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Pace Securities
May 20, 2020
4:36 am
Elaine
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And the other thing of earning over 200,000 a year.
I am a retired TTC employee.They get good pensions.I needed to retire early because my son was seriously injured in a hit and run accident and although the TTC was being very fair-I was taking so much time either thinking about what would happen to him or setting up appointments that it was no longer fair for anyone for me to continue working.And yes-I am a single parent.
Just thought it was important to clarify that point.The reason I had money was because I saved money-none of the luxuries like Tim Horton's.Last time I traveled outside country was 25 years ago and last time I flew was last year(and that was for a funeral)

May 20, 2020
6:05 am
JenE
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To both people affected so badly in this Pace debacle, I offer my sincere sympathy. I’ve been misdirected too, in the past, but fortunately for me, on a much, much smaller scale. I hope that a just remedy is obtainable.

May 20, 2020
6:23 am
Elaine
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Hi Jen
Thanks for your sympathy
I just want to let people know that when I signed up for the listen in session tomorrow I stated some of my woes.
The suggested I contact
investorinquiries@llroc.ca prior to the meeting.
I don't know how much good it would do but that's all I got and as I have said before-I am strictly a GIC girl.Not sure how I got into this( ya,I do- but I should not be taking the fall and neither should a lot of others)
Out to the credit union-stand on the sidewalk and inform people is all I can do today.
Best of luck to us all.If not luck-then at least fairness

May 20, 2020
7:07 am
Yaftica
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Elaine, I’m presuming they did the same thing with your GIC as they did with my TFSA savings and bought / put it against their Preferred Stock in PFL Ltd correct? You received a receipt like I posted confirming same?

The only thing explained to me about it was the masquerade of it being bank stock (I assumed Pace CU). If what Norm related is correct these options should never have been offered to us legally but who is going to be accountable now that Pace has scuttled that ship.

Yes they should be working with Laurentian Financial to make things right when the accounts emerge after the liquidation process but I’m not holding hope. Their lawyers have already advised to close PFL, which also means take your chances on whatever litigation arises from that. It seems the opposite of what their brand promotes alright. I’m telling everyone I know to pull everything they have from the CU, this deception should be front page news but things like this rarely get exposure. I only heard about the CU being put under notice late last year through internet musings. Certainly my broker never said anything when transferring my TFSA deposit in during that period.

May 20, 2020
7:16 am
Norman1
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Yaftica said

Here is the receipt they sent me after transferring my TFSA from another bank so hopefully you're right about the legalities... appropriate info deleted of course::

According to the receipt, PACE Securities Corporation, as an agent, sold you non-voting Series A, 5%, preferred shares of PACE Financial Limited for $5/share. The "Related To Issuer" note on the receipt indicates that PACE Securities is related to the issuer of those shares (PACE Financial Limited). So, there may be a conflict of interest in any advice provided by the PACE Securities rep.

Looks like the regulators have loosen up the rules.

According to New offering memorandum exemption increases access to capital markets in Ontario from law firm Stikeman Elliott, one doesn't have to be an "accredited investor" anymore. Such investments can now be sold, starting January 13, 2016, to "non-eligible investors" and "eligible investors":

  • non-eligible investors (i.e., investors who do not meet certain income or asset thresholds) – a maximum of $10,000, cumulatively for all investments made in reliance upon the OM Exemption inany 12-month period;
  • eligible investors – a maximum of $30,000, cumulatively, for all investments made in reliance upon the OM Exemption in any 12-month period unless they receive suitability advice from a portfolio manager, investment dealer or exempt market dealer, in which case this limit is increased to $100,000;
  • investors who qualify as accredited investors or family, friends and business associates – no limit; and
  • non-individual investors, whether eligible or non-eligible – no limit.

It lets people of more modest means to have the experience of losing $10,000, $30,000, or $100,000. Before, that kind of experience was only open to a select few. sf-frown

May 20, 2020
8:02 am
Doug
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Norman1 said

Yaftica said

Here is the receipt they sent me after transferring my TFSA from another bank so hopefully you're right about the legalities... appropriate info deleted of course::

According to the receipt, PACE Securities Corporation, as an agent, sold you non-voting Series A, 5%, preferred shares of PACE Financial Limited for $5/share. The "Related To Issuer" note on the receipt indicates that PACE Securities is related to the issuer of those shares (PACE Financial Limited). So, there may be a conflict of interest in any advice provided by the PACE Securities rep.

