Thinking of getting licensed in Quebec? Could this represent a business risk? Could this ruin and end your career? These are important questions to consider before you decide to get licensed outside of your province and in Quebec where the justice system does not recognize the presumption of innocence and where you can be found guilty of fraud without a trial.
Quebecers are great lawmakers but they have absolutely no comprehension of the concept of checks and balances. (Richard Proteau 2013).
At one point in time in his career an advisor must decide whether or not to get licensed in another province if he wants to retain important clients who have moved. The Uniform Insurance Act makes this decision simple for the Anglophone provinces as the laws are very similar. This is not the case in Quebec which has very different laws such as the Act respecting the distribution of financial products and services (which we will refer as the Act) which gives very broad powers to the regulator (Authority Marche Financier or AMF) to act against an advisor. An advisor who is thinking about getting licensed in Quebec should understand the risks and possible consequences of putting himself under such a regulatory jurisdiction and system of justice. In the text below, I list and explain the articles of laws that should be of concern for an advisor and how they were applied by giving an example of a real case.
Probity or Character Assassination?
In the Act, you have an article (article 220) that gives the AMF the right to make an assessment of the probity of an advisor and to decide whether or not his character is good enough to be an advisor in this province. Note that due to poor translation, in English the article 220 uses the term honesty while in French it uses the term probity. Probity and honesty are different where probity is not only about complete honesty but also includes trustworthiness and integrity towards others. Because the Quebec Courts have retained the principle of probity over honesty, we will interpret this article in function of the concept of probity.
220. The Authority may, for a given sector, refuse to issue or to renew a certificate, or impose conditions or restrictions on a certificate, where in its opinion the applicant does not possess the degree of honesty it considers necessary to pursue activities in that sector, or is in a situation it considers to be incompatible with the pursuit of activities in that sector.
I would first like to state here that I support this law but not as it is written. First probity is not defined. For example, let’s assume Sylvie Therrien, the whistleblower who leaked documents proving the government was lying to the Canadian public about quotas in employment insurance, applies to be an advisor. Does she have the probity to be an advisor? If the AMF makes its decision in function of her employer she would be deemed not to be trustworthy and therefore she does not have the probity to be an advisor. If the AMF judges this situation from her point of view and point of view of the public, we see a person who did the right thing at a tremendous cost to herself because it was simply the right thing to do. Truly she has the probity to be an advisor. As we can see a judgment of character can be very subjective. As stated the power of judging probity can be used for character assassination as we will see in the example below. Finally there is no process for the decision and delivery of this judgment. It can be done by one employee of the AMF and does not need to be explained. Therefore such judgment can easily hide discrimination and be delivered on the basis of color, race and religion. Also there is no process to defend yourself or to refute any allegations against your probity.
Judge Yves Alain in the case of AMV v. Alan Muphy 200-17-013666-102
Since the law does not provide any framework around the use of the power of judging probity, it would therefore be up to the justice Courts to provide this framework in cases where the defendant contest the decision of the AMF in the context of the Charter of rights and freedoms. Sadly the Courts in Quebec have refused to do this. A good example of this is the Murphy case. Alan Murphy was recognized guilty of having made transactions in mutual funds without being licensed following a miscommunication between him and his dealer regarding the status of his license. The AMF used this situation to deliver a probity decision against Murphy refusing to reinstate his license. As a defense, Mr. Murphy proved this was discrimination since he provided hundred of examples of advisors who like him had committed this infraction following an administrative error. In all of these cases, advisors were either reprimanded or they were fined. Never an advisor received a probity decision except Mr. Murphy who lost his right to be an advisor for the rest of his life. How can you explain this decision? Is it because Murphy is a catholic who became a Muslim which is frowned upon in Quebec? In fact members of his association and regulators tried to use his new religion to make accusations that he was a terrorist linking him to a bomb incident.
