gleberzon, Co-Director of Government & Media Relations, Canadian Association of Retired Persons: Thank you for the opportunity to speak on behalf of CARP. The Canadian Association of Retired Persons includes over 400,000 members across the country. We describe ourselves as Canada's association for the 50-plus. We are a national non-profit, non-partisan organization with a mandate to promote and protect the rights and quality of life of older Canadians. Our mission is to develop practical recommendations for the issues we raise.
The Chairman: So you represent us as well?
Mr. Gleberzon: It looks as if I do.
We agree with Mr. Buell and with the SIPA, that there should be a fundamental comprehensive structural change to create a single national pan-Canadian securities regulatory framework, especially in regards to mutual funds because the majority of RRSPs and RSPs that are held by 50-plus Canadians are held in mutual funds.
Depending on age and working status, either 50-plus investors are in the last working years to contribute to their retirement income, or if they are retired, their livelihood and quality of life could be dependent on income from their investments. In either case, if investments are based on bad, misleading or faulty information, older investors will have limited if any recourse to recoup losses. Indeed, mutual fund fraud must be recognized as a form of elder abuse because of its financial, psychological and emotional impact on victims.
It is a national situation, irrespective of provincial territorial boundaries, and therefore requires a national solution within a national framework.
The Investment Funds Institute of Canada estimates that $451.6 billion of investors' money is in the mutual fund industry. That figure is for 2004.
I want to bring to your attention the study that CARP and SIPA produced earlier this year called Giving Small Investors a Fair Chance: Reforming the Mutual Fund Industry. Each of you has a copy of that study. We also sent copies of the study to all provincial and territorial ministers responsible for security regulations as well as a range of federal ministers. In fact, we will officially submit this report to the Provincial Territorial Council of Ministers of Securities Regulation. We have been in discussions with many ministers concerning the proposal of a single national regulator.
Our argument is that Canadians make investments in financial markets across Canada regardless of the province in which they live, and the province in which the market is located. Uniform regulations should follow investments across provincial and territorial lines by providing protection across the country by a single national securities regulator. We have listed the significant benefits of single national securities regulator, but let me add that Canada is the only G7 country without such an agency.
We believe that the Provincial Territorial Council of Ministers of Security Regulations with the addition of designated provincial political representatives, minister of industry or justice, et cetera, could be transformed into the board of directors for this new single national regulator. We are not talking about a federal, Ottawa-centered regulator. We are talking about a national regulator, given the realities of the way in which the fragmented, diffused system exists today.
Current personnel working in the various provincial regulatory agencies could serve as staff. CARP recognizes that the regulation of securities falls under provincial territorial jurisdiction. Nevertheless, we urge this committee to endorse the creation of a single national regulatory agency regarding mutual funds. The next step in such a process could be to convene a conference of the Provincial-Territorial Council of Ministers of Securities Regulation with the appropriately designated federal minister or ministers as a starting point for discussions on the creation of such an agency.
Senator Grafstein's idea about exploring the federal government's authority around interprovincial commerce is another idea worth exploring. The bottom line in all of this is that investor consumer protection must be the basis of the mutual fund industry.
What we are really discussing is part of a larger issue that we realize is not part of the focus of this committee, but I will mention it. We must find a way to offer protection of and reform of retirement income in general because this is a piece of that larger puzzle. Secondly, there is a need for a new Senate committee to focus on ageing and ageism, such as exists in the United States.
[Translation]
Senator Angus: Sir, I believe you are already convinced.
[English]
You are preaching to the converted in many of the things you are saying but congratulations for the way you said it.
I was a little surprised, Mr. Gingras, to hear you say that policyholders do not have protection. My first experience on this committee happened at the time of the Confederation Life failure. We investigated the failure and heard from the people from OSFI.
You say they overly concern themselves with solvency. I understand that to be the ultimate protection for policyholders. Let us start with that and explore it.
