Independent Evaluation of the Canadian Ombudsman for ... · Canadian Ombudsman for Banking Services and Investments’ (OBSI) Investment Mandate ... , the independent reviewer described

IndependentEvaluationoftheCanadianOmbudsmanforBankingServicesandInvestments’(OBSI)InvestmentMandate

May2016

DeborahBattellNikkiPenderIndependentevaluators

Tableofcontents

Keyfindings.................................................................................................................................1

Glossary......................................................................................................................................3

Executivesummary.....................................................................................................................4

1 Evaluationframework........................................................................................................10

2 Roleandpurposeofanombudsman..................................................................................11

2.1 Internationalguidelines........................................................................................................11 2.2 Consultationinsights.............................................................................................................13 2.3 Comment–relationshiptoregulatoryroles.........................................................................13

3 Governance........................................................................................................................15

3.1 Achievements........................................................................................................................15 3.2 Keyissues..............................................................................................................................15

4 Securingredress.................................................................................................................27

4.1 Currentsituation...................................................................................................................27 4.2 Bindingauthorityinpractice.................................................................................................31 4.3 Appealingbindingdecisions..................................................................................................32 4.4 Issueswithimplementingbindingauthority.........................................................................33

5 Independenceandstandardoffairness..............................................................................36

5.1 Overview...............................................................................................................................36 5.2 Consultationinsights.............................................................................................................36

6 Timelyperformance...........................................................................................................41

6.1 Currentperformance............................................................................................................41 6.2 Currentmeasurementprocess..............................................................................................41 6.3 Internationalcomparisons....................................................................................................42 6.4 Handlingenquiries................................................................................................................43 6.5 Investigation..........................................................................................................................46 6.6 Resolution.............................................................................................................................48

7 Feesandcosts....................................................................................................................52

8 Resources...........................................................................................................................53

8.1 Funding..................................................................................................................................53 8.2 Staff.......................................................................................................................................53

9 Accessibility........................................................................................................................56

9.1 Buildingfirmandindustrysupport........................................................................................56

10 Systemsandcontrols......................................................................................................58

10.1 Confidentiality...................................................................................................................58 10.2 Qualitycontrol...................................................................................................................58

11 Coremethodologies........................................................................................................59

12 Informationsharing........................................................................................................60

13 Transparency..................................................................................................................61

14 Progresssincepreviousreviews......................................................................................62

15 Summaryofinternationalcomparisons...........................................................................63

16 Summaryofrecommendations.......................................................................................64

Appendix1:IndependentevaluationTermsofReference..........................................................67

Appendix2:References.............................................................................................................70

Appendix3:Contributorstotheevaluation...............................................................................72

Appendix4:ExtractsfromtheOmbudsmanAssociation“PrincipalFeaturesofanOmbudsmanScheme”....................................................................................................................................74

Appendix5:Progressagainst2011IndependentReview...........................................................76

Appendix6:Independentevaluators.........................................................................................80

AcknowledgementsThankyoutoallthosewhotookthetimetosubmit–everyonebroughtavaluableperspective.WeparticularlythankthestaffatOBSIfortheirassistance.Itisnevereasytosupportanexternalreviewwhilesimultaneouslydealingwithbusinessasusual,increasingcomplaintnumbersanddevelopmentinitiatives.ThankyoualsotothefinancialsectorombudsmanservicesintheUnitedKingdom,AustraliaandNewZealandfortheirassistance.AndtoStephenFranksfromFranksOgilvie,Wellington,NewZealandforhisconstructivechallenges.

IndependentEvaluationofOBSI

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Keyfindings

• ThisevaluationprimarilyconcernswhetherOBSIisoperatingconsistentlywithitsMemorandumofUnderstanding(MOU)withtheCanadianSecuritiesAdministrators(CSA).ItcoversonlyOBSI’sinvestmentmandate.ItalsoconsidersOBSI’seffectivenessandefficiencywithrespecttoitsinternationalcounterpartsandprogressmadesincethelastreview.

• OBSImeetstherequirementsoftheMOUandhasperformedwellwithinitscurrentmandate:itsdecisionsarefairandconsistentwiththosemadeinternationally;andwithitslosscalculationtools,itsabilitytodeterminefairamountsofresolutionisworldleading.

• OBSIhasmadeexceptionalprogresssincethelastindependentreviewin2011–themainimprovementshavebeeningovernance,obtainingtheregulators’confidencetoexpanditsmandate,effectingthisnewmandateandeliminatingthebacklogofcomplaints.

