While the Canadian Securities Administrators (CSA) get credit for proposing to strengthen the investment industry’s dispute resolution system, the effort won’t matter until the reforms are finalized and adopted across the country.

More than 10 years have passed since investment firms realized they could simply walk away from compensation recommendations handed down by the Ombudsman for Banking Services and Investments (OBSI) with no real consequences, leaving harmed investors high and dry. The organization’s “name and shame” powers don’t carry much weight when you have no shame.

A bigger problem followed when investors realized firms were willing to ignore OBSI’s recommendations and began accepting lowball settlement offers that were marginally better than getting nothing or going to court.

Worse, data from the CSA showed that OBSI’s largest compensation recommendations — the recommended redress for investors who suffered the greatest financial harm — are the most likely to result in lowball settlements.

Independent reviews have repeatedly called for regulators to allow OBSI to enforce its recommendations. The CSA took far longer than it should have to put forth what looks to be a solid model.

However, the proposal is sure to face pushback from segments of the industry interested in maintaining a system that shelters them from the consequences of their actions.

Inertia and the complexity of Canada’s regulatory landscape also stand in the way. Not only must the CSA’s often fractious members reach consensus on the rule changes, but all provincial governments must get on board and provide the legislative changes. History has proven this is tricky, even when the policy goal is relatively uncontroversial.

In short, while the CSA’s proposal is a good first step, that’s all it is. There’s still a lot of work to be done to get a beefed-up OBSI across the finish line. Investors should withhold their celebrations until then.

This article appears in the December issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.