A coalition of investor advocates is backing reforms that would give Canada’s investment ombudsman the power to make binding decisions in complaints involving issues like unsuitable advice and misrepresentation. Industry participants say the move would favour investors unfairly.
In a joint letter sent out Tuesday, the coalition supported a proposal from the Canadian Securities Administrators (CSA) to strengthen the Ombudsman for Banking Services and Investments (OBSI) by preventing firms from ignoring its recommendations or pressuring clients into unfair settlements.
“Canadians must be confident that governments and regulators will protect them when their hard-earned assets are at stake,” said Jean-Paul Bureaud, executive director of FAIR Canada. “Delaying or weakening these reforms will only hurt investors and erode trust in the financial system.”
The CSA unveiled the proposed changes in November 2024 following long-standing concerns about OBSI’s limited powers. Currently, OBSI can only recommend compensation — firms can choose to ignore its findings.
“We’ve been talking about the need to give OBSI binding power for well over a decade,” Bureaud said. “Other countries have ombud services that issue binding decisions — Canada continues to lag in building a fair and balanced system for investors.”
Ken Kivenko, president of investor advocacy group Kenmar Associates, called binding authority a long-overdue measure. “If OBSI makes a favourable recommendation and the firm refuses to pay, that’s not justice,” he said. “Binding authority is essential — otherwise, investors are left with lowball settlements or nothing at all.”
Kivenko noted that some firms, especially in claims over $50,000, routinely reject OBSI’s findings. “No major bank has ever paid a settlement they didn’t want to,” he said. “This undermines confidence in the system and discourages people from coming forward.”
Since OBSI assumed an expanded mandate as the sole organization to handle external complaints for the banking industry, it’s experienced a surge in consumer engagement and complaints, leading to record-breaking activity across multiple metrics, according to an OBSI newsletter. Before the mandate, banks were able to choose their own referee for resolving consumer complaints.
Total inquiries soared to a record 6,183, driven largely by a 72% quarter-over-quarter spike in banking-related inquiries. Those now make up 85% of the total. Overall cases opened also hit a record 1,278, up 71% from the previous quarter, with banking complaints up 91%.
Credit card disputes led the way, rising 51% quarter over quarter, followed by e-transfer and mortgage-related concerns. While banking cases surged, investment complaints saw modest declines, particularly in common shares and mutual funds.
Kivenko said he expects complaint volumes to grow, with inflation rising and more Canadians facing financial strain. He said binding decisions would help not just investors, but the industry. “Every stakeholder wins when complaints are handled fairly. Binding decisions won’t just help investors — they’ll also improve industry conduct by taking pressure off frontline advisors and encouraging firms to do the right thing from the start.”
Industry pushback
While the CSA’s proposal has support from investor groups, it faces pushback from some in the investment industry who argue that binding decisions would unfairly favour investors and remove the option for third-party appeals.
Matthew Latimer, executive director of the Federation of Independent Dealers, said binding powers are unnecessary, citing low dispute volumes and a high rate of compliance among dealers. “Cases paid in full on amounts below $10,000 are standard, and the last non-bankrupt refusal by a firm was nine years ago in 2016,” he said.
Latimer added that an average of 19.2 cases annually — fewer than 1% of complaints under $10,000 — are settled. He warned that mandatory binding arbitration could lead to greater costs and delays. “The remedy of a quick resolution may be more beneficial for investors than the downside of mandatory binding outcomes,” he said.
He also pointed to existing programs under the Canadian Investment Regulatory Organization (CIRO), which allow for binding arbitration of disputes up to $500,000. Granting OBSI binding powers, he said, would duplicate that process and remove investors’ ability to choose non-binding options.
Kivenko countered that many small-dollar complaints — especially under $10,000 — aren’t worth pursuing through legal channels due to the cost of hiring a lawyer, which he estimated at $5,000 to $10,000. “That cost barrier makes a binding system through OBSI essential,” he said.
The Investment Industry Association of Canada (IIAC) has also questioned the need for change, suggesting that OBSI’s mandate can be improved without adding binding authority.
“The average compensation in investment complaints last year was $12,235, and total investor compensation was just over $2.5 million,” said Laura Paglia, IIAC president and CEO, citing OBSI’s 2024 annual report.
“In light of the size of the investment industry, that is minuscule. … The recommendation for a binding authority isn’t supported by the data that’s been produced or by international practices.”
Paglia also raised procedural fairness concerns and argued for keeping investor choice intact. “We believe any dispute resolution regime should preserve investor choice and integrate existing mechanisms, such as external mediation and the arbitration programs of regulators,” she said.
The coalition disputes claims that OBSI favours investors. Bureaud pointed to independent reviews showing OBSI sides with firms in about 67% of cases. When compensation is recommended, firms often offer less than the suggested amount.
“Firms can simply say, ‘We’re willing to give you 50 cents on the dollar,’” Bureaud said. “That creates a very unfair dynamic for the client, and the investor may end up with nothing.”
He added that a judicial appeal process would tilt the playing field further. “Firms have more legal resources and time. Most investors don’t. They’re often out of pocket and just trying to recover their losses.”
Some have suggested lowering OBSI’s $350,000 compensation cap, but the coalition says the current limit is in line with international standards.
“That amount is lower than what’s in place in countries like the U.K. and Australia,” Bureaud said. “If we create two classes of complainants — one with access to binding outcomes and one without — we undermine the fairness of the entire system.”
The CSA is expected to publish an update in the second half of 2025 that includes the CSA’s proposed approach to oversight. But Bureaud stressed that broader government action will be needed.
“Ultimately, it will be up to governments to enact legislation that brings a binding regime into effect,” he said. “This proposal is a critical step forward — and we can’t afford to fall behind again.”