Regulators have taken a good first step toward improving the investment industry dispute resolution process but they need to do more, say the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) and the Public Interest Advocacy Centre (PIAC) in a joint statement published on Friday.
In particular, the advocacy groups are demanding that the regulators give the Ombudsman for Banking Services and Investments (OBSI) binding decision-making authority, “to prevent low-ball offers and refusals from being a systemic issue,” the joint statement says.
In their joint statement, FAIR and PIAC recommend that regulators “take immediate action against registered firms that have repeatedly ignored their complaint handling obligations and refused to comply with OBSI’s recommendations, from the beginning of the OBSI complaint process.”
The two organizations also recommend:
- regulators ban firms from using the “ombudsman” title as part of their internal complaint-handling process;
- regulators commit to reviewing OBSI refusals and low-ball offers, “in as close to real time as possible and practicable;” and
- firms be required to provide a link to OBSI on their websites.
On Thursday, the Canadian Securities Administrators, the Investment Industry Regulatory Organization of Canada, and the Mutual Fund Dealers Association of Canada, the regulators who oversee OBSI, issued a joint notice warning industry firms that refusing OBSI compensation recommendations, or offering “low-ball” settlements to aggrieved investors will be coming under greater regulatory scrutiny, and could lead enforcement action.
The regulators’ notice also aims to address an issue raised by FAIR and PIAC earlier this year, which is the use of the “internal ombudsman” by certain firms. The advocacy groups worry that this practice may be undermining the dispute resolution process by confusing and misleading investors, and causing them to abandon legitimate complaints.
In their notice, the regulators stress that industry firms must ensure that they are treating clients fairly. The notice calls on firms to make adequate disclosure regarding the use of internal ombudsmen, and demands that firms provide proper disclosure about OBSI’s services.
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