OBSI oversight leaves much to be desired, says investor advocate

Commentary slams recently published report for failing to address top concerns on complaint resolution

OBSI oversight leaves much to be desired, says investor advocate

The Joint Regulators Committee (JRC), which consists of representatives from various provincial securities regulators as well as Canada’s self-regulatory organizations, has a lot of improving to do if it wants to ensure that the Ombudsman for Banking Services and Investments (OBSI) effectively performs its mandate to protect consumers.

That was the position of investor advocacy group Kenmar Associates in its commentary on the recently released OBSI-JRC 2019 annual report.

Kenmar noted OBSI did not report finding any systemic issues to the JRC for 2019, in direct contrast to Kenmar’s own experience identifying numerous systemic issues that have affected consumers throughout the year.

“We remain puzzled as to why the JRC did not challenge the OBSI report that there was not a single systemic issue in Canada to report upon in 2019,” Kenmar said, noting that investor complaints rose by 12% in 2019, despite the fact that market performance was positive during the year.

It also cited the External Complaint Body (ECB) review previously conducted by the Financial Consumer Agency of Canada (FCAC), which found that OBSI is falling short of expectations for reporting systemic issues. While OBSI does report roughly one systemic issue per year, that’s far less than the number reported by counterparts in comparable jurisdictions such as Australia, Kenmar said.

The report noted that all throughout 2019, no orders to compensate investors were refused, though Kenmar said that refusals will predictably remain unlikely since the lack of a binding-decision mandate allows firms to offer low-ball settlements without consequence.

OBSI statistics show that for the fiscal years of 2018 and 2019, 316 cases brought to the ombudsman ended with monetary compensation. Of those, Kenmar said 23 cases involving 15 firms were settled below OBSI recommendations, which the JRC said resulted in clients receiving approximately $1.04 million less than what OBSI recommended. OBSI has not disclosed the number of low-ball cases and average amount by which investors were low-balled, Kenmar said, despite its repeated requests for the information.

“There is no mention of any discussion regarding a plan to provide OBSI with a binding decision mandate,” Kenmar said, maintaining that it has been a top priority among investor advocates for nearly a decade.

And while the Ontario task force set up to modernize securities regulation issued its recommendations for OBSI – including a binding-decision mandate with a compensation cap set at $500,000 – fell outside the 2019 fiscal year, Kenmar suggested that it should have been included in the report as a subsequent event of note.

“Much of the language in the report is similar boilerplate to that written in the 2018 report. … In our view, the report is superficial, giving only glimpses of a small number of OBSI’s issues,” Kenmar said. “JRC reports are woefully inadequate and lack the transparency needed to inform the public debate to give insight to regulation/policy development.”


Follow WP on FacebookLinkedIn and Twitter