It’s been more than two years since an independent review of the investment sector’s dispute-resolution service recommended sweeping changes. In the autumn of 2011, the Navigator Co. of Australia submitted a report on its review of the Ombudsman for Banking Services and Investments (OBSI), which warned that the organization was in need of fundamental reform. The review found that OBSI was facing increasing resistance within the sector to its work as an independent arbiter of client complaints. The review also found that the criticism OBSI was getting was unfounded.

The Navigator report suggested that the active intervention of regulators and broad reforms were necessary to act as a “circuit breaker” to the growing opposition. Indeed, the report said, this sort of intervention is “well and truly overdue.”

Since then, regulators have largely ignored the report’s recommendations. And, as predicted, OBSI’s position has deteriorated. In the past two years, one of the big Canadian banks has withdrawn from the service (leaving OBSI with just three of the Big Five). More disturbing, OBSI has had six investment firms refuse the service’s recommendations for compensation, after having only one refusal in the previous 10 years.

In response to changes to banking legislation, OBSI proposed amendments earlier this year to its terms of reference that would reduce its powers to investigate systemic issues, which would weaken it further. The Ontario Securities Commission’s Investor Advisory Panel has called these proposals “unacceptable and a major blow to investor protection.”

The Navigator report noted that there was no substantive basis for the investment sector’s criticism of OBSI’s investment complaints methodology. The report suggested that the unjustified criticism is not being balanced by consumer-sensitive governments or authoritative regulators.

Regulators clearly have failed OBSI — and investors. Surely, there’s a leader within the sector with enough strategic perspective and vision to see the inherent value in ensuring that investors can turn to a credible, cost-effective dispute-resolution service. A business that rises and falls on the trust and confidence of its clients demands it.