Current practice involving handling of mixed portfolios called out as 'improper, unprofessional and unfair'
A vocal investor-rights advocate has filed a complaint against the Ombudsman for Banking Services and Investments (OBSI) over its practice of splitting advice complaints that involve segregated funds.
“The complaint centers around OBSI’s practice of splitting advice complaints involving an investment portfolio that contains an insurance product, a segregated fund,” Ken Kivenko, president of Kenmar Associates, said in a letter to the Canadian Securities Administrators Joint Regulator Committee, which oversees OBSI.
In his complaint, Kivenko explained that in cases concerning mixed portfolios — those that contain both securities and segregated funds — OBSI splits the portfolio into two parts, and refers the portion involving the segregated fund to the OmbudService for Life and Health Insurance (OLHI).
“Our attempts to work with OBSI to resolve this issue have failed,” he said. “It is our firm conviction that this is improper, unprofessional, unfair and to the detriment of complainants.”
Citing the OBSI Terms of Reference, Kivenko noted the ombudsman’s obligation to take into account general principles of good financial services and business practice, law, regulatory policies and guidance, professional body standards, and any relevant code of practice or conduct applicable to the subject matter of a complaint.
“Splitting a portfolio for a complaint investigation is contrary to sound portfolio theory and incongruent with the way the portfolio was designed to operate,” he emphasised.
He maintained that OBSI’s oversight mandate covers firms that offer and provide wealth management services including portfolio construction, which may include investment products that are not securities.
Kivenko added that aside from eschewing a joint investigative approach between OLHI and OBSI, as recommended by the landmark 2016 Battell report, the practice of complaint splitting adds complexity and inconvenience to the resolution of a case.
“Splitting of a complaint is conduct unbecoming of an entity that refers to itself as an authentic ombudsman,” Kivenko said. “[It] is clearly not in the public interest … We are therefore asking the JRC to make a determination and compel OBSI to correct its complaint handling practice so that it is fair to complainants or to cease investigating complaints involving insurance products.”
