Broker wars: Whose clients are they, anyway?

Carolann Steinhoff was at the top of her game. Until she decided to quit ScotiaMcLeod. That's when an all-out rumble broke out over who would get her customers. Because, in the brokerage business, your book is everything

It was a rude awakening. Bert Van der Geest, an IT consultant in Victoria, learned in May 1999 that his investment adviser of seven years, Carolann Steinhoff, had just left brokerage ScotiaMcLeod Inc. Weeks later, he met with the new broker assigned to his account, Ron Campion. Campion had some bad news: contrary to Van der Geest's understanding, his portfolio had performed badly under Steinhoff's administration.

Campion handed him a portfolio evaluation. “He said I'd lost quite a lot of money in all these stocks,” Van der Geest recalls. “I looked at it, and it just didn't seem right to me. It was very disturbing. I felt, geez, I hadn't been paying close attention.”

Confused, Van der Geest took the portfolio evaluation home. That night, he compared it to the official monthly statements he had received over the years. Several things struck him. First, the book values of his securities (the prices paid at purchase) on Campion's evaluation did not match those on the statements. For example, the book value of a mutual fund he had bought for $879.45 was listed as $4,593.57. What's more, columns on ScotiaMcLeod's report didn't add up. That left Van der Geest even more baffled. “I didn't know whom to trust at the time,” he says.

Though he hadn't realized it yet, Van der Geest had become a pawn in a no-holds-barred struggle between Steinhoff and her former employer. Steinhoff, one of ScotiaMcLeod's top brokers, had been fired, ostensibly due to concerns about her trading practices. She had since joined a small independent brokerage, United Capital Securities Inc., and tried to convince her clients to move their accounts with her. ScotiaMcLeod had other plans. It divided Steinhoff's accounts among her former colleagues, who tried to persuade clients to stick with the firm. Much was at stake: Steinhoff had been, by a wide margin, the Victoria office's top-performing broker.

In the financial services game, squabbles over high-net-worth clients can get rough. The baffling portfolio evaluation presented to Van der Geest was just one sign that this one would be particularly nasty. The fight would generate numerous complaints, an out-of-court settlement and a lumbering disciplinary process that dragged on for years.

If Van der Geest and other clients thought they'd be shielded from the flying fur, they were sorely mistaken. Steinhoff's expectation that the Investment Dealers Association of Canada would rein in her former employer was similarly misplaced. Though she fought for–and eventually received–complete exoneration, a dark cloud hung over her reputation for more than five years. ScotiaMcLeod, meanwhile, would come away largely unscathed, but with fewer clients than it had probably hoped for. The enduring lesson is that when disputes erupt in brokerage boardrooms, they have a way of spilling out onto public streets.

Carolann Steinhoff believes in good and evil. She is equally certain of her own morality. She is extensively involved in philanthropy, and in an interview with Canadian Business at a Victoria restaurant said she was “incapable of doing anything wrong.” But perhaps her most distinguishing feature is an unflinching combativeness. That, coupled with her considerable financial resources, made her a less-than-ideal target for ScotiaMcLeod's aggressive tactics.

Originally from Montreal, Steinhoff headed west as a pharmaceuticals sales representative for Johnson & Johnson. She entered the brokerage industry in the late 1980s, and landed her first job at ScotiaMcLeod in Victoria. As part of her efforts to learn the ropes, she spent a week with one of the firm's top producers, Jacques Maurice, studying how he conducted his business. Steinhoff took to her new job like a fish to water. “From Day 1 in this business, I went, 'Thank you, God, I have found something I absolutely love doing,'” she says. Former colleagues say Steinhoff regularly worked 12-hour days, and weekends. From the outset, she set her sights on lawyers, surgeons, professors, wealthy retirees and other high-net-worth clients. “I didn't know anyone in Victoria, so I used to sit in the boardroom and do cold calls,” she says. “I'd just pick up the phone, night after night until 11 p.m., call people and get money into T-bills.”

But Steinhoff did not relate well to her fellow brokers in ScotiaMcLeod's Victoria office. “I was the only female broker,” she says. “When I joined, another broker came up to me and said, 'We had a female once, and she married one of her clients and she lasted six months.' I dug in my heels and said, 'It doesn't really matter.' I worked my guts out. And as I became more successful, they became more resentful.”

