Ask Sarah Bradley what’s the most important challenge she faces as the new ombudsman and CEO of the Toronto-based Ombudsman for Banking Services and Investments (OBSI) and the answer may surprise you.
It’s not clamouring for greater powers to enforce OBSI’s recommendations or obtaining bigger budgets to do her job, both of which would be welcome. Rather, she says, “It’s maintaining the trust and confidence of our consumers and, also, member firms.”
Bradley views a bond of trust between OBSI and investment firms as critical to winning over those firms and persuading them to accept OBSI’s findings. OBSI, as a dispute-resolution service, can recommend that firms pay up to $350,000 in compensation.
“We need to be impartial and fair,” she says. “We cannot be seen to be on either side and, in fact, we’re not on either side. The challenge is to maintain that balance.”
That’s a fine line to walk and one Bradley is preparing for. Since she stepped in this past September to replace Douglas Melville (formerly OBSI’s ombudsman and CEO, who left to take on a similar role in the Channel Islands), Bradley has been busy meeting with people externally and internally to get the lay of the land.
“I am gathering some diverse views,” says Bradley, noting that she has been speaking to investment industry groups, consumer advocacy groups and ombudsmen from the larger firms that participate in the OBSI program.
At the same time, Bradley is on the ground and talking to staff to learn OBSI’s internal intricacies.She wants to gain a better understanding, she says, of how “we look at consumer complaints and how we calculate losses and engage with consumers and firms.”
It’s part of Bradley’s approach to decision-making, which she describes as “gathering and understanding evidence before I reach a conclusion.”
So, what feedback has Bradley received thus far? “I think there’s a lot of support for OBSI out there,” she says, although she admits she “may be in a bit of a honeymoon phase,” as people become familiar with her management practices.
“There has been substantial work put in at OBSI over the past few years to deal with issues that were previously the subject of some criticism – most notably, work the organization has done on the backlog of cases,” Bradley says, noting that these issues have been eliminated. “I have received a lot of encouragement that we continue to focus on those timelines.”
Bradley comes to her job with an impressive resumé and an extensive background in securities law. She recently held the position of chairwoman and CEO of the Nova Scotia Securities Commission (NSSC).
Bradley, who grew up in Toronto, graduated from law school at Queen’s University and joined law firm Fasken Martineau DuMoulin LLP in 2002, where she practised estate and tax planning. She left to obtain a master’s degree from Harvard University with a focus on corporate law, then moved to Nova Scotia in 2006, where she practised securities law at McInnes Cooper LLP.
She later joined the law faculty at the Schulich School of Law at Dalhousie University, where she taught a range of business and securities law courses.
So, Bradley is no stranger to the securities regulation. During her time at the NSSC, Bradley was vice chairwoman of the Canadian Securities Administrators (CSA) and chaired its policy co-ordination committee, which oversees the CSA’s policy development and facilitates decision-making. She also is a member of the North American Securities Regulators Administrators Association.
Bradley’s appointment is applauded by the Investment Industry Association of Canada: “[Bradley’s] extensive and experienced background brings the needed leadership to guide OBSI through a crucial period of challenging regulatory change, both within the existing regulatory framework and the imminent Capital Markets Regulatory Authority.”
Bradley joins OBSI at a time when there’s much consternation among member firms regarding its rulings and power.
The dispute-resolution service was created as a non-profit organization in 1996 at the suggestion of the banks, which preferred an industry ombudsman rather than a government department to resolve consumer complaints.
However, Royal Bank of Canada (RBC) pulled out of OBSI for consumer banking complaints in 2008 and Toronto-Dominion Bank (TD) followed suit in 2011. The key issues for those banks were the length of time OBSI took to resolve complaints, backlogs and the amount of money OBSI was recommending that banks pay to settle matters. TD and RBC now use third-party dispute-resolution firms for banking complaints.
Melville fanned the flames stirred up by the banks’ departure in 2012, when he told the federal Standing Committee on Finance that the move by the two banks was “a giant step backward for consumer protection in Canada. The independent investigation of consumer complaints cannot be handled credibly by a private for-profit supplier chosen and paid for by the bank.”
Despite the absence of TD and RBC, OBSI has been increasing its banking clients, adding four banks in 2014.
Regarding complaints in the investment industry, the law mandates that the Investment Industry Regulatory Organization of Canada’s and the Mutual Fund Dealers Association of Canada’s member firms use OBSI’s dispute-resolution services. In 2014, OBSI’s membership was expanded to include portfolio managers, exempt-market dealers and scholarship plan dealers outside Quebec. OBSI’s membership now includes about 1,500 financial services firms.
However, member firms are not required to comply with OBSI’s recommendations: those remain voluntary. The system generally worked well until the volume of client complaints rose after the financial crisis, and some firms refused to follow OBSI’s recommendations.
OBSI responded with a “name and shame” campaign: under its regulations, OBSI is required to publish the names and details of cases where firms have refused to comply with OBSI’s recommendations. The number of those cases now totals 18.
Bradley is blunt about this situation: “It’s certainly something on my radar. Nobody is happy with naming and shaming.” Consumers “clearly aren’t happy” when they don’t receive the recommended compensation and the “vast majority of participating firms are also not happy with it. [Firms’ non-compliance] looks bad for the whole industry. People have identified it as something that needs to be addressed.”
By the same token, she adds, “The process we have does work and we have resolved 99% of the thousands of complaints that are brought to us. The solution that is going to be found to ‘naming and shaming’ is a solution that is developed collaboratively by our stakeholders and industry representatives.”
The easy answer would be to mandate that firms follow OBSI’s recommendations. But Bradley says that this would add to the formality and costs of the process.
Changes that could challenge OBSI further are the sweeping reforms under the second phase of the client relationship model (CRM2), which are designed to better inform clients about the costs and performance of their investments. OBSI has already acknowledged that it is anticipating an increase in client complaints as a result of the new requirements. However, Bradley is optimistic.
“We have to be prepared for things that may come in the future,” she says, “[but] we don’t know what they may lead to. Many firms have been very proactive in terms of getting prepared [for CRM2].”
By ensuring OBSI listens to firms and sticks to defined processes and methodologies, Bradley adds, “We can get ourselves a long way toward acceptance of our recommendations. That is an important goal.”
© 2016 Investment Executive. All rights reserved.