Mr. Gingras: You are right, Senator Angus, OSFI concentrates on solvency. The failure of Confederation Life was a traumatic event for OSFI. I was also involved in the attempt to rescue the company when I was general counsel of another company.
The section 4 of the OSFI Act says that they must monitor solvency of pension plans and of financial institutions to see that they comply with the law. Section 4(3) adds that different from just solvency, they must strive to protect the interests and rights of policyholders. That is the part that they have abandoned.
Senator Angus: I understand that not only are you a lawyer both in the civil and common law jurisdictions, but that you were with Mutual Life of Canada for 30 years, involved with Revenue Canada and the Department of Finance quite extensively, and advised on Bill C-8.
I am curious as to what dialogue you had with the likes of Mr. Nicholas LePan and before him Mr. Palmer and before him the other chap. Did you not raise these concerns? Were you speaking to a wall?
Mr. Gingras: I certainly did raise these concerns. You will remember that in January 2003, The Department of Finance published a paper that contained provisions to protect the rights of life insurance policyholders, including disclosure, a policyholders committee of the board, et cetera.
OSFI was not interested in the rights and interests of policyholders because they did not involve solvency. OSFI has changed. Mr. K.R. MacGregor was a good friend of mine. There once was a time when the Superintendent of Insurance would go to bat for policyholders.
OSFI has changed completely since the merger with the Office of Inspector General of Banks in 1987. OSFI has turned its focus to solvency. Solvency is one thing, but if you do not look at the rights of policyholders and if you do not care about the rights of policyholders but insist on solvency, the policyholders will not receive the dividends they should receive because the more surplus the company has the more solvent it is. My feeling is that OSFI is working for shareholders to make sure that they are solvent institutions, and the first ones to lose in insolvency are the shareholders. There should be a balance between the two.
Senator Angus: I have looked at your letter to Mr. LePan, and I have read your letter to Senator Grafstein. I do not know whether Mr. Lepan ever answered your letter of May 18, 2003. If he did I would be interested in what he had to say.
Mr. Gingras: It was attached to my letter, but I can send you another one. In fact, it was delivered on the morning of the annual meeting to my home in Orleans. I had no time to get to Toronto, and it said, ``We have consulted with the company and they did nothing wrong.''
The Chairman: I apologize, Mr. Gingras. We do have it. It was sent to us electronically. We will make sure it is circulated to all members.
Senator Angus: In my mind, an insurance policy is a contract and it has terms and conditions. Whether the company is a mutual company or a demutualized share capital company, it is in the business of selling those contracts and seeing that they are duly honoured. They are expected to fulfill their terms, whether it is payout, straight life to 65, or one of the other thousands of ways life insurance policies are used.
What rights of policyholders other than the fulfillment of the terms and conditions of the contract are you concerned about? I am missing something very important here, and it is important to all of us.
Mr. Gingras: It is a good question. There are two types of policyholders. A power policyholder is the participating policyholder. Participating policyholders are very important. There was $12.5 billion paid to power policies in Canada in 2003. They have a contract. So does a shareholder. They have a contract with the company and get a share certificate. The policyholders are promised they will share in the profits of the company. That is why they are participating policyholders. They elect directors. They have the right to a share of the profits of the company, and it is at the discretion of the board that they get that share. There are not guarantees, but par policyholders have that right. That is what I mean by ``rights.'' They also must have a right to have information on how their policy is doing because there is a lot of discretion given to the company to change the investments to the par fund, to allocate the assets as they choose in some way to not produce income. They must have some information about that.
England, Australia, and all the countries we compare with have recognized that, and we have similar systems. Information to policyholders is very important. If you have a par policy, look at the dividend policy they send you. It is meaningless.
Senator Angus: With my very first job I bought a policy back in 1951 with Standard Life. Standard Life sends reams of material every year. It is still mutual but it is in the process of be being demutualized. Being on this committee now I am fascinated and I am reading all this stuff, and it is quite extensive. If OSFI has the mandate and is not fulfilling it, we want to know.