The industry's top performers are awarded in numerous ways. One is membership to a brokerage's President's Council, reserved for the best salespeople; the elite wind up in the sanctified Chairman's Council. While Scotia does not reveal the terms of admission, these clubs are exclusive. By any measure, Steinhoff outshone her colleagues. She made ScotiaMcLeod's President's Council in her first year; every year after, she was on the Chairman's Council. By 1999, she had about 500 clients. She says she was raking in more than $4 million a year in commissions for the firm and was one of its best-performing brokers, not only in Western Canada, but nationwide. In August 1998, Scotia Capital Markets chairman and CEO David Wilson sent her a letter celebrating her 10th anniversary with the company. In a handwritten postscript, he wrote: “You have made an outstanding contribution to the firm over 10 years! Keep Going!!”

That same month, Steinhoff got a new boss, when Nola Grant became branch manager at the Victoria office. The two women clashed. Steinhoff claims Grant tried to revoke terms of her employment negotiated years before. (Citing the matter as a human-resources issue, Grant declined comment for this story.) At the same time, Steinhoff did things that didn't exactly endear her to Grant. Steinhoff says she told regional sales manager Hamish Angus that Grant was too young and immature for the job. “You've hired the wrong person,” she remembers telling him. “You have to fix this situation.”

On Dec. 17, 1998, a dark cloud formed over Steinhoff. According to ScotiaMcLeod, she received a memo from her superiors alleging that she may have engaged in discretionary trading. It was a serious allegation. If a client wants his broker to trade on his behalf, he must apply in writing for what's known as a “discretionary” account. The application must be approved in writing by a senior brokerage official. Otherwise, before executing a transaction, brokers must obtain client instructions on the security to be traded, at what price, in what quantity, and the timing of the order. Failure to do so could be construed as discretionary trading, an offence most brokerages consider grounds for termination.

That same month, Steinhoff claims, one of her assistants came into her office in tears. As Steinhoff tells it, the woman related a conversation she had just had with Grant, whom she claimed had told her: “If Carolann leaves, we'll make it worth your while to stay on.” Steinhoff concluded that Grant was planning to punt her, and wanted the assistant (who had good relations with clients) to help keep customers happy. Recalls Steinhoff: “I said, 'You know what? It's time to leave.'”

Steinhoff put word out on the street that she was looking for a new employer. It wasn't long before brokerage houses–including Merrill Lynch and TD–were soliciting her. “Pretty soon, they were fighting over me,” Steinhoff says. During lunch with senior executives at Merrill Lynch in Toronto, she adds, they asked: “What do we have to do to get you onside?” There was one problem: despite precautions, Steinhoff believes, news of her job hunt managed to get back to her ScotiaMcLeod superiors.

By looking for employment elsewhere, Steinhoff had raised one of the brokerage industry's most important questions: Who owns the client? Investors, after all, are the industry's lifeblood. The commissions they pay are split between firm and adviser, according to a grid structure that typically changes each October. Top producers get as much as half; Steinhoff received up to 51% of trading commissions from large client accounts by the end of her tenure. When firm and adviser part ways, however, the client is in play.

Brokerages have a variety of options when attempting to retain customers. Some insist advisers sign non-solicitation agreements barring them from contacting clients for a specified period after their departure. Firms can also apply for court injunctions to prevent former employees from soliciting customers–a common tactic, particularly when the ex-employee was a manager and therefore has a greater fiduciary duty.

Advisers, however, typically have the upper hand. That's mainly because they interact directly with clients, and tend to build stronger personal relationships. There are no industry-wide statistics. But one B.C. Supreme Court judge estimated that a “competitive recruit” from another brokerage firm could bring 50% to 75% of his clients with him; “a senior broker with a long-term clientele” could bring as many as 90%. The attitude of Philip Hagell, a longtime Steinhoff client who has followed her through two job changes, is typical. “Whether Carolann had worked for ScotiaMcLeod, Royal Bank or Sam's Loan Sharking, it wouldn't matter to me,” he says. “I deal with Carolann because I like Carolann.”

