TORONTO, Dec. 1, 2020 /CNW/ - The Ombudsman for Banking Services and Investments (OBSI) today announced the refusal of Becksley Capital Inc. (Becksley) to compensate an investor $33,055 for losses caused by the firm's sale of unsuitable investments.
Becksley is an exempt market dealer based in Richmond Hill, Ontario.
At the time of the investment, Mr. J was a 37-year old skilled tradesman with a high school education. Mr. J had an income of $69,000 and a net worth of less than $100,000.
On the advice of an agent of Becksley Capital, Mr. J borrowed $60,000 on a line of credit to invest in an exempt market product. Exempt market products are private investments that can only legally be sold to investors who meet certain income and net worth requirements.
The Becksley agent was a financial planner and a family friend of Mr. J's who was not licensed to sell this kind of investment. He wasn't an employee of Becksley but worked as a referral agent. He helped Mr. J complete false documentation about Mr. J's assets so he would appear to be a high net worth "accredited" investor.
Becksley Capital received Mr. J's forms from the referral agent, opened his account and sold him the exempt market investment without taking any steps to verify that the information about him was accurate or know anything else about him. Exempt market dealers are required to take steps to "know their client" before selling investments to them and are not allowed to delegate that obligation to any unlicensed individuals.
The income and wealth requirements for investors in exempt market or "private" investments are in place to ensure that investors are:
- sophisticated enough to understand the investment and its risks, and
- financially able to withstand the potential loss of all the money they invest.
Through our investigation, OBSI found that Mr. J did not qualify as an accredited investor and that exempt market products were unsuitable for him. We determined that Becksley Capital had improperly delegated its know-your-client and suitability obligations to an unlicensed referral agent and failed to verify that Mr. J was an accredited investor.
We also found that Mr. J had some responsibility for his losses because he had the capacity to understand the risks of the investment which were disclosed to him and signed documents that he knew or should have known contained false information.
As a result, we recommended that Becksley Capital and Mr. J both shared responsibility for Mr. J's financial losses, which is reflected in the recommendation amount.
A copy of OBSI's investigation report for Mr. J's complaint is available here. Some names and personal information have been edited to protect the identity of certain individuals involved, including the complainant.
All investment firms in Canada are required to make OBSI services available to their clients. Following the investigation of a complaint, OBSI may make a recommendation for compensation where it would be fair to do so, considering all the facts and circumstances of the case. If a firm refuses to follow a recommendation, OBSI is required to publicize that refusal and the details of the complaint.
Canada's Ombudsman for Banking Services and Investments (OBSI) is a national, independent and not-for-profit organization that helps resolve and reduce disputes between consumers and financial services firms in both official languages. OBSI is responsive to consumer inquiries, conducts fair and accessible investigations of unresolved disputes, and shares its knowledge and expertise with the stakeholders and the public. If a consumer has a complaint against an OBSI participating bank or investment firm that they are not able to resolve with the bank or firm, OBSI will investigate at no cost to the consumer. Where a complaint has merit, OBSI may recommend compensation up to a maximum of $350,000.
SOURCE Ombudsman for Banking Services and Investments (OBSI)
Mark Wright, Director, Communications and Stakeholder Relations, 416-287-2877 ext.2225, [email protected]
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