OBSI an industry body trying to help the public?

[admin]

Subject: Roseman: Ombudsman can't resolve dispute with members over compensation

Ombudsman can't resolve dispute with members over compensation
TORONTO STAR
By Ellen Roseman | Tue May 24 2011

Canada’s large investment firms are fighting with the Ombudsman for Banking Services and Investments (OBSI), which can review client complaints and recommend restitution of up to $350,000.

They think OBSI’s decisions are too favourable to investors and too costly for industry members, in some cases. They want to work with other complaint mediators.

Five investment dealers – RBC, TD, Manulife, Investors Group and Macquarie Group – met with securities regulators to seek exemption from mandatory participation in OBSI earlier this month.

Regulators denied their request, but asked the ombudsman to explain and justify the method used to calculate investment losses.

“We are confident that we are resolving complaints fairly. We welcome oversight by the regulators to provide assurance to all stakeholders that we perform our mandate in the public interest,” says Doug Melville, the lawyer who has headed OBSI since 2009.

In a consultation paper to be released later this week, the ombudsman will try to address the industry’s concerns and seek public support for keeping the status quo.

What’s behind the battle? I think there are three issues at stake.

Participation isn’t mandatory for banking disputes.

The federal government encouraged banks to set up and fund their own complaint handling system in 1996.

But in 2008, Canada’s largest bank (RBC) started using ADR Chambers for all its banking complaints. The federal government did not intervene.

While setting a precedent for OBSI’s banking operations, RBC’s move had no impact on the handling of investment complaints.

All members of Canada’s two national self-regulatory groups – the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) – had to join OBSI in 2002. They can’t pull out unless the rules are changed.

Investment complaints soared after the 2008 market crash.

When stock prices fell by almost half from September 2008 to March 2009, many people looked at their investment portfolios to see how suitable they were for their age and stage of life.

If they had too much exposure to stocks, they filed a complaint with their investment dealer – and later with OBSI – as a faster and cheaper option than going to court.

However, OBSI handles complaints in a different way than a court would. When analyzing suitability, it looks at an investor’s asset mix going back many years – and not just before the 2008 crash.

In doing this, it’s departing from the trend to adopt a statute of limitations for investor restitution in court cases. In Ontario, investors can sue firms for only two years after they become aware of problems.

OBSI takes account of opportunity costs.

Some investment firms want to limit the compensation to the actual losses suffered by an investor. They may throw a bit of interest into the settlement.

OBSI, however, looks at the opportunities an investor gave up by adopting an unbalanced portfolio.

Suppose you complain about losing money because you were overweighted in stocks. You ask OBSI to investigate.

It starts by looking at the form you had to sign when opening the account (often called the “know your client” or KYC form), which sets out your knowledge, experience and investment goals.

If the recommended strategy didn’t fit your objectives, OBSI then tries to apportion responsibility between you and the investment firm.

Finally, OBSI sets up an imaginary portfolio that is suitable for your needs. It compares the sensible portfolio’s performance with the actual performance you achieved – trying to get you back to where you’d have been on day one if you hadn’t agreed to the unsuitable recommendation.

In two-thirds of cases, OBSI doesn’t recommend that the firm compensate the investor, Melville says.

However, OBSI currently has about 15 cases in which there’s a stalemate and the firm refuses to follow its recommendation. This ongoing quarrel is hurting investors and needs to be resolved quickly.

Ellen Roseman writes about personal finance and consumer issues. You can reach her at eroseman@thestar.ca.

[admin]

https://docs.google.com/viewer?a=v&pid= ... MmJh&hl=en

The google doc link above should take you to ADR Chambers 2010 Annual Rpt RBC Banking.......an alternate dispute resolution process that RBC has elected to go with while trying to avoid the OBSI system.

It strikes this author that RBC might prefer to hire its very own judge and jury in order to have greater control over the outcome of any disputes that come it's way. My thoughts are that this process should be avoided like a Kangaroo court should be avoided. Abused and violated financial clients should (if they can) pursue any financial predator in an open, reasonably unbiased court of law, and not in an arena where the referee is chosen, bought and paid for by your opponent. I could be wrong on some exact specific details and I await and welcome corrections to come my way.

