David Milstead: “Advocacy group for Canadian investors struggles for funding and survival”

Written by David Milstead and originally published in the Globe and Mail. 

To read the original article on the Globe and Mail click here.

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The primary advocacy group for Canadian investors is losing money, looking for an executive director – and struggling to survive.


“We’re in a bit of an existential crisis,” said Ermanno Pascutto, the founder and, now, interim executive director of the Canadian Foundation for the Advancement of Investor Rights, known as FAIR Canada. The group was started in 2008 to provide a voice for individual investors that would complement, and sometimes oppose, the investment industry’s views when securities regulators developed new rules and regulations.


In recent months, FAIR Canada has submitted comments or participated in roundtables on mutual-fund sales practices, the client-financial-adviser relationship, and a proposed code of conduct for banks selling products to senior citizens.


FAIR Canada has survived in large part in recent years on a $2-million gift from Stephen Jarislowsky, the founder of investment firm Jarislowsky Fraser Ltd., and an additional $2-million contribution from the Ontario Securities Commission, which used money collected in settlements and from fines.

Mr. Jarislowsky’s 2014 gift was conditional on FAIR finding $4-million in matching gifts, but outside of the OSC money, it has fallen far short, Mr. Pascutto said. Mr. Jarislowsky has extended a deadline for the match several times, most recently agreeing to postpone it to this coming September from March 31.

“FAIR needs a financial basis to operate and do what it’s supposed to do, and that has been consistently denied by the financial corporations in Canada, which should match me, to my mind,” Mr. Jarislowsky said this week in an interview. “Because there is really nothing quite equivalent to FAIR to protect the individual investor.

“It makes more sense to close FAIR down at this point, unless we get funding,” he said.

FAIR has had a handful of corporate contributions in the past, but players in the financial sector generally are not inclined to do that, Mr. Jarislowsky said, because FAIR continues to argue the fees charged to Canadian investors are too high.

“The financial firms and big business are not really interested in helping FAIR,” he said. “Big business and banks like laws that favour big business and banks. They’re not really our sworn friends.”

Mr. Pascutto estimated that FAIR Canada has lost more than $1-million since 2014, and that number would more than double if revenue from the Jarislowsky and OSC donations wasn’t counted. In the year ended June 30, 2018, FAIR Canada spent $772,228, mostly on employee compensation, and lost $546,413, its financial statements show.

“The board has been looking at this for several years now,” Mr. Pascutto said. “We can’t keep going at this rate. We have to find a better balance between the money we raised and our expenditures. For the last couple of years, our approach has been to try to keep expenditures at the same level and raise more money, and that is the number one job of the executive director: get out there and raise more money.”

As FAIR grapples with fundraising, it’s also seeking an executive director. Frank Allen, who joined in August, 2017, left Feb. 28 and is now a senior legal counsel to the executive director of the Ontario Securities Commission. Before Mr. Allen, Neil Gross, a securities lawyer who now chairs the OSC’s investor advisory panel, served in the top spot for a little less than three years. Mr. Allen and Mr. Gross declined to comment for this article.

Mr. Pascutto served as executive director for the first six years of the group’s life, continued on the board after he left the top job, and was chairman of the board until he resigned to return to the executive role temporarily. (He said he does not want to be selected as the next executive director.)

FAIR Canada said its vice-chairs, Ellen Roseman and Guy Lemoine, would become co-chairs. Mr. Lemoine is former vice-chairman and commissioner of the Commission des valeurs mobilières du Quebec and Ms. Roseman is a personal finance columnist with the Toronto Star.

FAIR Canada’s solution may entail finding a dedicated stream of money from a regulator or other government source, as opposed to periodic grants, Mr. Jarislowsky said. He suggests a one-cent payment for each securities transaction, or a portion of enforcement fines for securities offenders.

The Investment Industry Regulatory Organization of Canada (IIROC), which provided the initial funding for FAIR Canada, has given a total of $4.9-million over the years, including a $250,000 grant in the fall of 2018 from its restricted fund that comes from fines and settlements, spokeswoman Andrea Zviedris said in an e-mailed statement.

“There are many important national and regional causes,” she said, adding that IIROC has given to more than 40 projects, many providing financial literacy education. It has also formed its own national Investor Panel “as a means of hearing directly from Canadians on important issues and IIROC initiatives.”