Not all broker departures turn into the sort of free-for-all experienced by Steinhoff's clients. But Steinhoff was no ordinary broker. With about $250 million in assets under management in 1999, her “book” represented more than half of the total at ScotiaMcLeod's Victoria office. When a brokerage office loses that much business, it could be forced to close its doors.

While Steinhoff considered her job options, more storm clouds gathered. According to a document generated by ScotiaMcLeod, she received two memos–and attended two meetings–in late 1998 and early 1999–in which her employer admonished her to cease executing discretionary trades. “I knew the heat was on, and I had to get out of there,” Steinhoff says. “But I couldn't–because my father was dying.”

Steinhoff's father died in April 1999. After she returned to work about a week later, she received a letter, dated April 30, from James Werry, a ScotiaMcLeod managing director and head of brokerage. It informed her she would be placed under “close supervision” for one month due to client complaints about discretionary trading. That meant her superiors would review and sign off on every trade she executed. The letter further warned that Steinhoff could be fired “for cause without further notice or warning” for future transgressions. “This is a serious matter and it must be dealt with by you in that fashion,” Werry stated. (Ironically, nearly two weeks later, he sent a warm congratulatory letter to Steinhoff for winning the company's 1998-99 RRSP campaign and awarded her a $1,000 marketing allowance.)

Steinhoff mounted an internal defence and denied executing a single discretionary trade. The same day Werry's letter arrived, she sent a missive of her own to the human-resources department complaining about how Angus and Grant were treating her. She also made it clear that she believed Grant was making plans for her departure. “Recently,” Steinhoff wrote, “she approached another senior assistant of mine, Kathy Allen, and offered her a job as an associate with another broker in the office.”

Steinhoff argued in a follow-up letter to Werry that each of the five client complaints was without merit. But her arguments seem to have had little impact. Steinhoff was called into a boardroom at around 10 a.m. on May 18. Waiting for her were Grant and Angus. Steinhoff instantly knew something was wrong–the Vancouver-based Angus wouldn't regularly be there. But she had little time to ponder where things were headed. According to Steinhoff, Angus stood up, strode over and handed her a letter.

Steinhoff opened and read it. It tersely explained that her employment had been terminated for failure to comply with the terms of her supervision. “My legs went wobbly,” she says. “My vision went blurry, and I almost fell down–the physical impact of that betrayal was so huge.”

Steinhoff recalls Angus telling her: “The door is there.” Disoriented, she turned to leave–and walked straight into the wall.

Word of Steinhoff's firing spread quickly. ScotiaMcLeod did the obligatory paperwork, filing a Uniform Termination Notice, which lays out the reason for an adviser's dismissal, with the Investment Dealers Association. Steinhoff's UTN showed that she had been fired for “violation of terms of close supervision.” (Exactly what aspect of supervision she had violated was not disclosed.) The form also observed that she was subject to unresolved client complaints and internal discipline for regulatory infractions.

ScotiaMcLeod wasted no time. On the same day it fired Steinhoff, Grant wrote clients a letter notifying them that Steinhoff was no longer with the firm. “ScotiaMcLeod values your business and would ask your support as I personally review your investment portfolio(s) and objectives in order to appoint the appropriate investment executive to meet your needs,” she wrote.

It was a feeding frenzy, as Steinhoff's former colleagues divvied up the action. “They'd indicated during our meeting that because her account was so large, it would take a number of people to manage it,” says client Hagell. “They were giving us the impression that the account was so busy that she couldn't have possibly paid attention to everything.”

Steinhoff suddenly discovered her currency was on the wane. Granted, she still had defenders. Among them was Merrill Lynch's Thane Stenner, who had left ScotiaMcLeod some years earlier and claimed that after his departure “the rumours they floated were vicious.” He sent a memo to senior Merrill Lynch officials suggesting Steinhoff's dispute with ScotiaMcLeod presented an opportunity to pick up a top broker on the cheap. Under normal circumstances, Merrill Lynch would have to follow standard industry practice of paying a big signing bonus or offering other incentives to acquire Steinhoff. That, Stenner observed, wouldn't be necessary. Stenner's memo acknowledged that hiring Steinhoff would involve risks–including unwanted media coverage. But, still, he threw his support behind her. “I've known C.S. for 10 years and I believe strongly that C.S. is worth the risk of at least investigating further,” he wrote.

