The Ombudsman for Banking Services and Investments has released the letter it received from securities regulators promising to consider reforms to the service, and pushing for the resolution of a series of outstanding complaints.

On Friday, OBSI released the letter it received from the Canadian Securities Administrators, the Investment Industry Regulatory Organization of Canada, and the Mutual Fund Dealers Association of Canada at the end of October, which pushes the industry and OBSI to resolve “a small number of complaints considered to be ‘stuck’,” where firms are refusing to abide by OBSI decisions and compensate investors.

Following the regulators’ directions, OBSI says it will be identifying a method of finalizing these cases by the end of the 2011. “This method will be an independent assessment of the files in question by a credible and experienced outside party, based on standards consistent with OBSI’s terms of reference.” It also says that there will be discussions over the coming weeks with the affected firms and the regulators as they attempt to resolve the outstanding complaints.

Regulators reviewing independent review of OBSI

In response to the report from the Navigator Company, which was published back in September, recommending sweeping changes to OBSI in order to shore up the service, the letter also indicates that the CSA, IIROC and the MFDA are reviewing the report’s recommendations, and that regulatory changes may result.

The letter says the regulators intend to work with OBSI and its stakeholders “to promote ways to improve and enhance the current system so that investors have the best complaints handling system available”, which may lead to regulatory rule and policy changes. It doesn’t reveal whether they support the Navigator report’s specific recommendations.

OBSI bylaw change ensures continued funding

In the wake of TD Bank’s withdrawal from OBSI, the service has also changed its bylaws to ensure that if other banks leave they will have to continue funding the service.

OBSI board responds to TD withdrawal

OBSI reports that, earlier this year, it undertook consultations with the industry on a proposed change to its bylaws that would have established a notice provision for firms withdrawing from OBSI, which would have meant any firm leaving OBSI would continue to be responsible for their share of the budget for a number of months. It was concerned that when a firm withdraws, as Royal Bank did in 2008, the remaining firms are left to face higher costs; and the financial pressure on OBSI increases too. When RBC withdrew, OBSI chose to deplete its operating reserve to help offset some of the burden.

During the consultations, OBSI heard from the industry that more time was needed to study the proposed bylaw, and a decision was deferred to its December board meeting. However, on Oct. 26, TD Bank announced that it is withdrawing from OBSI for banking complaints, effective Nov. 1. In response, OBSI’s board met on Oct. 26, and an additional board meeting and special meeting of its voting members was held on Oct. 27, resulting in the approval of a bylaw change to address these sorts of financial risks. The change received approval from the Minister of Industry on Oct. 28.

“With the bylaw’s passage, TD has volunteered to abide by its provisions,” OBSI reports, and, “Firms can no longer walk away from OBSI without any regard for meeting their financial responsibilities: to OBSI, to their fellow participating firms, and most importantly, to all those individual consumers who have brought their complaints to OBSI seeking a fair resolution.”