Douglas Melville has his work cut out for him this autumn as the newly appointed ombudsman and CEO of the Toronto-based Ombudsman for Banking Services and Investments. With consumer complaints on the rise, the Canadian Securities Administrators’ registration reform on its way and the implementation of OBSI’s revised terms of reference, Melville certainly has his hands full.

“I think the registration reform, the [related] new rules out of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada, and the link to our terms of reference are going to lead us into a very busy year,” Melville says. “Plenty to keep us occupied, that’s for sure.”

The CSA’s registration reform rule, National Instrument 31-103: Registration Requirements, came into play at the end of September. The new rule brings a number of changes to proficiency requirements, compliance systems, referral arrangements and advisors’ ability to service clients in other provinces. Both the MFDA and IIROC are in the process of updating their rules to comply with the registration reform; at the same time, OBSI will begin implementation of its new terms of reference.

“We have committed with the industry that we would not go ahead with our revised terms of reference until those new rules landed from IIROC and the MFDA,” Melville says. “The intention was for us to synchronize implementation of our terms, which basically mirrors what is in those rules.”

OBSI’s new terms of reference will bring two notable changes: the agency will now be allowed to identify systemic issues, as well as adopt new complaint-handling procedures that are consistent with those that self-regulatory organizations in the investment dealer and mutual fund dealer channels are adopting.

Upon implementation of the new terms, OBSI will be allowed to investigate systemic issues that arise out of individual complaint files by contacting the firm involved and asking it to undertake an investigation. If a systemic issue is found, OBSI will offer to work with the firm to reach a fair resolution, which may include the firm compensating all affected clients and carrying out remediation. If there is disagreement between OBSI and the firm on the nature of problem — or the remedy — the file will be referred to the appropriate regulator for review.

The proposed change regarding systemic issues came about late last year and has since attracted a lot of attention in the industry as to whether OBSI would be allowed to take on the role of another regulator.

“In some ways, I liken us to a canary in the coal mine,” Melville says. “An individual complaining is not a systemic issue, but individual complaints can be indicators of potential systemic problems and bigger issues. I think that is where the regulators look to us as a potential partner in helping them effectively perform their function as part of the consumer protection framework.”

The other notable change — new complaint-handling procedures — will now give consumers the option of bringing their complaint to OBSI 90 days after they start the relevant firm’s internal complaints process. Previously, consumers had to wait until the firm’s internal process was complete before complaining to OBSI. This is consistent with the new complaint-handling rules from both IIROC and the MFDA, which are meant to streamline the process and ensure consumers are aware of their options.

The changes are nothing new for Melville, who joined OBSI in early 2006 as senior deputy ombudsman for banking services. Melville worked alongside David Agnew, former OBSI ombudsman and CEO. Melville led the team responsible for investigation and resolution of consumer complaints arising from Canada’s banking sector. He was also present when Royal Bank of Canada decided to pull OBSI from handling complaints in its banking services, a move that occurred just days after OBSI released its new terms of reference.

The latter item doesn’t worry Melville as he steps into his new role: “Let’s put it into context: RBC is one of more than 600 participating firms here, and it was only on the banking side of their mandate. We still work with RBC on all the investment complaints for all their investments subsidiaries.”

When asked if OBSI expects to be able to bring RBC back into the fold, Melville says the call on whether RBC wants to work with OBSI again is between the bank and the federal regulators in Ottawa, and, as such, is not for OBSI to resolve.

@page_break@“My job is to make sure that we offer a really effective service that provides resolution for its customers’ complaints,” Melville says. “If [RBC] made the choice to source it elsewhere, then that is between [the bank] and the regulators whether it is acceptable.”

Melville also formerly led the client services team that handles the intake of all OBSI complaints and inquiries. He says his biggest challenge last year was the huge growth in complaint volumes — particularly those centred on areas of payment frauds and scams, mortgages and collection issues. With complaints increasing by 67% between the first and second quarter, 2009 has definitely been a year of growth.

“We don’t know what the volumes are going to look like, in terms of complaints, but we’ve had a wild year. It was a combination of the economy hitting the banking side and the markets hitting the investment side,” Melville says. “It was a perfect storm this year, and we got hit simultaneously. And that generated huge increases.”

To ensure the increased number of complaints are handled in a timely manner, OBSI has been expanding its workforce, with additional recruiting and training efforts.

“Staffing and training will be the challenge for the coming year,” Melville says. “We’ve had to add capacity midyear, and it takes time to bring people up to speed as effective investigators. Not a lot of people do exactly what we do, so there is a learning curve — and that has implications for our ability to respond quickly to changes like this. I think we have done a remarkable job of keeping up with things, but it has been a sprint. And during a time of leadership transition and a move in offices, it’s definitely been a busy summer.”

It doesn’t look like things are going to slow down for the year ahead, with OBSI projecting a 50% year-over-year increase in case files that will be coming in. As well, Melville is in the process of hiring a replacement for his former position.

Prior to joining OBSI, Melville had held several senior positions in the financial services industry. A lawyer by training, he has more than 16 years of industry experience in a wide variety of institutions and roles spanning the banking and mutual fund businesses, insurance compliance, corporate finance and international banking.

However, it wasn’t always the financial services industry that piqued Melville’s interest. While still completing his undergraduate degree in the mid-1980s, he became a student intern at the Canadian International Development Agency at the same time an African famine broke out. This led to his early career as a foreign-aid worker, during which he spent time in both Africa and the Middle East. “I had a real passion for that work, and a lot of it was policy-related,” he says. “So, in that sense, I see that parallels to what I am doing today.

Although Melville changed his career path when he decided to start a family, he says the time he spent as a foreign-aid worker is an experience that will always stay with him. In fact, in addition to the charitable organizations that Melville works with, he continues to travel abroad on volunteer missions to South Asia, Latin America and East Africa with various agencies, supporting disaster and post-conflict reconstruction, financial co-operatives and community-based partner organizations.

Melville says he plans to take his wife and four children to South Africa on his next trip.

When Melville is at home, he enjoys playing hockey in a recreational league every Wednesday night: “For 50 minutes each week, all the complexities of my day are temporarily forgotten in a flurry of middle-aged fun with other folks in similar circumstances.” IE

— With files from James Langton