Take your disputes to the Ombudsman.
That’s the simple take on CSA’s proposed amendments to National Instrument 31-103 that would require more securities market participants to put dispute resolutions through the Ombudsman for Banking Services and Investments.
IIROC and MFDA rules already require participation in OBSI for resolution of client disputes. The change (which doesn’t apply to firms in Quebec) would capture portfolio managers, exempt market dealers, and scholarship plan dealers under the Ombudsman’s umbrella.
Many such firms already participate voluntarily in OBSI, but the rule change would roughly double membership from the current 600.
Complaints can only go through OBSI if they are raised within six years of the client becoming aware of a problem, and require compensation below $350,000 (OBSI is not authorized to award higher sums).
Firms that don’t yet participate in OBSI have the option to refer disputes to arbitrators, many of which charge for their services. CSA says the change would erase perceptions of profit motive when resolution services are recommended. Further, the regulator notes, sending all firms through OBSI would provide uniformity to how disputes are resolved in the Canadian financial services marketplace.
CSA’s move is not without precedent. Clients of brokerage and advisory services in the U.S. sign forms at account opening whereby they agree to take complaints to arbitration.
Those arbitrations, performed for the most part via FINRA, the Nasdaq and NYSE self-regulatory body, give clients and firms the advantage of resolving disputes outside the court system and allow for appointment of arbitrators who have experience in the securities industry.
That structure is said to speed dispute resolution, free up courts to deal with other matters, and ensure frivolous complaints do not result in massive jury awards.
The difference, though, is that the U.S. Securities and Exchange Commission has its own adjudicatory powers and can serve as a secondary court of review for matters that are not resolvable through arbitration, or which require criminal penalties.