Yes, that's the obvious conflict of interest that Pace Securities Corp., as investment dealer and advisory firm, is related to the issuer, Pace Financial Ltd. However, there's also several conflicts of interest or malfeasance on the part of Pace Savings & Credit Union Ltd., which you seem to be skirting for some reason, Norman. For one thing, we have reports from Pace members that Pace Securities representatives were colocated in Pace Savings & Credit Union branches, possibly dually employed by Pace Savings & Credit Union and Pace Securities, and that Pace Savings & Credit Union unlicensed staff engaged in non-permissible activities in controvention of either IIROC or MFDA, as applicable (in this case, IIROC), regulations and guidelines. As well, since Pace Savings & Credit Union also issued its own investment shares, it's conceivable to think that Pace Securities relied on the fact that it was wholly owned by Pace Savings and shared the same brand in order to persuade, implicitly or even explicitly, Pace members that they may have been buying Pace Savings investment shares without realizing where they truly stood in the capital stack.

We don't seem to be talking about a lot of money here, at least as far as Pace Savings & Credit Union is concerned. Whether they're legally required to do this or not, I would argue, and given my explanation, believe this is a view that @Loonie, @Briguy, and even @AltaRed would share, that, morally, Pace Savings should do the right thing here and make Pace Financial Ltd preference share holders whole, less any dividends that had been paid to date, such that, when all is said and done, Pace Financial Ltd holders earned a 0% return on their invested capital but, at the same time, they received effectively the "par value" of their PFL preference shares back.

Looks like the regulators have loosen up the rules.

According to New offering memorandum exemption increases access to capital markets in Ontario from law firm Stikeman Elliott, one doesn't have to be an "accredited investor" anymore. Such investments can now be sold, starting January 13, 2016, to "non-eligible investors" and "eligible investors":

  • non-eligible investors (i.e., investors who do not meet certain income or asset thresholds) – a maximum of $10,000, cumulatively for all investments made in reliance upon the OM Exemption inany 12-month period;
  • eligible investors – a maximum of $30,000, cumulatively, for all investments made in reliance upon the OM Exemption in any 12-month period unless they receive suitability advice from a portfolio manager, investment dealer or exempt market dealer, in which case this limit is increased to $100,000;
  • investors who qualify as accredited investors or family, friends and business associates – no limit; and
  • non-individual investors, whether eligible or non-eligible – no limit.

It lets people of more modest means to have the experience of losing $10,000, $30,000, or $100,000. Before, that kind of experience was only open to a select few. sf-frown  

Thanks, Norman. I didn't realize that non-eligible investors could invest up to $10,000 as a "non-eligible investor"; I thought that was only limited to B.C. and Ontario residents. Can you confirm that this class of investor is applicable in all provinces and territorities? I take a somewhat different here, Norman. For one thing, by having a new class of registered exempt market dealer being required to sell the shares, there is additional regulatory supervision and oversight (proactive oversight, at least in theory, and responsive oversight, in practice). As well, investors must be provided with an offering memorandum, before they invest, which, while not the same as a prospectus in a legal sense, does include full audited financial statements and states fairly clearly what the investor might expect in terms of reporting obligations. Some unregulated mortgage investment corporations even go so far as to publish their audited financial statements on their websites publicly, not just in password-protected areas to investors. As more and more MICs are now doing this, a new social norm in business and finance appears to be forming that such that investors would likely shun a MIC or other issuer that doesn't do this.

Anyway, by allowing smaller investors to invest amounts as little as $1,000-5,000, instead of minimum subscription amounts that would represent far too large a portion of their portfolio, we're at least minimizing their potential losses.

