Giving the OBSI Binding Authority – A Mistake or a Welcomed Change?
The New Proposed Framework – An Independent Dispute Resolution of Binding Authority
The International Monetary Fund and domestic parties have long been critical that OBSI’s recommendations are not binding. In response, the Canadian Securities Administrators (CSA) has proposed to effectively make OBSI’s recommendations binding on registered firms, if OBSI is selected to offer dispute resolution services as proposed.
The CSA proposes establishing an independent dispute resolution service (IDRS) that would issue final binding decisions. The IDRS would be a not-for-profit entity that would be designated or recognized by the CSA. The CSA has indicated that OBSI would be considered for appointment as the IDRS, effectively changing its mandate from mediator to adjudicator.
The CSA has stated that the proposal is intended to address perceived shortcomings in the current non-binding OBSI dispute settlement mechanism. If adopted, what they propose likely will have a significant effect on your operations. A few of the key features of the proposal are discussed below.
How would the IDRS be Established and Overseen
The IDRS would be overseen by the CSA. The CSA would take steps to:
a) establish and authorize the IDRS to act as the investigator with regard to client complaints;
b) make IDRS’s decisions binding; and
c) require all registered firms to be subject to IDRS’s jurisdiction and fund its operations.
The CSA has identified OBSI as evolving into the IDRS.
Firm Obligations with IDRS
All firms would be required to offer the IDRS to their retail clients free of charge. Firms would also be required to be members and maintain membership in the IDRS (i.e. pay fees) and cooperate with the IDRS in its investigations and review of complaints. Certain words (e.g.ombudsman, identified ombudservice) could not be used by firms when referring to their internal complaint handling procedures, department or service.
IDRS’s Two-Step Operating Procedure
The existing OBSI investigation/inquisitorial process would be adopted by the IDRS. An IDRS investigator would gather evidence from the parties, including oral evidence, identify core issues, ask the parties follow-up questions, and make a recommendation. A recommendation would become binding on firms and a final decision in two scenarios:
if neither the firm nor complainant objected to the recommendation within a specific time limit, and;
the complainant has not withdrawn from IDRS’ process by starting a separate legal proceeding or otherwise.
All recommendations would be subject to review in certain circumstances at the option of the firm and complainant. A firm or complainant would trigger a review by submitting a written objection to the IDRS regarding specific provisions of the recommendation. A senior decision maker at IDRS, who was not previously involved with the complaint would review the objection to the recommendation. One may question the impartiality of this approach to reviews of recommendations. This process is proposed to follow an essential process test, where the IDRS would engage in the most efficient and quick procedure necessary to resolve the complaint, including acting in an adversarial capacity. We are not aware of any other situation where an independent resolution service acts in an adversarial capacity.
If only the firm objects to a recommendation thus triggering a review, the complainant would have the opportunity to reject the decision resulting from the review within a time limit and pursue other courses of action, including legal action. If the complainant does not reject the decision resulting from the review within the time limit and does not withdraw from the process, the decision is final and binding on both parties. If the complainant triggered the review, they are bound by the decision resulting from the review.
The Decision and Lack of Statutory Appeal Process
The binding decision would either be monetary compensation or corrective action. Once the decision is rendered by IDRS, it or the complainant would file the decision with a superior court, making it enforceable. There is no statutory appeal process available for these decisions. Only judicial review would be available of the final decision of the IDRS.
Monetary Compensation – Limits will Increase
OBSI’s current maximum compensation is $350,000 would apply to the IDRS. It proposed that this maximum would be reviewed and increased in the future. There is also no statutory appeal mechanism which could have the potential to impact the fairness and effectiveness of the proposed framework for the parties to the dispute.
We are here to help!
If you would like to discuss the impact of any of the proposals on your business or would like help putting a comment letter together, please call us. If you would like to comment on the proposals, make sure to have them in by February 28, 2024