The Chairman: I am having trouble gasping your substantive point as well. Are you saying to us that a company that has a participating policy does not segregate its interests between it and the shareholder and the board will be more sensitive to the needs of the shareholder than the needs of the policyholder and therefore there is an inherent conflict between an allocation of funds or the appropriation of funds? Is that what you are saying?
Mr. Gingras: Yes, Mr. Chairman. The company must establish a participating account. That is a separate account. The Superintendent under section 458 of the Insurance Companies Act must determine the form. The Superintendent does not determine the fund. They let the company do whatever they want. They may have segmented or separate assets or they may have a separate account, not a fund, on which there is a formula to allocate income and a formula to allocate expenses.
The Chairman: When you have a participating unit as opposed to a straight life under contract, when you participate in the cash flow of the company in effect, is that a form of trust?
Mr. Gingras: It is a question I ask myself. I spend so much time in the legal part of the life insurance company.
The Chairman: That is why I am asking you that question. Senator Angus has provoked an important question.
Mr. Gingras: I think the board has a fiduciary duty to its shareholders, while acting in the best interest of the company as required by law. If the policyholders are entitled to receive company profits, there must be a fiduciary duty of some sort. The problem is there is no litigation in life insurance. No one can take on the life insurance companies. It is expensive and policyholders do not communicate with each other. They cannot even access the policyholders' list. It is difficult to launch a case. However, there were cases launched recently.
Senator Angus: You mentioned they got together.
Mr. Gingras: Yes, they got together in a class action. There are these recourses, but there is the discretion of the board. Directors do not have to declare profits to policyholders. However, they allocate expenses to par policyholders. Who looks after the reasonable allocation of expenses? They may allocate all of their marketing expenses, paying agents' commissions to the policyholders.
The Chairman: What role do the auditors play in this?
Mr. Gingras: The auditors rely tremendously on the actuary of the company when it comes time to see if the reserves are sufficient to meet the liabilities.
The Chairman: There is always an internal question that the auditor has to ask when he or she looks at special accounts that have special responsiblies. If there is an inherent conflict between the shareholder and those allocating costs toward the company generally and those allocating it towards shareholders, the auditors have to draw that to the attention of the public. They must ascertain whether that allocation is appropriate.
Mr. Gingras: The allocation is made according to a formula that has been established by the board. It is filed with OSFI who gives its sanction by accepting the formula.
The OSFI investigators verify if the formula is followed. They verify if the right assets or expenses are allocated to the account. It is difficult to get information from OSFI. My knowledge is that the inspectors do not delve too much into this sort of thing.
[Translation]
Senator Massicotte: You all agree with the fact that we need a national commission. One of our earlier witnesses told us that it was not necessary to have a national commission to protect the consumers, but rather that it was more important to better coordinate our regulations and our means of supervision.
Moreover, we have learned that mutual funds intend to create a supervisory council that would be independent from the corporation's board. Could these two things help to meet that need for a national commission or do you want more regulations? You say that self-regulating industries do not work, but if that is the case, how does one find a solution?
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Mr. Buell: Well, we feel that the self-regulatory organizations have an inherent conflict of interest. If you look at the IDA website, they admit that. We feel self- regulation does works for an industry, but they should not have primary mandate for investor protection. We get a lot of feedback from ordinary Canadians and small investors, who have lost all their savings. This is not something that comes out in statistics.
I know the Senate is interested in statistics, but we approached four of the major CSAs a year ago. They gave us a number of complaints, but they do not track the age of the complainants and the amount of the losses. We did a survey ourselves a few years ago. We had a small response, but that response indicated that the average age of the investor who lost money was in the mid-60s, and the amount was in the mid-$80,000. Those responses did not include the members of our association that I know lost in excess of $1 million. My guess on the estimated average loss is well over $100,000. We estimate that it is more than $1 billion every year.
When you asked what it would cost to provide some sort of authority to protect investors, if it costs less than $1 billion a year, we feel it would be cost effective.
