TORONTO, Aug. 27, 2020 /CNW/ - The Ombudsman for Banking Services and Investments (OBSI) today announced the refusal of WealthTerra Capital Management (WealthTerra) to compensate an investor $50,810 for losses caused by WealthTerra's sale of unsuitable investments in high-risk exempt market securities.
WealthTerra is an exempt market dealer based in Alberta.
In 2011, Ms. X was recently divorced and living full-time with her two young children. She was self-employed and offered services such as house cleaning and pet sitting for clients. She earned an annual income of approximately $20,000 and was living with her mother as she could not afford to live on her own.
Ms. X had a Locked-In Retirement Account (LIRA) worth approximately $46,000 that held pension money she received in the early 2000s from a former employer. Her only other asset was $12,000 in emergency savings, making her total net worth $58,000.
A mother at the school Ms. X's children attended was an insurance agent who introduced Ms. X to her boss and a WealthTerra representative to discuss insurance and investment options. The WealthTerra representative recommended Ms. X transfer her LIRA to WealthTerra and invest in exempt market securities.
In 2017, Ms. X became aware of problems with one of these investments, which led her to ask another firm to review her investments. She subsequently complained to WealthTerra that her investments were not suitable for her.
WealthTerra refused to compensate Ms. X because it said the investments were suitable for her and because she had not questioned the suitability earlier.
Following OBSI's investigation, we 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. We 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.
As a result of being unsuitably invested, Ms. X incurred financial harm. We recommended that WealthTerra compensate her $50,810. To ensure no possibility of double recovery, we also recommended that Ms. X transfer all rights and interests in certain exempt market securities to WealthTerra.
WealthTerra chose not to fulfill its responsibilities to its client by fairly compensating her based on our recommendation in this case. The firm has recently applied for the voluntary surrender of its registration and is no longer in business.
A copy of OBSI's investigation report for Ms. X's complaint is available here. Some names and personal information have been edited from the original version 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)
For further information: Mark Wright, Director, Communications and Stakeholder Relations, 416-287-2877 ext.2225, [email protected]