The ombudsman for banking Services and Investments (OBSI) has faced its share of challenges over the past few years. Now, OBSI must take on yet another: vastly expanding its ranks as new rules take effect that mandate membership for a new and vast array of firms.
As of May 1, the requirement to join OBSI has been extended to all registered dealers and financial advisers in the securities industry, except for those in Quebec. Prior to that date, only investment dealers and mutual fund dealers were obliged by their respective self-regulatory organizations (SROs) to participate in OBSI. Now, the firms that are regulated directly by the various members of the Canadian Securities Administrators (CSA) – such as exempt-market dealers, scholarship-plan dealers and portfolio managers – will have to belong to OBSI as well.
OBSI doesn’t have hard numbers on exactly how many firms will be required to join as a result of the new CSA rule; some of them already belong voluntarily. Nevertheless, OBSI expects its total membership to more than double to about 1,600 firms.
The affected firms have three months to sign on with OBSI – although the rule took effect on May 1, the deadline to join is Aug. 1. For these new members, this means added costs. There are OBSI’s annual fees, which initially are set at $165 per rep. The CSA also requires firms to communicate their membership in OBSI to clients at three specific times: upon opening an account; when clients make a complaint to the firm; and when the firm gives them a decision on that complaint.
Firms also will have to develop their own processes for dealing with this new step in the complaint-handling process. The firms also face the prospect of paying restitution to clients in cases in which complaints are upheld by OBSI.
At OBSI itself, there’s also plenty to do amid this influx of new members. Tyler Fleming, director of stakeholder relations and communications, says that OBSI has been doing plenty of outreach to the firms that now are required to join to explain how the ombudservice process works and what the firms must do to become OBSI members.
There’s also the administrative work associated with simply accepting new members. OBSI will have to staff up on the investigative side to handle the anticipated increase in complaints. However, for now, OBSI is taking it slow in that respect, Fleming says, until it has a better idea of the number of complaints these new member firms will generate.
“We don’t want to be overwhelmed if there are a lot of complaints,” he says, “nor do we want to spend money unnecessarily on personnel that’s not needed. We’re trying to strike the right balance.”
OBSI has made some forecasts based on a variety of data, but Fleming notes: “Since it’s impossible to predict complaint volumes with 100% accuracy, it’s important for us to be flexible in our approach.”
Although the growth in OBSI membership may call for flexibility, the ombudservice recently has begun taking a harder line in its actual work of addressing client complaints. Along with revising its mandate – so that, among other things, OBSI no longer investigates systemic issues or deals with complaints involving segregated funds – the ombudservice recently adopted a series of changes in its internal processes that aim to speed up its service.
These changes do seem to be producing faster conclusions. Since OBSI adopted its new approach late last year, Fleming says, it has managed to resolve 80% of new investment complaints within 180 days, thus meeting its benchmark for timeliness.
Previously, OBSI was far from meeting that standard. Although the service did much better with banking complaints, only about 17% of investment complaints were being resolved within the 180-day time frame in fiscal 2013.
The turnaround has been dramatic. And, although the sample size is small, Fleming says, OBSI “will have no trouble” continuing to meet the standard of closing 80% of new investment cases within 180 days this year.
There’s no single process change that explains this vast improvement, he adds, and all of OBSI’s “experimental” changes have contributed.
However, a primary cost of this new attitude is that the announcement of refusals by member firms is becoming increasingly routine as well – and the stigma attached to refusing an OBSI recommendation seemingly continues to erode. OBSI has already announced four refusals this year, three of which have taken place since mid-April.
It remains to be seen whether the CSA is prepared to let this trend continue or if the regulators will start enforcing OBSI’s recommendations somehow. (Along with the expansion of OBSI’s mandate, a new regulatory oversight mechanism that involves the CSA and the SROs also has been created.)
At the same time that all of this is happening on the investment side, OBSI also still is going through the new federal recognition process for dispute-resolution providers on the banking side. Although OBSI applied to the Financial Consumer Agency of Canada (FCAC) for recognition in September 2013, that process continues.
In early May, the FCAC announced that it won’t be making a decision on whether the draft applications it has received are considered complete until Sept. 30. If they are deemed complete, organizations will have 30 days to file a formal request for the federal finance minister’s approval; the FCAC’s commissioner, Lucie Tedesco, then will submit her recommendations to the minister.
Ironically, Joe Oliver, the new federal finance minister, was instrumental in setting up OBSI in 2002, when he was the head of the Investment Dealers Association of Canada. Oliver may have a hard time recognizing what OBSI has become since those early days.
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