OBSI an industry body trying to help the public?

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Re: OBSI an industry body trying to help the public?

Postby admin » Sun Jul 15, 2012 8:39 am

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New Oversight for Banking Complaints
Jacqueline Shinfield and Dawn Jetten

On July 6, 2012, the Minister of Finance proposed regulations in respect of the resolution of complaints by bank customers. The draft Approved External Complaints Bodies (Banks and Authorized Foreign Banks) Regulations (the proposed Regulations) will be published in the Canada Gazette on July 13, 2012, with a 30-day comment period. The Department of Finance press release makes it clear that the government views these changes as establishing a necessary pro-consumer framework for dispute resolution in the banking sector.

While the principal purpose of the proposed Regulations is to establish a framework for the approval and ongoing business of external complaints bodies, the proposed Regulations also impose disclosure and notice requirements on banks and authorized foreign banks (referred to in this bulletin collectively as “banks”). In addition, changes to the procedures of external complaints bodies required by the proposed Regulations may necessitate amendments to the complaint handling policies and procedures of their bank members.

Despite numerous references to consumers in the press release and the Backgrounder provided by the Department of Finance, the complaints procedures requirements of the Bank Act and the complaints resolution process and reporting requirements of an external complaints body under the proposed Regulations are not limited to consumer complaints or complaints relating to non-compliance with the consumer provisions of the Bank Act. Banks should review compliance with these requirements outside of their consumer business.

Under the Bank Act, banks are required to establish procedures for dealing with complaints made by persons requesting or receiving products or services in Canada from the bank (customer complaints). Currently, the Minister has the power to designate a complaints body to deal with customer complaints and all banks would be required to be members of such designated complaints body. No such designation has been made. Amendments to the Bank Act, which will come into effect together with the proposed Regulations, will allow the Minster to approve external complaints bodies and a bank will be required to be a member of one approved external complaints body.

The Ombudsman for Banking Services and Investments (OBSI) was established more than 15 years ago as Canada’s independent financial ombudsman service. However, membership in OBSI is currently voluntary for banks and two Canadian banks are now using the services of the privately owned ADR Chambers Banking Ombuds Office (ADRCBO). In the absence of any regulatory requirements, the OBSI and ADRCBO have established their own terms of reference and procedures for reviewing and resolving complaints and they are not subject to regulatory oversight.

With the introduction of the proposed Regulations, there will finally be a process in place for approval of complaints bodies by the Minister on the recommendation of the Commissioner of the Financial Consumer Agency of Canada (FCAC). Notwithstanding strong opposition by the OBSI, the proposed Regulations allow a privately owned complaints body to become approved as an external complaints body.

The stated purpose of the proposed Regulations is to enhance the process of dealing with complaints under the Bank Act by establishing a scheme for external complaints bodies. External complaints bodies are to be accessible, accountable, impartial and independent and must discharge their duties in a manner that is timely and co-operative.

Pursuant to the Bank Act and the proposed Regulations, the FCAC will have these external complaints bodies within its regulatory ambit. This further expands the types of entities over which the FCAC has jurisdiction, to include not only banks and other federally regulated financial institutions, but also payment networks and now external complaint bodies.

Application Requirements
The proposed Regulations require a proposed external complaints body to have a reputation for being operated in a manner that is consistent with the standards of good character and integrity. A complaints body that intends to apply for approval must, prior to submitting an application, have policies and procedures as well as terms of reference that govern its functions as an external complaints body. Moreover, these policies and procedures must address the prescriptive requirements specified in the proposed Regulations.

Given the Commissioner’s role in recommending applications for approval by the Minister, applications will be made to the FCAC. The Backgrounder provided by the Department of Finance with the proposed Regulations indicates that the FCAC will consult shortly on how the application process will work.

Obligations imposed on External Complaints Bodies
The obligations imposed on external complaints bodies under the proposed Regulations include:

making their services available free of charge in both English and French;
ensuring that any person appointed by the external complaints body to resolve a complaint is impartial and independent to the parties to the complaint;
notifying persons who have made complaints within 30 days if all or part of the complaint is outside of the external complaint body’s terms of reference;
advising the FCAC without delay if the external complaints body determines that a systemic issue is raised by a complaint;
dealing with and resolving a complaint in a manner that only affects the parties to the complaint; and
resolving complaints by making a final recommendation within 120 days after the date the complaint was originally received.
The requirements set out above seek to provide individuals with a more timely resolution of their complaints by requiring an external complaints body to provide notice within 30 days if a complaint received by it is outside of its mandate and to resolve any complaints within its mandate within 120 days. These are more specific and shorter deadlines than are currently stated on the OBSI and ADRCBO websites.

Administrative Requirements
Under the proposed Regulations, external complaints bodies are required to comply with various administrative requirements in their handling of complaints. For example, at least once a year, an external complaints body must consult with bank members, as well as with persons who have made complaints since the previous consultation, in respect of the discharge of its functions and the performance of its activities.

Unfortunately, there is no guidance on the scope of this consultation process and it is not clear if the proposed Regulations require the external complaints body to consult with all persons who have filed complaints over the last year or if only a random sampling will be sufficient.

External complaints bodies will be required to submit an annual report to the Commissioner of the FCAC on the discharge of their functions and activities, including a summary of the results of the annual consultation process. This report is also to be made available to the public “without delay”.

In addition to the annual report, an external complaint bodies will be required to have a third party evaluate the performance of its activities every five years. This evaluation is to be done in accordance with terms of reference to be established in consultation with the Commissioner of the FCAC.

An external complaints body will also be required to make available to the public the following information:

information about the identity of its members;
information about its constitution and governance and the terms of reference that govern its functions;
information about all sources of funding for its activities including the fees charged to its members and how those fees are calculated; and
information in respect of the results of its five-year evaluation.
All information that is to be provided under the Regulations must be provided in language that is clear, simple and not misleading.

Effect on Banks
The Regulations define a complaint as a complaint made to an external complaints body by a “person” about a “product or service” that was requested or received by the person from a member of that body. The term “person” is defined in the Bank Act to include an “entity”. Accordingly, the proposed Regulations apply to complaints made by businesses in respect of commercial products and services, in addition to complaints made by consumers. This accords with the Bank Act requirements with respect to procedures for dealing with complaints, which are not limited to consumer complaints.

The Backgrounder provided by the Department of Finance with the proposed Regulations contemplates that the FCAC will be consulting shortly on proposed guidelines to clarify expectations for banks’ internal complaint handling procedures.

Once the proposed Regulations are finalized, each bank will need to review the complaints procedures for the external complaints body of which it is a member to check if any changes to its own complaints handling policies and procedures are required. The rules with respect to federally regulated trust and loan companies are somewhat different, but those that are members of an external complaints body will also have to conduct such a review.

