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Post by Moderator on Dec 29, 2019 20:40:05 GMT
disappointedinvestor is right, after 3 years of redemption suspension, in 2019 Investors were held captive in the reorganization standoff that is still on. Younger investors might have time and stomach to take higher risk with their investment and let Larry Dunn use their funds in real estate construction development business. What about older investors? Is this type of investment suitable for them? The answer is a big NO. They invested for income and they rely, sometimes heavily, on this income. With their funds locked up indefinitely, they might be desperate. Let's listen to them and hope that HE management will hear and wake up to do the right thing that is to give these Investors an Exit Option and then go ahead with the Investors that agree with the Reorganization Plan
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Post by Moderator on Dec 29, 2019 20:43:26 GMT
rwi71158 and brad1 My story is short, but very sad. Taking the advise of my financial adviser, I invested my RRSP in HarbourEdge with the purpose of giving it a boost with DRIP prior to converting into RRIF. As I do not have a company pension the RRSP is really important to me, representing 66% of my retirement income (the rest to 100% is covered by CPP&OAS). This year I had to convert the RRSP to RRIF and make the first withdrawal of 5.28%. "Thanks" to the dividends going down, I do not have enough cash in my account to cover the minimum withdrawal. I hoped that for such a case I would be able to redeem some Class A HarbourEdge shares to be able to make the min withdrawal, but this is not the case, as CRA has an in-kind rule that allows the RRIF Administrator to pay you in paper money. And, guess what? I have to pay tax for that  The RRIF Administrator advised me to request a redemption from HE and the rep was quite shocked that HarbourEdge refuses any kind of redemption. I am sad and scared. The money I worked hard for and saved in RRSP are arrested by HarbourEdge that doesn't stop telling us that this is the best solution for us. How is this best for me? The minimum withdrawal is going up every year, reaching 6.82% at age 80, but the dividend goes down (currently at 4%). Not only my income will be insufficient for living, but I will have to pay tax for paper money. How could HarbourEdge management be so cruel with older investors and lockup their money? Some investors on this forum are of the opinion that we have to give them more time to fix the fund. Did it occur to them that some of us DO NOT HAVE THAT TIME? This is a MUST READ. Did it occur to HE management that they are hurting Seniors? |
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Post by maryanne on Dec 29, 2019 22:47:38 GMT
I invested my pension benefits kept in a LIRA (Locked-In Retirement Account) in HarbourEdge shares. Now I MUST convert LIRA into a pension as the max age for conversion is approaching and I need money for living. As I was on DRIP, I do not have much cash in that account, so I’ll take my pension in paper money and then pay tax on that (as I learned today on this forum)!
I purchased the investment from Sean Dwyer, a HarbourEdge employee. In my KYC (Know Your Client) I was very clear about my investment objective (Income), investment horizon (until retirement), and risk tolerance (Medium). Sean matched my KYC with the KYP (Know Your Product) for HE investment that he knew and the result was that he decided that HE securities are suitable for me. Right now, they are not and Sean did not update my KYC with the KYP for the new securities HE is insisting to force us into (real estate construction, development, management and such).
I know that HE sells securities in the exempt market; it doesn’t mean they can do whatever they want with our investment without any legal consequence. The Canadian Securities Administrators (CSA) has a special warning for EMD (Exempt Market Dealer):
“EMDs are specifically reminded to take extra care in complying with their KYC, KYP, and suitability obligations when dealing with clients who are seniors, on a fixed income, or who otherwise may be in a position of vulnerability. A loss from a registrant's failure to comply with these obligations may have particularly devastating consequences for these clients. CSA staff will take regulatory action, including enforcement action, in circumstances where registrants do not appropriately address the special needs of these clients.”
I don't know about others expressing their opinion on this forum, but in my case the consequences of the reorganization standoff are devastating indeed
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brad1
Full Member
Posts: 39
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Post by brad1 on Dec 31, 2019 1:33:05 GMT
thebigshort and maryanneImpressive stories that HE directors do not consider, they are clueless when it comes to investors' needs. They still believe that every investor needs are the same as theirs! Although they are in charge with managing a fund of over $200M they are still not clear with the suitability obligations, KYC, KYP and such, everything sounds Greek to them.
Besides the obvious needs of the Investors over 65, there are also others as an Investor in need of a lump sum for a health emergency. In a life and death situation, a HE Investors would not be able to withdraw their funds because these are locked-up indefinitely.
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Post by maryanne on Jan 1, 2020 16:12:52 GMT
Everyone is indeed in a different financial position though we would all prefer to not lose money.
I bought HE shares several years ago partially in a RRIF and partially in a taxable account. It has been my personal financial policy to take as much out of the RRIF every year as I am able to without my income being subject an increased marginal tax rate or to OAS clawback. (This may seem odd but it is my choice to pay tax at 30% while I can rather than potentially more later.)
