FAIR Canada believes that a single, national ombudservice for investment complaints is vital to the integrity of the Canadian financial services marketplace and investor protection.  FAIR Canada supports continued mandatory OBSI participation for IIROC and MFDA member firms.  FAIR Canada supports the loss methodology used by OBSI, which is described in its Consultation Paper dated May 26, 2011.  OBSI’s guiding principle is to determine a reasonable estimate of the financial position the investor would be in had the unsuitable investment advice not been given and acted upon.  OBSI’s approach to determining suitability and calculating investor losses is entirely appropriate and comparable to other jurisdictions.

To see FAIR Canada’s submission, please click here.

FAIR Canada is disappointed with the industry’s response to OBSI’s request for comments on its Consultation Paper. Submissions by members of the financial industry and industry organizations demonstrate that the industry continues to oppose the idea of any ombudservice for financial consumers.  Alternatively, the financial industry spokepersons do not understand or accept the principles upon which an ombudsman is guided. FAIR Canada believes that if the industry persists in its lobby to effectively “kill” OBSI, the only alternative is a statutory ombudservice, which would have the ability to impose its decisions on firms and enforce them, if necessary.

See here for OBSI’s website providing links to all the submissions received by OBSI.

Financial Industry Turns Issues with OBSI into a Crisis

The submissions by the financial industry and its lobby organizations indicate that the financial industry has not moved from its position.  Any legitimate issues that the industry has with OBSI should have been resolved with goodwill through a process involving all stakeholders and moderated by securities regulators.

Instead the financial industry has transformed its issues with OBSI into a crisis.

1. Several major financial institutions have lobbied IIROC, MFDA and the CSA members to permit them to opt out of OBSI, knowing that their withdrawal from OBSI would effectively kill OBSI. (Kudos to the CSA, IIROC and MFDA for declining to grant exemptions to these firms.)
2. Several financial institutions have refused to accept OBSI’s recommendations in approximately fifteen cases, effectively undermining OBSI’s credability and making it more difficult for OBSI to do its job while any issues of concern to stakeholders are addressed.
3. Finally, while now professing to support OBSI (in light of the CSA’s refusal to grant an exemption) the financial industry’s written submissions insist on changes to OBSI that would effectively prevent it from acting as an ombuds service.

In response to this attack by the financial industry on OBSI, investors and investor advocates have turned to the regulators and government for support. SIPA has called on Canadians to write to Finance Minister Flaherty and to his provincial counterparts. No doubt the various Finance Ministers have received many emails and letters. For its part, FAIR Canada has written to the CSA and OSC.

The escalation of industry concerns about OBSI into a full blown public controversy was not necessary or constructive. It is time to defuse the crisis by resolving the existing outstanding cases with OBSI and for all stakeholders to come to the table with a genuine acceptance of the mandate and principles that guide OBSI and a spirit of goodwill to resolve differences.

The Public Interest Advocacy Centre, who also supports OBSI and its assessment of loss from unsuitable investments, views the public examination of OBSI’s practices as unseemly and wholly unnecessary. “Such considerations and questions could easily have been settled amongst the industry and OBSI within the governance structures of OBSI.  We view the present exercise as only a thinly disguised effort at industry bullying of an otherwise highly effective consumer protection ombudsman in an area that sorely needs it.  If the substantive goal of these complaints from industry about OBSI is abolition or crippling of the OBSI, we hereby signal to that industry our determination to fight such a result with the Minister of Finance.”