ADR Chambers 2010 Annual Rpt RBC Banking

https://docs.google.com/viewer?a=v&pid= ... MmJh&hl=en

[admin]

FINANCIAL POST
Theresa Tedesco May 12, 2011 – 7:57 AM ET | Last Updated: May 12, 2011 8:33 AM ET

Officials from RBC Capital Markets Ltd., TD Securities and Manulife Financial Corp. are meeting today with securities watchdogs and industry self-regulating agencies to argue for changes to the way brokerage firms are forced to resolve disputes with their aggrieved customers.

FP Street has learned that a meeting has been scheduled at the offices of the Ontario Securities Commission, the country’s top securities regulator, in the wake of an unsuccessful attempt by RBC, TD and Manulife to pull out of a mandatory provision that requires brokerage firms to mediate through the Ombudsman for Banking Services and Investments (OBSI).

OSC chairman Howard Wetston is hosting the meeting that will include William Rice, chair of the Alberta Securities Commission and current chair of the Canadian Securities Administrators (CSA), the national umbrella organization responsible for securities regulation, Susan Wolburgh-Jenah, president and chief executive of the Investment Industry Regulatory Organization of Canada (IIROC), her counterpart at the Mutual Fund Dealers Association of Canada (MFDA) Larry Waite, and Douglas Melville, chair of OBSI. The brokerage firms will also be represented at the afternoon session.

A mutiny has been in the making for months because a growing number of investment dealers are refusing to accept OBSI’s recommendations in as many as 50 cases.

At the heart of the dealer revolt is OBSI’s loss calculation methodology used to figure out compensation to be paid to aggrieved customers.

There is considerable difference of opinion on OBSI’s methodology for calculating losses. The ombudsman’s office does not negotiate with its member firms directly. Rather, it is tasked to reach a “fair” conclusion based on the facts of each individual case.

The investment dealers are up in arms because OBSI has been assessing opportunity costs on suitability without consultation. Many of OBSI’s decisions are not only factoring in money lost if a dealer puts a client in an unsuitable investment, the mediator is also awarding costs for lost opportunity.

The major firms argue there is no oversight of the banking ombudsman by any regulatory body, and its powers have been expanded considerably since its creation in 1996 with no accountability.

“The last thing the big dealers want is to send something to OBSI because they aren’t going to get a reasonable, cogent and logical analysis of a complaint,” said an industry observer. “This is not a simple case where dealers want to castrate OBSI. They’ve been complaining for years. They want choice.”

What made the long simmering dispute finally boil over was the introduction of the CSA’s national instrument 31101, part of broader registration reform tabled in 2009, that states dealers must provide their clients with independent dispute resolution or mediation services at the brokerage’s expense.

However, that provision collides with a 2002 rule by IIROC and the MFDA which makes it mandatory for all brokerages to use OBSI, which is funded by its 600 participating banks and investment firms to sort out several hundred individual complaints a year that consumers and financial firms can’t resolve themselves.

The CSA had delayed the implementation of its rule for two years (it was scheduled to become effective in September) and the controversy is threatening to delay it further.

The large investment firms want IIROC and MFDA to adopt the CSA rule allowing them a choice of mediation and dispute resolution services for their customers. And they want the self-regulatory bodies to oversee OBSI, which IIROC and the MFDA have so far resisted.

RBC, TD and Manulife recently filed an application with IIROC and the MFDA for an exemption from the mandatory provision that requires them to resolve disputes through OBSI. That request was denied two weeks ago by IIROC, setting up today’s meeting.

Consumer advocate groups have not been invited to attend today’s gathering.

[admin]

thanks to ken from http://www.canadianfundwatch.com for this story
(get on his mailing list)

Email from a reader :
Mr. Kivenko , I just have to tell you what's it's like to deal with the Ombudsman. My complaint has been there for more than one year. We experienced a rather uncomfortable interview that seemed oriented towards pinning the blame on me.

Despite repeated messages , our calls are never returned. We don't know the status of their investigation or when we can expect a decision. The result is that my elderly relative ( whom I'm representing) is getting anxious , frustrated , angry and stressed out at the long time it's taken. This is making his “golden” years a nightmare and adversely affecting his health.

Quite frankly , we need the money to keep him in the retirement home and I can't keep financing this much longer. I'd get a lawyer and file a suit but am told if I do, OBSI will immediately stop their investigation. Our case is very simple- at age 8x he was sold U.S. Equity and Technology mutual funds with an early redemption penalty . They've lost a lot of money and now he's had to pay $1x,000 to escape from the funds , his adviser and the firm.