None of these regulations would've prevented the Pace Securities Corp. scenario, as we had a registered investment dealer in an obvious issuer/dealer conflict of interest, supported by a credit union with whom it shared office space and benefited from cross-selling and referrals, sell what seems to be fairly large amounts of at least $100,000 to people who didn't fully understand the risks. Elaine and Yaftica either may never have purchased PFL investment shares, or they may have purchased a much smaller amount of only $5-10,000 which, while it would still sting, wouldn't have stung as badly. 🙁

Elaine and Yaftica, as with JenE and others, you have my deepest sympathies. This thread has tugged at my emotional heartstrings in ways no other thread has, and I hope that you can recover as much money as possible in whatever venues you're forced to do so. If you don't mind going public, I would suggest going to CBC Marketplace or CTV W5 about Pace Securities and Pace Savings & Credit Union, in the hope it may prompt Pace Savings to do the morally and ethically right thing here. The more publicity you and others affected can generate should, in turn, spur the interest of class action law firms that, together, should put legal pressure on the surviving legal entity in Pace Savings & Credit Union.

Cheers,
Doug

May 20, 2020
8:07 am
Yaftica
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I appreciate your info Norm I’ve learned more about how and why this occurred from your posts than anywhere else and likely will be told by Pace or E&Y too. I just wish I had this level of knowledge before entrusting my savings to them in this manner. As a result it would appear my only hopes are that they didn’t disclose the risks to me in this same manner. In fact I’m certain risks were discussed in the opposite manner actually and none of the other paperwork I have hints on the fragility of these preferred shares. I certainly feel deceived as I’m sure most others do and will be the basis of whatever class action starts from this. Although he said she said and other hearsay won’t be our best option to rely upon I’m sure. Thanks for your time again.

May 20, 2020
8:41 am
AltaRed
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I have not followed every post in detail as I have read through this BUT I do agree with Doug's suggestion to try and get CBC's Marketplace or CTV W5 or CBC's Go Public involved. If both Elaine and Yaftica did this, the power of 2 speaks a lot more than just one individual. Enough public shaming might make Pace CU come clean and keep investors whole, or at least mostly whole.

Best I can tell without spending a lot more time on this matter, not nearly enough disclosure was provided by the embedded or co-located folks within Pace CU, and Pace CU appears complicit in a number of ways. FSRA(?) may need some heat put on them. The CU is where the money really is at this point.

May 20, 2020
1:01 pm
Bud
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Is it fair to other members of the credit union the ones who bought vanilla Gics to sue them.

May 20, 2020
1:24 pm
Norman1
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Doug said

Yes, that's the obvious conflict of interest that Pace Securities Corp., as investment dealer and advisory firm, is related to the issuer, Pace Financial Ltd. However, there's also several conflicts of interest or malfeasance on the part of Pace Savings & Credit Union Ltd., which you seem to be skirting for some reason, Norman. For one thing, we have reports from Pace members that Pace Securities representatives were colocated in Pace Savings & Credit Union branches, possibly dually employed by Pace Savings & Credit Union and Pace Securities, and that Pace Savings & Credit Union unlicensed staff engaged in non-permissible activities in controvention of either IIROC or MFDA, as applicable (in this case, IIROC), regulations and guidelines. …

There's nothing wrong with dual representatives. There's also nothing wrong with credit union staff or bank staff referring clients to an affiliated licensed investment dealer. That the investment dealer has rented a cubicle or an office in the branch is not relevant.

Losing money on some of the investment products that such an investment dealer may offer is also not considered out of the ordinary and is not, on its own, grounds for liability, not even for the dealer. One needs to understand that when one leaves the safe realm of insured deposits.

Doug said

Thanks, Norman. I didn't realize that non-eligible investors could invest up to $10,000 as a "non-eligible investor"; I thought that was only limited to B.C. and Ontario residents. Can you confirm that this class of investor is applicable in all provinces and territorities? …

The $10,000 limit in 2.9 of National Instrument 45-106 seems to apply in all provinces except BC and Newfoundland/Labrador. In those two jurisdictions, there doesn't seem to be a limit.

An offering memorandum does need to be provided to the purchaser. It is a different matter whether or not the purchaser reads or understands what is in the document.

May 20, 2020
2:16 pm
Doug
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Norman1 said
There's nothing wrong with dual representatives. There's also nothing wrong with credit union staff or bank staff referring clients to an affiliated licensed investment dealer. That the investment dealer has rented a cubicle or an office in the branch is not relevant.