Mr. Gleberzon: I think a part of what you are asking is a fundamental philosophical question: Can an industry regulate itself and at the same time protect all the elements that go into the regulation of that industry?
I think that a national regulatory agency that has government support and government foundation will protect thebasic consumer and the small investor. We have that systemin Canada, but the problem is that it is fragmented into 12 or13 different organizations. The federal government really is not involved at all.
With the proposed establishment of a national governmental based regulatory agency, you will protect consumers better, and you will encourage external investment in Canada, because we are the laughing stock in the sense we are so behind other countries in not having that kind of an agency.
We know that even if you do have that kind of agency, as Mr. Spitzer has shown in the United States, there are still major problems. Nevertheless, a man like Mr. Spitzer may have his own personal agenda; it is the American way.
The Chairman: It is also the Canadian way, except here in the Senate.
Mr. Gleberzon: We understand, but with that exception, the point is that whatever the reasons for the motivation, when the government gets involved the system is more efficient than when an industry regulates itself.
[Translation]
Senator Plamondon: My first question concerns consumers, because before being appointed to the Senate I led a consumer assistance service which closely examined vanishing premium life insurance policies. I know that our recommendation was to clearly indicate in the charts that these were scenarios and not probabilities nor promises.
My question has to do with transparency when it comes to a firm's solvency. Oftentimes, consumers ask whether an insurance company is reputable. When this type of question is asked, the provinces and others tell us that they cannot give us an indication of a company's solvency, of whether it is monitored every six months or if there is increased monitoring of a company. The disclosure of this type of information would lead a company to ruin because it would be an admission of financial difficulties.
Some people such as investors or insiders know, but consumers do not know how poorly a company is doing until it folds. Should they not have an idea of its solvency or weaknesses before investing in it?
My second question: because I was involved in several studies regarding insurance companies, I met with Ms. Gloria Stromberg who is an authority in the field, and she told me to look into universal life insurance policies the next time around.
You talk of protecting the interests of policyholders, but most people who hold universal life insurance policies know nothing of the investment side of universal life insurance. How do you envision protecting this part of life insurance companies? Do we need a Mr. Spitzer in Canada?
Mr. Gingras: I will start by answering your question on insurance companies' solvency and on advertising insurance companies' financial strength. In the past, there was a lot of information available. There was what was called the Blue Book, published by the Superintendent of Insurance. Two or three large-sized books were published every year. You could find out practically anything on a given company, surplus, profits or losses. We knew about its business.
These publications no longer exist and it is practically impossible to obtain information. I have a better understanding of federal companies because I have not worked for Quebec companies. They plead confidentiality. Your policy can be transferred to another company. You chose a company because you thought it was solvent. The company chooses to sell a block of accounts to another company and you can do nothing about it. Very little protection exists in that case. It is a problem.
Then again, should companies' financial statements be more complete? I understand why the Office of the Superintendent of Financial Institutions does not declare that a company is facing financial difficulties and that it has less than 120 per cent of the minimum capital required. If that gets published, a chain reaction will ensue. However, if we had information on companies in general, that would be fine, but solvency is not the only thing. Companies have practically stopped selling participating insurance, they prefer to sell discretionary contracts, universal life insurance.
Senator Plamondon: Yesterday we heard from credit record companies such as Equifax and TransUnion and they know everything about us, our solvency. Why is it that we cannot have any indication of the solvency of companies we are dealing with?
Mr. Gingras: I think companies generally publish the minimum capital required. They publish this and say that according to legislation there is a 100 per cent capital recommendation to meet their obligations. They publish it and say that they have 225 per cent of this amount. So this can be a very valuable source of information.
However, as for universal policies, that is exactly what I call adjustable policies. In that sense, the company has discretion. A universal policy is a bank account with daily fees for the insurance. The bank account goes up or down and you do not know how much interest the company is crediting and how much it is billing for the first five years. With any kind of luck, you will be told how much you will be charged for the insurance, but after that the insurance company can increase insurance rates at its discretion.