Why does the obvious take so long to decide?Are they trying to wear us down? We feel victimized twice -once when we got taken by the so-called adviser – and again when we tried to get our money back! - sender's name deleted by us Response: We often hear about very long cycle times at OBSI, OLHI and the MFDA/IIROC . There is little you can do except make them aware of your dire situation. They should have a procedure for accelerating a complaint investigation in cases of financial , emotional and physical distress.

(advocate comment......each of these industry paid organizations now appear to be kangaroo courts with loyalty to those who pay them. If you go into this process please know in advance that the referee might be being paid by the other team. Very, VERY, unprofessional examples of worst practices by industry people.)

[admin]

DRAFT

OBSI Governance Checklist
In the 1990’s the Federal Government gave OBSI the opportunity ( non-binding) to act as the nations ombudsman for banking services which was changed in 2002 to include securities by the CSA. Thus, OBSI in effect has a public service function. Back in 1996 there was a handshake understanding that the banks would use OBSI. The understanding was breached in 2008 when RBC banking chose its own dispute resolver service., ADR Chambers Despite this isolated incident and the voluntary nature of the arrangement, OBSI is recognized as the nation’s banking and investment ombudsman.
By its nature, OBSI has a huge complaint database entrusted to it. This fact plus its critical public service role makes it necessary that governance is set at the highest possible level. OBSI's governance process is delineated at http://www.obsi.ca/UI/AboutUs/Governance.aspx OBSI has 4 Committees, the most important one from a financial consumer viewpoint is the Standards Committee. The Standards Committee recommends and monitors OBSI’s quality and performance standards, independent reviews and the Code of Conduct, as well as overseeing any revisions to the Terms of Reference. Its composition is not publicly disclosed.

Some current governance issues:

Some of the governance issues:

Non-responsiveness of the Chair. The Chair didn't even acknowledge my email requesting disclosure of Section 27 rejection rationale .

Rejection of  Section 27 Ombudsman recommended amendment , a housekeeping change, without publicly providing rationale

Advocates are questioning why Complainant satisfaction surveys are no longer authorized  for release by the Board

Questions are arising why there are 2 Industry Directors from TD but no representative from mutual fund dealers , an industry where complaints are numerous and severe. Board Nomination Committee failure? 

Failure  to conduct required  3 year  Independent review as required by Framework with Regulators agreed to by the Board .

Of the OBSI cases I'm handling all range from 10 -18 months without a recommendation - i.e. not meeting  unambitious 80%/180 day target by wide margin . OBSI's own stats show massive below standard cycle time performance. The Board should be disclosing its plan to get back on track.

Poor disclosure of restitution methodology 

Recent complaint  interviewing techniques where victims are put on the defensive. I listened in on 2 of these calls as INTERVENOR and had to ask they be halted. Investigators were attempting to put words in people' mouths. Has the Board established/ approved a standard of conduct  ?

Not publicly posting Comment letters is poor transparency and not a BEST PRACTICE for a public interest entity like OBSI. Even the OSC posts comments for all to view.

RBC  is on a tirade at the performance of OBSI and openly condemning it for lack of accountability, understaffing / poor training of investigators and long case cycle times. They are totally satisfied with ADR Chambers and rave about their speed and professionalism.  They are not alone in voicing dissent.
EXTRACT: http://www.industrymailout.com/Industry ... 386&p=174b
 
This should be a RED FLAG FOR OBSI  BOARD [ RBC is Canada's largest Bank , mutual fund manager and mutual fund  dealer]
 
Note that the RBC Bank pulled out a few years ago. Now we see a pretty vocal denunciation of OBSI's processes from the Investment (IIROC ) side as well . Hopefully, OBSI's Board  approved the public disclosure of RBC's submitted Comments.  
·      "   RBC DS continues to have significant concerns about the overall lack of accountability and transparency with respect to OBSI’s public consultation and approval process for revising the ToR.     -Many of the recent amendments to the ToR expanded the scope of OBSI’s powers beyond that of a dispute resolution service, allowing OBSI to effectively adopt quasi SRO functions while it is not subject to the high standards of due process that are required of a statutory body. As expressed in a number of industry submissions to OBSI over the past years, this has created a significant dissatisfaction among the Participating Firms. The request for comments published on October 29, 2010 presents an example where substantive changes in OBSIs process were introduced as changes of a housekeeping nature and as such, would not be subject to due process that accompanies material changes to the ToR.RBC DS strongly supports investors’ access to dispute resolution services that are fair, transparent and efficient; however, RBC DS does not believe that OBSI provides a dispute resolution service with these merits."

