Securities regulators are proposing changes to how investment related disputes are handled. The Ombudsman for Banking Services and Investments (OBSI) may be given the authority to make binding decisions. Find out more about what this could mean.
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What is the proposed new regulatory framework for independent dispute resolution?
Securities regulators have published for comment a proposed framework for an independent dispute resolution service whose decisions would be binding. Under this proposal, it is expected that the Ombudsman for Banking Services and Investments (OBSI) would be the designated service for the investment industry.
OBSI is a free, independent service that is available to people who want an impartial and expert third party to resolve a dispute and get money back. All clients of registered investment firms may be able to access OBSI to make a complaint in order to get money back is appropriate.
Currently OBSI successfully resolves most complaints that come to it, but its decisions are not binding, and so some people receive less money than they should. The regulatory proposal aims to change that by providing retail investors, who are not satisfied with their firm’s response to their complaint, with a system that results in binding decisions in an efficient, fair and accessible manner. These proposed changes would further improve confidence in our capital markets.
This proposed change will also bring Canada up to international best practices. Internationally, a number of financial ombudservices like OBSI already have the authority to issue binding decisions.
The next parts of this article describe some of the technical aspects of the regulatory proposal.
Under the CSA’s proposal, there would be two stages to the dispute resolution process through OBSI:
- The investigation and recommendation stage
- The review and decision stage
Investigation and recommendation stage
The investigation and recommendation stage would preserve OBSI’s current processes to either facilitate a settlement between the complainant and an investment firm or to make a recommendation to resolve the dispute.
Once a recommendation has been made, either the investment firm or complainant, or both, could object to the recommendation within a specified time period. A complainant may withdraw from the investigation and recommendation stage at any time, even after OBSI makes a recommendation, and in doing so the recommendation would not become a final decision that an investment firm must comply with.
Review and decision stage
The review and decision stage would occur only at the option of either the investment firm or the complainant. If the firm or complainant requests a review of OBSI’s recommendation after a specified time period, the recommendation would be reviewed by a senior decision-maker within OBSI who was not involved in the complaint during the investigation and recommendation stage.
The scope of the review would be limited to the specific objections raised by the party requesting the review. In reviewing its recommendation, OBSI would use processes that are essential to achieving a proportionate process for both parties to resolve a dispute fairly.
OBSI would not facilitate a settlement between the parties during this stage. If the complainant did not request the review of the recommendation, the complainant would be permitted to withdraw from OBSI’s process at any time and reject a final decision within a specified period. However, if the complainant requested the review of the recommendation, they would be required to accept OBSI’s final decision.
The framework set out in the CSA’s proposal is designed to be easy to navigate. We look forward to hearing your views on whether the two-stage process is understandable, or whether it can be improved (and how).
The regulatory proposal contemplates that neither the investment firm nor a complainant can appeal OBSI’s final decision, but if either party wishes, they may consider applying for a judicial review of OBSI’s final decision where available. A judicial review takes another look at a decision or order made by an administrative body — such as OBSI — to ensure the decision or order is fair, reasonable and lawful.
Learn more about what judicial review means or speak to your own legal counsel.
OBSI’s final decisions would always bind investment firms and would be binding on complainants, too, where they objected to OBSI’s initial recommendation. We look forward to receiving retail investor views on this aspect of the Canadian securities regulatory proposal.
In addition, we look forward to receiving retail investor views on whether parties bound by an OBSI decision should be able to appeal the decision to a separate body if the compensation exceeds a certain amount — and if so, what the appropriate amount should be.
The regulatory proposal is open for a 90-day comment period. You are invited to provide comments in writing on or before February 28, 2024.
What would this change mean for retail investors?
Once implemented, this change would mean that investment firms, and sometimes complainants, must comply with a final decision of OBSI.
A final decision may require an investment firm to provide monetary compensation to a complainant, or to take a specific type of corrective action (such as returning documents or correcting erroneous information) as appropriate in the circumstances. The proposal contemplates that the maximum monetary compensation that OBSI could award would remain at $350,000, but we’re also inviting comments on that amount.
While an investment firm will always be bound by the outcome of a final decision, a complainant will only be bound by a final decision if they requested a review of OBSI’s recommendation.
To ensure that a final decision by OBSI would be enforceable against an investment firm, either a complainant or OBSI would be able to file the decision with a superior court as an order of the court.
We want to hear what you think
To share your thoughts on the questions above or provide additional views, you can email us at comments@osc.gov.on.ca. Please note that your comments will be published on the websites of each of the Alberta Securities Commission at www.asc.ca, the Autorité des marchés financiers at lautorite.qc.ca and the Ontario Securities Commission at www.osc.ca. Therefore, you should not include personal information directly in your email to us.
The regulatory proposal has been developed by the Canadian Securities Administrators, which is the umbrella organization representing Canada’s 13 provincial and territorial securities commissions.