Ultimately Merrill decided against recruiting Steinhoff. She recalls asking one Merrill Lynch executive, “'You don't think I've done anything wrong, do you?' He said, 'Well, we'll have to wait and see.'” TD also backed off. “I phoned around to the other firms I'd done some interviewing with, and it was just click, click, click,” Steinhoff says. “Everything was on ice, and that gave Scotia's brokers time to go after my clients.”

With help from former ScotiaMcLeod veteran and friend Chris Hodgson–who has returned to the company and is now executive vice-president of wealth management at Scotiabank–Steinhoff began negotiations to find work at a smaller brokerage. In June 1999, she joined United Capital Securities Inc., a Vancouver-based firm. UCS did not have a Victoria office, but Steinhoff's book was sufficient to justify opening one. “I have decided that an independent (rather than bank owned) full service, money management firm is more compatible with my investment philosophy,” she wrote in a letter to clients. “You are all very valued clients to me and I would very much like to have you here with me to move into the new millennium on a very positive, personal and professional platform.” She encouraged clients to sign documents transferring accounts to her.

ScotiaMcLeod representatives immediately set out to undermine confidence in Steinhoff and her new employer. “The innuendo was horrendous,” Steinhoff claims. She alleges that ScotiaMcLeod officials told clients her house was for sale. (In fact, her neighbour's was.) ScotiaMcLeod officials also expressed skepticism about UCS. One letter to clients from Grant read: “Many clients have asked us about this new firm. As we had not heard of them before, we researched the internet and were able to determine that they are a Vancouver based investment firm. On June 15, 1999 we were able to download some information from their web-site, however this site is no longer active. If you would like a copy of this information, please do not hesitate to call.” Grant added that most clients had told her they would stick with ScotiaMcLeod.

Steinhoff claims that her former colleagues were also soliciting complaints against her. Hagell, for one, says Scotia- McLeod investment adviser Mark Stoker asked him and his wife to sign a letter indicating that Steinhoff had misrepresented the value of his accounts and had executed unauthorized trades. Hagell had no such complaint. “I recall telling them point-blank that we would not sign anything until we had researched ourselves, and we'd asked them for a copy of the letter,” he says. He became suspicious when ScotiaMcLeod refused to provide a copy.

Steinhoff's boss, UCS's Brian Worth, was taken aback. “This kind of behavior in our industry is unfortunate,” he wrote in a letter to Steinhoff. “In a business where trust is the key link between advisor and client…misinformation will lead them to certain failure. I suspect that if the core management of ScotiaMcLeod knew what was going on in the Victoria office they would be as unimpressed as we are.”

While Steinhoff grappled with ScotiaMcLeod, a new opponent arrived on the scene: the Investment Dealers Association. The IDA advances the interests of its 208 member firms, all of which are investment dealers like Scotia Capital, ScotiaMcLeod's parent. It also has a self-regulatory function: it licenses brokers and brokerages, requires firms have adequate capital and enforces bylaws and rules of business conduct.

No fewer than nine client complaints were outstanding against Steinhoff at the time of her dismissal; most were for unauthorized trading. But the most damaging were yet to come. They originated from Mary Conley, a Victoria physician who had been a customer since 1992. Conley was a happy client until 1998, but several factors appear to have contributed to her change of heart. First, she had started putting money in tech stocks using a discount broker; the bubble was in full swing, and Conley enjoyed eye-popping returns. However, such stocks ran contrary to Steinhoff's value-oriented investment style, embodied in her “get rich slowly” philosophy. Then came allegations of discretionary trading. Conley claimed that in December 1998, she became irritated because Steinhoff was executing trades in her account without consulting her. Conley later complained in a letter to Grant that her “impression was that [Steinhoff] needed money for Christmas.”