If IIROC approves new Arbitration rules with higher limits ,  what will be OBSI's response?

Chair rotation - is 10 years too long?

There are additional issues on the operational side but the Ombudsman needs Board support including funding .  SIPA and others has always felt an Ombudsservice should not be industry funded and represented on the Board . The Board needs to develop a better relationship with all stakeholders. The Consumer/Investor Council will help  but that was a long overdue move recommended by myself  to Ms. Brown way back when Lauber was Ombudsman. An unresponsive Board is in our view an example of deficient governance.
 
K. Kivenko
Kenmar Associates
January 10, 2011

[admin]

CONSUMER COMPLAINTS ABOUT BANKING SERVICES AND INVESTMENTS GROWING RAPIDLY

For immediate release June 9, 2010

CONSUMER COMPLAINTS ABOUT BANKING SERVICES AND INVESTMENTS GROWING RAPIDLY
TORONTO – Complaints about the financial industry have reached record levels, according to new figures released today by the Ombudsman for Banking Services and Investments (OBSI).

OBSI looked into 990 banking and investment consumer complaints in 2009, representing a 48 % increase over 2008 and a more than tripling of the number of case files in just three years. OBSI also processed over 12,400 individual inquiries from consumers and small businesses in 2009.

As in recent years, OBSI saw more investment cases (599) than banking cases (391). Investment complaints continue to drive much of the overall increase in complaint volumes OBSI deals with. While banking sector complaints were up 21%, investment complaints were up a staggering 73%.

"The global economic crisis, coupled with sharp declines in financial markets, gave rise to much of the increase in complaints we saw," said Douglas Melville, Ombudsman for Banking Services and Investments. "However, despite the improvement in the markets over the last year, complaint volumes remain high. We expect this to continue."

OBSI looks into complaints about most banking and investment products and services including: debit and credit cards; mortgages; stocks, mutual funds, income trusts, bonds and GICs; loans and credit; fraud; investment advice; unauthorized trading; fees and rates; transaction errors; misrepresentation; and accounts sent to collections. Where a complaint has merit, OBSI may recommend compensation up to a maximum of $350,000.

"On the banking side, many of the complaints we saw dealt with mortgage prepayment penalties, rates on lines of credit, or fraud," said Melville. "On the investment side, the vast majority of cases were related to the suitability of investment advice. Investment advisors need to fulfill their "know your client" obligations as well as explain the risks and characteristics of the products they are recommending."

In 2009, consumers received compensation in 28% of cases reviewed by OBSI. The rate of compensation was 20% for banking complaints and 35% for investment complaints.

The Ombudsman for Banking Services and Investments (OBSI) is the national independent dispute resolution service for consumers and small businesses with a complaint they can’t resolve with their banking services or investment firm. As a free alternative to the legal system, we work informally and confidentially to find fair outcomes to disputes about banking and investment products and services.

For further information:

Tyler Fleming
Director, Stakeholder Relations and Communications
416-218-4244
www.obsi.ca

(advocate comments........please keep in mind as you read media releases from organizations such as OBSI, that these "referee's" are bought and paid for by the industry team. If you play against the industry keep in mind that the game might be rigged in their favour.)

[admin]

Here is an example of the continuous lack of serious response a consumer gets when using OBSI as a complaint resolution process...How long is my government going to allow the victims of financial crime be treated with such a complete lack of respect, dignity and consideration by this industry?

It is very important that everyone in the position to correct the injustices being committed against victims of financial crime everyday in this country are made aware of just how broken the system is. WE NEED SERIOUS REFORM IN CANADA.

You will notice OBSI does not address the serious issue of obstruction of their investigation by TD employee and perhaps even by TD itself...Why is this????

They also refuse to address the fact that there was a significant financial loss to all parties involved. In fact that loss is adding up everyday in the amount of 9.55 percent on a mortgage that was done in error without a doubt and in our belief purposeful intent to commit fraud/forgery.

There was also the issue of funds over $22,000 being lost due to employee's ERRORS in the application.....Why is no one addressing these issues.....why are tax paying Canadian Citizens being left to fend for themselves against these corrupt, unregulated financial bodies and subsequently the very groups that are supposed to be protecting the consumer after the fact.......Where is our democratic government in all of this????