Every year I ask Sean Dwyer to prepare the paperwork for the Trust Company holding the shares. It is required to pay the withholding tax in cash in the RRIF. Despite HE not making redemptions, I believe that it is required to do so to the extent of the minimum RRIF withdrawals. This has been my experience. Each year HE cashes shares to the value of the minimum RRIF withdrawal and this is used to pay the tax on my chosen in kind transfer.
Until this year the min withdrawal was high enough that I could transfer almost as much as I wanted in kind to the cash account at HE.
My plan this year would be to move the remaining shares out of the RRIF this year, but without redemptions I simply cannot do it. In fact, as the amount inside reduces so does the min payment and so does my ability to pay the tax and I am stuck paying the Trust Company to "manage" an ever decreasing RRIF.
- “In the event you hold a RIF/LIF that does not have sufficient cash to withdraw the mandatory minimum you would be presented 2 options. The first option would be transferring cash in from a RIF/LIF at another institution in your name so that you could take a cash payment. The second option would be withdrawing stock certificates rather than cash, this I called an in kind payments. Both options in cash and in kind would result in a T4RIF being issued to be included with you taxes.”
- “You can also request a redemption from Harbouridge. If they cannot do redemptions at the time of request you would then have to withdraw share certificates rather than cash.”
Maybe this is the paperwork that HE prepares every year for your RRIF min withdrawal? You better check out!
We all know that redemptions are suspended; this is stated in the Annual reports received from HE, including the last one from Nov 2019: “In 2016 and under the pressure of a large Shareholder redemption, unfortunately, HarbourEdge had to suspend redemptions.” and the Audited Financial Statements for 2019: “Redemptions and subscriptions for Class A preferred shares are currently suspended.”
I have a year old redemption request that is on the redemption list and I asked repeatedly HE to honor it; same response every time: redemptions are suspended, but my request is on the list.
Is HE treating differently the shareholder? That would be very sad indeed. 
You agree with me according to your statement posted in the thread “The future of your investment in HarbourEdge” on Dec 20, 2019 that reads as follows: “I do not favour HE accepting redemption requests as this disadvantages the other investors.” |
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Post by Moderator on Jan 14, 2020 14:21:50 GMT
I am one of those investors for which time is of the essence. I have very little confidence in a good outcome in the short term (in fact modest confidence in the longer term). I believe the best course of action is to recognize that value has already been reduced and we should accept that and drive toward redeeming the current value ASAP. I would prefer a portion of my investment now, while I can still use it rather than trying to (perhaps unsuccessfully) increase its value over a longer period before pushing for redemption. If we don't get out now - it could be all gone later. Time is indeed of the essence. I totally agree with you, this is what we are advocating for on this Forum. Investors participate with ideas that HE could use to respond to redemption requests. Unfortunately, HE management doesn't listen to everybody, but only "select representatives". As we are waiting for the next plan, we can hope it will finally address our concern in an effective way, by making a firm commitment for redemptions and selling the real estate properties. If the investors would be given a redemption schedule that makes clear the timeline of recovering their investment, maybe more would be open to accepting the reorganization plan. |
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Post by maryanne on Jan 14, 2020 19:53:21 GMT
The value of our investment is already dented, everyone knows that and many came to accept the obvious.
Some investors are running out of time and they want their 💰 now.
HarbourEdge wants to continue with mortgages and also to diversify in real estate development.
Some investors see value in this approach.
Different interests, nothing unusual in this. What it is unusual is that HarbourEdge directors cannot align these interests and push to force everyone to accept their plan that, for some is simply not feasible
Sooner or later this will blow up and make more damage to our investment if HarbourEdge directors are not doing their job and align their interests with shareholders that want out and those who want to stay in the fund
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harry
Junior Member
Posts: 15
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Post by harry on Jan 16, 2020 17:30:05 GMT
"Investors have few protections other than suitability requirements and the rights provided by the Ontario Business Corporations Act."
I would like to ask what happens if you no longer fit the suitability requirements? For me, about 10 years have past since my first investment in HE and my situation has changed due to other failed mortgage investments. If the KYC were done today I would probably fail it. How would the OSC or CSA see this? Would they insist HE remove me from the investment?
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Post by nemesis on Jan 16, 2020 18:39:51 GMT
Excellent question Harry. Anyone able to answer this one about 'suitability"?
