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ARTICLE · 15 MARCH 2012

Questionable Ruling Certifies Class Action Against Investment Advisors – Hoping For Appeal

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On February 17, 2012, the Ontario Superior Court of Justice certified a class action brought against two investment advisors and their registered dealer (the "Dealer") in the case of French and Karas et al v. Smith and Stephenson et al, 2012 ONSC 1150 ("French").

CanadaLitigation, Mediation & Arbitration
Ellen Bessner
Ellen Bessner
Geoffrey Breen
Geoffrey Breen
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On February 17, 2012, the Ontario Superior Court of Justice certified a class action brought against two investment advisors and their registered dealer (the "Dealer") in the case of French and Karas et al v. Smith and Stephenson et al, 2012 ONSC 1150 ("French"). This is a terrible decision for securities dealers, mutual fund dealers and advisors because a class action was certified, notwithstanding that a strategy alleged to be applied to an entire client base must be assessed for individual suitability to determine if the advisor was negligent.

The class is comprised of the clients of two mutual fund advisors, David Karas ("Karas") and James Stephenson ("Stephenson"). The claim alleges that Karas and Stephenson inappropriately applied a "one size-fits all" investment strategy for their clients and had no regard for client suitability or objectives. The plaintiffs allege that Karas and Stephenson engaged in a leveraging scheme whereby they encouraged and

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