Losing money on some of the investment products that such an investment dealer may offer is also not considered out of the ordinary and is not, on its own, grounds for liability, not even for the dealer. One needs to understand that when one leaves the safe realm of insured deposits.

Thanks, Norman. On the first part of what you rote, I'm not saying there's a problem with dual representatives (i.e., employed and paid by one, or both, and licensed by the one). We also don't know that the investment dealing representative, or even Pace Securities, paid rent to Pace Savings & Credit Union for the office space. Given the integrated nature in which credit unions operate, I suspect the rent was all paid for by the credit union. If Pace Securities had not been wholly owned by Pace Savings, then I would suspect that Pace Securities paid commercial rent, or shared in the asset management fees it collected from clients with Pace Savings, as is typical with the way many full service investment advisory firms of the major banks operate.

The fact that we have at least one confirmed report, from Elaine, of a Pace Savings representative, ostensibly an unlicensed teller or receptionist at the credit union branch, mentioning potential returns (strictly prohibited by IIROC and MFDA regulations governing the activities of non-licensed assistants and other staff) is highly problematic. Together with that, the integrated Pace Securities and Pace Savings account statements, and the fact that there was likely widespread confusion on where investors stood in their buying Pace Financial Ltd preference shares as opposed to Pace Savings & Credit Union Ltd preference shares is also highly problematic, and, I think, may show some potential legal liability on the part of the credit union, no?

Norman1 said
The $10,000 limit in 2.9 of National Instrument 45-106 seems to apply in all provinces except BC and Newfoundland/Labrador. In those two jurisdictions, there doesn't seem to be a limit.

An offering memorandum does need to be provided to the purchaser. It is a different matter whether or not the purchaser reads or understands what is in the document.  

Ah, that makes sense, thank you, Norman. I knew about the B.C. and Newfoundland exemptions and not being limited to the amount they may purchase in a given calendar year. It was that "non-eligible investor" category I was unclear about. So, essentially, if an Alberta investor read through the offering memorandum (or at least received it), but only grossed $50,000 per year in income from employment and a further $5,000 per year in income from deposits and investments, they could still purchase up to $10,000 per year as a non-eligible investor and also provided they completed the applicable questionnaires and risk profile acknowledgements?

Cheers,
Doug

May 20, 2020
2:47 pm
Elaine
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Bud said
Is it fair to other members of the credit union the ones who bought vanilla Gics to sue them.  

Tried respondingt once-I always do vanilla.You can check my history if you want.No secrets here.I have vanilla GIC's at PACE.I don't like scammers.
And some of us (if not all) have been scammed.Sit high on your pedestal.Wear a seatbelt because the fall might hurt

May 20, 2020
2:51 pm
Elaine
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Doug said

Thanks, Norman. I didn't realize that non-eligible investors could invest up to $10,000 as a "non-eligible investor"; I thought that was only limited to B.C. and Ontario residents. Can you confirm that this class of investor is applicable in all provinces and territorities? I take a somewhat different here, Norman. For one thing, by having a new class of registered exempt market dealer being required to sell the shares, there is additional regulatory supervision and oversight (proactive oversight, at least in theory, and responsive oversight, in practice). As well, investors must be provided with an offering memorandum, before they invest, which, while not the same as a prospectus in a legal sense, does include full audited financial statements and states fairly clearly what the investor might expect in terms of reporting obligations. Some unregulated mortgage investment corporations even go so far as to publish their audited financial statements on their websites publicly, not just in password-protected areas to investors. As more and more MICs are now doing this, a new social norm in business and finance appears to be forming that such that investors would likely shun a MIC or other issuer that doesn't do this.

Anyway, by allowing smaller investors to invest amounts as little as $1,000-5,000, instead of minimum subscription amounts that would represent far too large a portion of their portfolio, we're at least minimizing their potential losses.

