Skip to Content Skip to Subnavigation

OBSI – Ombudsman for Banking Services and Investments

Consumer Portal LoginFirm Portal Login
Français
Increase Contrast
Fran�aisFR Main menu icon Open Menu
  • For Consumers
    • Can OBSI Help?
    • Consumer Bulletins
    • Consumer Portal
    • Consumer Resources
    • FAQs
    • Find Your Firm
    • How the Complaint Process Works
    • How We're Funded
    • Make a Complaint
    • Past Feedback and Input
    • Video Library
    • What to Expect for Consumers

    View our Make a Complaint page

    Make a Complaint

  • For Firms
    • Apply for Membership
    • Fee Payment Structure
    • Firm Bulletins
    • Firm Feedback and Input
    • Firm Helpdesk
    • Firm Portal
    • Firm Resources
    • Participating Firms
    • What to Expect for Firms

    Log in to OBSI Firm Portal

    Firm Login

  • How We Work
    • FAQs
    • Our Approaches
    • Our Service Standards
    • Outreach to Consumers and Firms
    • Reconsiderations and Complaints About OBSI
    • Responsibilities of Firms and Consumers
    • What to Expect From Our Process

    View our FAQs page

    FAQs

  • Case Data and Insights
    • Case Data
    • Case Studies

    View our Case Studies page

    Case Studies

  • News and Publications
    • Annual Reports
    • Firm Refusals
    • News Releases
    • OBSI News
    • Presentations, Reports and Submissions
    • Print Materials
    • Public Consultations
    • Video Library

    View our OBSI News page

    OBSI News

  • About Us
    • About OBSI
    • Accessibility
    • Careers
    • Contact Us
    • COVID-19 Update
    • Governance
    • How We're Regulated
    • Our History
    • Our Vision
    • Privacy
    • Staff
    • Terms of Reference

    View our Contact Us page

    Contact Us

I'd Like To... Open icon Close Icon
  • Make a complaint
  • Contact OBSI
  • Find my firm
  • Apply for membership
  • Know how the complaint process works
  • Learn more about OBSI's outreach to consumers and firms
  • Subscribe
  • Follow OBSI on Twitter
  • Follow OBSI on LinkedIn

bookshelf

Investor incurs significant losses from unsuitable advice and excessive trading and accepts low settlement offer

Print Print link
Share Share icon
  • Open new window to share this page via Facebook Facebook
  • Open new window to share this page via LinkedIn LinkedIn
  • Open new window to share this page via Twitter Twitter
  • Email this page Email
Increase link Increase text size
Descrease link Decrease text size
Back to Search

Key Lesson

OBSI is committed to conducting impartial investigations and recommending fair outcomes for both firms and consumers. When consumers escalate their complaints to OBSI, firms are obligated to participate in our process in good faith. Most firms do so and treat their customers fairly by complying with OBSI recommendations. However, sometimes firms choose not to comply and when that happens, consumers who have incurred losses have limited options and may accept unfair low settlement offers.

Tragedy leaves consumer and her children with uncertain future and small nest egg

In August 2005, Ms. F was 37 years old with two young children and had recently been widowed after her husband died unexpectedly. Ms. F earned $25,000 per year from her retail sales job and cared for an infirm elderly parent as well as her two young children. Ms. F’s home was worth $180,000 and she had a $90,000 mortgage.

Ms. F received $327,000 from her husband’s life insurance policies and investment accounts. She also received $10,000 from her church community to put toward her children’s education. In September 2005, Ms. F deposited these funds at her bank and opened investment accounts with Firm A based on the bank’s referral. On the advice of Firm A, she invested in primarily conservative low-medium and medium risk income-oriented investments.

Ms. F struggled to provide for herself and her family on her modest income. She occasionally withdrew from her investments to pay monthly bills and other expenses.

In June 2006, Ms. F contacted Mr. Q from Firm B on the advice of a friend. She sold her investments from Firm A, used some of the proceeds to pay off her mortgage, and transferred approximately $230,000 to Mr. Q at Firm B to invest.

Ms. F remarried and sold her home in July 2007. She and her new husband’s total income was $80,000 and they had a blended family of young children. Ms. F added $200,000 from the sale of her home to her investments with Firm B.

Unsuitable investments, unauthorized trades and excessive trading impact consumer’s portfolio

Ms. F had very limited investment knowledge. Before her husband had passed away, he handled all their finances. Ms. F followed the advice of Mr. Q without question and depended on Mr. Q’s expertise and judgment about which investments were appropriate for her.

In the spring of 2013, Ms. F noticed a sharp decline in her investments and asked Mr. Q about it. On Mr. Q’s advice, she kept her investments and believed his reassurances that they would recover.

