Lokanan on investment advisor negligence
Accounting and financial governance expert Assoc. Prof. Mark Lokanan was interviewed by the Globe and Mail regarding whether financial advisement regulators need to prioritize negligence over fraud.
Here’s an excerpt:
Investment industry regulators are focusing too much on trying to protect investors from fraudsters and not enough on shielding them from the more widespread problem of financial advisor negligence.
That’s the message from outspoken investor advocate Harold Geller, a lawyer at MBC Law Professional Corp. in Ottawa whose firm handles negligence and fraud cases.
[…]
Mr. Lokanan says his research shows that a “significant majority [of investors] have very poor investment knowledge and are depending upon the right advisors to advise them in a direction that they will not fall victim to financial exploitation.”
However, he says he found “the total opposite” in his research in that many advisors are not leading their clients down the right path.
The report, funded by the Social Sciences and Humanities Research Council of Canada, a federal research-funding agency, says retired people, in particular women, and people with low or moderate-level investment knowledge were more at risk.
Mr. Lokanan says he believes the current regulatory system is too lax and not equipped with the technology to prevent advisor misconduct. The researcher and data scientist is working on an algorithm, expected to be available commercially early next year, that he says could help investment firms pinpoint negligent and fraudulent behaviour.
“If [the self-regulatory organizations] can utilize computational technology the way it’s being utilized in many other industries, detection of these kinds of practices will perhaps increase,” he says.