OBSI to modify suitability and loss assessment process

OBSI hosting info session on suitability and loss assessment process

To start, OBSI will utilize common indices as performance benchmarks in most suitable performance comparisons, and will take fees and trading costs into account in all suitable performance comparisons.

Additionally, as a general rule, OBSI will only add interest on compensable losses if a final report recommending compensation is issued, but not in the case of facilitated settlements. And, that interest would typically be calculated from the date the investor complained to their firm, in order to compensate the investor for not having access to the compensation during lengthy delays in resolving the complaint.

OBSI is also adopting a self-imposed limitation period of six years from the time when it believes an investor knew, or ought to have known, there was a problem with their investments.

OBSI will also provide working versions of its loss calculation spreadsheets during its investigation.

The use of common indicies as performance benchmarks was perhaps the most controversial of the proposed changes, with investor advocates calling it “a step backward”, while industry lobbyists were in favour. “We understand and acknowledge that in some instances, indices will outperform other suitable securities. In others, indices will underperform. However, OBSI believes that using common indices in most cases will be the most objective approach,” it said today. “It will decrease debate over benchmark selection and increase the consistency, efficiency, and predictability of our process, which we believe is fair to both parties.”

The changes come in the wake of a consultation process OBSI began in 2011, in response to industry complaints. That was followed by an independent review of the dispute resolution service, which also included an examination of its suitability and loss assessment methodology. That review concluded that OBSI’s processes are first rate, and it called on regulators to endorse them (as well as recommending other sweeping reforms). Nevertheless, OBSI initiated a second consultation on proposed changes to the methodology earlier this year, and has now decided to adopt those changes.

OBSI has also made changes to its governance practices in response to that report.

Earlier this week, the Ontario Securities Commission (OSC) announced that the Canadian Securities Administrators (CSA) will soon be introducing a rule requiring all firms under their jurisdiction to use OBSI’s services. Most of the other fundamental reforms recommended in the independent review remain outstanding however.