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Post by disgustedbeyond on Jan 16, 2020 20:10:49 GMT
I wasn’t even asked until years later when they expected some type of review and a new form of registration . We sat down with Tim and very quickly lol went over the risk tolerances and net worth / income requirements . I suggested at that time we couldn’t prove or support the requirements but of course all was going well then as far as we were told , and not to worry about signing it , no one reads them anyways . In 2011 we withdrew all funds and then reinvested under different “ vehicles “ and weren’t asked to sign anything of the sort then either
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worried
Junior Member
Super worried for my investment in HarbourEdge
Posts: 13
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Post by worried on Jan 16, 2020 20:34:59 GMT
"Investors have few protections other than suitability requirements and the rights provided by the Ontario Business Corporations Act." I would like to ask what happens if you no longer fit the suitability requirements? For me, about 10 years have past since my first investment in HE and my situation has changed due to other failed mortgage investments. If the KYC were done today I would probably fail it. How would the OSC or CSA see this? Would they insist HE remove me from the investment? Suitability obligations provide effective protection for Investors and HE should have both our KYC and KYP (Know Your Product) redone and matched for risk tolerance, investment objective - income or growth, time horizon, and Liquidity Needs. With all the changes that happened with HE investment product - increase risk on mortgage side and diversification into real estate development business, the KYP would not match the KYC of many investors. For seniors, KYC and KYP would not match for sure, as real estate development does not provide steady income and requires many years to play out which is what some investors simply cannot afford. To answer your question if OSC would remove you from the investment, similar cases indicate that they can do that (refer to the OSC position related to another Liahona Mortgage Investment Corp. ("LMIC") that encourages us to see hope www.osc.gov.on.ca/en/Proceedings_set_20160212_liahona.htm) The very first step for you is to file a complaint with OSC ( OSC Ontario Securities Commission), but it has to be done as quickly as possible, because if the Plan of Arrangement that splits our Class A shares in Class A and Class B for real estate passes, then we lose the OSC scrutiny, including the suitability protection (this is a possible reason HE pushes for a POA). If OSC procedures take longer, then our last chance is to appear in Court where the Arrangement is submitted for approval and tell the Judge that the new investment has devastating consequences on our life |
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chris
Junior Member
Posts: 13
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Post by chris on Jan 21, 2020 14:57:05 GMT
"Investors have few protections other than suitability requirements and the rights provided by the Ontario Business Corporations Act." I would like to ask what happens if you no longer fit the suitability requirements? For me, about 10 years have past since my first investment in HE and my situation has changed due to other failed mortgage investments. If the KYC were done today I would probably fail it. How would the OSC or CSA see this? Would they insist HE remove me from the investment? More info on suitability requirements, harry Dolphin Enterprises from Vancouver builds end to end software for MICs, including modules for MIC management, underwriting, accounting, and last but not least an integrated Web Portal for investors. Besides 24/7 online access to statements and balances that we already have via Finhub, Web Portal allows investors to update Know Your Client (KYC) requirements to stay compliant with Canadian Provincial security commissions and CRM2 statements. Punch line is that continuous suitability requirements (KYC) are applicable for MICs and HarbourEdge should act accordingly when their product becomes unsuitable for us and redeem our investment. And a Q for HarbourEdge: how can we access "Update KYC function" in Finhub? |
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chris
Junior Member
Posts: 13
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Post by chris on Jan 21, 2020 16:42:02 GMT
More on suitability requirements: OSC Suitability Requirements
I found this document on the OSC website confirming that HarbourEdge has a legal obligation to update our KYC with current information about risk tolerance, investment knowledge, goals, etc. On page 48-51 an entire section explains KYC and suitability assessment for senior investors; according to OSC, HarbourEdge should NOT "invest senior clients in high risk and/or illiquid products if the clients rely on their investment principal, or income generated from it, to find their retirement expenses". Punch line: HarbourEdge is totally non compliant forcing senior investors to stay invested in HRAC properties. |
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chris
Junior Member
Posts: 13
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Post by chris on Jan 23, 2020 21:15:23 GMT
In Fact Check doc from Jan 21, 2020, HE rejects the statement "Management has ignored investor suitability requirements by putting them in a real estate fund" concluding that "The investor suitability was accessed at the time of purchasing their shares in a mortgage investment." (anything between 5 and 15 years for HE investors) OSC is very clear that suitability determination is an ongoing obligation including for an EMD such as HE Asset Management. CSA Staff Notice 31-336 Guidance for Portfolio Managers, Exempt Market Dealers and Other Registrants on the Know-Your-Client, Know-Your-Product and Suitability Obligations"1. How often should registrants update KYC information? A registrant is required to obtain current KYC information about a client's investment needs and objectives whenever a suitability determination is required. However, we expect registrants to be proactive in ensuring that KYC information is kept up-to-date. We expect PMs (and EMDs that have an ongoing relationship with their clients -- see below for further information) to update KYC information at least annually and more often if there is a material change in a client's circumstances ". They also know that creating Class B for HRAC assets is a transaction deemed to be a trade and requires suitability determination for the existing clients. This is why HE needs the arrangement that would allow a transaction exemption (suitability is not required, but >66% of the shareholders must vote for the arrangement). Maybe HE management doesn't fully understand the ramifications of this legal obligation and just follows the lawyer's lead, but this is even more serious offence in my opinion, a breach of fiduciary duty that management has for all investors |
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harry
Junior Member
Posts: 15
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Post by harry on Jan 24, 2020 20:05:24 GMT
I recently requested my (last)2012 KYC from them and noted my "liquidity needs" for 6-10 years as 50% and 11-20 years as 50%. can't get that if they suspend redemptions.
Also, I noted that they had hand-written that they changed my "risk tolerance" from low to medium (with agreement from me).
I talked with OSC compliance dept this morning and they have opened an investigation on my behalf.
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