The missive addressed to OSC chair Howard Wetston bemoans OBSI’s lack of enforcement powers.
“[OSC, IIROC and MFDA] elected to not give OBSI the power to compel firms to award compensation to their clients, preferring instead to rely on the voluntary cooperation and goodwill of the firms to comply with the Ombudsman’s recommendations. Sadly for investors, this reliance appears increasingly misplaced as more and more firms are refusing to accept the Ombudsman’s recommendations.”
“Ontario investors deserve better,” the panel continues. “They rightly expect their regulators to not stand by passively as the system that they put in place falters in the face of firm non-compliance. It is long past time for the Ontario Securities Commission to address the flawed nature of the only restitution system they have made available to Ontario investors.”
The letter concludes with a call to grant OBSI binding power, which would allow the ombudsman to force firms to pay investors compensation.
Marsha Gerhart, a securities lawyer at Borden Ladner Gervais in Toronto, urges caution.
“Enforcement powers are very precious; they have to be given out very carefully and under statute.”
Though OBSI lacks binding power, investors still have other options, such as taking their cases to a provincial commission or the courts. This means legal fees, but the courts have discretion to award costs, she notes.
“From a practical, business perspective, most firms will try to resolve a complaint themselves before it even gets to OBSI. If it does get to OBSI, and if it’s a reasonable complaint they will likely settle. But they have the right not to accept OBSI’s recommendation” if they disagree with the ombudsman’s assessment.
Gerhart adds that there will always be fallacious complaints, and firms that fall short in the goodwill department.
“But the majority of firms will settle if they determine they made a mistake.”