One industry veteran may have ferreted out why dealers balk at compensating clients even for the relatively small amounts clogging up OBSI files.
Last week’s move by the Ombudsman for Banking Services and Investments altering its dispute resolution process between the client, advisor, and dealer, has many in the industry scratching their heads.
As discussed in a story Friday, the OBSI will now share the identity of the both the advisor and client with the appropriate regulators in cases where it’s clear the dealer won’t agree to the compensation recommendation of the Ombudsman.
Compliance expert Sandra Kegie spoke to WP Monday about what this change means for the average advisor.
“What would be going on in terms of inappropriate activity that would cause the dealer, even where these amounts are small relatively speaking, to not pay?” wondered Kegie. “Not in all cases but in many cases that I’m aware of it’s because the advisor is so blatantly at fault.”
Kegie wonders why in these instances the advisor isn’t the one “named and shamed” rather than the dealer who was simply performing its compliance duties mandated by regulators. Where the dealer has done everything in its power to supervise rogue advisors it seems nonsensical to put the blame on the dealer. Conversely, many argue that once an advisor realizes the jig is up it’s virtually impossible to draw blood from a stone leaving the dealer as the most logical scapegoat.
Investor advocate Ken Kivenko of Toronto-based Kenmar Associates has his doubts about the OBSI’s move especially when it pertains to the client who he believes could shy away from the process knowing that their names could be given to regulators – creating a potential breach of privacy as more people gain access to their personal information.
In Kivenko’s estimation this change does little for clients when it comes to helping them get restitution.
“The communication on this TofR (terms of reference) change was buried inside a news release. It should have been a standalone news release,” Kivenko said in an email Friday. “No robust justification was given for this controversial change. We [investor advocates] don't think this is an incentive to settle claims at all. Since the move can be pre-emotive it might cause dealers to dig in their heels even more.”
For most advisors the OBSI’s changes will have no effect on their businesses.