Unbelievably judge Yves Alain did not even tried to explain this and just censored the examples provided by Murphy reaffirming instead that the power of the AMF to judge probity must be a liberal power not based on a known norm that would be objective and verifiable which meant that the Courts should not intervene to change this and should show instead deference to the AMF who becomes the only expert in defining what is probity.
However in the same judgment, judge Yves Alain destroys the expertise of the AMF in this regards by criticizing the ONE individual that is judging the character of the advisors a bit like a god. This individual, a Director at the AMF is Marc Beaudoin. In his judgment, judge Yves Alain criticizes Marc Beaudoin stating that he was an individual who had shown a lack of knowledge and chronic incompetence. This represents the kind of expertise in Quebec necessary it seems for an employee of the AMF to make a judgment of character.
So the Courts in Quebec refuse to provide a framework that would put boundaries around this power to judge probity. As a result, this power can be used by one employee of the AMF no matter how incompetent he is and no matter if the decision is discriminatory. One employee at the AMF can destroy the life and career of the advisor by pure incompetence or simply because he does not like you, your race, religion…
With each decision of probity there is a sanction. Again the Courts have a duty to intervene when the sanctions are not graded. Under the Charter of rights and freedoms, justice applies to all in the same fashion. But the Courts have refused again to intervene. Let’s look at an advisor whose name is Thibault and who has declared the biggest bankruptcy in Quebec. This advisor was found to have lied on his income tax returns, to have falsified insurance applications, to have sold unsuitable investments and even lost a civil lawsuit against Empire Life worth millions of dollars in a stratagem to defraud this company. Not surprisingly the AMF made a probity decision against him but surprisingly he was deemed not to have the probity to act as the principal or director of a firm but he could still continue without any restrictions to act as an advisor. When you compare this decision to the much lesser infraction of having sold mutual funds by error where Murphy lost his right to be an advisor for life, is there an argument that can be possibly made that does not prove it is discrimination? Not surprisingly judge Yves Alain made certain not to tackle or answer this question even if it was raised in the trial.
Finally just to show to what extent an employee of the AMF can go to destroy your career by making this probity decision, we learn in the judgment of judge Yves Alain that Marc Beaudoin refused in part to reinstate the license of Murphy because there were new complaints against him. These complaints were done anonymously with the anonymity of the accuser protected by the AMF which basically refused to provide the proofs of these complaints to Murphy for his defense. In this judgment we learn that this anonymous source was Marc Beaudoin himself. He basically made the complaints himself in order to support his probity decision and to deny the request for the reinstatement of Murphy’s license. It is an act of incredible bad faith however judge Yves Alain viewed this as an error and therefore provided immunity for Marc Beaudoin and the AMF.
Immunity of the AMF
“For the judges in Quebec, the AMF can do a lot of errors intentionally or unintentionally. However for the Courts, the AMF can simply do no wrongs.” Richard Proteau 2013
Article 32 of the Act respecting the AMF gives this organization the right to immunity:
32. No proceedings may be brought against the Authority, the president and director general, a staff member or an appointed agent of the Authority by reason of acts performed in good faith in the exercise of his or her functions.
The problem is there has never been a case in Quebec where a person having being wronged by the AMF has been able to prove bad faith in the courts of Quebec. As we have seen with the Murphy case, even if an employee like Sylvain Theberge lies in his public communication, the judge Yves Alain will consider this an error stating that Theberge should stick closer to the truth instead of writing with such a bias. When the judge Yves Alain comments on the abuses of power made by the investigators of the AMF, he qualifies their practices as being disputable but again it is all done in good faith. When judge Alain questions why the investigator Rousseau got involved in the Murphy case when he is responsible for economic crimes and who therefore accessed protected private information usually not available to other investigators without a warrant under the Confidential Information Act, this is not bad faith either.
As a result it is impossible to prove bad faith of the AMF. The employees of the AMF know they have full immunity no matter what they do. They can discriminate or even use racism in their decision without ever having to face the consequences of their decisions. They can destroy life without fear of repercussions.
