A dispute between the industry and regulators has the OSC at odds with its own investment advisory panel.
By Jeff Sanford
The Ontario Securities Commission's and its independent investor advisory panel seem to be at odds over the issue of advisor compensation to wronged clients.
The OSC’s Investor Advisory Panel, this week, sent a letter to OSC chair Howard Wetston commenting on the lack of powers at the body that oversees compensation paid from advisors firms to clients in the case of negligence.
Recently, the Ombudsman for Banking Services and Investments (OBSI) adopted rule changes that require registered firms to belong to the OBSI. The new OBSI regulation would see an ombudsman resolve disputes and firms incented to pay compensation to wronged clients. August 1 Over 1,600 firms are about to become part of the oversight regime. But the OSC elected to not give OBSI the power to compel firms to award compensation to their clients. Instead clients can only rely on the cooperation and goodwill of the firms to comply with the Ombudsman's recommendations, a so-called “name and shame” regulatory regime.
The rules have been controversial. Those in the industry argue the regulations would handcuff portfolio managers. On the other hand, recent reports in the financial media have focussed on cases of seeming negligence by advisors that have left clients without compensation as firms. The financial media has also been documenting cases in which firms have elected not to comply with the regulations. As well, a recent consultant’s report found that naming and shaming wasn't working. According to Navigent: “Between 2007 and 2011 there was "significant deterioration of goodwill from member firms".
The letter from the investment advisor panel takes the dispute to the next level: "We call on the Ontario Securities Commission to act now to ensure Ontario investors have access to independent, timely and binding compensation services," write the authors.
The Ontario Securities Commission's and its independent investor advisory panel seem to be at odds over the issue of advisor compensation to wronged clients.
The OSC’s Investor Advisory Panel, this week, sent a letter to OSC chair Howard Wetston commenting on the lack of powers at the body that oversees compensation paid from advisors firms to clients in the case of negligence.
Recently, the Ombudsman for Banking Services and Investments (OBSI) adopted rule changes that require registered firms to belong to the OBSI. The new OBSI regulation would see an ombudsman resolve disputes and firms incented to pay compensation to wronged clients. August 1 Over 1,600 firms are about to become part of the oversight regime. But the OSC elected to not give OBSI the power to compel firms to award compensation to their clients. Instead clients can only rely on the cooperation and goodwill of the firms to comply with the Ombudsman's recommendations, a so-called “name and shame” regulatory regime.
The rules have been controversial. Those in the industry argue the regulations would handcuff portfolio managers. On the other hand, recent reports in the financial media have focussed on cases of seeming negligence by advisors that have left clients without compensation as firms. The financial media has also been documenting cases in which firms have elected not to comply with the regulations. As well, a recent consultant’s report found that naming and shaming wasn't working. According to Navigent: “Between 2007 and 2011 there was "significant deterioration of goodwill from member firms".
The letter from the investment advisor panel takes the dispute to the next level: "We call on the Ontario Securities Commission to act now to ensure Ontario investors have access to independent, timely and binding compensation services," write the authors.
