The rejection by many financial services firms of investor compensation recommendations handed down by the Toronto-based Ombudsman for Banking Services and Investments (OBSI) is hurting the financial services industry, according to Susan Wolburgh Jenah, president and CEO of the Toronto-based Investment Industry Regulatory Organization of Canada (IIROC).
“This recent line in public refusals by certain firms [to follow OBSI recommendations] negatively impacts public confidence in the financial services industry as a whole,” said Wolburgh Jenah, who spoke at the Canadian Institute of Financial Planners (CIFPs) annual conference in Halifax on Monday.
IIROC-regulated firms are required to participate in OBSI’s complaint resolution system, according to Wolburgh Jenah. However, firms are not obligated to follow recommendations put forward by the ombudsman.
Yet for most of OBSI’s history IIROC and firms regulated through the Toronto-based Mutual Fund Dealers Association of Canada (MFDA) have followed those recommendations. “Until recently, there had been only one case of an MFDA member firm that had refused an OBSI recommendation,” said Wolburgh Jenah, “and that was the case for the first 14 years of [OBSI’s] existence and operation.”
However, within the last two years roughly 15 firms have refused to follow OBSI’s recommendation in regards to compensation. As such, Wolburgh Jenah says IIROC has been working with OBSI and member firms, most recently at a forum held two weeks ago, to discuss recent changes at the dispute resolution service, such as process changes and a new oversight framework. These sessions are meant to ensure OBSI remains a dispute resolution resource investors can trust; and this would help bolster investor confidence in the financial services industry more generally.
“We believe an acceptable, timely, independent and fair dispute resolution system in which investors in the industry have [placed] their trust is critically important,” said Wolburgh Jenah, “and that’s why we organized the forum and will continue to work with the industry to ensure the benefits of the system we have are not undermined.”