Advisors continue to speak out against the new rule changes that require registered firms to adhere to compensation decisions from the Ombudsman for Banking Services and Investments (OBSI) in cases of client dispute.
The new rules have been controversial. August 1 some 1,600 firms will become part of the oversight regime that will see the OBSI determining compensation in the case of disputes between firms and their clients. Those in the industry argue the regulations would handcuff portfolio managers and many firms are refusing to work with the OBSI.
Firms already operating under the new regulations have refused to abide by OBSI rulings.
The OSC elected not to give OBSI the power force firms to award compensation to their clients. Instead clients can only rely on the cooperation and goodwill of the firms to comply with the ombudsman's recommendations, a so-called “name and shame” regulatory regime. Since then, many firms have refused to work with the OBSI. A recent consultant’s report from Navigent found a "significant deterioration of goodwill from member firms" over the past several years.
Last week the OSC’s Investor Advisory Panel, sent a letter to OSC chair Howard Wetson commenting on the lack of powers at the body as companies continue to avoid working with OBSI. But there is real resistance to the plan within the industry.
“Naming and shaming does not work because the OBSI does not provide fair and balanced judgements. If a claim gets to them it always comes down in favour of the client. Don’t forget their appeal has been rejected at other levels already. No wonder firms are ignoring them, they are biased,” said an advisor on the WP site recently.