An investor is out over $100,000 due to bad advice provided by his financial advisor – but the financial management firm won’t pay despite involvement from the ombudsman
A financial management firm is refusing to reimburse a wronged investor, despite direction to do so from the Ombudsman of Banking Services and Investments.
Saskatoon-based Sentinel Financial Management has stated it will not pay $128,799 to an investor who suffered deep losses due to advice given by one of the firm’s advisors. According to OBSI, the investor, who had limited experience and knowledge of investment products, followed the advisor’s recommendation to transfer pension funds to a locked-in retirement product and to purchase several high-risk securities.
OBSI also alleges the advisor mislead the investor of the risk profile of the investments, describing them as “generally low” in a memorandum. One of the investments has since entered receivership while the other suspended redemption indefinitely, devastating the investor’s pension savings.
“OBSI found these high-risk exempt market securities unsuitable given Mr. E's low to medium-risk tolerance,” the ombudsman stated in a release. “Furthermore, the Sentinel Financial advisor characterized the products as "low-risk" and failed to adequately disclose the actual risks and product features. Had Mr. E understood the true risks associated with these investments, we have concluded that he would not have purchased them.”
It isn’t the first time the firm has refused OBSI’s directive. "Sentinel Financial is responsible for the financial harm caused by one of its advisors," stated ombudsman Sarah Bradley. "It's rare for any firm to refuse our recommendation to compensate an investor when warranted. But this marks the fourth time Sentinel has refused an OBSI recommendation in the past two years. To date, Sentinel has refused to pay almost $450,000 in compensation to investors."
OBSI has been criticized in the past for its inability to enforce its recommendations. An independent report out in June called for greater autonomy for the organization, finding as many as one in five compensation cases fall short – or are publicly refused to be paid altogether.
“Publicizing refusals has served to reinforce OBSI’s limitations and undermine public confidence in both the resolution system and the investment market,” the report states. “This is a shame as OBSI has been effective for 82 per cent of complainants who have been assessed as requiring compensation.”
Ken Kivenko, Chair SIPA Advisory Committee of the Small Investor Protection Association, told Wealth Professional that over half of the cases that go to the Ombudsman don’t receive financial retribution.
“Approximately 40% of the cases that go to OBSI get compensation, and 60% don’t,” he says, adding that many of OBSI’s decisions are also reversed after the fact. “After the dealers have done all their work, four out of 10, ultimately get reversed when they bring it to OBSI, which is pretty scary. You’ve got a fifty-fifty chance that the dealer didn’t get you a fair deal when someone independent looks at it.”
“OBSI reported a year ago about low balling, where they said, even after they recommended something, the firm said ‘No, we’re not going to do that. We’re either going to do nothing, or we’ll do a fraction.’”
Related stories:
Canadian banking ombudsman needs teeth: Report
OBSI move changes little
Saskatoon-based Sentinel Financial Management has stated it will not pay $128,799 to an investor who suffered deep losses due to advice given by one of the firm’s advisors. According to OBSI, the investor, who had limited experience and knowledge of investment products, followed the advisor’s recommendation to transfer pension funds to a locked-in retirement product and to purchase several high-risk securities.
OBSI also alleges the advisor mislead the investor of the risk profile of the investments, describing them as “generally low” in a memorandum. One of the investments has since entered receivership while the other suspended redemption indefinitely, devastating the investor’s pension savings.
“OBSI found these high-risk exempt market securities unsuitable given Mr. E's low to medium-risk tolerance,” the ombudsman stated in a release. “Furthermore, the Sentinel Financial advisor characterized the products as "low-risk" and failed to adequately disclose the actual risks and product features. Had Mr. E understood the true risks associated with these investments, we have concluded that he would not have purchased them.”
It isn’t the first time the firm has refused OBSI’s directive. "Sentinel Financial is responsible for the financial harm caused by one of its advisors," stated ombudsman Sarah Bradley. "It's rare for any firm to refuse our recommendation to compensate an investor when warranted. But this marks the fourth time Sentinel has refused an OBSI recommendation in the past two years. To date, Sentinel has refused to pay almost $450,000 in compensation to investors."
OBSI has been criticized in the past for its inability to enforce its recommendations. An independent report out in June called for greater autonomy for the organization, finding as many as one in five compensation cases fall short – or are publicly refused to be paid altogether.
“Publicizing refusals has served to reinforce OBSI’s limitations and undermine public confidence in both the resolution system and the investment market,” the report states. “This is a shame as OBSI has been effective for 82 per cent of complainants who have been assessed as requiring compensation.”
Ken Kivenko, Chair SIPA Advisory Committee of the Small Investor Protection Association, told Wealth Professional that over half of the cases that go to the Ombudsman don’t receive financial retribution.
“Approximately 40% of the cases that go to OBSI get compensation, and 60% don’t,” he says, adding that many of OBSI’s decisions are also reversed after the fact. “After the dealers have done all their work, four out of 10, ultimately get reversed when they bring it to OBSI, which is pretty scary. You’ve got a fifty-fifty chance that the dealer didn’t get you a fair deal when someone independent looks at it.”
“OBSI reported a year ago about low balling, where they said, even after they recommended something, the firm said ‘No, we’re not going to do that. We’re either going to do nothing, or we’ll do a fraction.’”
Related stories:
Canadian banking ombudsman needs teeth: Report
OBSI move changes little
