The Ontario Superior Court building is seen in Toronto on Jan. 29, 2020. Former Richardson Wealth investment advisers have filed several lawsuits against the wealth manager.Colin Perkel/The Canadian Press
A group of former Richardson Wealth investment advisers have filed several lawsuits against the wealth manager, claiming that 90 per cent of their shares in the company were “unfairly” withheld after they resigned during a corporate restructuring.
According to court documents filed in Ontario Superior Court, one group of eight investment advisers is alleging that the company breached its employee shareholder’s agreement and “acted in a manner that is oppressive” when it failed to transfer their shares in Richardson Wealth to them after they voluntarily resigned between June, 2020, and September, 2020.
Two other former investment advisers, Dean Bowe and Christopher Ballanger, filed separate cases with similar allegations, accusing Richardson Wealth of failing to pay out the full amount of their company shares when they departed in July, 2020.
A spokesperson for Richardson Wealth declined to comment as the “matter is before the courts.”
Richardson Wealth is one of Canada’s largest independent wealth managers, with about 160 investment advisers. But over the past three years, it has undergone a tumultuous restructuring that began when parent company GMP Capital – which was renamed RF Capital Group Inc. – sold off its capital markets division in 2019 to become solely a wealth management company.
To do so, RF Capital had to purchase the 67-per-cent stake of its own wealth management arm – Richardson GMP – that it did not already own, giving it full ownership of the operation. In October, 2020, a majority of Richardson GMP shareholders voted in favour of the acquisition.
The deal included a requirement that 90 per cent of the RF Capital shares held by employees be placed in escrow for the next three years to prevent a mass exodus of advisers – and the assets they managed – from occurring.
But a combined group of 10 advisers, who all left prior to the closing of the acquisition, are arguing they were not aware of the escrow clause in the share purchase agreement that had been amended in 2015.
According to court filings, the advisers said the changes to the share purchase agreement were made several years after they had joined the firm when many of them had set up employment contracts that specifically did not include any non-compete agreements or restrictions on their share purchase agreement.
The dispute stems from the company’s decision in 2015 to change its employee share purchase agreement when it became apparent that, without restrictions in place, no potential buyer would offer to purchase the company’s shares at a reasonable price if its key assets – its advisers and their clients – could easily walk out the door prior to a sale closing.
To make the firm more attractive to a future buyer, the share purchase agreement was changed to include non-competition and non-solicitation restrictions, as well as an agreement that shares could be held in escrow for up to three years after a sale or restructuring of the company.
According to court documents, the new agreement permitted RF Capital to claw back 90 per cent of shares issued to any employee who left the company during the three-year escrow period and continued to work in the field of wealth management.
Margaret Waddell, a partner with Waddell Phillips, said the 90-per-cent forfeiture clause the firm has implemented is “like nothing she has seen before” and “quite extreme” for the industry.
“They are trying to handcuff advisers to their business,” Ms. Waddell said in an interview. “Even if an adviser stays beyond the period when the purchase price can be adjusted, they will be required to pay back the full amount if they leave at any point within the three-year forfeiture term.”
Richardson has denied the claim, according to court documents, stating the advisers voluntarily resigned from Richardson GMP after the restructuring had been publicly announced by a press release in February, 2020, and that the advisers knew “full well that such a decision would result in their forfeiting 90 per cent of their shares in RF Capital.”
The firm also said in court records that in addition to the press release announcing the changes, the company – during an investor relations call in February, 2020 – referenced the fact that 90 per cent of shares would be forfeited “if during the escrow period, a RGMP shareholder were to leave to compete.”
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
