The Ontario securities Commission‘s new Office of the Investor did not quite hit the ground running as promised on April 1. But when it finally gets on its feet, it will have its work cut out for it.

One of the highlights in the OSC’s new strategic plan, unveiled earlier this year, was the creation of a new branch to focus on investor issues. That initiative was to launch officially with the start of the OSC’s new fiscal year, on April 1. But the new office is not yet up and running; it has yet to be staffed and hasn’t begun any real work.

However, the OSC maintains that establishing the Office of the Investor is a top priority. The OSC says that it will soon begin recruiting for a director to head the branch and that it has allocated – and the board has approved – a budget for the development of the office for this fiscal year.

Choosing the right person to lead the creation of this new office is going to be critical to its success, says Ilana Singer, deputy director of the Canadian Foundation for Advancement of Investor Rights, an investor advocacy group also known as FAIR Canada. To ensure the investor perspective is inculcated in everything the regulator does, she adds, this new office will need to win credibility – within both the OSC and the investor advocacy community.

Finding the right person to navigate both these worlds successfully, and to build this new branch, may be complicated by the fact the OSC has been undergoing a bit of a management shakeup over the past few weeks, with several directors departing from the OSC. The chore of launching the Office of the Investor comes on top of the need to replace executives and other personnel in several other areas.

When the new office does finally get up and running, there will be no shortage of work to do. Although it’s hoped that the new office will ultimately be able to embed the investor perspective more deeply into the OSC’s culture, there also are certain specific investor-protection issues that clearly should be at the top of its agenda.

Some of these are spelled out in a recently released draft of the OSC’s new statement of priorities for the coming year, while others are suggested in a new effort to engage investors by the OSC’s independent investor advisory panel, which was established in August 2010 to provide investor feedback on OSC policy initiatives.

Near the top of any list of specific investor-protection issues is the fundamental question of whether a fiduciary duty should be imposed on the client/advisor relationship.

The idea of a statutory fiduciary duty has been bandied about among investor advocates – and both the IAP and FAIR Canada have called for regulators to adopt some sort of formal requirement for financial advisors to put clients’ interests before their own. However, the notion has yet to be explored seriously by regulators.

In last year’s statement of priorities, the OSC had pledged to publish a paper examining the issue of fiduciary duties for advisors. That paper has yet to be published, although the OSC indicates in its new draft priorities that it plans to finish its research in this area and that it will publish a paper this year along with the rest of the Canadian Securities Administrators.

In the absence of a statutory fiduciary duty, disclosure remains the foundation of investor protection in Canada – and yet that also remains a perpetual work in progress.

The OSC says in its draft statement of priorities that there continue to be episodes of investors being sold products that are unsuitable and inadequately explained, which have “shone a spotlight on the inadequacies of the existing disclosure regimes.”

Finally, investor restitution and dispute resolution also remain top investor-protection issues. In last year’s statement of priorities, the OSC had promised to work with the Ontario government to explore a mechanism that would enable the OSC to award compensation to investors who have suffered losses as a result of securities-law violations. However, that hasn’t happened – and the promise is not included in this year’s draft priorities.

At the same time, the best option for many wronged investors seeking compensation – the Ombudsman for Banking Services and Investments – has come under siege from the financial services industry in the past year. And an independent review of OBSI, which was released this past autumn, calls on regulators to shore up the service with a series of fundamental reforms.

Yet, although regulators have expressed support for OBSI and promised to consider a couple of the reforms recommended in the report, little in the way of concrete action to improve OBSI’s standing is evident. That, and the restitution issue generally, should be another top priority for the OSC’s new Office of the Investor.

Beyond these key issues, the list of investor-protection concerns remains a lengthy one. When the OSC’s Office of the Investor does finally does launch, it’s going to have its hands full. IE

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