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What to make of OSC ruling about RBC and TD Banks?

The banks are back in the news again – for all the wrong reasons.

Just in case you missed it, the Ontario Securities Commission just issued a settlement with RBC and TD for more than $24 million for foreign exchange compliance failings.

The transgressions are detailed in their statement:

The Ontario Securities Commission (OSC) today approved settlement agreements with Royal Bank of Canada (RBC) and The Toronto-Dominion Bank (TD) related to compliance failures in the banks’ foreign exchange (FX) trading businesses. These failures allowed RBC and TD FX traders to share confidential customer information in chatrooms with FX traders at competitor firms.

From 2011 to 2013, OSC Staff identified hundreds of instances in which RBC and TD FX traders disclosed confidential transaction details, such as trade sizes, timing, price, or stop-loss levels. This information allowed traders to gain a potentially unfair advantage in the market.

What does this tell us about the biggest banks? It all comes back to a fundamental question: who are the banks out to serve – their customers or themselves?

We have no interest in piling on with criticism. The violation itself is an obvious breach of trust, but it’s more important to view this as an insight into the corporate culture.

We are the first to recognize that inside the banks there are many very talented advisers who work very hard on behalf of their clients’ interests. That isn’t in dispute.

The problem is that banks are very large publicly traded corporations. That means profit and shareholder return are of primary importance. That’s the nature of large corporations. But when it comes to serving literally millions of individual customers, there’s a tug of war of competing interests. The more the banks can extract from their clients, the healthier the bottom line. It comes close to becoming a conflict of interest.

That’s what is most irksome about what this settlement reveals. If the banks are willing to literally sell customer information to further their own interests, how can they expect faith or loyalty to their services?

Yes, sure, all businesses are built with an objective of maximizing profit, but at an institutional level this clearly goes much too far in putting their clients’ interests far below their own.

At BarecWealth, we of course want our boutique financial planning firm to grow and succeed, but we have the luxury of charting our own course to achieve those goals. We have always believed in slow growth of our client base, word-of-mouth referrals, and long-term relationships based on trust.

No client is going to stay with you for 20+ years if you either neglect or abuse that trust. What we are proudest of isn’t the scale of our book of business, it’s our retention rate with our clients. In the course of our entire careers, we’ve had only tiny percentage ever leave us.

We’re weighing in on this issue because unfortunately these OSC violations cast an unflattering light on our entire industry.

We know that there are many individuals out there who are disillusioned by the treatment they receive from their financial institution – this is particularly true since a full disclosure of fees was mandated more than a year ago.

We welcome the scrutiny. The more clients know about how we conduct our business, the more confident they are in the objectivity of our advice.

If you know of anyone who is interested in gaining a more independent perspective on their financial future, we’re ready to start a discussion.

Thanks again for reading our posts,



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This information has been prepared by Barbara & Eric Chong who are Financial advisor for Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Financial Advisor can open accounts only in the provinces in which they are registered. For more information about Investia, please consult the official website atwww.investia.ca

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