The latest battle in the investor complaints-handling arena has emerged in Quebec. The province’s Autorité des marchés financiers (AMF) has closed a second consultation into proposed rules to improve complaint handling throughout the province’s financial industry. The rules would cover securities dealers, planners, insurers and all other provincially regulated financial institutions.
Following an initial round of consultation that took place in the fall of 2021, the AMF revised its proposals in several areas: expanding the definition of a complaint, introducing a simplified process for routine issues that can be resolved within 10 days, and allowing firms more time to respond to complaints by setting a 60-day standard but permitting firms to take up to 90 days.
The revisions are intended to address concerns raised by the industry about the proposals’ impact on existing complaint-handling processes, the AMF said. The regulator also said it believes the proposals still serve the goal of ensuring the industry deals with all complaints “fairly and diligently.”
Despite the concessions, the securities industry opposes the latest proposals, which are slated to take effect on Jan. 1, 2024.
The Investment Industry Association of Canada (IIAC) and the Conseil des fonds d’investissement du Québec (CFIQ) object to the lack of uniformity between the AMF’s proposed new rules and the new industry self-regulatory organization’s (SRO) requirements for complaint handling.
The IIAC’s submission to the second consultation said the AMF’s proposed new regulation is “unnecessary” for firms belonging to the new SRO, given that those firms are already subject to the rules of both the new SRO and the Canadian Securities Administrators.
The CFIQ’s submission, meanwhile, “strongly recommends” that firms belonging to the new SRO be exempt from the AMF’s new rules.
While the AMF and the industry both support the concept of harmonization, they don’t agree on what should be harmonized.
The AMF, which is an integrated regulator, wants to harmonize complaint-handling requirements for all firms under its oversight in Quebec. But the CFIQ called for harmonization across the country.
“This harmonization would prevent redundancy and reduce the regulatory burden on dealers practising in several jurisdictions who would otherwise have to implement and comply with a different complaint handling process in Quebec and elsewhere in Canada,” the group said.
The CFIQ wants the AMF to “maintain the status quo” in complaint-handling requirements, arguing that any benefits of harmonization within Quebec will be offset by the negative side effects — including client confusion, needless complexity and excessive compliance costs.
The group also argued that introducing potentially duplicative or conflicting requirements for fund dealers in Quebec runs counter to a fundamental goal of the new SRO — which the AMF signed onto — and “which served as the basis for the dealers’ vote to create the new SRO,” the CFIQ noted.
The IIAC’s submission objected to the difference between how the AMF and the new SRO define complaints, saying the AMF’s broader definition would divert resources to “minor matters.”
Furthermore, “a sensible and attentive investigation of an investor complaint, which often involves communications with multiple individuals, and analysis of multiple accounts,” requires more than 90 days, the IIAC argued.
The AMF’s proposed extension for addressing complaints to 90 days rankles in another camp for another reason.
FAIR Canada’s submission questioned the wisdom of allowing firms more than 60 days, noting the limit was recently reduced to 56 days from 90 days under federal banking legislation to bring Canada in line with international best practices. If the AMF is going to allow firms to go beyond 60 days, it should provide guidance on the circumstances that would warrant longer timelines, FAIR Canada suggested.
The investor protection group also questioned other changes in the latest version of the AMF’s proposed rules, including the removal of a provision requiring firms’ complaints officers to avoid conflicts of interest and to act independently when dealing with complaints.
And FAIR Canada opposed eliminating the requirement that customers be given at least 20 days to consider a firm’s resolution offer.
“In our experience, firms have tried to pressure complainants by insisting on a response within a few days. The purpose of having a fixed period (in this case, 20 days) is to deter firms from using such pressure tactics,” FAIR Canada’s submission stated, adding that the AMF should restore the originally proposed 20-day minimum and impose monetary penalties on firms that violate the requirement.
The Ombudsman for Banking Services and Investments (OBSI) also made recommendations for improving the AMF’s proposals. These included clarifying that complaints don’t have to come from firms’ existing clients, broadening the possible subjects of complaints to include off-book products and services, and expanding the assistance firms are expected to provide to clients who need help articulating their complaints.
Additionally, OBSI called on the AMF to ensure that firms have a duty to determine whether other clients were harmed by any issues uncovered and to provide redress for all affected customers.
OBSI also recommended raising penalties for not complying with the new regime, noting that “fines or penalties in the range of $1,000 to $5,000 are unlikely to have much, if any, deterrent effect on financial services firms.” Penalties also should escalate for repeat offenders, OBSI stated.
Finally, OBSI suggested the AMF require firms to restore harmed clients to the financial position they would have been in absent the error or misconduct that generated the complaint. OBSI said this would be consistent with international best practices for ombudservices and other dispute-resolution bodies.