Investment and Wealth Management Lawsuits

Have you loss funds in the stock market as a result of bad ‘professional’ advice? You may have a claim.

We have extensive experience representing individual, business and institutional clients in disputes involving a wide variety of investment products, both in individual actions and securities class actions.

With the increasingly complex range of investment products and opportunities available in Canada and in the global marketplace, ranging from mutual funds, debt and equity investments in publicly traded companies, complex derivatives, hedge funds, exempt market products, and cryptocurrencies, many Canadians seek out professional advice when deciding how to invest their money for retirement, education, and major purchases. 

There are various types of investment professionals that offer financial advice and other services to Canadians, including: advisors and dealers registered under the Ontario Securities Act., and self-regulated by the Investment Industry Regulatory Organization of Canada (IIROC); mutual fund dealers and their members that are self-regulated by the Mutual Fund Dealers Association of Canada (MFDA); insurance brokers regulated by the Financial Services Regulatory Authority of Ontario (FSRA); and other financial planners that are not licenced to sell securities, mutual funds, or other investment products and may not be registered at all. 

The Advisor-Client Relationship

The advisor-client relationship falls on a spectrum. At one end, is a relationship of full trust and candour where the advisor effectively makes all discretionary decisions as to how to invest a client’s funds. At law, this may create a fiduciary relationship. At the other end, is a relationship where the advisor simply acts as an “order-taker” for the client and provides no investment advice at all. 

The extent of an advisor’s duty to any client beyond executing instructions and acting honestly turns on the specific facts of each case. Advisors that give financial and investment advice beyond executing orders have a duty to know their client and assess a potential investment’s suitability in the context of a client’s: 

• investment knowledge, 

• investment objectives, 

• risk tolerance, 

• income and net worth, and 

• age. 

The legal standard of care that applies to an inexperienced investor is considerably higher than the standard that exists between an advisor and a sophisticated investor. 

Broadly stated, claims against financial advisors fall within three general categories: 

• Failing to following instructions; 

• Negligent advice; and

• Outright fraud.

Failing to Follow Instructions

Claims against financial advisors for failing to follow instructions are relatively straightforward. Client X tells Broker Y to sell a certain amount of shares in Company Z. Broker Y fails to follow Client X’s instructions, resulting in a loss to Client X when the price of Company Z’s shares plummet in value. Depending on all the facts, Broker Y may be found liable for both breach of contract and negligence.

Negligent Advice 

In addition to facing liability for breach of contract and fraud, financial advisors and other investment professionals may also face liability in negligence for breaching the “know your client” and “suitability” requirements. For example, an advisor may face liability for:

• failing to properly warn a client about the risks of an investment; 

• failing to promptly follow a client’s instructions to buy or sell an investment, especially in a volatile market (see the example above); 

• advising a client to invest in a product that is unsuitable given their personal and financial circumstances; 

• failing to advice a client to restructure their portfolio given a change in their personal and financial circumstances (for example, job loss, divorce, etc.); 

• advising a client to invest in a product that is illiquid;  

• advising a client to invest in a product that the advisor does not fully understand, including by failing to conduct adequate due diligence into a product; 

• inappropriately advising a client to borrow money to invest (leveraged investing); 

• “churning” a client’s account by making a series of trades for the sole purpose of earning commissions for the advisor; 

• failing to consider the tax implications of engaging in a transaction; 

• Overly concentrating a client’s portfolio in a few investments, or otherwise failing to ensure proper portfolio diversity. 

If you have an issue with the way your advisor has been managing your investments, or if you are an advisor being sued by a current or former client, please call us for a free initial consultation.