An annual report released on behalf of Canada’s regulators outlines some of the results obtained by the Ombudsman for Banking Services and Investments (OBSI) in 2021 and calls for the OBSI to be empowered to make awards that are binding.
The publication, CSA Staff Notice 31-362, OBSI Joint Regulators Committee Annual Report for 2021, is published jointly by the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada (MFDA). It states that the joint regulators committee (JRC) believes that a fair and effective independent dispute resolution service is important for investor protection in Canada.
An independent evaluation of OBSI, published in June 2022, found that OBSI dealt with complaints in a timely manner, investigators were able to identify key issues, were skilled, and kept parties apprised of progress. The OBSI’s decisions were determined to be fair and proportionate, with conclusions that flowed from evidence. The report also concluded that OBSI should be able to make awards that are binding.
The joint regulator’s annual report adds that a CSA working group also considered legal issues related to binding decisions and conducted significant design work on a binding authority framework during the year.
The work is underway, in part because a proportion of firms that are ordered to pay compensation to clients repeatedly settle for less than OBSI’s recommendations.
“For OBSI’s fiscal years 2018 to 2021, out of the 674 cases that ended with monetary compensation, 39 cases, approximately six per cent, involving 23 firms settled below OBSI recommendations,” they write. “About 56 per cent of these low settlement cases involved recommendations over $50,000. On average, low settlement cases settled for 60 per cent of OBSI’s recommended amount of compensation. In the same four-year period, 10 of the 23 firms settled below OBSI’s recommended amount more than once.”
Overall, they add that since OBSI’s 2018 fiscal year, clients received approximately $1.5-million less than what the ombudsman recommended. “This continues to be an area of concern.”
