Pro-investor group calls for dialogue on ombudsman’s complaint-handling processes, low-balling, and CFRs' impact, among others
Following the Joint Regulators Committee (JRC) of the Ombudsman for Banking Services and Investments’ (OBSI) annual report published last month, one investor advocacy group is speaking out and calling for an opportunity to discuss its ongoing concerns.
“[W]e found the 2020-21 JRC Annual Report provided little information that would assist us in our advocacy work,” Kenmar Associates said in a missive addressed to the JRC-OBSI. “Kenmar would welcome an opportunity to meet with the JRC to discuss the many issues and challenges facing OBSI.”
Among a lengthy list of issues, Kenmar called NI 31-103 “embarrassingly light on client complaint-handling rules” relative to other jurisdictions. As one example, it noted how under the existing regime, a cycle time of 90 days for complaint handling is permitted by the self-regulatory organizations, compared to the 56 days required for banks in the U.K. and 45 days for those in Australia.
The Liberal federal government, Kenmar noted, plans to establish a new national external complaint body (ECB) with a 56-day standard. Under proposed rule amendments in Quebec, complainants would be able to access OBSI after 60 calendar days, which Kenmar observed would create a discrepancy with other provinces.
“We urge regulators to consider lowering cycle times to come closer to international standards,” the letter said. It also urged the JRC to have OBSI enhance its cycle time standards and disclosure, arguing that better disclosure will deter some complainants from being diverted towards internal ombudsmen at banks.
Kenmar also reiterated its call for OBSI to be granted binding authority, which it noted the Liberal government also plans to provide for its national ECB. “This issue has dragged on for over a decade,” Kenmar said. “It is time the CSA made a decision to hold investment dealers accountable for OBSI recommendations. … This should be the TOP priority for OBSI and the JRC.”
Low-balling was another crucial issue. Emphasizing their severe impact on aggrieved investors, Kenmar said OBSI should publicly disclose statistics on low-ball offers set out by firms to complainants. On a related note, it said the cap on OBSI compensation recommendations should be raised from its current level of $350,000, which has been in place since 2002; it cited the 2016 Battell Report’s recommendation to adjust the cap in line with inflation, as well as the Ontario Capital Markets Modernization Taskforce’s suggested $500,000 cap, which would also be adjusted appropriately over time.
The letter also asked for clarity on how the Client Focused Reforms (CFRs) would impact OBSI’s investigation processes, compensation recommendations, and loss-calculation methodology. “The higher CFR standards must surely impact OBSI processes and practices - all we are asking is that the impacts be publicly disclosed and implemented,” Kenmar said.
Some other issues and suggestions raised in the letter were:
- To establish a written disclosure policy to ensure key information is disclosed in a prominent and timely manner;
- To stop the OBSI Board’s practice of preventing public disclosure of the work done by the OBSI Consumer and Investor Advisory Council (CIAC), which feeds the perception of the CIAC being used “as an OBSI PR tool”;
- IIROC’s withdrawal of amendments that would have strengthened its relationship with IIROC by easing restrictions on complaint information that IIROC can receive from OBSI.
