With the one-year anniversary of the release of the Canadian Securities Administrators’ (CSA) proposed framework for binding dispute resolution looming on the horizon, the CSA signalled that the next phase of the project won’t come until the back half of next year.
On Nov. 30 last year, the CSA published its initial proposals for reforming the dispute resolution system to enable the existing provider, the Ombudsman for Banking Services and Investments (OBSI), to hand down investor compensation recommendations that would be binding on industry firms.
The move to introduce binding authority is intended to address the long-standing criticism from independent reviewers, and investor advocates, of OBSI’s current capacity to enforce its decisions, which is limited to its “name and shame” powers.
Over the years, a number of firms have refused to pay OBSI recommendations.
And, more recently, OBSI’s lack of enforcement authority has resulted in harmed investors accepting “low-ball” settlement offers for fear of receiving no compensation.
To address this issue, the CSA has proposed a new regulatory framework that would allow for binding dispute resolution.
“With the proposed binding dispute resolution mechanism, complainants would have more certainty that they would receive fair redress that reflects the harm suffered, including potentially compensation where OBSI determines that financial redress is warranted to address a dispute,” the CSA said in a release outlining its proposed framework.
Today, the regulators said that they have been reviewing the feedback that they received on that initial consultation, and they revealed their timing for the next phase of the initiative.
“As work continues on introducing binding authority, the CSA plans to issue a further publication for comment in the second half of 2025 that includes the CSA’s proposed approach to oversight,” it said.
The CSA’s proposal envisaged enhanced regulatory oversight of a reformed OBSI that has binding authority to ensure procedural fairness in the process, and the service’s accountability.
In the meantime, the Canadian Investment Regulatory Organization also just launched a consultation on proposed reforms to its arbitration program, which aims to position it as a viable alternative for larger, more complex disputes between industry dealers and their clients — specifically, claims that are larger than OBSI is able to handle.
That consultation is open for comment until Jan. 31, 2025.