The move would bring the ombudsman's powers in line with international best practice for investment-related complaint handling
Enabling Canada’s Ombudsman for Banking Services and Investments (OBSI) to have binding authority on its decisions would have a positive impact on complaints handling.
The latest five-yearly review of the ombudsman’s operations and practices for investment-related complaints is generally positive but has made a renewed call for a bolstering of its enforcement capabilities, first identified in the 2016 report.
The independent report, conducted by Professor Poonam Puri, one of Canada’s leading experts in corporate governance, corporate law, and securities law, says that stakeholders have expressed frustration at the lack of movement in the ombudsman’s powers in securing redress.
The report highlights the weakness in OBSI’s current ability to use the ‘name and shame’ system effectively due to a presupposition that firms that are named will comply with recommendations.
If they do not, there is little OBSI can do about it, which provides no solution or compensation for harmed investors and ultimately undermines public confidence in OBSI.
Professor Puri points out that international best practice is for OBSI’s counterparts to have binding authority, and that making this change would “level the playing field” between consumers and firms.
However, industry representatives were against the move on the grounds of increased processes, costs, and time when complaints were handled by OBSI, and make a shift towards a more adversarial and less collaborative approach.
The report decided that, on balance, the pros of greater enforcement powers outweigh the cons.
The ombudsman’s inability to universally secure redress for consumers through the name and shame system continues to limit its effectiveness, the report says, because it provides an economic incentive for both parties to settle for amounts below the OBSI recommendation.
The recommended process would be similar to that used in the UK, which would involve:
1. an OBSI investigator investigates the case;
2. if the investigator determines that compensation is warranted, the investigator will attempt to facilitate a reasonable settlement between the parties;
3. if a facilitated settlement cannot be reached, the investigator sends the parties a written recommendation about what the outcome should be;
4. if either of the parties rejects the recommendation, both parties are able to submit further arguments and evidence, and a separate, senior member of OBSI’s staff with appropriate experience and training who has not been previously involved in the case (perhaps one of its deputy ombudsmen) issues a final decision;
5. if compensation is awarded, the complainant has a defined amount of time to accept the decision;
6. if the complainant accepts the decision within that timeframe, the decision is binding on both the firm and the complainant, and the complainant cannot pursue the matter in court;
7. if the complainant rejects the decision, or does not accept the decision within the specified timeframe, the decision is not binding on either party, and the complainant is free to pursue the matter in court.
Aside from the call for enhanced powers, the report says that OBSI has met and exceeded its obligations under its Memorandum of Understanding (MOU) with the CSA.
It found that the ombudsman service:
- Has dealt with complaints in a timely manner;
- Investigators were able to identify key issues in a complaint and requested additional documents where necessary;
- Investigators were skilled at conducting interviews and assessing credibility;
- Investigators kept the parties apprised of progress in the investigation, were candid with the parties about the merits of the case, and explained their views well and as early as possible;
- Decision reasons were fair, proportionate, and were explained in plain language; and
- Case conclusions flowed from the evidence.
“We are pleased to see that Professor Puri’s report recognizes OBSI’s strengths and achievements, while putting forward important ideas for improvement,” said OBSI Chair Maureen Jensen. “The board would like to thank her for her excellent work leading this review. We will consider the recommendations carefully and engage with all of our stakeholders to ensure that OBSI makes any changes needed to continue to fulfil its public interest mandate.”
An independent review of OBSI’s banking-related complaints handling is expected in the coming weeks.
The OBSI Joint Regulators Committee (JRC) issued the following statement in response to the publication of the report:
“A fair, efficient and accessible dispute resolution system is an important component of the investor protection framework and is vital to the integrity and confidence of the capital markets. The JRC strongly supports OBSI as the dispute resolution service and expects registrants to abide by their obligations by participating in OBSI’s services in a manner consistent with their obligation to deal fairly, honestly and in good faith with their clients.
The Canadian Securities Administrators (CSA) and JRC have received a copy of the report of the independent evaluators delivered to the OBSI Board, and we thank them for their work on this evaluation. The JRC has met and will continue to meet with OBSI staff and will meet with the OBSI Board in September to learn more about OBSI’s position on the report’s findings and recommendations. In the meantime, we will begin analyzing the findings and recommendations, along with other stakeholder input, in considering next steps in response to the report.”