Conley applied to have her accounts transferred from Steinhoff to MD Management, a brokerage for medical professionals, in January 1999. Steinhoff was able to convince Conley to keep her Scotia accounts open, but the honeymoon was over. Steinhoff's dismissal, and the accompanying rumours, apparently exacerbated matters. In July 1999, Conley complained to the IDA that Steinhoff was aggressively soliciting her to transfer her account to UCS. “I feel that I am being harassed and want her to desist,” Conley wrote. The IDA dropped the complaint as unsubstantiated. Conley filed a second complaint the following month stating that Steinhoff had executed unauthorized trades. Conley was also quoted in a local newspaper, the Business Examiner, alleging Steinhoff had left her portfolio “in shambles.” Conley later retracted the allegation, which was demonstrably untrue.

Meanwhile, complaints were piling up against ScotiaMcLeod. One client complained about a broker's “somewhat aggressive tactics” to convince her to stay with the firm. Another wrote to the IDA: “There has [sic] been some very unprofessional things happening and we hope this matter will be looked into.” The portfolio evaluations worried customers, too. In some cases, they painted an ugly picture. ScotiaMcLeod furnished some clients with “commission schedules” that reported Steinhoff had received certain commissions that in fact she had not.

Steinhoff began to drive around and visit clients at their homes. “Everywhere I went, clients had the same story: 'They gave us a portfolio review, and we thought we'd done better,'” she says. “By the third time I heard that, I knew there was something wrong.”

That something included mathematical errors. For example, client Sheila Colwill confronted Steinhoff with one such review. Steinhoff pointed out erroneous calculations. “It would be immediately apparent to the broker that the review was false and understated the value of the account,” she says.

After discovering mistakes on his own evaluation, Van der Geest says he phoned ScotiaMcLeod broker Campion, who promised to look into the matter. He never called back. Earlier, Van der Geest adds, Campion had told him that a junior person at the office had prepared the evaluation. “Being in the computer industry myself, I understand the types of errors that can be made on these things,” Van der Geest says. “But it left me with an uncomfortable feeling that they had someone inside their office who wasn't a professional in the systems industry preparing their reports for them.” Van der Geest says he called Campion twice more, trying to better understand the problem, but received no response. “It was almost as if they were hiding something,” he says.

Gradually, it became clear that ScotiaMcLeod's campaign was faltering. Some clients believed the firm had misled them to win their business; Colwill complained to the IDA about what she viewed as “the shameful misleading of investors with fear, innuendo and false information.”

Meanwhile, Steinhoff had collected no fewer than 10 erroneous evaluations produced by ScotiaMcLeod's Victoria office. When confronted with them, Steinhoff says, ScotiaMcLeod's lawyers became eager to discuss an out-of-court settlement. Initially, Steinhoff says, she wasn't interested. “I was going to take it to trial,” she explains. “I would have loved to let the world see how avaricious the banks can be. My lawyer said, 'You know, Carolann, if you take this to trial, it's going to cost you $1 million. Take the settlement, and the IDA will take care of Scotia.'” Her husband, urologist Dr. Gary Steinhoff, also discouraged her from going to court.

Steinhoff and her lawyer met with Bruce Maranda, the IDA's then head of member regulation in Vancouver. Steinhoff claims she told Maranda that she would settle with ScotiaMcLeod only if the IDA promised to sanction the firm for its alleged transgressions. She showed him copies of the erroneous portfolio evaluations. “He was alarmed,” recalls Steinhoff, “and his exact words were: 'There will be severe disciplinary action.' I said, 'Great, we'll settle then.'”

Maranda has since moved on from the IDA. Contacted by Canadian Business, he disputed Steinhoff's account of this conversation. “Not only do I not remember saying the words ascribed to me, but they are quite contrary to the way I speak,” he wrote in an e-mail. “Further, I do not believe that there was any talk of her possible settlement with ScotiaMcLeod being in any way influenced by any possible action by the IDA.” Maranda added that he never formed an opinion on the merits of Steinhoff's wrongful dismissal suit against ScotiaMcLeod.

ScotiaMcLeod and Steinhoff entered into a settlement agreement, the terms of which have not been disclosed. It included a gag agreement that both parties never speak about the matter. As part of the settlement, ScotiaMcLeod's Angus wrote a letter to some of Steinhoff's clients, acknowledging that some portfolio evaluations and commission statements were incorrect. “There may be inaccuracies showing losses when in fact there had been gains,” he wrote. “Dividend income may have been omitted or underestimated.”

