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If an investor believes he has suffered a financial loss as a result of someone else’s wrongdoing but can’t afford a lawyer, where should he turn?

This is not a riddle.

It is, however, a question that has gone largely unanswered in the financial industry. Of course, investors can turn to regulators and industry ombudsmen — but the failure of those organizations to provide adequate investor redress is a recurrent issue. (Note that investors in Quebec have more options via the AMF than those in other provinces, and that the MFDA offers an investor protection corporation for all provinces except Quebec.)

Read: 

Regulators are working on a solution. In a May compliance roundup, we highlighted how the OSC’s proposed 2017-2018 priorities mentioned its intention to empower the Ombudsman for Banking Services and Investments (OBSI) so it could “secure redress for investors.” That aligns with one of 19 recommendations made by an independent evaluator of OBSI in 2016.

Read: OSC to publish embedded commissions policy options in 2017

When the OSC’s priorities were published in July, after a comment period in which 21 letters were received, the regulator again reiterated the importance of this move.

“There was strong support for our priority to strengthen the powers and support for the [OBSI],” said the OSC. “A number of commenters suggested that more should be done (e.g., establishment of a Restitution Fund) to provide restitution to investors when they have suffered losses due to breaches of securities laws.”

While the OSC considers next steps, there’s a new, lesser-known option for investors.

The Investor Protection Clinic at Osgoode Hall Law School, York University, offers free legal advice — investors can reach out directly and, as the university says on its website, the clinic will also receive referrals from the government, regulators and law firms.

The clinic says, “Canadian investors have not had a place to go for free legal advice.” It adds it fills “this void.”

The clinic officially opened this month. It’s funded by the Law Foundation of Ontario, has a partnership with FAIR Canada, and is staffed by Osgoode Hall Law School students who work on cases with supervising lawyers from law firms in Ontario. Clients are chosen on a case-by-case basis, after they complete four steps, and the clinic partly bases its decisions on people’s “income, assets, net worth and the nature of the concerns.”

Poonam Puri, professor of law at Osgoode Hall Law School, says it’s important that the clinic focus on those who can’t financially help themselves. She adds, “We also look at the nature of the concern to figure out whether and how we can assist.” 

Investors won’t receive support if they’re dealing “with losses that occurred as a result of market forces and risks inherent in investing,” the clinic notes on its website. But help can be offered if it appears advisors have misrepresented risk, charged unexplained fees or signed forms on a client’s behalf, for example. The clinic can write a complaint letter on an investor’s behalf to a company or regulator, and may even represent investors at hearings — Puri says, “The services that are eventually rendered will be based on the facts of the case and the clients’ circumstances.” 

When agreeing to work with the clinic, clients are aware that they will be “responsible for the payment of the other party’s legal fees should they lose at trial or any adverse cost award against the client,” says Marian Passmore, director of policy and COO of FAIR Canada. “The client also is responsible for any filing fees that are payable to the court.”

The clinic isn’t the perfect — or final — investor-restitution solution. But its creation does show that where regulators are responding slowly, objective third-parties are willing to back investors until a permanent fix is found.

For more on investor protection, read:

Why FCAC and IIROC have signed a MOU

How to approach conflict of interest transactions: CSA notice

Advisor or adviser? It’s not that simple

Forgery “widespread” in investment industry: SIPA and MFDA cracking down on supervision failure, falsifications: CSA review

Katie Keir is Content Editor of Advisor Group. Email her at Katie.Keir@tc.tc.
Originally published on Advisor.ca
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VSiva

Investor protection clinic is a positive step and be strengthen to help investors. Those unsatisfied with ombudsman decision must be able to appeal to an independent body over Ombudsman or take a legal action.
Many Cdn financial systems are outdated, not provide required info online in the home page, not issue proper tax forms, not provide proper account, tax and performance reporting, no customized annual compound rates of return for 1, 3, 5, 10 and since inception, no margin requirements and consolidated position in one screen, not provide statements on daily MV, margin, etc for a specific period but charge high fees. It was in media recently that banks overcharged clients’ accounts that are solid evidences of serious lapses and wrongdoing in the financial services industry; CRA and IRS must enforce companies to issue tax forms and detailed (Gain/Loss) statements in required formats and electronically to Revenue agencies. CBC GoPublic is a great program to bring public awareness!

Wednesday, Sep 27, 2017 at 9:37 am Reply

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