Questionable practices at banks may be prevalent due to a jurisdictional ‘shell game’
According to an investment industry critic and former bank employee, a federal investment protection agency is needed to deal with unethical practices reported at Canada’s big banks.
Larry Elford, a former certified investment manager at RBC, said some aspects of the activities currently fall under federal jurisdiction and others under provincial jurisdiction, reported CBC News.
“The silos that separate the mutual fund salesman from the bank employee, from the investment salesman, from the provincial regulation, from the federal regulation are like a shell game,” Elford said in a news conference on Parliament Hill.
He cited an example of a woman who was talked by her financial institution into investing in mutual funds — which were riskier than they should have been — by taking out loans she couldn’t afford. According to Elford, the business cards shown by the financial institution had different titles for the same person, and the person authorizing the loans was the same one selling the funds.
“Quite frankly, there's no one who can keep track of this, and there is certainly no one at the FCAC (Financial Consumer Agency of Canada) who is keeping track of this and trying to make sense of it,” he said.
Elford issued the statements prior to testifying before MPs on the Commons finance committee. Federal MPs heard testimony from former bank employees as they explored allegations of questionable, and even illegal, sales practices by some of the country's largest financial institutions.
The committee had also heard testimony from Financial Consumer Agency of Canada commissioner Lucie Tedesco, who says a review of bank business practices is underway, with initial findings due by the end of the year.
The big banks have defended their practices and insist they put the needs of their clients first, regularly seek employee and customer feedback, and address any inappropriate behaviour.
with files from the Canadian Press
For more of Wealth Professional's latest industry news, click here.
Related stories:
Canadian bankers testify on sales practice allegations
Finance committee hearings launched to probe bank practices