Under the FCAC compliance regime, banks are currently required to report systemic issues in respect of the consumer provisions of the Bank Act to the FCAC within 60 days of such an issue being identified. The FCAC views a systemic issue as a compliance issue that could affect multiple consumers and/or could potentially have market-wide implications. Banks should note that external complaint bodies will be required to advise the FCAC immediately of systemic issues identified through complaints. By requiring external complaints bodies to report what they perceive as systemic issues to the FCAC, the FCAC will be provided with even more information on banks and their internal practices, including information on potential systemic issues that are not related to the consumer provisions of the Bank Act, and the FCAC may even receive such information before the bank itself has reported the issue to the FCAC.

Effective Date
As drafted, the proposed Regulations will be effective when registered. However, the timing of the related amendments to the Bank Act and the effective date of the final Regulations will need to be co-ordinated to allow time for applications for approval of external complaints bodies – including development of the application process by the FCAC, preparation and implementation of the required policies and procedures by complaints bodies and receipt of Ministerial approval – and any necessary amendments to bank policies and procedures.

For more information on any of the above matters, please contact:

Paul Belanger 416-863-4284
Dawn Jetten 416-863-2956
Jacqueline Shinfield 416-863-3290
John Teolis 416-863-2548
or any other member of our Financial Services Regulatory Group.

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Re: OBSI an industry body trying to help the public?

Postby admin » Fri May 04, 2012 2:11 pm

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Antilla: Americans began signing their rights away after Shearson vs. McMahon

Landmark court decision approving brokerage arbitration system caught attention of other industries; 'no place to go'

May 4, 2012
American business entered its Teflon era on a spring day 25 years ago.

Lawyer Madelaine Eppenstein had taken the morning off from work for a parent-teacher event at her 5-year-old's elementary school on June 8, 1987, when she was summoned to the principal's office for an urgent call. Her husband and law partner, Theodore Eppenstein, told her they lost the Supreme Court case he had argued two months before on behalf of a couple trying to sue their stockbroker for fraud.

“I felt like I got punched in the face,” she told me in an interview late last month.

If Eppenstein was punched, the investing public was mauled. The case known as Shearson v. McMahon would wind up locking investors out of U.S. courts any time they tried to sue a broker. A tiny clause in customer agreements turned out to be Wall Street's magic formula to keep its transgressions out of sight. The agreement that Eugene and Julia McMahon signed said that any dispute between them and their broker at Shearson/American Express Inc. -- a trusted fellow parishioner at their church --“shall be settled by arbitration” in a Wall Street forum. Investors since then have either had to agree to similar terms, or forget about having a securities account.

“If you get screwed,” Theodore Eppenstein says, “now you have no place to go.”

Looking for Luxuries

No place to go, that is, if you're looking for luxuries like publicly filed documents, juries that hear the facts and judges that preside over open proceedings.

The McMahon decision was damaging enough for the impact it had on individual brokerage customers, who tell their stories about fraud, misrepresentation and churning behind closed doors where the public -- including reporters -- isn't welcome. Perhaps worse is what happens when a powerful industry gets accustomed to keeping its squabbles quiet: Wrongdoers are inclined to relax, sending ethics to ever-lower lows.

“It means that all sorts of scams against individuals, however large, are very unlikely to come to the attention of the media and the public,” says F. Paul Bland Jr., a senior attorney at the public-interest law firm Public Justice in Washington.

Wall Street may have been first to catch on to the benefits of mandatory arbitration, but Bland worries that the closed-door trials are spreading to industries from retailing to homebuilding. “The silence and secrecy that surrounds arbitration is extremely harmful to the country,” he says.

These days, employers -- Manpower Inc. and Nordstrom Inc. among them -- require new hires to give up their rights to court before a fresh-faced recruit can check in for orientation. And consumers can forget about opening a Netflix account, signing a mobile-phone contract, or putting a loved one into most big-name nursing homes unless they are willing to give up their rights to go to court. Buying a Starbucks gift card? You are agreeing to mandatory arbitration of any fraud or misrepresentation by the company.

The results can be chilling. After watching his father die from sepsis of the blood caused by infections from 13 bedsores in 2005, David W. Kurth of Burlington, Wisconsin, tried to sue the nursing home whose staff he claimed had left his father's wounds covered in excrement and urine for days at a time. Though the death of his father would have been shocking enough, Kurth told a Congressional subcommittee in 2008 that the “most shocking” part of his family's ordeal was this: They wouldn't be able to sue for the alleged neglect because the deceased man's wife had signed admissions documents that had a mandatory- arbitration agreement.

“How can anyone in good conscience argue that it should be perfectly legal to trick frail, elderly, infirm senior citizens experiencing the most stressful time in their lives into waiving their legal rights?” Kurth asked.

Free Phones

Conscience, of course, plays no role when companies demand arbitration. But Supreme Court decisions do. In April 2011, the court dealt a new blow to consumers and employees in a case known as AT&T Mobility v. Concepcion. AT&T had pitched a deal to woo new mobile-phone customers by offering free phones, but it turned out the freebie came with a $30.22 bill for “taxes.” Vincent and Liza Concepcion tried to bring a class-action lawsuit on behalf of all the other consumers who took AT&T's deal. But the court said that when the couple signed the customer agreement, they gave up their right not only to sue, but also to a class action even in arbitration.

In the year since the Concepcion decision, lower courts have trashed dozens of cases in which consumers or employees were trying to sue as a group. The National Labor Relations Board pushed back against the impact the Concepcion decision might have on employment class actions, ruling in January that it's a violation of federal labor law to make workers give up the right to pursue group claims. That decision probably will be challenged in court.

About 25 percent of U.S. employees are covered by mandatory-arbitration clauses, says Alexander J.S. Colvin, an associate professor of labor relations and conflict resolution at Cornell University. He figures the number will grow as a result of the Concepcion case.

If you are wondering just how bad arbitration can be, the examples are many. When I wrote my book about sexual harassment on Wall Street, “Tales From the Boom-Boom Room,” I was aghast at the things brokerage firms could do that would never be allowed in court. In the weeks before one woman's arbitration hearing was set to begin, her former employer hired a psychiatrist who questioned about her sex life and her menstrual cycle. She had alleged that a man in the office had followed her into a stock room and grabbed her breasts. Another woman, who said the same man had accosted her, was directed by the consultant-shrink to sit in a chair in the middle of a room and recite the names of all the U.S. presidents -- in reverse order.

Both women bailed out and settled, having seen enough of arbitration's downside before the hearings even started.

Get There Early

In October, a doctor who was fired from her job by a physicians' group in suburban Philadelphia told the tale of her arbitration to the Senate Judiciary Committee. Deborah Pierce would have preferred to sue the partnership (17 men, one woman at the time) that fired her, but her employment agreement tied her to arbitration run by the American Health Lawyers Association. One morning, she arrived early to her hearing at a law office in Wayne, Pennsylvania, to see one of her former bosses strolling out of the arbitrator's office carrying a cup of coffee. That sort of encounter is known as an ex-parte meeting between a judge and a party to a case. It isn't allowed in court proceedings.