Angus did not explain the source of the errors. In an interview with Canadian Business, Scotiabank spokesman Frank Switzer declined to speak about the Steinhoff case specifically, but attributed the errors to software problems. In 1998, ScotiaMcLeod rolled out a supplementary program called Plaid Navigator, a portfolio and contact management software package designed to assist advisers. “This system was a supplementary tool for advisers to generate optional reports for clients,” says Switzer. “That system, at that time, in some cases, did produce some errors in information on reports that were generated. It was a limited systems issue, and not the result of actions by any individuals who printed reports off the system.” Other Scotia officials also said that investment advisers were unable to modify information churned out by the system. Further, says Switzer, “We would view any attempt to deliberately issue false or misleading information to clients as a serious violation of our standards.”

The software problems were news to Steinhoff. “This is the first time they have offered [systems error] as an explanation,” she says of Scotiabank's claim. “Since I was preparing accurate [reports] for my clients up until the day I left, the computer program must have conveniently malfunctioned the day I left and remained malfunctioning until my lawyer confronted them that we were on to them.”

If Steinhoff believed that the IDA would punish Scotia, she was mistaken. The IDA investigated Colwill's complaint about false information. The response she received in August 2000 read:

ScotiaMcLeod Inc. does recognize that the information provided on the portfolio report presented to you by Mr. Simmons may have contained inaccurate information with regards to the performance of your portfolio. The aim of our members should be for complete accuracy and full disclosure when relaying data to clients. It would appear that your complaint to the Association was justified. While the Association will not be pursuing this matter further, a summary of this incident will be forwarded to the Association's Sales Compliance department for consideration in a future audit.

IDA policy prohibits discussion about investigations that do not involve a public hearing, so the reasons ScotiaMcCleod emerged unscathed remain a mystery. As Switzer reports, the IDA gave the firm “a complete clean bill of health.” Some found the outcome disconcerting. Steinhoff wasn't pleased; today, she claims the IDA is “a pretty incestuous little club.” Glorianne Stromberg, an investor rights advocate and former commissioner of the Ontario Securities Commission, says it seems unlikely ScotiaMcLeod did not know that its portfolio evaluations were incorrect. “Somebody–a fair number of bodies–had to know what was going on and had to be condoning the practices,” she says. “There's good reason to question why the IDA has not taken action against her immediate supervisors, the branch managers, the regional managers.”

Other critics claim that the IDA has a bias toward sanctioning individual brokers while treating firms more gently–a bias fostered by its dual role. “The implication of lower fines to brokerages than to their employees is clear: employees can walk away from the association and even the industry, but the association needs those member firms and the fees they provide,” John Lawrence Reynolds wrote in his recent book, The Naked Investor. “Slap a million-dollar penalty on a member firm, however, and it might vote with its feet, preferring to operate outside the organization's bounds.” (This criticism didn't hold in 2004, however, when a number of firms were heavily fined for market-timing offences; none of them cancelled their IDA memberships.)

As for longtime Steinhoff client Hagell, he's still scratching his head. “Why didn't the IDA go after ScotiaMcLeod?” he asks. “Did they get their licences pulled? They should have.”

ScotiaMcLeod may have escaped the IDA's wrath, but Steinhoff's regulatory nightmare was far from over. The IDA frequently takes disciplinary action against advisers accused of discretionary trading; last year, 311 of the 1,311 complaint files opened by the IDA dealt with that offence. The IDA investigated about half a dozen complaints against Steinhoff–a lot for a single broker. Even more remarkable, however, is the fact that all of them were eventually withdrawn or dismissed. Conley's complaint went the furthest: it took more than five years to resolve.

In numerous letters and phone calls, Steinhoff asked the IDA to speed its efforts to resolve the complaints, and at one time flew to Toronto to meet with a senior enforcement official. She was, by all accounts, extraordinarily co-operative with the IDA's investigations. But the organization's vice-president of member regulation for Western Canada, Warren Funt, later acknowledged at an IDA hearing that Steinhoff's case was “not the highest priority” of enforcement staff.

