How Investment Professionals Can Avoid Liability
The purpose of this brochure is to highlight the legal pitfalls faced by investment advisors and to suggest means of avoiding them.
Canadian equity markets have in the past experienced unprecedented growth due, in part, to the baby-boomers' desire to secure retirement income. However, as we have all learned, with every boom comes a bust, which has a negative impact on the holdings of baby-boomers and others. As the equity markets return to a growth phase, investors and investment professionals are making financial gains. As soon as the market experiences another significant correction, investors will begin to scrutinize the advice they have received from their investment counsellors. This may result in legal action and potential liability.
Liability means that the courts will hold an investment advisor responsible for providing advice that has resulted in unnecessary losses. While liability may arise from a variety of circumstances, it will normally stem from a breach of one or a combination of the following three areas of law:
- the law of negligence;
- the law of contract; and
- the law of equity. A clear understanding of each of these areas is necessary in order to avoid liability.
Authors:
Joseph A. Bradford
- O'Flynn Weese LLP
Alexander M. Gay
- Federal Department of Justice
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