Of being found guilty of fraud without a trial
There are 2 ways for the AMF to find an advisor guilty of fraud without going through a trial and without the advisor being given the right to defend himself or present his version of the facts.
Bureau de decision et revision (BDR): AMF v. Assurance Claude Belzile
The BDR functions as an administrative tribunal charged in first instance, at the request of the Autorité or any interested person, with exercising certain powers provided for in the Securities Act, the Derivatives Act and the Act respecting the distribution of financial products and services. When the
AMF seeks for example to shut down a firm or to cease the bank accounts of a firm or an advisor, the AMF will request these injunctions to the BDR. If the situation is urgent and the public is at risk, this can be done in an ex parte hearing. This means the firm or advisor are not present, represented or have the right to present their version of the facts. Sadly these ex parte hearings have been abused with the BDR failing to meet its duty of reserve. These ex parte hearings have become an easy way to convict a firm or advisor without having to consider the version of the defendant and without giving them the right to a full defense.
This is what happened to Assurance Claude Belzile, a firm accused of having told clients they were insured when they were not in order to pocket the premiums. This firm was accused of fraud and since the public was at risk, the AMF sought, in an ex parte hearing, an injunction closing down the firm and the right to cease all business and personal accounts of the owners and their agents. At the hearing without the defendant being present, the judge Claude St Pierre threw away his duty of reserve and found the defendant guilty of having done all of this fraud and agreed to the injunction demanded by the AMF.
One month later, the AMF admitted publicly there was no fraud and the accusations were the result of an administrative problem between the firm and the insurer.
How could this happen? Well, when we study the minutes of the hearing, we discover that the procurer of the AMF, Sylvie Bourgeois and its investigators, falsified and withheld information to the Courts. In fact this is so severe that the question remaining is whether Sylvie Bourgeois committed perjury in order to get her trophy on the wall. We learn that in order to convince the tribunal there were many situations of clients stating they were insured when they were not, the procurer used a complaint of a client lodged in small claims court where the client who had cancelled an option under her automobile coverage got into an accident and was now saying she was insured when she was not. The procurer Sylvie Bourgeois used this case as the center or her argument that there were many instances of fraud and that the public was at risk without telling the Court the case was thrown out of the small claim court. Also the client had made a complaint to the Chambre Financiere whose syndic had investigated the matter and found that Assurance Belzile had done nothing wrong. Therefore the injunctions requested by Sylvie Bourgeois were procured under false pretences and false allegations made by this procurer.
Despite the fact that the abuses of Sylvie Bourgeois of the AMF are proven, Assurance Belzile is still shut down today and Sylvie Bourgeois is still allowed to persecute this firm in her quest to find anything wrong in order to justify what she has done and in order to save her career.
Financial Services Compensation Fund: Cuggia v. AMF
Here we have to applaud the imagination and creativity of the AMF in order to get an advisor and get their trophy on the wall. The strategy is simple. Let’s dispense of a trial and let’s just find clients who are unhappy with an advisor and pay these clients compensation under the name of fraud. Since the fund can only make a payment if there is fraud, this means by this circular logic that the advisor has committed fraud. “Voila” no need for a difficult trial. This is what was done to Mr. Cuggia. The fund in question is established by the Act under section 258:
258. A financial services compensation fund is hereby established under the name “Fonds d’indemnisation des services financiers”.
The fund shall be assigned to the payment of indemnities payable to victims of fraud, fraudulent tactics or embezzlement for which a firm, an independent representative, an independent partnership or a mutual fund dealer or scholarship plan dealer registered in accordance with Title V of the Securities Act (chapter V-1.1) is responsible.
