The Ombudsman for Banking Services and Investments (OBSI) is proposing to give up its ability to investigate so-called “systemic issues”, among a variety of other possible changes to its terms of reference.
OBSI launched a consultation Wednesday on a series of proposed changes to the terms of reference that set out its mandate, powers and duties. Among the proposals, OBSI is planning to surrender its ability to expand investigations from an individual client with a complaint in cases where it believes that an issue may have affected a large number of clients.
The move comes in response to new regulations for resolving banking disputes that were set by the federal department of Finance last year. According to OBSI’s proposals, those rules require any potential systemic issues to be referred to the federal financial regulator, the Financial Consumer Agency of Canada (FCAC) for investigation.
So, in order to comply with those requirements, OBSI is giving up its ability to investigate systemic issues on the banking side; and, for the sake of consistency, it has also decided to drop that power for investment industry complaints too. “OBSI’s board believes that there should be one policy on systemic issues for the entire organization, and the decision by the Department of Finance has necessitated this policy change,” it says, adding that securities regulators support this position too.
Some of the other proposed changes include clarifying that it will not investigate any complaint involving segregated funds, referring these issues to the Ombudservice for Life and Health Insurance (OLHI); describing the circumstances where it will accept complaints beyond its typical 180-day deadline; establishing conflict of interest policies; clarifying that clients can pursue complaints in other venues for compensation beyond OBSI’s $350,000 limit; and, formalizing its process for “naming and shaming” firms that refuse its recommendations.
It also aims to clarify that its jurisdiction involves making recommendations against firms, even though losses involved are often caused by an individual rep. “Whether the firm then goes back to the representative to try to recover any compensation paid is a business decision for the firm to make and is not part of OBSI’s process,” it says, noting that the courts have established that investment firms are vicariously liable for the actions of their investment advisors.
And, it also establishes that OBSI will continue to report to firms any threats against them that come to light during an investigation, but that it will now be keeping the identity of the OBSI staffer who reported the threat confidential. It says it’s making this change because of several incidents over the years in which OBSI staff have reported these sorts of threats to firms, and have then themselves been exposed to threats from the complaining clients who made the initial threats against the firm. “OBSI believes proper protections for its own staff should be in place if we are to provide this information to firms,” it says.
The proposed changes are out for comment until August 12.