To pay for her case, which included her half of the arbitrator's $117,042 fee, Pierce took out a home-equity loan that she and her husband are still paying off three years later. Her consolation prize: the arbitrator at one point ordered her adversaries to pay her $1,000 in sanctions for destroying documents and delaying the proceedings. And then, he billed her $2,000 for the time he spent deciding whether he should impose the fine. She lost.

It's an open secret in legal circles that arbitrators are more worried about alienating the corporations who give them regular business than they are about one-shot plaintiffs. “Arbitrators who ding a major firm know they're going to be blackballed,” says Timothy J. Dennin, a New York lawyer who represents aggrieved investors.

There are upsides to arbitration, if only the public had a chance to consider it as an alternative to court instead of a mandate. Investors whose losses are too small to be attractive to lawyers, for example, can often navigate securities arbitration more easily than a court case. And arbitration can be faster than court.

“Do some cases fare better in arbitration? Definitely,” says Ryan K. Bakhtiari, the president of the Public Investors Arbitration Bar Association, a group of lawyers who represent investors. He says arbitration should be at the choice of the investor, not mandatory.

Bad Behavior

The more cases we relegate to arbitration, the more we fail to hold companies accountable for bad behavior.

Frank Partnoy, the author of “Infectious Greed: How Deceit and Risk Corrupted the Financial Markets,” says that even if an arbitrator decides a business is guilty of fraud, a company “can write a check and not worry about creating a dangerous precedent.”

That case by the McMahons never got to arbitration after the Supreme Court said the couple couldn't go to court. Regulatory records for their former broker show they settled for $700,000. Christine Hines, the consumer and civil-justice counsel in Public Citizen's Congress Watch unit, says groups such as hers would simply have no material to work with if bad products and practices were all relegated to private justice.

“There is no way we, as advocates, would know what's going on,” she says.

Twenty-five years after the McMahons lost their fight for a public hearing, it's hard not to conclude that's precisely what business is counting on.

--Bloomberg News--

(Susan Antilla, who has written about Wall Street and business for three decades and is the author of “Tales From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View columnist. The opinions expressed are her own.)

http://www.investmentnews.com/article/2 ... =20120504#
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Re: OBSI an industry body trying to help the public?

Postby admin » Tue Mar 27, 2012 5:36 am

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Bank ombudsman considers closing operations
Last updated Monday, Mar. 26, 2012 8:28PM EDT

Royal Bank of Canada's head office in downtown Toronto. RBC is one of the banks that pulled out of the Ombudsman for Banking Services and Investments. (NATHAN DENETTE/THE CANADIAN PRESS)
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The future of Canada’s national bank ombudsman is in peril as the country’s only independent office for consumer banking complaints looks at shutting down those operations after the departure of the country’s two largest financial institutions.
Sources close to the Ombudsman for Banking Services and Investments (OBSI) say its board of directors has approved a scenario that would see the consumer banking complaints office closed unless Ottawa prevents banks from ignoring the service and choosing their own complaints handlers.
RBC and TD raise mortgage rates, signal end to price war
Banks should not have choice of dispute mediator: Ombudsman
Strengthen banking ombudsman, panel urges
Royal Bank of Canada and Toronto-Dominion Bank have pulled out of OBSI, deciding instead to hire their own dispute resolution service for customer complaints, using arbitration firm ADR Chambers to handle problems with clients.
According to sources, OBSI’s board feels the organization can no longer continue as a credible ombudsman if banks are allowed to leave if they are unhappy with its decisions. RBC pulled out of OBSI for consumer banking complaints in 2008, while TD announced it was leaving in November. Both banks are required to remain part of OBSI for their investment dealer operations.
OBSI, a non-profit office that is funded by the industry but has independence from the banks, has been waiting for the Department of Finance to clarify whether banks can opt out of the federal ombudsman process and employ their own complaint-handling services, which are funded directly by the financial institution.
However, with no word on forthcoming regulations, the office has started to consider other scenarios for its future, sources say.
OBSI was created in 1996 at the suggestion of the banks, which preferred the arrangement of an industry ombudsman rather than a formal government department. Though the banks fund OBSI, no single institution holds sway over its decisions. All complaints that a customer can’t resolve with the bank’s internal complaints officer are elevated to OBSI.
The ombudsman handles files ranging from disagreements over penalties associated with cancelling a mortgage, to complaints over missing money in accounts.
However, friction has built between OBSI and RBC and TD over the years. The banks say they were upset with the length of time it took to resolve problems. As well, sources indicate the banks were upset about the financial settlements OBSI required them to pay, and for the powers the ombudsman wielded.
In the 2010 budget, Finance Minister Jim Flaherty announced that Ottawa would require the banks to belong to an “approved” third-party ombudsman, but did not stipulate that it needed to be OBSI. The banks interpreted this as permission to use their own arbitrators.
Industry watchers are looking to Thursday’s federal budget, where Mr. Flaherty could seek to clarify the matter, but there is no indication the government will move on the issue. Several sources within the industry say a two-year wait for regulations has baffled banks and OBSI alike.
A spokeswoman for the Department of Finance said Monday night that the matter is a concern for the government.
“Currently, all banks are required to have a consumer complaints procedure in place and have a third-party dispute handling body. However, there is a variation in procedures used. This is a source of concern for us and more importantly, for consumers,” Mary Ann Dewey-Plante, spokeswoman for Mr. Flaherty, said in a statement.
Ottawa wants banks to use government-approved dispute resolution services, Ms. Dewey-Plante said. The statement suggests financial institutions may be able to choose their own complaints adjudicator, as long as it is sanctioned by the government.
“We have passed legislation forcing banks to belong to government-approved, independent third-party bodies; establishing uniform regulatory standards for internal complaints procedures and giving the Financial Consumer Agency of Canada the authority to monitor as well as enforce compliance. We are now finalizing regulations,” the statement said.
A call to OBSI board chairwoman Peggy-Anne Browne was not returned. Officials with the ombudsman’s office would not comment on the potential of shutting down the consumer banking complaints office, but provided a brief e-mailed statement.
“We believe that Canadians deserve a banking dispute resolution system that is independent and impartial, and not beholden to any one stakeholder group,” OBSI spokesman Tyler Fleming said in the statement. “There are regular Board discussions around scenario planning that take place, but we remain optimistic that the integrity of the system will be restored and that RBC and TD will once again participate in OBSI for banking complaints.”
Should OBSI close down its consumer banking complaints arm, it would still continue handling disputes involving investments for customers of each of the banks.
The move comes after OBSI chief executive officer Douglas Melville appeared before the House of Commons finance committee last week to discuss the bank’s decision to use their own mediators – a move he said gives all the power to the financial institution” and none to the consumer.
“We are literally the only avenue for consumers to get compensation in the event of a problem caused by their bank, outside of the courts,” Mr. Melville said. “A service hired by the bank and that, consequently has the bank as a client, creates the perception, if not the reality, of a loss of critical independence. The service will know who it is they need to please in order to keep the business, and it’s not the individual making the complaint. It is a clear conflict of interest.”
While RBC and TD have decided to opt out of using OBSI, other banks say they have no plans to leave. Bank of Nova Scotia said in a statement Monday that it would remain in the organization. “We believe in the value of an objective point of escalation for customer care and we don’t have any immediate plans to change,” Scotiabank spokeswoman Ann De Rabbie said.
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Re: OBSI an industry body trying to help the public?

