Banking ombudsman says an Alberta firm sold the woman unsuitable investments in high-risk securities
An Alberta woman has not been paid compensation by an investment firm despite a regulator determining that she was sold unsuitable exempt market securities.
Dating back to 2011, the case focuses on a high-risk investment recommended by exempt market dealer WealthTerra.
The recently-divorced self-employed woman (Miss X) had an income of $20,000 to support her and her two young children. The family were unable to afford a home of their own and were living with her mother.
Her net worth comprised around $46,000 held in a Locked-In Retirement Account (LIRA) which was from a pension fund from a previous employment; and $12,000 in emergency savings.
The Ombudsman for Banking Services and Investments (OBSI) says that Miss X was introduced to a WealthTerra representative through a parent at her children’s school.
The representative recommended that Miss X should transfer her LIRA funds to WealthTerra and invest in exempt market securities.
Earlier this year, the Alberta Securities Commission warned investors that cashing out a LIRA to fund high-risk investments was one of its top 6 “too good to be true opportunities.”
Unsuitable investment
In 2017, Miss X became concerned about her investment and asked another firm for a review, which resulted in her making a complaint to WealthTerra that the investment was not suitable for her.
The firm said that the investor should have complained sooner if she believed the investment was unsuitable.
Following OBSI's investigation, it was found that Ms. X had limited investment knowledge and experience and that her account was unsuitably invested in high-risk exempt market securities that exceeded her low to medium risk tolerance.
The ombudsman also found that prior to 2017, Ms. X's account statements did not reflect any investment losses or other red flags that would reasonably have led her to question the suitability of her investments.
Refusal to compensate
OBSI recommended that WealthTerra compensate Miss X a total of $50,810 and that she should then transfer all rights and interests in certain exempt market securities to the firm (to avoid possibility of double recovery).
“WealthTerra chose not to fulfill its responsibilities to its client by fairly compensating her based on our recommendation in this case,” OBSI said in a statement. “The firm has recently applied for the voluntary surrender of its registration and is no longer in business.”
