OBSI Board welcomes Ontario Capital Markets Modernization Taskforce proposals to strengthen ombudsman’s ability to help investors
Toronto, July 10, 2020 – OBSI’s Board of Directors welcomes the proposal of Ontario's Capital Markets Modernization Taskforce to give OBSI the power to require investment firms to pay fair compensation to harmed investors when warranted, and increase the limit on OBSI’s compensation recommendations.
We appreciate that multiple investor interest organizations including the Canadian Association for Retired Persons (CARP), The Foundation for the Advancement of Investor Rights (FAIR Canada), and the Ontario Securities Commission’s Investor Advisory Panel all supported strengthening OBSI’s powers to ensure redress for investors in their presentations to the Taskforce leading up to the publication of this consultation report.
Multiple independent expert reviews of OBSI have recommended that as a financial ombudsman service, we be given greater authority to secure redress for harmed consumers. Since the publication of our most recent external review in 2016, OBSI has worked closely with securities regulators and key stakeholders to find a more effective alternative to our current process of publicly identifying the firms that refuse to pay our recommendations, a practice often referred to as ‘name and shame.’
While the publication of a firm’s refusal may serve to ‘shame’ the firm involved, the result is typically that the consumer receives nothing. Therefore, a concerning consequence of this system is the emerging trend of low settlement offers in investment cases – these are settlements that occur when firms counteroffer OBSI’s recommended compensation amount with a much lower offer. OBSI’s inability to compel firms to pay compensation in these cases leaves investors that have suffered financial harm with no reasonable alternative but to accept a firm’s low offer.
Although low settlements occur in a relatively small percentage of our overall cases, such settlements are unfortunately common for larger recommendations – especially those above $40,000. Such low settlements can be devastating to impacted consumers and are, in part, a consequence of OBSI’s inability to compel firms to pay the amounts we recommend.
OBSI’s Board has been and continues to be supportive of establishing an alternative mechanism that would allow us to more effectively secure compensation for consumers when compensation is fair in all the circumstances of the case, and avoid the possibility of low settlement outcomes. This will serve to improve access to justice for Canadian investors and to support their confidence in Canada’s capital markets.
While the Board has been disappointed with the lack of progress on this issue in recent years, we are hopeful that this Taskforce proposal, in conjunction with the Canadian Securities Administrators’ recently renewed commitment to strengthening OBSI, will lead to an effective and fair solution for investors and industry participants and we are committed to working with regulators and other interested stakeholders towards that goal.
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Canada’s Ombudsman for Banking Services and Investments (OBSI) is a national, independent and not-for-profit organization that helps resolve and reduce disputes between consumers and financial services firms in both official languages. OBSI is responsive to consumer inquiries, conducts fair and accessible investigations of unresolved disputes, and shares its knowledge and expertise with the stakeholders and the public. If a consumer has a complaint against an OBSI participating bank or investment firm that they are not able to resolve with the bank or firm, OBSI will investigate at no cost to the consumer. Where a complaint has merit, OBSI may recommend compensation up to a maximum of $350,000.
For more information, contact:
Mark Wright, Director, Communications and Stakeholder Relations
416-287-2877 ext.2225
mwright@obsi.ca