1. Presented by Eric Dolden and Tom Newnham Dolden Wallace Folick LLP
Cross-examination of the financial advisor – an insider’s perspective from the legal world                   
IFB Fall Summit (Vancouver) – October 12, 2017
Presented by Eric Dolden and Tom Newnham
Dolden Wallace Folick LLP

2. Scope of Presentation
Overview of examination for discovery process (cross-examination)
Live demonstration using actual case and real advisor
Commentary and discussion of outcome of case

3. Overview of the Examination for Discovery process
Mandatory pre-trial procedure (under oath)
Broad scope of permissible questions (low bar for ‘relevance’)
Some questions prohibited – legal conclusions, expert opinion, speculation, privilege

4. Not a venue to “tell your story”
Evidence can (and likely will) be used against you
Purpose is to obtain read-ins for trial and to assess credibility
Many lawsuits are won and lost at discovery

5. Described as a “bruising procedure”
Described as a “bruising procedure”. Examining lawyer entitled to be “insistent, persistent, emphatic, and skeptical”
Limited ability of your lawyer to “protect” you during the discovery

6. Sadly, it does not work this way….

7. MacRury v. Keybase Financial (2016-2017, Nova Scotia)
Facts: clients sued advisor for $650,000 in losses from leveraged investments (“Smith maneuver”)
Borrowed a total of $1.75 million in 2007 to invest in return on capital (ROC) mutual funds

8. value of funds dropped and clients unable to make interest payments on loans with distributions from funds
Problem for advisor: damaging ‘admissions’ made during MFDA settlement
MFDA settlement = public document

9. The Cross-Examination…

10. …Starring: Tom Newnham as the Lawyer Monica Woldring as
the Advisor in the “hot seat”

11. Exhibit 1 MFDA settlement agreement:
leveraged strategy was ‘unsuitable’
did not adequately explain the risks
misrepresented KYC information on loan applications to lenders

12. Exhibit 2 Know Your Client (KYC) forms: Risk tolerance: medium high
Investment knowledge: good
Time horizon: years

13. Exhibit 3 Loan application (April 5, 2007) Investment income - $75,036
Jewelry and Art - $80,000
Vehicles - $40,000

14. Exhibit 4
Spreadsheet and charts

15. Debrief
What was sought to be accomplished by the lawyer?
Why?

16. Lawyer sought admissions designed to:
Underscore importance of KYC rule
Confirm advisor understood clients’ reliance
Highlight inconsistencies between KYC forms, loan applications and the clients’ actual situation

17. Leading questions to force concessions or make advisor seem unreasonable or dishonest
Sarcasm, skepticism and hostility designed to test evidence and assess strength as a witness

18. Result at trial Client applied for early judgment without a full trial
Issue: did advisor’s prior admissions to MFDA result in adverse civil finding?

19. MFDA settlement was public record
Some admissions related to all 25 clients, some admissions limited to ‘most’ clients – unclear if admissions applied to these clients
Advisor argued he was not bound by admissions in MFDA proceeding

20. Decision: admissions do not result in automatic finding of negligence BUT still relevant to civil lawsuit
MFDA settlement also did not address contributory negligence – needed trial to determine if client was partially responsible for losses

21. Court left issue of the MFDA admissions to the trial judge
Court of Appeal agreed
Result: client forced to continue to full trial ($8,000 in costs awarded to advisor)

22. Questions?

23. DOLDEN WALLACE FOLICK LLP Insurance Lawyers
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