FAIR Canada
FAIR Canada Newsletter

August 2012

Federal Consumer Complaints Regulations Need Major Reform

FAIR Canada has provided comments to the federal Department of Finance ("Finance") and to the Financial Consumer Agency of Canada ("FCAC") on their Proposed Regulations and Proposed Guidelines for External Complaint Bodies ("ECBs"). FAIR Canada is of the view that a pro-consumer framework would have been created had Finance mandated OBSI as the sole dispute resolution provider for financial institutions or had it had created a single statutory ombudsman for financial services. However, Finance chose not to do so, and appears to be proceeding with a system that endorses multiple ECBs. The Proposed Regulations do represent progress in that they set standards for external dispute resolution services for banks that have left OBSI where no such standards existed previously, and they provide for government oversight of ECBs.

 

However, FAIR Canada is concerned that the direction being taken in permitting multiple ECBs creates a pro-bank system and is far less optimal than mandating participation in OBSI or having one independent statutory bank ombudsman.

 

Please click here to read the full article.

 
 

OSC Issues Public Interest Orders against Three Group Scholarship Plan Providers

 

FAIR Canada commends the OSC for the temporary orders issued against Global RESP on July 26, 2012, Knowledge First Financial Inc. ("KFFI") on August 10, 2012 and Heritage Education Funds Inc. ("HEF") on August 13, 2012. Among other things, the orders require Global RESP, KFFI and HEF to retain independent consultants to examine their policies, practices and procedures relating to: documenting and collecting clients' know-your-client information ("KYC Information"); ensuring that all trades are suitable for their clients; and preparing and distributing marketing materials. The orders also require Global RESP, HEF and KFFI to retain independent monitors, and not to accept any new clients or accounts from existing clients until these monitors are in place. The monitors will follow up with all new clients within 30 days of investment to confirm: that KYC Information was recorded accurately; that the investment was suitable for the client; and that the client understands the associated fees. 

 

The orders are a result of OSC compliance reviews of Global RESP, HEF and KFFI. The OSC's actions are further evidence that it is taking its investor protection mandate seriously. The use of an independent monitor is an appropriate mechanism to help ensure that the dealers comply with their suitability and other obligations to clients, most of whom are lower income consumers.

 

Earlier this year, FAIR Canada called for an overhaul of group scholarship plan rules, stating that we believe such plans to be generally poor savings vehicles with little or no benefits to consumers. Our recommendations should be given serious consideration by the CSA in light of the OSC's compliance reviews and findings. One of our key recommendations was that, at a minimum, fees should be set at a maximum of 10 per cent or less of the contributions in any one year. Ellen Roseman recently shone a light on the significant problem of upfront fees in the following article: Fees eat up 90% of RESP refund after baby's death.

 

FAIR Canada also reminds Canadians that unbiased information regarding registered education savings plans is available at www.smartsaver.org.

 

Click here to read the rest of the story.

 

FAIR Canada Concerned About Industry Pressure on OBSI  

 

FAIR Canada has provided comments to OBSI on its suitability and loss assessment process. While supportive of OBSI and its role in resolving consumer complaints, FAIR Canada does not agree with several changes proposed by OBSI, including proposals:

  • to use common indices as performance benchmarks in most suitable performance comparison calculations;
  • to only award interest for loss of use where disputes are resolved by way of an Investigation Report; and
  • to share loss calculation spreadsheets with firms but not with complainants.

Please click here to read the rest of the story.

 
 

Civil Liability for Secondary Market Disclosure Caught in a "Catch 22"

 

FAIR Canada is concerned about a legislative loophole that has allowed defendants in large securities class action cases to escape civil liability to the detriment of investors. Investors are being "timed out" as a result of the judicial interpretation of limitations period provisions.

 

An action for secondary market disclosure liability must be commenced within 3 years of the misrepresentation in accordance with Ontario's Securities Act ("OSA").  Leave of the court is required in order to commence the action. Normally, a representative plaintiff pleads in the statement of claim that leave will be sought to proceed with a secondary market liability claim, along with other causes of action, in a class action. The Court of Appeal in Timminco has held that section 28 of the Class Proceedings Act does not operate to suspend the limitation period. While it may take several years to obtain leave of the court to commence an action for secondary market disclosure liability, the 3 year limitation period may have fully run. Thus, the plaintiff is in a catch 22 situation - he or she wants to commence the action within the 3 year time limit, however the plaintiff may be prevented from doing so given that it may take more than 3 years, in light of the realities of civil litigation in our court system, to obtain the order from the court granting leave to commence the secondary market disclosure action.

 

Click here to read the full story.

 

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