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Securities regulators propose bank ombudsman resolve disputes

Canada’s securities regulators are looking to change the way they handle consumer complaints involving investment dealers, proposing to use the national bank ombudsman to settle disputes over investments and financial advice.

The Canadian Securities Administrators (CSA) issued a proposal Thursday to use the Ombudsman for Banking Services and Investments (OBSI) to mediate those complaints. The CSA represents provincial securities regulators across Canada, but Quebec has its own dispute resolution system in place so is excluded from the proposal.

The bank ombudsman already handles dispute resolution for about 600 investment dealers who are part of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.

However, there are more than 500 advisers and dealers in Canada, such as portfolio managers, who are not part of those organizations. This change would include them in OBSI’s dispute-resolution service, which attempts to independently resolve consumer complaints between the industry and clients over investments.

The move, if accepted, will establish “a level playing field in terms of expectations and costs, and will provide investors with a common, independent and consistent service standard,” said Bill Rice, chair of the CSA and head of the Alberta Securities Commission.

Industry comment on the proposal is due by Feb. 15. If adopted, OBSI would handle complaints raised “within six years of the date when the client knew or reasonably ought to have known of the trading or advising activity” in question, the CSA said. Claims are allowed up to $350,000.

The move is a vote of confidence for the bank ombudsman, which has seen its role significantly undermined in the past few years.

While Canada’s major banks must use OBSI to oversee complaints about their investment dealer arms, the banks can choose their own dispute resolution firm for retail banking issues that can’t be resolved directly with the financial institutions themselves.

This has led Canada’s two largest consumer banks, Royal Bank of Canada and Toronto-Dominion Bank, to pull out of OBSI after disagreements over costs and delays associated with resolving cases. Those banks have chosen to go with a Toronto mediation firm for consumer complaints.

As well, OBSI recently moved to start “naming and shaming” investment dealers who don’t respect its decisions on cases where a client has been awarded a financial reward. The new policy is designed to compel investment dealers to follow the ombudsman’s rulings on cases, after several firms were ignoring such decisions.

OBSI has only named one company under the new policy, singling out Toronto-based Octagon Capital Corp. last week for refusing to compensate a client following a dispute over investments. OBSI said the firm has refused to pay $181,339 to a client, after being found to have mismanaged her investments. Octagon would not comment on the matter.

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