Postby admin » Sun Mar 18, 2012 12:45 pm

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While it appears that Ottawa is not expected to end a messy battle by forcing the country’s banks to resolve client disputes through the Ombudsman for Banking Services and Investments (OBSI), the provinces are set to continue making it mandatory for investment dealers — including those owned by the banks – to use the mediator of last resort.

Sources say the Canadian Securities Administrator (CSA), which represents 13 provincial and territorial watchdogs, and the self-regulating bodies for the brokerage and mutual-fund industries, will reject the multi-platform system widely anticipated to be advocated by the federal government that would allow federally-chartered banks to hire their own mediators to sort out disputes with aggrieved clients.

“We’re not going with that multi-platform in securities so we’re going to have an issue,” said a senior regulator who asked not to be named. “It’s a shame. There’s no question that investors require something straightforward and predictable.”

At a time when Canadians are being asked to take more responsibility for their financial affairs, including investments, a crucial avenue for consumers to seek compensation in the event of a problem caused by their bank or broker will become more complicated — and more expensive.

There is growing concern among consumer advocate groups and regulators that if banks are allowed to choose a mediator to resolve disputes with their clients, the independence of the decisions will be compromised. Given that 75% of people who complain to OBSI are 50 or older — 53% of those are seniors — the financial harm may be magnified.

That’s the message Douglas Melville, OBSI’s chief executive, brought to the House of Commons standing committee on finance Tuesday.

“The public-policy question is this: Should banks be permitted to choose their own provider of dispute resolution? In essence, hire and pay for the organization that will judge and rule on their market conduct?”

For almost a year, OBSI has been under fire from a handful of the 600 member banks, investment dealers and mutual fund companies that fund it. Publicly, the complaints range from the methodology used to calculate reimbursements to aggrieved customers and the time it takes OBSI staff to investigate and close a file. Privately, what’s really chafing is the industry’s belief that OBSI has overstepped the boundaries of its mandate and has emerged as a quasi-regulator.

Founded in 1996 by the big banks, Canada’s independent financial ombudsman was the voluntary compromise offered by the banking sector at a time when it was concerned that Ottawa would impose a government mediator on them. OBSI was originally intended to review complaints by small business against the chartered banks and all banks were expected to participate.

As the mediator’s authority was later expanded to cover all consumer complaints, tensions began to emerge. Banks had been handling customer oversight for decades and resolving client matters privately without airing dirty laundry in public.

In 2002, in the aftermath of the technology bust, brokers, credit unions, mutual funds and other financial firms were forced to join OBSI by their self-regulatory bodies. However, participation for the banks remained voluntary.

Royal Bank of Canada, the country’s largest, cut ties with OBSI in 2008 at the height of the economic meltdown and has since been using its own private mediation services.

Two years later, the federal budget in 2010 announced changes to the Bank Act would be implemented to address the festering problem, but the subsequent amendments haven’t resolved anything. In fact, by not confirming its intention, critics say Ottawa’s inaction has severely undermined OBSI’s authority and credibility.

Last November, Toronto Dominion Bank, the country’s second largest, withdrew from OBSI.

“Banks are opting out because they can, and that is jeopardizing the model,” says a financial industry participant. “We really need Jim Flaherty to close the barn door.”

The industry is hoping the Finance minister will address the contentious issue in his upcoming federal budget later this month.

In the meantime, during his speech to the Commons committee, OBSI’s chief executive questioned the intentions of a “vocal minority of banks,” saying that consumer complaints “cannot be credibly handled by a private for-profit supplier chosen and paid for by the bank.” He added that such a situation “creates the perception, if not the reality, of a loss of critical independence.”

In the absence of a statement of intent from Ottawa, more banks are expected to follow Royal and TD. In the meantime, provincial regulators are trying to resolve the impasse between the ombudsman and the securities industry. The Ontario Securities Commission has been working with OBSI to adapt to its reduced role, and make it more receptive to the dealers’ concerns. At the same time, the CSA and industry regulators have been active with brokerage and mutual fund companies, assuring them that OBSI has proper oversight.
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Re: OBSI an industry body trying to help the public?

Postby admin » Wed Mar 14, 2012 10:14 am

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http://www.advisor.ca/news/industry-new ... es-and-who’s-complaining-73323
Steven Lamb / February 24, 2012


Last year was a little bit easier for the Ombudsman for Banking Services and Investments, with the number of opened cases falling to the lowest since 2008. It’s likely a welcome change, as the Ombudsman was swamped with complaints in 2010.

The Ombudsman’s office opened a total of 802 cases in 2011, including 397 related to banking, 255 related to IIROC-member firms and 130 MFDA-member firms. The remaining 20 cases involved RESP dealers and “other” investment dealers.

Among banks, TD was on the receiving end of the most complaints (131), followed by Scotia (72) and CIBC (65). Among Investment cases opened, TD was again at the top of the table, with 59 cases, followed by RBC (34) and Investors Group (32).

The high number of complaints may have played a role in TD’s decision to drop out of the voluntary OBSI system In October 2011. This affected only the banking arms of the overall company, TD Bank and TD Canada Trust, and not its various investments divisions.

Read Board: Force banks to use OBSI

TD is the second Canadian bank to withdraw from OBSI, following RBC’s withdrawal in 2008.


OBSI received 397 banking-related complaints in 2011, a decline of 14% from 2010.

“Service issues and fraud continued to be the largest contributors to the issues we addressed,” said Tom Goodbody, deputy ombudsman for banking services. “The areas where we saw the greatest breakdowns in service were in transaction accounts, mortgages, credit and debit cards and loans.”

He says that while customers have an obligation to read and understand product documentation provided, the banks must ensure to the best of their ability that the customer understands the product and that it meets their needs.

OBSI recommended compensation in 66 banking cases totalling $487,546, ranging from a high of $74,983 to a low of $30. The average compensation amount was $7,387.


“The surge in investment complaints that came in following the market meltdown of 2008-09 finally subsided this year,” Robert Paddick, deputy ombudsman for investments said in his report.

OBSI received 405 investments-related complaints, with Suitability being the most common issue (224 cases), followed by fees (50), transaction errors (41) and misrepresentation (40).

OBSI recommended compensation totalling $2,691,721 in 167 investments cases, ranging from a high of $220,000 to a low of $154. The average compensation amount was $16,118.

Who’s filing complaints?

OBSI has compiled demographic data on those who filed complaints, including information on age, ethnicity, education, occupation and income.

