FAIR Canada calls for national ombudservice and fraud compensation fundBy Andrew Rickard | May 19 2016 09:45AM
The Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) is pleased that regulators are considering a statutory best interest standard, but it believes Canada needs a national ombudservice with teeth.
In its recent submission on the Ontario Securities Commission's (OSC) statement of priorities for 2016-2017, FAIR Canada argues that current industry practices do not do enough to protect financial services clients. The investor rights organisation is calling for "robust oversight and strong enforcement" and says compensation for investors who lose money when securities laws have been violated should be a "top priority".
Statutory best interest standard
FAIR supports the statutory best interest standard that has been proposed by the Canadian Securities Administrators, but adds that regulators' compliance departments need to have the resources and authority to do their jobs properly. FAIR notes that, under the current system, firms are free to refuse compensation recommendations made by the Ombudsman for Banking Services and Investments (OBSI).
Binding decision making
"Steps should be taken to have a single, national, statutory ombudservice in Canada with the power to make binding decisions," reads the submission. "FAIR Canada believes that a robust regulatory framework is not achievable if the rules in place allow firms to disregard their obligations to compensate investors. In order for our financial services system to work, effective consumer redress is required, and this must include binding decision making as part of the dispute resolution system."
The organisation also suggests that investors who have lost money through fraud should be able to obtain compensation from an indemnity fund such as Quebec's Fonds d’indemninsation des services financiers or Britain's Financial Services Compensation Scheme. "Recent high profile cases involving fraud and related insolvency have not resulted in investors receiving any meaningful compensation through existing mechanisms such as the courts or through the Canadian Investor Protection Fund coverage," says FAIR.
These are only some of the points raised in the 11 page submission. The complete document is available on the FAIR web site.