By Glorianne Stromberg
The fallout from the third-party ABCP disaster has shone a bright light
on major investor protection issues centering on mis-selling, due
diligence failures, flawed underwritings, and unsuitable products and
advice. It has exposed fundamental flaws in our regulatory structure and
system. And it has highlighted gaps in the capability of a large portion
of the Canadian investing community to make sound investment decisions.
This sorry state of affairs has been greeted with a deafening silence
from the regulators that share investor protection mandates and from the
financial institutions and related industry participants, that with some
justification are waiting to see how this situation plays out.
Although regulators and industry participants are waiting, many
investors are not. They have filed complaints with both the Investment
Dealers Association of Canada and the Ombudsman for Banking Services and
Their complaints are focusing new light on the many negative responses
from industry trade associations, industry participants and one of the
self-regulatory organizations to both organizations’ proposals for
complaint and dispute resolution procedures.
These negative responses confirm the clear and immediate need for
In light of the negativity, the IDA’s response to OBSI’s request for
comments on its proposed revisions to its Terms of Reference (posted at
the beginning of March) is a refreshing and sensible approach to working
with OBSI to streamline processes for investors who decide to avail
themselves of OBSI’s dispute resolution process. The IDA’s comments were
focused on constructive suggestions to accomplish this. It would benefit
the industry and investors to proceed with constructive suggestions to
enhance the OBSI dispute resolution service.
In this respect, despite assertions from some in the industry, OBSI does
not see itself as a regulator. OBSI is clearly focused on providing a
much-needed dispute resolution service for investors.
To improve its effectiveness, OBSI needs: (i) sensible regulatory and
industry rules for complaint handling to be put in place; (ii)
investors’ awareness of the OBSI dispute resolution service to be
raised; and (iii) the dispute resolution process to be streamlined.
The current investor environment additionally highlights the need to get
on with putting in place, without delay, the four components of the
“Treating Customers Fairly” initiative that are embodied in the
Registration Reform Project, the Point of Sale Disclosure Proposals, the
Client Relationship Model, and the OBSI Terms of Reference. There has
been enough consultation. It’s time to implement.
It’s time to take a fresh look at the proposed delays contemplated by
the industry’s complaint handling procedures — 90 days is far too long.
In the UK the time delay is eight weeks. In Australia it is 60 days and
in Ireland it is 25 business days. If firms want an internal Ombudsman
to review a complaint, they need to streamline their internal processes
and conduct some in parallel. Internal, multi-tiered complaint review
processes are confusing and distressing to investors and result in
The industry needs to make its systems work better for its clients and
to provide a better investment environment for clients. Addressing these
matters is a starting point and the least that can be done in Canada’s
bifurcated regulatory system, which also is something that has long
needed to be addressed. IE