The public comment period on the proposed changes to the Ombudsman for Banking Services and Investments (OBSI) mandate closed Friday and there is clearly concern in the industry.

The main point of contention is the proposals around investigating “systemic issues.” This section of the proposal would allow OBSI to identify, investigate and recommend compensation in situations where the original complaint led to discovery of loss or inconvenience for others.

Last week, the Investment Funds Institute of Canada (IFIC) released its response to the OBSI proposal. IFIC is opposed to OBSI asking firms to provide information for investigations of systemic issues. It says the powers proposed in this area “duplicate, and even exceed, regulatory mandates,” and as OBSI is not held to the same standards of due process as a statutory body, it should not have such powers, according to the Institute’s comments.

“We can’t require compensation. We recommend compensation,” insisted David Agnew, Ombudsman at OBSI, Friday at a panel discussion in Toronto. Although he conceded that many might feel that an OBSI suggestion essentially amounts to a requirement.

“Our authority stems all the way to ‘name and shame,’” said Agnew. “If a recommendation is refused, we publish that fact. That’s our penalty. It’s not fines, it’s not pulling of licenses. We are not a regulator.”

But the industry is skeptical. OBSI received a number of comments on the proposed mandate changes, along with the extensive IFIC response.

“We do not support the proposal that OBSI undertake systemic investigations,” wrote the Canadian Bankers Association. It notes that there are privacy and waiver issues that differ when a single complaint becomes a class-action complaint. “We are concerned that the changes to the Terms of Reference go beyond the intention of the Joint Forum and the role that would be appropriate for OBSI.”

The Joint Forum produced a report called “A Framework for Collaboration” last summer, which outlines a collaborative approach to complaint resolution.

Representatives from the Investment Dealers Association (IDA) and the Mutual Fund Dealers Association (MFDA) joined Agnew in Friday’s complaint-handling discussion, which was presented by IFIC.

The IDA and MFDA have recently tabled new complaint handling policies as well. The public comments periods for both of these new policies have closed and the two organizations are in the process of responding.

IFIC was the first to respond to the OBSI proposal. Its letter highlighted the increased potential for overlap with regulators’ mandates and the duplication and conflicts that would arise if the mandate were imposed. “In effect the result will be that investment funds gain an additional regulator with the ability to audit firm practices, make findings and direct restitution, without the procedural safeguards and due process required of statutory agencies,” reads its comment.

Investment dealer Woodstone Capital Inc. supports this view. “We strongly believe the Ombudsman’s office should be confined to helping with the resolution of individual complaints and not to expand its scope to areas that are more than fully reviewed by other regulators,” it wrote in a comment. “The ombudsman would perhaps do better to refer any areas of concern to the IDA for investigation and resolution.”

Woodstone said it is currently subject to five different types of audits and “resources of time and personnel are stretched to the limit in terms of meeting the many and varied demands of the regulators.”

“We take very seriously the concern that this turns us into a quasi-regulatory body,” said Agnew in response to the heated debate the proposal has spawned. “We certainly look forward to working with the industry on a way of moving forward that is going to increase the comfort level.”

Agnew cites examples of ombudsmen organizations in other parts of the world — the UK and Australia — that successfully investigate systemic issues. “This is not unplowed territory,” he said.

“If not us, who?” he asked. “The regulators have made it pretty clear that they don’t want to get into the restitution game.”

“Are we becoming a quasi-regulatory body? No.”