Gaps in a set of guidelines from one regulator expose investors to abuses
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An investor advocacy group has highlighted gaps in a set of guidelines set out by IIROC, and wants the CSA to step in.
“We are writing you today to seek your support for changes to three specific sections of the IIROC Complaint Handling Rule 2500B that call out for immediate investor protection,” said Ken Kivenko, president of Kenmar Associates, in a letter to the CSA.
The first concern involved a requirement for dealer members to respond to client complaints within 90 days. According to the IIROC rule, internal ombudsman processes offered by an affiliate of the firm receiving the complaint should not be counted as part of the 90-day period.
Kivenko said that internal ombudsman processes could be used to drag complaint resolution processes out for more than 90 days. Effectively, investors who are not satisfied with the response they ultimately receive from the dealer could be delayed from taking their case to the Ombudsman for Banking Services and Investments (OBSI), through civil litigation, or to IIROC for binding arbitration. Therefore, he said, the exemption should be removed.
The rule on complaint handling also calls for a balanced approach that “objectively considers the interests of the complainant, the dealer member … and/or any other relevant parties.” Kivenko argued that following a “balanced interests” standard risks short-changing complainants, and complaints should be decided based on facts undertaken. He also noted IIROC’s often-stated position that conflicts of interest should be resolved in favour of clients.
Finally, when the severity or frequency of complaints received by a dealer suggests a systemic problem, Rule 2500B requires the dealer to review its internal procedures and practices. It also requires that suggested solutions be submitted to the appropriate management level.
However, Kivenko pointed out, the rule doesn’t require any form of external transparency, affirmative action, or redress. He noted that the OBSI no longer handles investigations on systemic issues. Therefore, there should be clear requirements for firms to alert regulators and potentially affected investors when it suspects or confirms a systemic problem.
“We would welcome a direction by the CSA to the IIROC to undertake a comprehensive review and revision of its complaint handling rule,” Kivenko said, adding that a review should also be done for the MFDA. “Absent this type of comprehensive response, we ask the CSA to require IIROC to take prompt and effective action to address the three most critical flaws identified in this letter.”
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“We are writing you today to seek your support for changes to three specific sections of the IIROC Complaint Handling Rule 2500B that call out for immediate investor protection,” said Ken Kivenko, president of Kenmar Associates, in a letter to the CSA.
The first concern involved a requirement for dealer members to respond to client complaints within 90 days. According to the IIROC rule, internal ombudsman processes offered by an affiliate of the firm receiving the complaint should not be counted as part of the 90-day period.
Kivenko said that internal ombudsman processes could be used to drag complaint resolution processes out for more than 90 days. Effectively, investors who are not satisfied with the response they ultimately receive from the dealer could be delayed from taking their case to the Ombudsman for Banking Services and Investments (OBSI), through civil litigation, or to IIROC for binding arbitration. Therefore, he said, the exemption should be removed.
The rule on complaint handling also calls for a balanced approach that “objectively considers the interests of the complainant, the dealer member … and/or any other relevant parties.” Kivenko argued that following a “balanced interests” standard risks short-changing complainants, and complaints should be decided based on facts undertaken. He also noted IIROC’s often-stated position that conflicts of interest should be resolved in favour of clients.
Finally, when the severity or frequency of complaints received by a dealer suggests a systemic problem, Rule 2500B requires the dealer to review its internal procedures and practices. It also requires that suggested solutions be submitted to the appropriate management level.
However, Kivenko pointed out, the rule doesn’t require any form of external transparency, affirmative action, or redress. He noted that the OBSI no longer handles investigations on systemic issues. Therefore, there should be clear requirements for firms to alert regulators and potentially affected investors when it suspects or confirms a systemic problem.
“We would welcome a direction by the CSA to the IIROC to undertake a comprehensive review and revision of its complaint handling rule,” Kivenko said, adding that a review should also be done for the MFDA. “Absent this type of comprehensive response, we ask the CSA to require IIROC to take prompt and effective action to address the three most critical flaws identified in this letter.”
Related stories:
CSA, OSC grilled on embedded commissions
Financial complaints on the rise: OBSI
