The current state of investor redress mechanisms in Canada was summarized in the recently published Final Report and Recommendations of the Expert Panel on Securities Regulation as follows (the Expert Panel Report):
“Although many mechanisms have been put in place to provide investors with simpler, more cost-effective alternatives to the courts, the numerous organizations, the multi-step processes, and the lack of uniformity across Canada pose challenges for investors to properly understand and achieve a proper conclusion in an expeditious manner. Based on some of the personal accounts, it appears that investors are often not provided with the information required to understand the full range of options available to seek redress.”[1]
In reviewing its arbitration program, IIROC’s objective should be to address some of the concerns expressed in the Expert Panel Report and, in particular, aim to provide a simpler, more cost-effective alternative to the courts.
FAIR Canada does not get involved in individual dealer-client disputes, and therefore does not have hands-on experience with the IIROC Arbitration Program. However, as a national investor-focused advocacy organization, we strive for improvements in all investor complaint-handling and dispute resolution mechanisms. FAIR Canada believes that IIROC plays a crucial role in the individual investor complaint-handling and dispute resolution processes. We welcome IIROC’s review of its arbitration program.
In addition to carefully considering the IIROC request for comments within FAIR Canada, we have canvassed the views of a number of individuals who focus on advancing individual investor interests, including: lawyers, dispute resolution specialists, advisors, and consumer advocates. We have also had the benefit of reviewing the submission prepared by the Small Investor Protection Association (SIPA) in order to arrive at our four specific recommendations. Within our submission, we make specific reference to the individuals or organizations that provided their perspectives.
Summary of FAIR Canada’s recommendations
(1) Create no- or low-cost service to assist investors. Improve dispute resolution and access to arbitration for investors by creating a no- or low-cost service that assists investors with organization and preparation of relevant paperwork and claim-related documentation. FAIR Canada suggests that: (a) the service be funded out of IIROC’s restricted funds and (b) investor rights groups across Canada be given the opportunity to provide the service.
(2) No cap on award limit, or minimum cap of $1 million. FAIR Canada recommends that: (a) there be no limit on the award that an arbitrator may make or (b) if a limit is deemed necessary, the limit be increased to a minimum of $1 million.
(3) Parties should each bear their own costs, with no discretion for cost awards. FAIR Canada recommends that a rule under the IIROC Arbitration Program be put in place: (a) requiring that each party bear its own costs, and (b) removing the discretion that arbitrators currently have to make cost awards, except in cases where a dealer has acted in an abusive or unfair manner.
(4) Improve transparency of arbitration process. IIROC should publish (on a no-names basis) a summary of each arbitration case, including the decision and award amount. This would improve the visibility of the IIROC Arbitration Program, assist investors in better assessing their claim, and assist individuals in understanding whether arbitration is a preferable route for their case.
Click here to read full submission to IIROC.
[1] Final Report and Recommendations of the Expert Panel on Securities Regulation at page 34.