One possible explanation for the IDA's sluggishness is that the regulator had insufficient resources to deal with Steinhoff's case expediently. In a report about the IDA in 2000, the OSC noted that “a significant issue facing member regulation is the continued and growing backlog of files in both the Investigation (including Complaints/Inquiries) and Enforcement Counsel groups.” At the time, the IDA lacked a plan to address the problem.

Conley's complaint was eventually considered during a five-day disciplinary hearing in February 2003. She testified that Steinhoff often executed trades in her account without prior consultation–and specifically identified 23 such trades (grouped in nine transactions). It was an unusual complaint, especially given her investments were profitable overall. Furthermore, before Steinhoff's dismissal, Conley had never complained about the transactions, even though she had received trade confirmation slips.

There had been mixed evidence about Steinhoff's trading practices prior to the hearing. One of Steinhoff's former assistants, Rebecca Packer, wrote to Conley's lawyer in 2000: “I am certain that there was a lot of discretionary trading that occurred.” But another assistant, Marnie Williams, testified during an earlier trial that she was not aware of Steinhoff executing any discretionary trades. The IDA panel, too, heard conflicting testimony. Nanci Murdock, a former administrative assistant to Steinhoff, alleged that Steinhoff routinely engaged in unauthorized trading. But Kim Christiansen, who had worked for another Scotia broker and later with Steinhoff at UCS, testified that Steinhoff always obtained client permission before trading. Clients Van der Geest and Hagell said the same thing. And Steinhoff described in detail the procedures she adhered to, which included consulting with clients before every trade.

Some accused the IDA of bungling the case. But the regulator's worst enemy proved to be Conley herself; she inspired little confidence as a witness. “There are a number of reasons that require us to scrutinize the evidence of Dr. Conley very carefully,” the panel observed. For one thing, members found it difficult to believe Conley could receive trade confirmation slips for six or seven years before registering a complaint. They also noted that Conley had developed “a strong animus against Ms. Steinhoff,” and had “made several reckless and unsupported allegations” against her.

The three-member IDA panel threw out all but a single charge based on Conley's complaint. It determined that Steinhoff had executed one unauthorized transaction consisting of four trades, and was therefore guilty of conduct unbecoming or detrimental to the public interest. “We believe there is a high likelihood that from time to time Ms. Steinhoff operated her business in a discretionary manner because, despite her admirable work ethic, we doubt she could always effect as many transactions as she does and still respect specific IDA regulations,” the panel's decision read. “Some approvals may have fallen through the cracks.” Steinhoff was fined $5,250 and ordered to rewrite a basic industry exam.

But Steinhoff wouldn't tolerate any blight on her record. She appealed to the B.C. Securities Commission. IDA counsel Barbara Lohmann also appealed–she wanted harsher sanctions. The BCSC considered the matter last October, and threw out the IDA's decision. “In our opinion, the IDA panel erred in law, overlooked material evidence, and relied on speculation as to facts not in evidence,” its decision read. It noted that the IDA, by failing to admit relevant evidence, had denied Steinhoff the right to a fair hearing. Andy Poon, a BCSC spokesman, says that he knows of no further actions outstanding in the matter.

Just a few minutes walk from the separate downtown offices where Steinhoff and her former ScotiaMcLeod colleagues work, the tranquility of Victoria's waterfront is a stark contrast to the internecine struggles and clashing egos of the brokerage industry. There, in the mist, you can watch boats and seaplanes come and go, and talk to local artists selling their works at the seawall. Grant is no longer the Victoria branch manager, but still works with Scotia. As for Angus, he was promoted to national sales manager in mid-2004.

If you think Steinhoff's battle with Scotia is uncommon, think again. At least five such cases have come before Canadian courts in as many years (see for more). While details vary, the question of who owns the customer is central to all of them. With so much at stake, it's no wonder that few brokers honour the conventional practice of giving two weeks' notice.

Steinhoff, apparently, learned a thing or two from her years at ScotiaMcLeod. She estimates she has won back up to two-thirds of her clients, and has been able to continue building her book with new ones. In January 2004, she left UCS to join Wellington West, an independent investment services firm. “This time, nobody knew when I was leaving UCS to come here,” she says, pointing out that the only people in the loop were two Wellington West executives and her husband. “We literally moved in the night.”