In February 2016, Ms. F expressed concern to Mr. Q that he was making trades without her authorization, that the volume of trades in her accounts were high and that he was not making her aware of the commissions she was paying.

Dissatisfied with Mr. Q’s response, Ms. F asked Firm B to review her accounts. She requested to be compensated for the losses she incurred on investments that were higher than the risk she had agreed to and reimbursement of the commission she paid on trades where Mr. Q did not disclose the cost of commission to her. When Firm B refused and closed the case, Ms. F brought her complaint to OBSI.

Our findings

During our investigation, we found that:

  • Mr. Q recommended a greater allocation to high-risk investments than was suitable for Ms. F and that her investment accounts were unsuitably concentrated.
  • Mr. Q traded excessively in Ms. F’s account.
  • Ms. F incurred losses as a result of the unsuitable investments and paid excess commissions due to excessive trading.
  • Firm B was responsible for Ms. F’s losses.

OBSI’s financial analysis team determined that Ms. F incurred a loss of $133,070 in her investments at Firm B, and if she had been suitably invested, she would have gained $49,306. In addition, we found that Ms. F was charged $42,849 in excess commissions due to the excessive trading that Mr. Q had undertaken in her accounts.

We recommended that Firm B compensate Ms. F $226,497 for the financial harm she incurred, including interest, and we informed both Firm B and Ms. F of our findings.

A settlement is reached far below the fair recommendation amount

Firm B did not accept our recommendation. They said that Ms. F understood and accepted the risk in her investment portfolio and that they should not be liable for her losses. They offered compensation of $25,000. Ms. F declined this offer because it was so much lower than what OBSI recommended as fair and she hoped that the firm would extend a better offer. OBSI worked to facilitate a resolution of the case, but no higher offer was made by the firm.

Because Firm B refused to make a fair offer to resolve the dispute, we were required under our Terms of Reference to publish the results of our investigation, naming Firm B. We followed our normal process of contacting the firm’s CEO directly to attempt a last-minute resolution, informing the firm’s regulators of the imminent publication, and preparing our anonymized publication report and press release.

Hours before our publication of the case, Firm B extended a new offer of $40,000 to compensate Ms. F for her losses. After months of waiting for a better offer and although this was a small fraction of our total recommendation of $226,497, Ms. F reluctantly accepted the $40,000 due to her financial situation and her belief that she had no realistic alternative to recoup a higher proportion of her losses. Because Firm B and Ms. F had agreed to settle the case, we did not publish our report.

Subscribe to this Page
Subscribe
  • Can OBSI Help?
  • Consumer Bulletins
  • Consumer Portal
  • Consumer Resources
  • FAQs
  • Find Your Firm
  • How the Complaint Process Works
  • How We're Funded
  • Make a Complaint
  • Past Feedback and Input
  • Video Library
  • What to Expect for Consumers
  • For Consumers
  • For Firms
  • How We Work
  • Case Data and Insights
  • News and Publications
  • About Us
  • Other Links
  • Can OBSI Help?
  • Consumer Bulletins
  • Consumer Portal
  • Consumer Resources
  • FAQs
  • Find Your Firm
  • View All...
  • Apply for Membership
  • Fee Payment Structure
  • Firm Bulletins
  • Firm Feedback and Input
  • Firm Helpdesk
  • Firm Portal
  • View All...
  • FAQs
  • Our Approaches
  • Our Service Standards
  • Outreach to Consumers and Firms
  • Reconsiderations and Complaints About OBSI
  • Responsibilities of Firms and Consumers
  • View All...
  • Case Data
  • Case Studies
  • Annual Reports
  • Firm Refusals
  • News Releases
  • OBSI News
  • Presentations, Reports and Submissions
  • Print Materials
  • View All...
  • About OBSI
  • Accessibility
  • Careers
  • Contact Us
  • COVID-19 Update
  • Governance
  • View All...
  • Privacy
  • Sitemap
  • Accessibility
  • Subscribe to Our News
  • Contact Us
  • Website Feedback
  • View All...

Ombudsman for Banking Services and Investments logo

Toll-Free Telephone: 1 (888) 451-4519
Greater Toronto Area: (416) 287-2877
TTY Telephone: 1 (844) 358-3442

Toll-Free Fax: 1 (888) 422-2865
Greater Toronto Area Fax: (416) 225-4722

Design by eSolutionsGroup

© 2017 Ombudsman for Banking Services and Investments (OBSI), 20 Queen Street West, Suite 2400, P.O. Box 8, Toronto ON M5H 3R3

High Contrast Mode is on

Browser Compatibility Notification

It appears you are trying to access this site using an outdated browser. As a result, parts of the site may not function properly for you. We recommend updating your browser to its most recent version at your earliest convenience.