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
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 CanadianFundWatch.com 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.