Evidence of meeting #35 for Finance in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was savings.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Murray Candlish  As an Individual
Larry Elford  As an Individual
Wynne Miles  As an Individual
Diane Urquhart  Independent Consulting Analyst, As an Individual
Steven Furino  Treasurer, Beaver Creek Housing Co-operative
Andrée De Serres  Professor, University of Quebec in Montreal, School of Science management, Coalition pour la protection des investisseurs
Robert Pouliot  Chairman and Chief Executive Officer, Coalition pour la protection des investisseurs

10:30 a.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

Thank you, Mr. Chair.

Your testimony is incredibly compelling. It refers to fraud, illegal practices, misrepresentation, misleading sales practices, financial abuses, and immunity from prosecution. Essentially you paint a portrait in this particular case of a financial services sector that's the wild west. There doesn't seem to be any oversight or any protection for the Canadian public.

I have a series of questions, and I'd like to start with Ms. Urquhart.

You referred to the margin calls around the ABCPs. Essentially, new money was needed to be put in to keep the situation afloat. It sounds very similar to a pyramid scheme. Would that be an accurate assessment of how this situation developed?

Second, this offer from Canaccord came about the day before they knew you were all coming here to testify before the finance committee. Do you think there was a very clear connection?

10:30 a.m.

Independent Consulting Analyst, As an Individual

Diane Urquhart

It's my belief that had Brian Hunter not set up Facebook, had my husband and I not become aware of the group, and had we not engaged in a fundraising process to seek legal counsel, it was the intent of the pan-Canadian committee and Mr. Crawford to enter a vote without their having legal representation and with the hope that the vast majority of the 1,800 families would not be organized or have the sufficient wherewithal to vote no. Most importantly, the parties who were in a position to inform them and advise them were Canaccord, Credential Securities, and National Bank Financial.

Credential Securities is owned by the Credit Union Central, and there were five Credit Union Centrals on the pan-Canadian committee. Canaccord was on the pan-Canadian committee. The pan-Canadian committee in whose interest it was to vote yes, and those sets of brokerages in whose interest it was for the customers not to know and to join them in saying yes, were in a position to control the list. They were in a position to advise the customers to vote yes, contrary to their own financial interests.

This was a very significant situation that we were able to uncover in the last four weeks through sheer hard work, 24/7. I think every one of the members on this panel and another 30 behind them have been organizing, informing, seeking legal counsel, and gathering evidence, all for the purpose of ensuring that they would not be run over by the bus in the vote.

Canaccord only came to the table, in my opinion, because of the adverse publicity and because of this hearing today.

10:30 a.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

If you hadn't done your work, there was not going to be any protection or any response from financial services.

10:30 a.m.

Independent Consulting Analyst, As an Individual

Diane Urquhart

Yes, and I'd like to add that we are not paid to be government regulators. OSFI has paid staff; provincial securities commissions have paid staff; and even you yourselves, as members of this committee, are paid. All the people who have been scrambling to provide investor protection through the name and shame process are unpaid volunteers. These people, who have day jobs, who have had their money stripped from them, had to work 24/7, around the clock, just to get some kind of stabilization and recovery in their own affairs.

Thank God for people like Robert Pouliot, Andrée De Serres, Robert Kyle, Larry Elford, my husband, and I'll thank myself too, for making a contribution to try to get the money back for this group, to start, but more importantly, to begin the program of reform so that we do have government regulators who do the job. Canadians cannot rely on volunteers to provide very basic regulation to protect the savings of Canadians.

10:30 a.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

We thank you for coming here today, because the Canadian public needs to know what has happened to you and what is happening to other Canadians.

I'd like to go to Mr. Elford. Essentially you said the banks and financial institutions seem to be above the law. So I want to ask you, why is that? We've had governments, both the current government and the previous governments, who seemed to be very soft on corporate crime. Should there be consequences when CEOs and corporate directors make decisions that have such a profound impact on the lives of ordinary Canadians?

10:35 a.m.

As an Individual

Larry Elford

Absolutely. There should be proceeds of crime legislation that causes people to be responsible for their actions, fraudulent or otherwise. Robert is asking for compensation funds and those kinds of things, and I somewhat agree, but I don't think the government should simply bail out the fraudulent actions of white-collar criminals and allow those people to skate free in a Canadian justice system that does not prosecute white-collar criminals.