Over 75% of complaints were filed by people over the age of 50. A slim majority (53%) of OBSI clients were over the age of 60. Of those over the age of 60, 70% were retired and retirees made up 40% of all complaints.

Read: Why older clients complain

“For many of these individuals, the financial harm they suffer when a bank or investment firm makes a mistake is magnified by having fewer years to make up the losses,” the report points out. This make the ombudsman’s role even more important, as an OBSI complaint is both cheaper and faster to resolve than legal action.

“We are seeing more cases of elder financial abuse and in view of the country’s demographics this is likely to grow in the coming years,” says Goodbody. “Where an elderly person is adding a family member or friend to their account(s) or signing a power of attorney, the bank’s role has become increasingly difficult yet nonetheless important.”

The demographic survey also found that almost 80% of OBSI complainants had some form of post-secondary education, compared to just 52% of the overall population. This makes sense, however, since the general population data includes every Canadian over the age of 15, and few 15- to 20-year olds have higher education.

University graduates made up the largest segment of complainants, at 42.7%, followed by those with a college, CEGEP, or other non-university diploma (26.2%).

The higher education level of complainants also makes sense, given that people with higher education also tend to be more highly engaged with the financial services industry, and are more likely to know their rights when they feel they have been wronged.

OBSI also found that visible minorities were under-represented among complainants; while 16.2% of Canadians identify themselves as a visible minority, only 11.6% of OBSI complainants did so.

“While cultural factors may play a role, more research is needed into why we are still not reaching this important segment of Canadians in the way we should be,” the report says. “While we already handle inquiries in over 170 languages, include information in multiple languages on our website, and engage regularly with several ethnic media outlets, more can and should be done.”

A narrow majority of complaints came from single income households (53.2%). Among single-income households, 62.8% of complaints came from households with an income of less than $60,000. Those earning $60,001 to $80,000 accounted for 15.2% of cases among single income households.

Among the 46.8% of complaints that came from dual-income households, 57.8% of cases involved households with less than $100,000 in income.

A huge majority (83.6%) of complainants owned their home. Just under 19% had children under the age of 18.

The majority of complaints came from Ontario residents (58.2%), followed by Quebec (12.8%) and British Columbia (11.2%).

http://www.advisor.ca/news/industry-new ... es-and-who’s-complaining-73323

Full OBSI report found here:

http://www.obsi.ca/images/document/up-2 ... t_2011.pdf
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Re: OBSI an industry body trying to help the public?

Postby admin » Wed Mar 14, 2012 10:00 am

Screen shot 2012-03-14 at 10.56.38 AM.png

view the PDF document from Kenmar and Associates at the link

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Re: OBSI an industry body trying to help the public?

Postby admin » Sat Mar 10, 2012 9:36 am

https://docs.google.com/document/d/1AHe ... 25csU/edit

At this link is a document outlining how they calculate what an investor is owed, in order to "make them whole", if they have been the victim of an unsuitable investment.

Screen shot 2012-03-10 at 9.31.06 AM.png

Click to enlarge image or go to link for actual doc

Keep in mind that in Canada, these types of fairness discussions are frowned upon and not generally "allowed" by our self regulating industry. Do not take this as the final answer to your problem, however, as suitability, fraud, misdirection or malpractice is still wrong, even if those inside the industry do not admit it here yet.

In Canada, we are a decade or two behind most developed countries, in investor protection. Pursue your case as if right is right and wrong is wrong, and pursue it with independent authorities (criminal and civil courts) and NEVER ever fall into the trap of the kangaroo courts run by those paid by the industry. If you enter any industry paid process, you will no doubt suffer a second loss, the first being your money.

Cheers to your financial health.
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Re: OBSI an industry body trying to help the public?

Postby admin » Fri Feb 24, 2012 8:51 am

Screen shot 2012-02-24 at 8.49.59 AM.png
OBSI future in doubt without industry co-operation
Share Print this article
Without either industry or government support non-profit organization “cannot hope to survive”
By James Langton | February 24, 2012 09:00
Companies cited in this article
Ombudsman for Banking Services and Investments
OBSI plans governance revamp
Investment complaints taking longer to resolve, OBSI says
The besieged financial industry ombudservice says that if it doesn't get the necessary government and regulatory support, its future may be in doubt.
In its annual report released Friday, the Ombudsman for Banking Services and Investments doesn't shy away from the controversy that has dogged the service over the past year. OBSI has been meeting with increased industry resistance to its efforts, culminating with TD Bank's withdrawal from the service late last year. An independent review of OBSI found no real merit to the industry criticism, and it recommended sweeping reforms designed to shore up the organization's status as an independent dispute resolution service. However, governments and regulators have yet to take up those recommendations.
In the report, OBSI chairwoman Dr. Peggy-Anne Brown warns that OBSI's very survival may be at stake. While it lauds investment industry regulators for refusing to bow to pressure to allow firms to drop out of the service, it says that without either industry, or government, support, "A small non-profit organization cannot hope to survive."
"In the absence of sufficient industry co-operation and support, government and regulators must step in, as they have clearly done for the investment sector, to support a fair, independent and impartial reviewer of bank complaints," it says, and, if they don't, it suggests that it may be time to revive the original plan. "A statutory dispute resolution scheme, may be preferable," it says.
In addition to all of the controversy over its future, OBSI also reports that it saw the first instance of a bank refusing a recommendation to improve practices and provide compensation to consumers, after it uncovered a systemic issue, last year. And, as a result, consumers won't receive the compensation OBSI considers fair and reasonable under the circumstances.
OBSI reports that in its first full year of reviewing potential systemic issues, it identified 10 possibilities, of which seven were deemed not to be systemic concerns, and the other three (which were deemed systemic) were all with one firm and all involved a lack of disclosure in mortgage documentation.
Despite all the resistance OBSI faced from the industry last year, it also says that it saw its complaint volume go down last year, both on the banking and investments side. Banking complaints were down 14% from the previous year; and, it says, the focus of complaints has shifted from the calculation of interest rate differentials on mortgage prepayments to service issues and fraud as the top issues.
Investment industry complaints also dropped sharply, by 28%. Yet, OBSI reports that complaints about exchange traded funds, and in particular leveraged ETFs, are on the rise. "Many leveraged ETFs are complex, high-risk investments. It is important that advisors know their product and only recommend leveraged ETFs to those clients for whom they would be suitable," it says.
In total, OBSI says it recommended compensation in 233 cases in 2011, worth almost $3.2 million in total. This represents 26% of all closed cases, it says, adding that just 15% of banking complaints were upheld, versus 37% of investment complaints. Banking complaints were also resolved much faster, with 87% of cases concluded within 180 days, compared with just 26.5% for investment files.
Still, the drop in complaints, and the clearing of a backlog of investment complaints (which was completed on time and under budget) also means that OBSI's budget will decline for the first time ever in 2012 (by 4%).

http://www.investmentexecutive.com/-/ob ... EN-morning
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Re: OBSI an industry body trying to help the public?

