Canada’s securities regulators propose binding regime for investor complaints

By Karunjit Singh

Law360 Canada (November 30, 2023, 4:35 PM EST) -- The council of the securities regulators of Canada’s provinces and territories has introduced a proposed regulatory framework for an independent dispute resolution service with the authority to issue binding final decisions regarding client complaints against registered firms, including investment dealers and advisers, according to a release.

“The Canadian Securities Administrators (CSA) is seeking comments on the proposed changes to the system of redress available to Canadian investors when they have a dispute with their investment firm,” said CSA chair and CEO of the Alberta Securities Commission, Stan Magidson.

Under the proposed framework, it is expected that the Ombudsman for Banking Services and Investments (OBSI) will be the designated independent dispute resolution service for the investment industry, according to the release.

The CSA’s notice and request for comment highlighted that while most retail clients’ complaints in the country are resolved by firms, the CSA has observed historic refusals to pay complainants and patterns of disputes being settled for amounts lower than OBSI recommendations.

Currently, while all registered dealers and advisers outside Quebec are required to take reasonable steps to make OBSI available to their clients as a dispute resolution service, the OBSI cannot issue binding decisions.

“This can have significant impacts on complainants and may discourage others from taking their case to OBSI. Making OBSI recommendations binding could improve investor protection and promote increased fairness for retail clients,” the CSA noted.

The council added that a number of financial ombudservices that may be considered OBSI’s international peers, have the authority to issue binding decisions.

The CSA further noted that the implementation of a binding investment ombudservice regime in Canada would improve confidence in markets and provide retail clients who are dissatisfied with their firm’s response complaints a fully effective system of redress that is final, fair and accessible.

Stakeholders have been invited to provide their comments on the proposed framework comments in writing on or before Feb. 28, 2024.

The British Columbia Securities Commission is not participating in the proposal for comment on the rule amendments as it is considering legislative changes that may achieve the same outcomes as those intended by the proposed framework.

Additionally, the securities regulator for Quebec, Autorité des marchés financiers (AMF), is participating in the CSA consultation by proposing to maintain the exemption applicable to firms registered in Quebec regarding dispute resolution services requirements.

The AMF already provides a dispute resolution service, along with conciliation and mediation services, to consumers of financial products and services, including retail investors, under its governing legislation.

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