A former CEO of a company told me that with that kind of product, you have more security than you need, not in case the company goes bankrupt, but because you can decrease the interest rate on the bank account and increase the insurance fees. They have enormous discretion. That is the other side to a participating policy. There is no framework. There is nothing forcing the company to be reasonable and there is no statute saying that you must act fairly and equitably when you make adjustments.
The Americans, in New York, at least, passed legislation to that effect. Other countries have criteria concerning acting fairly and equitably. But that is not being done right now.
Senator Plamondon: Do we need Spitzer in Canada?
Mr. Gingras: That is beyond my scope. I am not sure I can answer.
[English]
The Chairman: Senator Plamondon is referring to a recommendation from our other witnesses. You are more concerned about insurance, but the others are more concerned about one national regulator.
Senator Plamondon asks what you think of that idea, and how do we establish such a national regulator.
Mr. Gleberzon: As I listened to Senator Plamondon's question, I realized that it applied in part to the answer to Senator Massicotte's question, because it is really the same principles that surround transparency. For example, if a financial adviser is under investigation for some charge of malfeasance, the adviser can continue to do business until something happens. During the time of the investigation, the pending charges are not a matter of public record. The same thing applies to companies on a watch.
The Ontario Securities Commission had just begun to publicize companies that it was investigating, but stopped doing so because there were a number of other companies on its list.
The kind of questions that you asked are the key questions that have to be asked because they justify, and explain the reasons why we need a national regulator.
We are talking about mutual funds, but there is no reason to believe such a national regulator could not look at all financial services. We have to see this in the broader sphere. I am a policyholder and have mutual funds, and whether I am in jeopardy in one or the other, I am in jeopardy. That is the way we have to look at it.
I do not know if we need an Eliot Spitzer, but we need a single regulator that can determine whether we do need someone like Eliot Spitzer who could shake everything up. When he first started everyone said it was not necessary for that kind of action, but he has demonstrated beyond a shadow of a doubt that it is necessary.
Mr. Buell: I am very impressed by the previous presentations and the questions that have been asked. I can see this committee has a good grasp of the problems that small investors face. It is not just one product; it is the entire financial services industry. There appears to be a cover up of widespread wrongdoing, whether it is a mutual fund company, an insurance company, a bank-owned brokerage house or an investment dealer.
We hear the same complaints over and over again. Canadians do not know where to go and as Mr. Oliver said, ``it is a convoluted and arcane regulatory structure.'' We could not agree more.
The small investor does not know where to go and when he does, the regulators say, ``We provide preventive investor protection; we do not provide remedial protection.'' The small investor has to go to the civil courts. Most people cannot afford to go to civil court. A 70- or 80-year-old senior has neither the time nor the money to take civil action. That is why we say we need a federal or a national authority that provides consumer investor protection.
Senator Angus: The big sophisticated investors are all on the bandwagon, recouping their losses, and the poor little widows the orphans and old people have suffered the losses. It is terrible.
I think your organization is on the right track. We have been listening very carefully today.
The Chairman: Mr. Buell, to be fair to the evidence, we have heard not only consumer protection but also remediation today. We heard that there was remediation and we heard that there were complaints and there was some cash going back to the consumers. The question is whether the remediation was sufficient, satisfactory, timely, and fair. These are all good, appropriate questions. To be fair to the other evidence, there was a balance between the two.
Senator Angus: I think he meant the authorities, the public. There is no remediation.
The Chairman: It is all self-regulation; that is true.
To be fair, it is a problem but it is important as well that we make sure the evidence to our listening audience is balanced as well. I am not underestimating or undervaluing your comments.
We have heard about fragmentation. As we look at one regulatory regime to another, we see that some are better than others and that some work more effectively.
Have you determined which of the provinces are more sensitive to the needs of the consumer?
Mr. Buell: We believe the Quebec model is probably the most socially advanced. We believe the B.C. model is probably second, in our opinion. For example, Mr. Oliver says that if you go to their website you can find all the disciplines; whereas, if you go into the BCSC website, they have an alphabetical list of all of the people who have been disciplined.
