The Canadian Securities Administrators’ (CSA) proposal to provide the Ombudsman for Banking Services and Investments (OBSI) with binding authority represents a significant change to financial dispute resolution in Canada. It is also part of a larger CSA initiative to artificially elevate OBSI’s role beyond a true ombudservice — above that of our courts and arbitrators — and to expand CSA’s control. But this proposal has generated remarkably little analysis on its broader economic consequences.
Over time, CSA has expanded OBSI into a mandatory, regulator-led mediation service that has materially influenced firms’ business models without asking whether doing so advances broader economic goals for the benefit of Canadians. CSA’s proposal to provide OBSI with binding powers continues this trend, with the debate surrounding this initiative having been reduced to a narrative of support for binding OBSI praised as good and pro-consumer and concern for the proposal shamed as bad and anti-consumer. This has stifled discussion and analysis.
Whether one supports binding authority for OBSI or not, this issue is a proxy for larger discussions on the impact of regulation on Canada’s financial markets at a time when the country’s economic competitiveness is under pressure.
According to the OECD, Canada is projected to have the lowest growth in real GDP per capita among OECD economies for the period of 2020 to 2060. Canada also has a concentrated financial services sector. The Bank of Canada notes that six banks hold roughly 93% of all banking assets.
Canada has many provincial and federal financial regulators, which gives rise to direct and indirect regulation costs. This is particularly hard on smaller investment firms and impacts the range of products and services that are available to Canadians.
Competition as consumer protection
Competition can serve as a powerful form of consumer protection. It creates continuous pressure on firms to lower prices, improve quality, service and choices.
OBSI’s affects on competition deserve serious analysis. The concentration in banking translates into those banks’ providing financial advice to millions of Canadians, where available models can be dependent on investable assets.
Granting OBSI binding authority may further increase legal and operational risk. Larger firms are better positioned to absorb those costs. If competition from independent dealers and portfolio managers is further reduced, consumers, especially those with less money, may have fewer options.
OBSI has contributed to a broader shift of investment firms redesigning products, standardizing advice processes and reassessing which clients, products and services they are prepared to prioritize, in order to meet regulatory expectations.
This has meant more defensive and less personalized advice with standardized recommendations and model portfolios that are easier to defend after the fact, rather than those with the hopes of higher return. Products that are growth-oriented, novel or less liquid carry greater complaint risk so that even if they are suitable for some investors, firms may simply decide they are not worth offering.
Firms are more selective about whom they serve, further reducing access to meaningful, personalized advice, particularly for mass-market Canadian investors. A binding OBSI authority does not resolve and may exacerbate this problem.
A self-fulfilling prophecy
Compliance with OBSI recommendations is staggeringly high. There have been no OBSI refusals since 2020.
OBSI recommendations are not infallible. Despite the CSA’s claims, there is no data to suggest that low settlements occur with any regularity. Overall, low settlements have declined and have never accounted for a significant proportion of OBSI’s recommendations for monetary compensation.
Yet, on July 22, OBSI released the results of its five-year review, conducted by Australian consultancy CRKhoury which recommended that OBSI be provided with binding authority.
No surprise. CRKhoury’s appointment was approved by the CSA. The CSA’s proposal to provide OBSI with binding powers emanates from an OBSI evaluation that CRKhoury completed in 2011. Following that 2011 report, this recommendation was repeated by subsequent evaluators and referenced in support of the CSA’s proposal.
On July 22, the CSA completed the circuit through a press release welcoming CRKhoury’s recommendations as the CSA “advances work on a proposed framework for an independent dispute resolution service with binding authority.”
The following day, the Joint Regulators Committee issued its 2025 Annual Report echoing OBSI and CRKhoury’s overstated low settlement concerns. The circle is complete.
The CSA’s proposal is heavily influenced by the United Kingdom’s Financial Ombudsman Services (FOS), one of the few outlier countries with a binding financial services ombudsman. According to the U.K. government, FOS has given rise to mass redress claims and suppressed investment and innovation in the U.K., leading to firms offering fewer and less innovative products and services to retail consumers.
The U.K. government has also expressed the concern that FOS has taken on the role of a “quasi-regulator” by making binding decisions that inform firm behaviour. To address these concerns, the U.K. government is considering the “most significant package of reforms since [the FOS’] inception” while the CSA is proposing to replicate the U.K. system.
At a time when Canada is struggling with productivity and consumer choice, policymakers should be asking harder questions: does expanding OBSI and CSA powers make Canada’s markets more competitive and better for investors, or does it simply entrench our standardization effect, our incumbents and shrink the range of products and advice available to ordinary Canadians?
Laura Paglia is a lawyer and advocate serving as president and chief executive officer at the Canadian Forum for Financial Markets. Jonathan Preece is a lawyer and advocate serving as senior policy counsel at the Canadian Forum for Financial Markets.