In the midst of an initiative by the Canadian Securities Adminstrators ("CSA") to require all registrants (outside of Quebec) to participate in the Ombudsman for Banking Services and Investments ("OBSI"), OBSI issued proposed changes to its Terms of Reference. The Terms of Reference is a key document that outlines OBSI's mandate, its powers and duties, the duties of participating firms and the process for handling complaints. OBSI, under the Framework for Collaboration agreement with provincial and federal regulators, is required to consult with stakeholders on any substantive changes to its Terms of Reference. In response to the OBSI consultation, investor advocates and individual financial consumers opposed several of the proposals while financial industry critics do not appear to have been appeased and continue to press for reduced consumer protection.
Segregated Fund Complaints
OBSI is proposing that it not consider segregated funds in its consumer complaint dispute resolution process, even if they form part of a consumer's portfolio of investments with a single financial advisor. OBSI is proposing that the consumer should be required to make two separate complaints, one to OBSI and one to the Ombudsman for Life and Health Insurance ("OLHI"). Investor advocates and financial consumers strongly believe that it is nonsensical to send segregated fund complaints (whether a part of a larger complaint about an investment portfolio or not) to the OLHI and that OBSI should continue to investigate and analyse complaints relating to other investments. Forcing consumers to use two dispute resolution processes when the complaint involves one financial advisor and firm is burdensome, time consuming, inefficient, confusing to consumers and creates greater barriers to access to redress than a single process. Other problems with this approach include the limitations of OLHI (see Andrew Teasdale's and FAIR Canada's submissions for details) and the unfairness that can result when the complete picture of the advice that was provided to the consumer is not assessed given that the complaint has been severed into different component parts to different dispute resolution providers. See Debra McFadden's submission and Peter Whitehouse's submission, for further discussion of this issue.
Systemic Issues
OBSI proposes to remove the consideration of systemic issues within a particular firm from its Terms of Reference on the basis that the new banking regulations require that OBSI refer any potential systemic issues relating to banking complaints to the Financial Consumer Agency of Canada ("FCAC") for investigation. Investor advocates and financial consumers point out that widespread problems need to be addressed by the financial regulatory system in order to adequately protect investors and retain confidence in the financial system. Rather than simply removing systemic issues from the Terms of Reference in the name of "harmonization with the new banking regulations", the Terms of Reference must address the issue of widespread or systemic issues with respect to investments directly and explicitly. Otherwise, the potential identification of misconduct causing harm to many clients of an investment advisor or firm (or indeed, several firms) may not be addressed, or may not be addressed in a timely manner, by any part of the financial system. Consumers who have been harmed will not be compensated and consumers will continue to be harmed.
Please click here to read the rest of the article which discusses the demands of industry critics, FAIR Canada's recommendations and how civil litigation is not a viable dispute resolution option for consumers.