Further to the first part of your question, where you pointed out my comments concerning the “above the law” type of thinking, the Alberta Securities Commission, in my province, spent between $1 million and $2 million to legally fight the Auditor General of Alberta to audit that crown corporation. So that is how they're standing their belief of themselves to be completely above the law. I found that same attitude at numerous securities commissions, at the Investment Dealers Association, and the list goes on.

10:35 a.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

Mr. Candlish, Mr. Furino, and Ms. Miles, what is your level of confidence now in the Canadian financial system, following all of this?

10:35 a.m.

As an Individual

Murray Candlish

I'll share a comment from a fellow back home when he found out what was going on. He said, “You know, I think I'm going to go down to my bank and put my money in a tobacco can and take it home with me.”

10:35 a.m.

Treasurer, Beaver Creek Housing Co-operative

Steven Furino

The comment in the co-op that has most commonly been made, particularly with this issue in the news out of the United States, is whether it's time to get a bigger mattress to stuff savings in.

10:35 a.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

They're saying that's more secure.

10:35 a.m.

Treasurer, Beaver Creek Housing Co-operative

10:35 a.m.

As an Individual

Wynne Miles

I recently bought some Canada Savings Bonds.

This has been a real education process. I was very naive before, and I certainly hope, now that I'm aware of it, I will see some changes being made.

10:35 a.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Our time has gone. Now we'll move to our second round, in which you will have five minutes.

Mr. McKay will lead that round off.

10:35 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Thank you, Chair, and thank you, witnesses.

It looks as though we're going to see a spike in mattress sales.

My first question is to Ms. Miles. Generally when you have a relationship between a broker and an investor, you have a disclosure document that has a know-your-client section. Did you enter into a know-your-client type of document with your broker?

10:35 a.m.

As an Individual

Wynne Miles

I believe we did. There are little boxes that you check at the bottom of the form.

10:35 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Yes. So that was signed.

I find it quite astounding that your broker would move from one asset to another without your knowledge or consent. That does strike me as quite astounding.

10:35 a.m.

As an Individual

Wynne Miles

You see, we've had those funds in a money market fund, and over the years they've gone from T-bills to equally secure things, such as very secure bank notes. She doesn't ask us when she does that. I know she assumed they were very safe, because she herself has her retirement savings in ABCPs.

We also have other funds. They are in very conservative bonds. Whenever they mature, she will phone us up and we will converse either by e-mail or by phone.

10:35 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

So she thought she was moving from one safe investment to another.

10:35 a.m.

As an Individual

Wynne Miles

That's right, yes.

10:35 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

In your restructuring deal you said you wouldn't see any money—I wasn't quite clear what you were saying, so I'm just asking for clarification—until 2013, and then the balance of your money until 2016?

10:35 a.m.

As an Individual

Wynne Miles

Yes, and my husband would be the one to speak to that, because I haven't read the agreement. But that's the way it's set up, and it's strange because most of the trusts in SIT III, which is what we own, come due by 2013. Yet we have to wait.

Perhaps Diane can answer that better.

10:35 a.m.

Independent Consulting Analyst, As an Individual

Diane Urquhart

I believe that was one of the conditions the international banks and the banks sought to protect their loans. They didn't want the Mileses to take their cash out when the various mortgages matured, because they would want the cash to make sure the cushion remained within these three large pools, so they would be assured that what they were owed...the money would be there to owe it at the maturity date.

10:40 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

So is this a matter of the banks, if you will...? There's a pool of bank clients and a pool of retail clients. What I don't understand is whether the banks are, in effect, insisting on a deal that's equivalent to the retail investors in terms of timing. Is that somewhat of a problem?

10:40 a.m.

Independent Consulting Analyst, As an Individual

Diane Urquhart

It would have been logical for the pan-Canadian committee and the major banks of Canada to know they had a business problem, and that there was $350 million worth of paper for which there was a strong legal case to be made that they had been sold on the basis of misrepresentation and broker negligence. They didn't do that. They have entered the court with the view that all are equal. So any stranded retailer that hasn't yet had a cash payment is treated the same as PSP Investments, the City of Hamilton, the Government of Yukon. They're all treated the same.

10:40 a.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

What I don't understand about the proposition that's on the table is who's funding the proposition for the retailers.