Postby admin » Fri Feb 24, 2012 12:26 am

To: OSC Investor Advisory Panel c/o Anita I. Anand Associate Professor Faculty of Law
University of Toronto 78 Queen’s Park, Suite 301 Toronto, ON M5S 2C5

February 1, 2012

Dear Mr. Wetston:

The Investor Advisory Panel of the Ontario Securities Commission appreciates the opportunity to comment on external dispute resolution services in Canada, including developments with the Ombudsman for Banking Services and Investment (OBSI). By way of background, the IAP is an independent body that was appointed by the Ontario Securities Commission in August, 2010. We are charged with representing the views of investors and providing input on the Commission’s policy initiatives, including proposed rules and policies, the annual Statement of Priorities, concept papers and other issues.


Maintaining and building trust between consumers and financial services companies should be a central goal of Canadian regulatory and governmental policy – a goal endorsed by the G20 meeting of world leaders in February, 2011.1 How the industry handles consumer complaints is an essential component of that trust. However, knowing where to turn with complaints and navigating the bureaucracies of large financial institutions can be overwhelming for many consumers and small businesses.
The Investor Advisory Panel believes wholeheartedly in the importance of an independent, impartial, and financially accessible body that provides Canadians with an effective way to resolve disputes with banks and financial institutions. We believe in a process that facilitates financial redress for consumers. Formal legal proceedings are often not a viable alternative because they are costly, complex, and not readily accessible to most Canadians for disputes of this kind.


Our recommendations are as follows:

First, we call on the Ontario Securities Commission as an important member of the Joint Forum of Financial Market Regulators to push for broader and more robust protection for consumers and investors.

Second, such protection should include a statutory fiduciary obligation for all advice-based financial service providers. If strong regulation exists ex ante, the likelihood of disputes arising ex post presumably decreases.

Third, a truly independent, objective, accessible and effective external dispute resolution (EDR) regime is likewise an integral component of investor protection. To be effective and to avoid the conflicts of the past several years, such a dispute resolution regime cannot rely on the voluntary participation of banks and other financial institutions. Participation in an independent, universal EDR service should be a legal requirement for all firms in the financial services industry. The decisions of this body should be binding on all participants with limited rights of appeal to an independent tribunal supervised by the regulators and it should have the statutory authority and resources required to provide timely, effective and impartial decisions to Canadians. Such a regime would bring Canada to the standard now implemented in other common law countries including the United Kingdom, Australia and New Zealand.

Accordingly, we believe that the Joint Forum of Financial Market Regulators which oversees OBSI should seek to prevent further departures of participating firms from OBSI and endorse the decisions of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) to require participation in OBSI. We support compulsory participation in OBSI by all banks and financial services providers, including the two banks that have recently departed. (TD, RBC)

The interests of Canadian consumers, including the cultivation of public trust in the domestic financial services industry, are not served by the increasing fragmentation of ombuds services for consumer financial complaints. No party in a dispute, including banks and other financial institutions, should have the right to choose its own adjudicator, particularly when those adjudicators are private, for-profit providers.

Such a system has an inherent lack of independence. A profit-seeking dispute resolution service chosen by and paid for by the banks cannot be impartial and independent.

Fourth, we call for a simple, accessible, and universal EDR service for all consumer financial and investment complaints in Canada. The scope of this service should not be constrained by sector or product type, but should encompass complaints relating to segregated (insurance) funds, and limited and exempt market dealers as well as banks and all financial institutions. Canadians should not be subject to different levels of protection and compensation depending on who sold them their investment. As an interim step, the separate insurance and investment dispute resolution bodies should at least share a common discovery process, so that consumers do not have to “learn” multiple systems in order to have their complaints adequately addressed.

Placing Industry Complaints in Context

Over the past three years, two major banks have withdrawn from OBSI, and several members of IIROC have attempted to do so.5 The extent and merit of the industry’s criticism have been challenged:

The independent review of OBSI’s activities published in 2011 (The Navigator Report)6 concluded that the industry’s complaints lacked substance. The Navigator report also established that the industry wins 69% of the complaints referred to OBSI, compared to the average of 50% in other common law jurisdictions.

Total compensation paid to consumers by financial institutions on 255 closed cases under OBSI mediation was $3.8 million in 2010.8 Of this amount, banking services customers received average compensation of $5,676 per settled complaint, with a median of $2,000, and investment services customers received average compensation of $19,121 per settled complaint, with a median of $8.205.9
In concordance with the Navigator Report’s findings,10 we do not think that OBSI membership imposes an unduly costly or onerous burden on the financial industry.

Fiduciary Requirement, Universal External Dispute Resolution

A legally explicit fiduciary duty for financial advisors would improve Canadians’ trust in the financial system and may reduce the volume and severity of complaints, in our view. Industry objections regarding Know Your Client forms, client risk tolerance, client knowledge and responsibility for investment decisions would lose force. Indeed, the Investor Advisory Panel’s own consumer research11 demonstrates that investors believe that such a fiduciary duty already exists. This false belief may contribute to the existing volume investor complaints, i.e., if investors place undue trust in their advisors on this basis, and this trust is broken, they rightly believe that they should have some recourse.
Certain financial services firms12 have criticized OBSI for disregarding or not adequately accounting for clients’ contribution to their own misfortune, i.e., through investor ratification or the failure to mitigate investment losses. The protection of investors and consumers in financial markets has long supplanted the raw idea of caveat emptor as it should in this case. The introduction of an explicit fiduciary duty would clarify the advisor-client relationship, further protect consumers and likely reduce the frequency and severity of complaints. It is long overdue.


The existing system is confusing for Canadian financial consumers. Many Canadians are unaware of OBSI’s services and powers. They lack clarity regarding which disputes should be addressed to the OBSI and the circumstances which entitle them to refer their complaints to it. The present and further fragmentation of EDR services in Canada is a regressive step in consumer financial protection. The implementation of a truly national and universal EDR service for all investor complaints would address these issues. The office should include as members dealers of segregated (insurance) funds as well as limited and exempt market dealers in order to simplify access to dispute resolution services for Canadian investors.
Once again, we appreciate the opportunity to comment on this important matter. We feel strongly about these issues. Please contact us if you wish to discuss the matter further which we would be pleased to do.
Yours very truly,
The Investor Advisory Panel Anita Anand, Nancy Averill, Paul Bates, Stan Buell, Lincoln Caylor, Steve Garmaise, Michael Wissell
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Re: OBSI an industry body trying to help the public?

Postby admin » Thu Feb 23, 2012 2:40 pm

Wednesday, 22 February 2012
Judge Lays Out Limitations of OBSI
A judge would be considered by most an expert in justice and an impartial observer of the conditions that lead to justice. It is thus worth noting the recent comments of Judge Bryan Shaughnessy of the Ontario Superior Court regarding the Ombudsman for Banking Services and Investments (OBSI). Though his comments are made only in relation to whether the OBSI would be a suitable body for resolving a class action in the case before him, I think his list applies in general to OBSI as a means for investors to get justice.

