The Ombudsman for Banking Services and Investments (OBSI) and Canadian securities regulators seem to be perfecting the “art of doing nothing” – a practice known as “la dolce far niente” in Italy – with their latest tepid response to investor concerns about OBSI, the investment industry’s dispute-resolution service.

In early December, the Canadian Securities Administrators, the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada – the triad that oversees OBSI – issued a notice responding to concerns that investor advocates raised earlier in the year about the use of so-called “internal ombudsmen” at certain firms. The regulators are calling on the industry to provide better disclosure about the dispute-resolution process and warn that they may scrutinize firms that reject OBSI’s investor compensation recommendations or firms that repeatedly provide investors with “low-ball” settlement offers.

What the regulators completely fail to address is the much more substantive underlying issue: OBSI lacks the authority to enforce its decisions.

More than 18 months ago, an independent reviewer recommended that OBSI be given binding decision-making power, among a host of other reforms. That report was damning and worth recalling. It found that OBSI’s lack of authority prevents the ombudservice from fulfilling the fundamental role of an industry ombudsman: securing redress for customers who have been wronged. In fact, the review concluded that OBSI’s power to “name and shame” firms that refuse its recommendations has actually proven counterproductive by highlighting OBSI’s limitations and undermining public confidence in the system.

The report noted that lack of binding authority effectively tilts the playing field in favour of the industry and against investors, who are already at a massive disadvantage in terms of resources and financial knowledge.

Yet, the regulators are addressing none of these failings. This could be forgiven if they were preoccupied with introducing other, critical reforms – such as implementing a “best interest” standard or banning embedded commissions. But the regulators continue to dither on these issues as well.

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