Unless you are very skilled at using a computer, it is more difficult to get the information on the IDA website.
The Chairman: If we believe in caveat emptor, let the buyer beware, the buyer must have adequate, fair and timely information. It is difficult for caveat emptor to operate if the information is not equal.
Mr. Buell: Absolutely.
Mr. Gleberzon: On the remedial side, Manitoba has instituted a system of arbitration that is operated by the government. I am a bit hazy about how many cases have actually been processed through that technique, but I do know it exists. We spoke with the minister responsible for it, and he spoke highly of it. We think that is another way to go, because if there is a national regulator, it could also develop an arbitration system or some other system that will not cost the small investor a great deal of money.
The Chairman: I represent the province of Ontario. Senator Angus represents Quebec; Senator Plamondon, Quebec; and Senator Moore, Nova Scotia. The Senate is regionally based, and we represent our regions. You are telling me the province of Ontario, which has most of the security business in the country, is least sensitive to consumer needs? I am hearing this for the first time.
Mr. Buell: I believe the leaders of our regulators are trying to do the right thing. They are trying to provide investor protection, but it is preventative in nature rather than remedial. We do not believe the leaders of the regulatory system know what is happening at the client interface.
To be fair, the Ontario Securities Commission has arranged for a town hall meeting in Toronto on May 31. Mr. Oliver and Mr. Waite will be on the panel. David Brown of the OSC will be on the panel. I have been invited to be on the panel to act as a voice for small investors.
They have opened this to the public. Many of our members are already sending in their stories and their questions. We feel this is an approach by the leaders of the regulatory system in Ontario to listen to the public. We are looking forward to that meeting.
The Chairman: We have asked those that are involved in self-regulation for their recommendations about how to improve the system. Each of the witnesses has told us there are problems, and they want to address some of those problems, be it in legislation or elsewhere.
If you have any specific recommendations about how to improve the existing self-regulatory system, please give them to us. We are interested in the other option of how we can accelerate a more centralized regulatory mandate. If you have any recommendations, please give them to us as precisely as possible.
Senator Angus: Back to the policyholders' rights issue; I feel that we have to hear now from the likes of Dominic D'Alessandro or his opposite in your former company, Sun Life. It seems to me you have made these statements firmly. You have written a letter that did not get answered satisfactorily. Mr. LePan has been here, and we did not know what to ask him on that subject.
Would we be spinning our wheels to do that?
I suppose it is unfair to ask you what you think Mr. D'Alessandro would say if asked what ManuLife is doing for its policyholders as opposed to its shareholders.
The Chairman: It is on our witness list to hear from the Canadian Life & Health Insurance Association. I think you are raising a deeper point. It is one thing to hear from the association.
Senator Angus: It is the lowest common denominator.
The Chairman: It might be the highest common denominator. We should perhaps also hear from some of the major consumer institutions, and we would be interested to hear your comments afterwards. This is an ongoing process, and we are interested in your opinion.
Senator Moore: Who is convening that symposium in late May? Will a paper be published as to the deliberations, something that could be forwarded to this committee?
Mr. Buell: I understand David Brown precipitated this town hall meeting, probably subsequent to a meeting I had with him last February. I presented a report, which we then sent to 25 of Canada's leaders, including the Prime Minister and the premiers of the provinces. We tried to illustrate that small investors are hurting, and our leaders really do not know what is going down.
The Chairman: I am looking at the clock. If you could wind up in 30 seconds, then Mr. Gleberzon will have the last 30 seconds. We have one minute left.
Mr. Buell: It was the OSC. It was David Brown. We will give a report to the Senate committee after it is over.
Mr. Gleberzon: We are partnering with the OSC on this to ensure our members are aware they have access to our website. Between the two organizations we will put together some material and submit it to you.
The Chairman: Thank you so much. I apologize. The clock is our enemy. We thank you very much as individuals and as citizens for coming forward. This has been very instructive and informative.
The committee adjourned.