Here are the defects and limitations Judge Shaughnessy lays out:
the OBSI invites participation by firms but cannot compel cooperation
the OBSI can make a recommendation but it cannot compel a firm to make the payment recommended
the only remedy for non cooperation by the firm and/or not following the recommendation is the "rather anaemic remedy" of publishing the name of the firm and details of the refusal
the enforcement procedure is not binding on the firm; this amounts to "... a denial of access to justice" for investors
the OBSI can only handle complaints for amounts up to $350,000 unless the parties agree
claims for punitive damages are not an explicit option under OBSI; I would guess this is what the Judge is thinking about when he says later that behaviour modification "... does not appear to be the objective or mandate of the OBSI process".
"The appearance of impartiality and independence of the OBSI is to some extent in play. ... [since] the ombudsman's recommendation is not binding on the Participating Firm or the Complainant. A truly impartial and independent body would have control over its process."
the OBSI dispute process is sparsely defined
there is no hearing process for complainants to introduce evidence or make submissions and there is little or no chance for investor participation
the OBSI is not bound by rules of evidence
the procedure by which recommendations are arrived at does not lead to a record of how the OBSI's recommendation is calculated
So there we have it, a checklist for reforming and strengthening OBSI.

Don't get me wrong. OBSI, even with its deficiencies, has been doing valuable work for investors. It does, however, need a counter to the industry offensive to shun it, no doubt spurred by too many cases where OBSI has taken the investor's side. As the saying goes, the best defense is a good offense. Let's reform OBSI and make it a body with sharp teeth and power. Go to it politicians.

Thanks to Ken Kivenko of [url]CanadianFundWatch.com[/url] for the heads-up on this court case (the details of which seem to show some odious, abusive practices involving mutual funds, financial "advisors" and inappropriate leveraging advice). Ken's website also has a very practical (and sobering) investor guide to dealing with the OBSI. The pdf judgment from which I extracted the Judge's ideas is linked to on this page of the website of Thomson Rogers, one of the law firms in the case.
http://canadianfinancialdiy.blogspot.co ... -obsi.html
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Re: OBSI an industry body trying to help the public?

Postby admin » Thu Feb 16, 2012 8:25 pm

images.jpeg (13.95 KiB) Viewed 21031 times
I had a conversation with a person going through the OBSI process and I thought I should pass along the highlights, which were shared with me, in case they may be of benefit to other abused investors.

First the background.......an investment victim, a fraud victim, given an industry promise of "trusted professional financial advice", and then delivered the services of a commission sales agent, touting the highest paying (commission paying) products, with the highest fees, lowest performance and some borrowed money (leverage ) thrown in the maximize the payout to the salesperson.

Despite this background, despite the fraud, the misrepresentation, and some of the clearest thinking and presentation of of the facts that I have witnessed yet........the feedback from OBSI sounded like this:

"IIROC regulations are not sufficiently clear to allow us to ..........."

"unless we can "convince" the firm that they did wrong............."

I won't go on and on, except to say that I have very little direct experience with OBSI, but I do not have to be told very much to imagine them being impotent and self protective, rather than client protective To add further to their vulnerability, they are at this moment, being "fired" by some (TD and RBC) banks who do not like OBSI's brand of dispute resolution, and prefer to hire their "own".

OBSI is living up to the image of an agency with no teeth, no balls, and no desire to do investor protection, but a huge need to work on agency protection. Sorry OBSI if I am being overly harsh, but your PR has been as invisible as the BC Sasquatch.....

SO another of the 120 plus agencies, departments, offices, associations, regulators and self regulators, all apparently either captured, or in the process of being captured (or marginalized) by a financial industry "too big to prosecute".

Buyer beware my fellow Canadians, now more than ever before. buyer beware even if they give you promises of "trusted professionals."

Fraud pays in Canada.
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Re: OBSI an industry body trying to help the public?

Postby admin » Thu Feb 16, 2012 10:56 am

Screen shot 2012-02-16 at 10.55.30 AM.png

HELP WANTED: New chair for OBSI
Theresa Tedesco Feb 16, 2012 – 7:00 AM ET | Last Updated: Feb 15, 2012 5:10 PM ET

The embattled Ombudsman for Banking Services and Investments (OBSI) is looking for a new chairman as part of a “broad-based” reform of its governance structure.

The not-for-profit mediator of last resort, which has been under fire from Canada’s major banks and their investment dealers, is currently canvasing for an independent chair to replace Dr. Peggy-Anne Brown. A special governance committee of OBSI’s 11-member board of directors, which was created to oversee the overhaul, is in charge of the search.

The changes, which were among key recommendations made by an independent evaluator from Australia last November, are expected to be completed in time to replace several long-serving independent directors, including Dr. Brown, who will step down in September, at OBSI’s annual general meeting.

Created in 1996 to review complaints by small businesses against chartered banks, OBSI is the only national independent dispute resolution provider in the financial services industry. Its mandate expanded in the past decade to cover all unresolved grievances.
As arbitrator of last resort, OBSI resolves disputes between the 600 participating banks and investment firms and their customers if an agreement can’t be reached between them.

However, while the major banks and credit unions participate on a voluntary basis, the investment industry-brokerages, and mutual fund companies joined OBSI on a mandatory basis in 2002 as required by the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Funds Dealers Association of Canada (MFDA).

But there has been tension building between the industry and OBSI in recent years. Troubled by the growing number of consumer complaints filed against them, the length of time to resolve the disputes and the steadily increasing damages being awarded to clients, investment dealers are demanding changes to OBSI’s governance structure to make it more transparent and accountable.

Last year, RBC Capital Markets Ltd., TD Waterhouse and Manulife Financial Corp. filed an application with IIROC, the national self-regulator overseeing investment dealers and equity trading, for an exemption from the mandatory provision that requires them to resolve disputes through OBSI.

That application was denied by IIROC and the MFDA in May, 2011. Since then, securities regulators and the industry have been trying to resolve their differences over OBSI.
While that was happening, TD announced last November that it would cease using OBSI to mediate disputes with its bank customers.

The departure marked the second time a major Canadian bank has relocated its dispute resolution business away from OBSI in favour of a for-profit mediator. Royal Bank of Canada was the first when it quit using OBSI for its banking disputes more than three years ago.

As a result, numerous shareholder advoate groups and OBSI’s 11-member board of directors have asked Canadian financial services regulators to force the banks to support the not-for-profit mediator of last resort through “mandatory participation.” So far, Finance Minister Jim Flaherty has not indicated what, if anything, the government will do.
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Re: OBSI an industry body trying to help the public?

