Cases are up at OBSI, but client compensation is down

By James Langton | April 29, 2021 | Last updated on April 29, 2021
2 min read
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In a year marked by wild market gyrations and a shift to remote work for the financial sector, complaints to the Ombudsman for Banking Services and Investments (OBSI) soared, but the compensation ordered to clients declined.

In OBSI’s latest annual report, the industry dispute resolution service revealed that the volume of cases it faced in 2020 climbed significantly. OBSI reported that inquiries from the public surged by 28% last year and the number of open cases rose by 23% compared to 2019.

Investment firms still account for the majority of the open cases (459 versus 332 for banks in 2020), but the number of cases involving banks increased more quickly: banking complaints rose 31% year over year, while investment complaints were up 18%.

“A significant portion of this increase occurred in the latter half of the fiscal year, following the dramatic market events that took place earlier in the year and the ongoing volatility and pandemic response measures,” Sarah Bradley, Ombudsman and CEO of OBSI, said in a release. “In the later quarters of the year, case volumes reached levels we have not experienced since the 2008 financial crisis.”

Despite the rise in case volumes, the total compensation recommended to consumers and investors dropped to $1.7 million in 2020 from $2.7 million in 2019 (which was already down from $3.4 million in 2018).

All of this decline came on the investment side, as both the proportion of complaints that ended in compensation recommendations and the average size of those awards declined year over year.

In 2020, OBSI recommended compensation in 35% of investment cases, down from 47% the previous year. The average compensation recommendation fell to $9,250 from $14,291. Total compensation dropped to $1.2 million in 2020 from $2.5 million in 2019.

On the banking side, the picture was somewhat different. The share of banking complaints that resulted in compensation edged up to 29% in 2020 from 27% in 2019, and the average recommendation jumped to $5,875 from $2,425.

However, there was one large award in 2020 that skewed the overall numbers for the banking sector. The largest recommended payout last year was $300,000, which pushed total compensation on the banking side to over $500,000 for the year, compared with the previous year’s total of just $162,500. In 2019, the single highest recommendation was just $32,600.

In addition to the decline in compensation recommendations on the investment side, OBSI also saw two firms, both exempt market dealers, refuse compensation recommendations in 2020. No firms refused in 2019.

Looking ahead, OBSI said it expects complaint volumes to remain elevated in 2021: “Case volumes in Q1 remain high and we expect this trend to continue throughout the year.”

As a result, the non-profit organization is anticipating increased spending to deliver its services in the year ahead. OBSI has budgeted for expenditures to rise to $9.8 million this year from $8.5 million in 2020.

However, rather than raising fees on the industry, OBSI indicated it will tap its reserve fund to cover the expected shortfall (around $900,000) while keeping firms’ fees essentially unchanged.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.