The Ombudsman for Banking Services and Investments (OBSI) has announced the refusal of Monarch Wealth Corporation to compensate a couple in the amount of $30,628.
Read: OBSI defies common sense
Monarch is a mutual fund dealer based in Toronto. The complainants, Mr. H and Ms. W, came to Canada from China in 2001 and had no family or friends here at the time. They met their advisor, who is of the same cultural background, through the church they all attended.
Their advisor, Mr. Z, recommended a strategy of borrowing money to invest (also known as leveraging). OBSI says this was unsuitable given the complainants’ personal financial situation and risk tolerance. The complainants had very limited investment knowledge and minimal investment experience, and did not understand the risks of leveraged investing, according to the ombudsman.
The leveraging strategy was not reviewed by Mr. Z after significant changes in the complainants financial circumstances (they purchased a house and Ms. W went on maternity leave). The couple was assured by Mr. Z that they would not incur any losses.
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OBSI says it found evidence of irregularities with the signatures of Mr. H and Ms. W on several documents. Although Monarch received complaints from other clients of Mr. Z about unauthorized transactions, including leveraged investment transactions, falsified signatures, and inaccurate documents, Monarch did not contact Mr. H and Ms. W about their accounts.
Mr. H and Ms. W suffered losses of over $61,000 as a result of the leverage strategy. Because the strategy was first implemented when the complainants were clients of Mr. Z at a different firm (Firm A), OBSI apportioned only 50% of the losses to Monarch. The complainants and Firm A agreed on a settlement in this matter, while Monarch refused to compensate the couple.
A copy of OBSI’s investigation report for Mr. H’s and Ms. W’s complaint is available on OBSI’s website.