Postby admin » Mon Jan 30, 2012 3:12 pm

Screen shot 2012-01-30 at 3.12.17 PM.png
All-public panels are a hit with investors, Finra says
Popularity of new program could quell calls to end mandatory arbitration

By Dan Jamieson
January 29, 2012 6:01 am ET
After nearly a full year, the Financial Industry Regulatory Authority Inc.'s program to let investor plaintiffs exclude industry arbitrators from hearing panels has proved more popular than expected.

So popular is the program, in fact, that it could ease concerns about industry bias and help quell calls to end mandatory arbitration.

From the start of the all-public program in February 2011 through Jan. 26, more than three-quarters (76%) of investors chose the all-public option, which allows them to strike industry arbitrators from proposed lists of panelists.

That figure was up from a 54% opt-in rate during a 27-month pilot program, according to Finra.

Normally, investor cases are heard by three-person panels that include an “industry” arbitrator who works in or is associated with the financial industry.


The popularity of the all-public program is a “bit surprising, because the pilot numbers were lower,” said Linda Fienberg, head of Finra's arbitration program.

Observers said a growing familiarity with the all-public option by plaintiff's attorneys is driving its widespread use.

The pilot also was limited to customer cases against a select group of firms and applied only to those cases where an individual broker was not named. The permanent program includes all firms, as well as cases against brokers.

“The program has given everyone an option” to use in a larger number of cases, said Ryan Bakhtiari, a partner at Aidikoff Uhl & Bakhtiari, and president of the Public Investors Arbitration Bar Association, which represents plaintiff's attorneys.

The Securities Industry and Financial Markets Association also supports the program.

“We also think it's quite important that an industry panelist remains an option for investors,” Kevin Carroll, associate general counsel at the trade group, wrote in an e-mail.

SIFMA was smart to support all-public panels, said David Robbins, a plaintiff's lawyer and partner at Kaufmann Gildin Robbins & Oppenheim LLP.

The program has eased concerns about industry bias and helped counter the push by the plaintiff's bar and state regulators to end mandatory arbitration, he said.

“Finra had to respond this way because ... they were fearful they would be out of [the arbitration] business,” Mr. Robbins said.

Finra “wanted to assuage customer's attorneys [about the process] and it's worked,” he said.


“I do believe this [program] has removed the one issue [critics] could use to claim the [Finra arbitration] forum wasn't as fair as it might be,” Ms. Fienberg said.

Data from the pilot program are inconclusive as to whether investors did better when they opted into the program.

Of 49 pilot program awards issued by all-public panels, investors were awarded damages in 26 of 40 cases, or 65% of the time, according to Finra. Another 23 pilot program awards were issued by panels with one nonpublic arbitrator, and in these instances, investors got relief 13 times, for a 62% win rate.

In nonpilot cases, win rates were lower: In 2009, arbitrators awarded damages to investors in 49% of cases; in 2010, the win rate was 48%.

However, Finra said that the award data are insufficient to draw meaningful conclusions about whether all-public panels tend to favor investors — a conclusion that others share.

“Talk to me in a year” about win rate data, Ms. Fienberg said.

“We'll have a better idea then” whether customers do better with all-public panels, she said.

The growing use of the all-public option has worried some industry arbitrators, who insist that they can be as tough, if not tougher, on industry malefactors as public panelists.

“I've noticed inquiries for me [to sit on panels] have dried up,” said Neal Tourdo, national sales director at Mastrapasqua Asset Management Inc., who serves as an industry arbitrator.

Eliminating industry panelists “is a mistake,” he said.

“Finra doesn't do a good job of educating [public] arbitrators about investments,” Mr. Tourdo said.

For more technical products, such as derivatives, “the public arbitrators are generally unprepared,” said Joseph Stineman, a partner and chief compliance officer at Fogel Neale Partners LLC, who is also an industry arbitrator.

He added, however, that his own caseload of four potential customer cases is heavier than ever.

Of the 1,431 cases in the permanent program that have ranked panelists, investors have chosen to strike all the industry people in 66% of the cases, according to Finra.

Despite the success of the all-public option, the plaintiff's bar and state regulators still want an end to mandatory pre-dispute arbitration agreements.

“We think choice is working with the all-public program, and we think choice is the way to go in arbitration” overall, Mr. Bakhtiari said.

If arbitration were made optional, “I think [the industry] would improve the customer protection aspect of it,” such as providing for attorney's fees and written decisions, said John Cronin, Vermont's securities director and chairman of the North American Securities Administrators Association Inc.'s broker-dealer section.

The Dodd-Frank reform law gave the Securities and Exchange Commission authority to prohibit mandatory arbitration in brokerage contracts.

The commission hasn't yet acted on that authority.


Mr. Robbins doesn't think that will happen, due in large part to the all-public option.

Customers “are winning” in Finra arbitrations, he said.

“Why kill a system where you can prevail?” Mr. Robbins said.

The SEC doesn't have a timetable for looking into the arbitration issue, Ms. Fienberg said.

“My best guess ... is, they are mightily working to do [other] things with a time requirement first,” she said.

Meanwhile, Republican control of the House and recent Supreme Court decisions make legislation prohibiting mandatory pre-dispute agreements less likely, Ms. Fienberg said.
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Re: OBSI an industry body trying to help the public?

Postby admin » Thu Jan 12, 2012 9:55 am

TD Mutual Funds.jpg
TD bank treated clients poorly : When TD Bank pulled out of OBSI at the end of November , a few TD complainants got caught with their complaint in mid stream. TD refused to pay for the continuance of the OBSI investigation. The hapless complainants had to start all over agian with TD's own "independent " Ombudsman ,ADR Chambers. These poor folks suffered as much from this abuse as the original cause of the complaint. To say they are bitter and angry is an understatemnt. Finance Minister Flaherty should mandate that all Canadian Charted Banks be participants in a legislated-enabled and reformed OBSI. OBSI's Board isn't clean either- it didn't have the foresight to anticipate what would happen to its clients if a bank decided to give it the finger. Once again, Main Streett gets the shaft due to complacency, negligence and blatant disregard.

Thanks to Ken at http://www.canadianfundwatch.com for this update

OBSI is the Ombudsman for Banking Services and Investments (OBSI) in Canada, which some banks are shunning so they can hire their own private "referee".
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Re: OBSI an industry body trying to help the public?

Postby admin » Fri Jan 06, 2012 1:33 am

As if it is not enough to be in a self regulating position in the country.............not enough to know that the criminal code rarely gets applied to ones industry indiscretions...........not enough to have near monopoly powers over ones marketplace..........not enough to earn billions in profits often at the expense of fair dealing at times. No, all that advantage is not enough for some.

See which Canadian banks have decided to "opt" themselves out of the official Canadian banking dispute resolution process and hire their "own" ombudsman to resolve complaints against them. http://www.bankingombuds.ca/participating_banks.html
Screen shot 2012-01-06 at 1.24.15 AM.png

Investor warning: If you are going to play in an arena with folks who insist on bringing their own referee to the game, keep in mind that some of the calls may not always be fair. Just sayin...........
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