None of these regulations would've prevented the Pace Securities Corp. scenario, as we had a registered investment dealer in an obvious issuer/dealer conflict of interest, supported by a credit union with whom it shared office space and benefited from cross-selling and referrals, sell what seems to be fairly large amounts of at least $100,000 to people who didn't fully understand the risks. Elaine and Yaftica either may never have purchased PFL investment shares, or they may have purchased a much smaller amount of only $5-10,000 which, while it would still sting, wouldn't have stung as badly. 🙁

Elaine and Yaftica, as with JenE and others, you have my deepest sympathies. This thread has tugged at my emotional heartstrings in ways no other thread has, and I hope that you can recover as much money as possible in whatever venues you're forced to do so. If you don't mind going public, I would suggest going to CBC Marketplace or CTV W5 about Pace Securities and Pace Savings & Credit Union, in the hope it may prompt Pace Savings to do the morally and ethically right thing here. The more publicity you and others affected can generate should, in turn, spur the interest of class action law firms that, together, should put legal pressure on the surviving legal entity in Pace Savings & Credit Union.

Cheers,
Doug  

Doug-I wish to say a big thank you to you for caring.You actually care.And in my books that is a big thing.I just had to say that.Tears in my eyes.

May 20, 2020
3:56 pm
Norman1
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Yaftica said
I appreciate your info Norm I’ve learned more about how and why this occurred from your posts than anywhere else and likely will be told by Pace or E&Y too. I just wish I had this level of knowledge before entrusting my savings to them in this manner. As a result it would appear my only hopes are that they didn’t disclose the risks to me in this same manner. In fact I’m certain risks were discussed in the opposite manner actually and none of the other paperwork I have hints on the fragility of these preferred shares. I certainly feel deceived as I’m sure most others do and will be the basis of whatever class action starts from this. Although he said she said and other hearsay won’t be our best option to rely upon I’m sure. Thanks for your time again.

I'm sure PACE Financial, PACE Securities, PACE Credit Union, and Ernst & Young will have more to say later as the windup process moves along.

Have another look at the offering memorandum for those PACE Financial preferred shares in light of recent events. Some items in the document that didn't seem very important when you read it previously may now have new importance.

I would expect there to be a statement in the memorandum about what PACE Financial was going to do with the money raised in order to generate the 5% per year needed to pay the dividends.

It is really unfortunate you and Elaine got caught up in this. sf-frown

Private placements have high risk. That's why they used to be restricted to certain well-heeled sophisticated investors.

Such investors profited by investing in something like ten of them. If the investor chose well, "only" 50% would fail with spectacular losses. The other 50% would produce spectacular returns that offset the failures and then some. However, if a person just invested in one of them, there would be a 50%+ chance that it was one of the duds.

May 20, 2020
4:03 pm
Doug
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Hi Norman,

For what it's worth, I'll just add that you and AltaRed do rightly note that investing in what was junk bonds, on margin, is absolutely very risk. If Pace Securities Corp. had been investing client funds into a portfolio of bond mutual funds, which was overweight junk bonds, it would still be a high risk investment, but I suspect many investors would've balked and not invested. This is just my personal theory, but it's, I think, a logical one, instead the Pace Securities Corp. investment advisors sought to invest client funds directly into junk bonds, with leverage, by issuing preference shares for a related Pace Savings & Credit Union subsidiary, Pace Financial, Ltd., knowing that many Pace members are attracted to the credit union's own Pace Savings & Credit Union investment shares that also paid dividends. I'm not sure whether Pace Savings did any investment share issuances in 2017-19, but in any event, it all added to the confusion and illustrates, so clearly, why the dealer cannot, without exception approval by securities regulators, also be the issuer of the securities being offered. 🙁

