Saturday, August 29, 2015

Paper on the regulator- corporation complex


Accommodating Power: The “Common Sense” of Regulators : Laureen Snider , Queen's U.
The OSC seems not to have been captured by the sector it regulates but handed over to them” Andrews, 2006: 86 “

This paper examines the perspectives, strategies and practical `common sense' of those charged with regulating and enforcing securities laws in the post-Enron era. It argues that crackdown periods following stock market disasters disrupt dominant patterns of governance and empower regulators to proactively enforce laws against powerful financial actors. The article shows how officials negotiate their regulatory terrain and accommodate the economic and social capital of the `stakeholders' they are charged with regulating outside crisis periods and how they re-interpret and redefine their mission in response to political, economic and ideological change. Empirically the article is based on 21 interviews with regulators and enforcement staff in securities commissions and law enforcement, and on the discourses and directives found in key regulatory documents Read the article here 

Saturday, August 22, 2015

How to assess mutual fund ads

We wrote this piece over 10 years ago. The recent scuffle over investment awards in sales communications prompted us to republish the paper. The key point to remember is that these ads are sales pitches. Canadian Securities regulators help unsuspecting retail investors understand the limitations of past-performance data by requiring fund ads touting historical returns to include a warning that states “The indicated rates of return are historical annual compounded total returns including changes in unit or share value and reinvestment of all distributions and dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ” .

The Annual investment awards have one basic purpose- to market the "winners". Current research shows that most funds under perform their benchmarks over the longer term. The awards have little economic or information value for Main Street but do have potential sales value for Bay Street.They have the same value as "Free lunch" seminars at best. BE AWARE. Here's the article: Analyze fund ads for clues 

 

Monday, August 17, 2015

Folklore of Finance: How Beliefs and Behaviors Sabotage Success in the Investment Management Industry

To better understand the flawed beliefs and behaviors within the industry, what State Street describe as “folklore,” they examined the views of thousands of investors, investment providers, government officials and regulators across 19 countries over 18 months. What they learned is that true success lies beyond what the industry previously accepted. It includes not only producing alpha - perhaps more importantly, it also requires helping investors achieve their long-term goals. They’ve outlined concrete steps that the industry must take to develop a new “Folklore of Finance.” Explore the full report

Thursday, August 6, 2015

Subject: Closet Indexing:Your Mutual Fund May Be Too Lazy


It is well documented that on average active mutual fund tends to underperform the market. However, there is now a further issue with mutual funds according to the recent research of Antti Petajisto formerly of Yale University and now at Blackrock.The problem is this. The point of owning a mutual fund is paying a team of analysts to pick stocks on your behalf, but according to this research, a significant group of mutual funds are no more than “closet indexers”, closer to following the market than trying to beat it. This matters because not only are you paying a high fee, you aren’t getting what you might expect. It’s a little like paying a premium for Gucci loafers and then discovering that the shoes you received are remarkably similar to a pair from Walmart.

Wednesday, July 29, 2015

ALERT Threats to your Financial Health

We have issued a number of Investor ALERTS in the past but new threats keep on appearing or old ones become more sophisticated. Here's our latest take on what to be on the alert for. Awareness of threats from Bay Street  is a key to successful investing.

Saturday, July 4, 2015

Advisor Titles requires Investor vigilance

Advisors use titles and designations to gain trust. While some titles and designations are meaningful, many are not.You need to be alert . Read Business Cards, Titles and Investor Trust

Thursday, June 25, 2015

Advisors as Executors: A wise move?

This article outlines the risks involved in appointing your investment advisor as your executor. Right now regulators do not perrmit this but the IIROC Board is considering allowing it subject to some conditions. Read the article

Fiduciary Standard and Financial Advice: Findings from Academic Literature


Fiduciary Standard and Financial Advice: Findings from Academic Literature

Abstract: This article provides an overview of theory and empirical evidence related to the benefits and costs resulting from the application of a fiduciary standard of care to the conduct of brokers, dealers (broker-dealers), and investment advisors. The purpose of this document is not to advocate a position on possible regulatory actions. It is intended to provide an in-depth review of the extant literature, primarily from economics, finance, and law, related to the regulation, incentives, and outcomes of the existing advice marketplace. Opinions on the likely impact of various strategies on the marketplace are entirely those of the author and are based on the preponderance of empirical evidence and the strength of related theories. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419727

Wednesday, June 17, 2015

Kenmar Commentary on the CSA commissioned Fund Fee Research Report

Dealer / advisor conflicts-of-interest are top of mind for regulators and investor advocates.Conflicted advice can skew recommendations that are not in the best interests of investors , thereby impairing savings and retirement accounts. The CSA commissioned third party research into the impact of advisor compensation on advisor recommendations.The Researcher was to conduct a literature review to evaluate the extent, if any, to which the use of fee-based vs. commission based compensation changes the nature of advice and investment outcomes over the long term. Following a competitive procurement by the CSA, the Brondesbury Group was contracted to conduct this research. The Brondesbury Group  has now completed their work and their findings are set out in the Mutual Fund Fees Research report which is the basis for our commentary. The report concluded that there is sufficient evidence of skewing to consider regulatory reforms.Indirectly, the report also  points to the need for the standard of advice giving  to be examined since a change in compensation model alone cannot satisfactorily resolve the core issue.Read our Commentary on the Report which is made from the perspective of the retail investor.

Tuesday, June 16, 2015

INVESTOR ALERT: Think twice before using internal Bank "Ombudsman"

If you  have a complaint with a a Bank-owned IIROC  investment dealer you may find yourself getting an offer to make use of the Bank's internal "Ombudsman" if you didn't accept the dealer's restitution offer ( if any). This INVESTOR ALERT tells you that the use of this " Ombudsman" is entirely voluntary and warns of the risks involved . You may want to use the Ombudsman for Banking Services and Investments, a free, independent Dispute Resolution Service.