Securities regulators have decided to continue monitoring the industry’s willingness to accept recommendations on investor compensation made by industry dispute resolution service the Ombudsman for Banking Services and Investments (OBSI).
In a notice published Thursday, the Joint Regulators Committee (JRC) that oversees OBSI — which includes the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) — indicated that the CSA has examined the adoption of a binding compensation model (as recommended by an independent review in 2016), but stopped short of going ahead with this approach.
“The framework explored would require legislative amendments, changes to OBSI processes, enhanced regulatory oversight of OBSI, and consideration of the need for a review mechanism for OBSI decisions,” the notice read.
However, the regulators indicated that they will continue to track the industry’s approach to OBSI recommendations — including the prevalence of refusals and low-ball settlements — before deciding whether to pursue binding authority.
“The CSA has decided to continue to monitor refusals and settlements for less than recommended amounts, as well as the impact of [regulatory guidance in this area], before further considering whether to move forward with the work necessary for binding decisions,” the JRC said.
The notice indicated that there were no compensation refusals in 2018 (unchanged from 2017), and that the incidence of low-ball offers declined last year.
In 2018, approximately 8% of investment cases were settled for amounts less than OBSI’s compensation recommendations, which is down from 15% in 2017.
“The JRC will continue to monitor for complaint trends and patterns, including refusals to compensate clients consistent with OBSI recommendations, or repeatedly settling for lower amounts than recommended by OBSI,” it said, noting that this can signal potential problems with a firm’s complaint handling practices, or its participation in OBSI.
The report also revealed that OBSI uncovered one systemic issue in 2018. While the notice doesn’t spell out the details of the issue, it indicated that the issue involved fee disclosure.
“In response to OBSI’s notification, the applicable regulator reviewed the matter and took appropriate regulatory action,” it said.