Mr. Cuggia was an advisor whose beliefs made a lot of people nervous and a lot of insurers nervous. For his entire career, Mr. Cuggia had been a critic of our insurance system for health, dental and medical insurance. He has argued that it is a discriminatory system that transfers the profit and the good risk to the insurers while the government keeps the losses and the bad risk. He made a mission to demonstrate this by creating insurance products that were proving he was right and by making insurance affordable to group of people that were discriminated by this system such as small businesses. He created a product where he was able to reduce the premium for group insurance for small businesses by more than 25% by creating an amalgamated pool of insurance risk which he managed.
The AMF in reviewing this arrangement played on the sophistication of the product and lack of understanding of the client to accuse Mr. Cuggia of not passing all the savings he had created through this product to the client. In fact, Cuggia took some of the savings to create a reserve against future bad experience in order to protect the viability of his pool of risk. The AMF accused Cuggia of fraud but not wanting to prove this into court decided to compensate directly three clients. This compensation was therefore a proof of guilt. Mr. Cuggia not having the right to a trial was never able to defend himself and so far the AMF has refused to give him the right to interrogate the clients who received this compensation from the AMF. He is now suing the AMF but this situation has totally destroyed him.
Not necessary to be licensed in Quebec to be a criminal; Viau v. AMF
A section not known of the Act is this section:
491. A person who, by an act or omission, helps or induces another person to commit an offence is guilty of the offence as if the person had committed it. The person is liable to the same penalty as that prescribed for the commission of the offence.
The same applies to a person who, by encouragement or advice or by an order, induces another person to commit an offence.
You would assume for this article to apply, the AMF would have to prove there is an intention for the person to help another person commit an offense. For example, you rent an office to a fraudster. Clearly this has helped the fraudster but this was not your intention. You should not be guilty of the offense committed by this person.
Sadly this is not the interpretation of the AMF and the Quebec Courts. In Viau versus AMF, we learn that an advisor named Viau with an impeccable career of 20+ years with never a complaint had a client seeking to buy a GIC at a rate Viau could not provide. However an advisor Viau knew could match the rate the client was seeking and Viau referred his client to this advisor who was in good standing with the AMF. Sadly this advisor was a fraudster linked to the Digital World fraud and while he was promoting GIC this is not what he was selling. Both Viau and the client did not know this.
When the Digital World was uncovered, this advisor/fraudster had died but the AMF still needed a trophy on the wall they could publicly show. Under article 491, the AMF decided to find Viau guilty of the offenses committed by the other advisor/fraudster. It is important to note that Viau referred only one client only. However the AMF portrayed him in the newspapers as one of the engineer of the Digital World fraud. The Court agreed with the AMF but reduced the sanction to the minimum stating that while Viau did not know anything or was not involved in the Digital World fraud, he was still guilty of the crime committed by the other advisor/fraudster because he had inadvertently helped this person to commit this offense.
Viau could have decided to appeal but he made a deal with the AMF and paid the fine in order to proceed with his life. However a bully at the AMF under the name of Paquette decided that he wanted to take a shot at Viau and decided to make a probity decision against him stating he did not have the probity to be the principal of his firm where he was the sole advisor since he had pleaded guilty to an infraction. Basically under this decision, Viau would have to sell his firm and block of business. Twenty years of work was going to disappear with an entire career.
So if you decide to still get licensed in Quebec, then considering the risks involved, my suggestion for an advisor is to keep a low profile. Do not make yourself a target. Beware of jealous competitors who are well connected and can use the system to their advantage. Do not criticize the system publicly. Replacing policies of certain companies in Quebec is an automatic infraction. Just walk away even if the replacement is in the best interest of the client. In Quebec there are 500% more convicted infractions for advisors in one month than for a full year for the rest of Canada. This is because errors have been criminalized in Quebec. Since errors are human, this makes criminals of all advisors in this province. Administrative errors are the worst. So get your house in order. Finally if you are accused of anything, remember the position of the AMF summarized to me by one of its employee: “In Quebec, advisors are considered guilty until proven guilty!” I agree with this employee. It is indeed the type of justice that is reserved to advisors licensed in this province.