Cheers,
Doug

May 20, 2020
4:49 pm
Elaine
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I will try and upload(download?) the only thing that I have ever gotten from pace security.The letter starts out with -as you are aware-(I was not) and then a names list at the back.People like Ernie Eves-not my cup of tea but did not think someone involved in crap like from -photos won't up load.
Guess I got to write it out
Date jan 14 2019 to shareholders of Pace Financial Limited series A preference Share
From Joseph Thomson-CEO PACE financial limited
re:Pace Limited fact sheet
Dear shareholdersas we begin another year of the markets I thought it appropriate to provide you with an update regarding your preference share holdings and the operations of pace Financial limited
Dividend payments
Then we have a box that shows when payments for the 5% and the bonus 2% that were paid in 2018.Also we will anticipate to continue in 2019
then
Description of pace Financial Limited(PFL)
As you are aware(I was not) PFL is a subsidaryof PACE General Partner Limited which in turn a wholly owned subsidiary of Pace Securities Corp.It is an investment company that invests in high yield bonds issued by corporate issuers PFL operates it's portfolio according to a set of parameters meant to generate a significant return within prudent risk parameters.The portfolio is operated so that no more than 10 % of the portfolio in the securities of any one issuer.We also avoid investing more than 30% of the overall portfolio in the bonds of issuers from a single Industry. The goal of our diversification parameters is to limit our risk exposure to events unique to a given issuer or industry.We operate the portfolio with an average leverage ratio of 3/1.What this means is that for every dollar we have to invest ,we borrow two dollars from Laurentian Bank SecuritiesInc(LBS) to purchase additional bonds.The yield to maturity for our portfolio is 9.06%at the time of writing.We pay LBS 2.65% to borrow Canadian dollas and 3.15%to borrow US dollars. While this does increase the risk of the portfolio.according to Bloomberg the annualized standard deviation of return is 7.86%,which we believe offers an attractive risk/reward scenario.From time to time we have and may continue to purchase listed options to reduce the risk or enhance returns.When purchasing an option contract the maximum loss is the premium paid for the option pus the transaction costs.

May 20, 2020
5:02 pm
Elaine
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Our Investment methodology
Within the parameters described above we look for bonds that are trading at a discount to par where there is an obvious path to improving credit quality or we regard it as simply undervalued.To mitigate our risk we focus on issuers that have average or better recovery ratings(what you will receive in the event of a default)These issuers tend to have significant assets that could be sold to a receiver;property,plant and equipment,cash and patent,etc
Our Reporting
PFL preference shares are not listed securities.In the absence of a price from an exchange the custody system used by Laurentan Bank Securities Inc requires a manual update every 90 days.We estimate the value of the preference shares on a monthly basis ND REQUEST lbs UPDATE THE SYSTEM ACCORDINGLY.
oUR BOARD OF DIRECTORS
(Oops sorry for the capitals)
Ernie Eves-and then description
Joseph Thomas
Grant Walsh
Ends with
Best wishes to you for 2019
Joseph Thomson

This is the only letter I have EVER received from Pace Financial Limited.
I hope some of you know what it means

May 20, 2020
6:04 pm
MG
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I really feel for you, Elaine and Yaftica. I'm sorry I can't offer any insights on what happened but I will suggest contacting Siskinds Law Firm. Their head office is in London and they are specialists in Class Action lawsuits.

Best of Luck!

May 20, 2020
6:43 pm
Yaftica
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Thanks MG. I surmise that this will end up that way for sure. I've no idea how these things commence or by whom but I've no doubt there are a few Bay Street firms already looking at this to see what the potential will be, bottom line for the firm, its years of person power alright and their take at the end of the day has to well outweigh the resources invested, I've been involved with many litigation issues during my working career (supporting the process) and mediation in the 10th year is typically where things end up. I know this will be a long road in that respect I don't expect Pace to support us as members in spite of this being their prime marketing directive it doesn't cover scenarios like this - their lawyers have already made that clear by closing the financial arm of the organization, interesting why they chose to do that over bankruptcy however it must be a smart business decision. Anyway - this has been said already.

Thanks Elaine for posting that info, I didn't see or receive communication like that as my TFSA take over and placement into these shares occurred in 2019 but after that letter I presume. Again - my discussions with my rep over where the funds were going to be utilized did not include questionnaires or evaluation of my financial situation, I was given the understanding that I was investing in the Financial Institution (Pace Credit Union) I'm certain of that but again - hearsay now. We have to await what will transpire here through the liquidation process and see where those preferred shares will stand after that. I find it interesting that I was told by E&Y that they hope Laurentian will take everything over which is ironic since this basically began with Laurentian making the moves that they did. There's nothing we can do but wait right now, I'm sure the news will come within the next couple weeks... in the meantime I like many have to break the news to significant others and think about what kind of austerity measures I'm going to have live with in order to rebuild the loss.

May 20, 2020
6:53 pm
Bud
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How much is the class looking to recover?

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