[admin]

Kenmar Associates
Investor Education and Protection
1
ALERT ALERT ALERT ALERT September 3, 2009
the Ombudsman for Banking Services and Investments
To: Retail Investors
Widows and widowers
Seniors
Retirees and pensioners
The infirm

Many investors believe that the Ombudsman for Banking Services and Investments (OBSI) is a
government agency. It is not. OBSI is an industry sponsored and industry funded entity.
According to an Agreement with the CSA , dealers must utilize OBSI but there is no requirement
for bank participation as was evidenced in 2008 when RBC Banking arbitrarily decided to pull
out of OBSI In October, 2007 the report from the Navigator Company, an Australian firm with
extensive experience in external reviews of ombudsman services, was released .The 24
improvement recommendations outlined in the report were to be addressed by the introduction of
new Terms of Reference on April 1, 2009. This date was missed and the key improvements are
not implemented as of the date of this ALERT.
OBSI has appointed Douglas Melville as new Ombudsman and CEO effective August 25,
2009. His bio at https://www.obsi.ca/images/document/up-
1Douglas_Melville_Bio_sketch_EN.pdf We are hopeful that the many reforms needed will be
implemented under his leadership.
We have recently received a growing number of questions and complaints about this
organization. Here are a few cautionary tips, should you have occasion to bring your complaints
to them for resolution:

A. Direct dealings:

1. Never attend an interview (aka interrogation) with OBSI without being prepped by a
professional.
2. Don't allow them to put words in your mouth.-ask if conversation is being taped
3 Don't let them cross-examine you – always have a witness with you
4 Don't think that they are your friend, and get lulled into a false sense of security -they are
financed by the securities industry.
5 Make a list of everything you want to say and make sure you say it whether you are asked
about it or not
6. Do not volunteer information and do not answer questions you do not believe are relevant to
your case. Assume anything you say can and will be used against you.

B. Statute of Limitations

Every province in Canada has a statute of limitation .This is the time period in which you have to
take civil action. In Ontario the time spent with OBSI stops the limitation time clock [the
limitation time period in Ontario is a short two years]... In other provinces be sure to check what
the time period is, otherwise you may find that the time taken dealing with the firm and the time
Kenmar Associates
Investor Education and Protection
2
taken dealing with OBSI may use up all the available time. Once the limitation period is
consumed, civil action cannot be taken. OBSI have a target of completing 80 percent of their files
within 180 days. Some files can take longer, a year or more.

C. Consent for release is one-way

When OBSI undertakes to investigate your complaint, they send you a letter asking you to sign a
Consent for the release of your personal information, by your brokerage house to them. In the
letter to you, OBSI say that they may also request you to provide them with certain documents
related to your complaint, and “We may discuss your complaint with [firm name] and we may
exchange information and documents between you and [firm name]. We also may need to provide
information or documents to advisors outside of OBSI who we consult about your complaint.
“. It is significant to note that although OBSI may provide your brokerage house with the
information or documents that you have provided to them, there is no corresponding obligation
on their part to furnish you with copies of any information or documents that your brokerage
house may have provided to them, in the course of OBSI’s investigations. These documents may
be of great importance to you to help you make an informed decision as to whether to accept or
reject any recommendation OBSI may make to you, with regard to a possible settlement of your
complaint.

D. Right to inform police and regulators

We have come across yet another issue with OBSI. Specifically, it appears that their new
standard Consent letter has language that may prohibit you turning over their recommendation
Report to police or securities regulators even if you believe it could help your case in the event
fraud or other illegal act is suspected. The form’s language is set out below:

“ .. The success of our process depends on both you and [firm name] dealing with OBSI in a frank
and open manner. By signing this letter, you and [firm name] agree that OBSI’s correspondence, files
and any discussions we have during our review are confidential. You and [firm name] agree that if
there are subsequent legal or other proceedings you will not use any correspondence or information
from our process. Neither you nor [firm name] will try to compel OBSI to produce its files or
records. Nor will you try to have the Ombudsman, any OBSI staff member or advisor give evidence
or testify…”

We are continuing to work this issue with OBSI as we believe it encroaches on civil rights and
acts as an obstruction of justice. Of course, if they receive a subpoena from law enforcement they
will provide the Report but we feel that as a Canadian citizen you should have the right to turn
over documents you believe are relevant evidence without any constraint.




Contact kenkiv@sympaico.ca for a copy of the OBSI Survival Guide. It may save you a lot of
time, trouble and money.