• OBSIisunlikeothercomparableinternationalfinancialsectorombudsmeninthatitdoesnothavetheauthoritytobindfirmstoobserveitscompensationrecommendations(bindingauthority).Thisdrivesitsoperatingmodelandpreventsitfromfulfillingthefundamentalroleofanombudsman,securingredressforallconsumerswhohavebeenwronged:

o in2015,18%ofnon-backlogcomplainantswhoOBSIconsideredshouldreceivecompensation,receivedlessthanOBSIrecommended(onaverage$41,927less);including3.5%whowereatriskofreceivingnothing.

• Therealmischief,however,isnotthatsomeconsumersreceiveless,butthatOBSI’scurrentmandateallowsthistohappen.It,ineffect,tiltstheplayingfieldinfavouroffirms.Thefactthisishappeninginacomplexindustrythathasasignificantimpactonpeople’swell-being,andinwhichcustomerliteracyisgenerallylow,isofconcern.

• Theuseofnamingandshamingasanalternativemeansofpromptingredresshasnotbeenuniversallyeffective:in2015,sixfirmsrefusedtopay,despiteOBSIhavingpubliclynamed18firmssince2011.

• Namingandshaminghas,infact,beencounter-productive:publicisingrefusalshasservedtoreinforceOBSI’slimitationsandunderminepublicconfidenceinboththeresolutionsystemandtheinvestmentmarket.ThisisashameasOBSIhasbeeneffectivefor82%ofcomplainantswhohavebeenassessedasrequiringcompensation.

• Withouttheabilitytosecureredressinallcases,itisdifficulttofairlycompareOBSI’sperformancewithinternationalcounterparts.OBSI’smandatehas,however,ledto:

o anoperatingmodelthatisinherentlyinefficient–itisoverlyfocusedonresolutionthroughnegotiatedsettlementsratherthanjudicioususeofdeterminations

o longerresolutiontimes

o theriskofcreatingfuturebacklogs.

• ItwouldbeeasytocriticiseOBSIfornotdeliveringgreatervalueorpromotingitsservicesmore.Becauseitscurrentresourcesareconsumedbytheresolutionprocess,OBSIhaslittlelefttohelpconsumers,firmsandregulatorslearnfromthecasesresolvedortoidentifymorewidespreadissuesandtrends.And,becausethelessonsarenotshared,OBSIisunabletofulfilanombudsman’sroleinhelping:

o preventfuturecomplaintsfromarising

o improvetheinvestmentindustry

o liftconsumerconfidenceintheinvestmentmarket.


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• Moreover,itismoredifficulttoconfidentlypromoteaservicethatisunabletoassureandsecureredressforconsumers.

• Inourview,therefore,OBSIisnotatrueindustryombudsman,itisadisputeresolutionservice.

• RegulatorsmustnowdecidewhetherOBSIistoremainwithitscurrentlimitedmandate–andthereforelimitedeffectiveness,efficiencyandvalue–orwhetheritbecomesafullvalueombudsmanservice.

• Inourview,OBSIisreadytotakethisnextstep.


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Glossary

Eachofthesetermsisdefinedonceinthereport,butlistedheretoaidreading.ADR AlternativeDisputeResolution(Europeandirective)ASIC AustralianSecuritiesandInvestmentsCommission(regulator)CAO CustomerassistanceofficerCIAC ConsumerandInvestorAdvisoryCouncil(OBSIestablishedcouncil)CMS CasemanagementsystemCSA CanadianSecuritiesAdministratorsEDR ExternaldisputeresolutionE&O ErrorsandomissionsliabilityinsuranceFMA FinancialMarketsAuthority(NewZealandregulator)FOSAustralia FinancialOmbudsmanService–AustraliaFOSUK FinancialOmbudsmanService–UnitedKingdomFSP FinancialserviceproviderGFC GlobalfinancialcrisisIDR InternaldisputeresolutionIIROC InvestmentIndustryRegulatoryOrganizationofCanadaIO InternalombudsmanINFO InternationalNetworkofFinancialServicesOmbudsmanSchemesJRC JointRegulatorsCommitteeKPI KeyperformanceindicatorKYC KnowyourclientMFDA MutualFundDealersAssociationMOU MemorandumofunderstandingOBSI OmbudsmanforBankingServicesandInvestmentsOLHI OmbudsmanforLifeandHealthInsuranceSCT SuperannuationComplaintsTribunal(Australia)SRO Self-regulatoryorganisationTOR Termsofreference


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Executivesummary

SummarystatementOBSIprovidesanimpartialdisputeresolutionservice,withrobustprocesseswhicharehighlypersonalisedandfairtobothregisteredfirmsandinvestors.However,itcannotconfidentlyassureconsumersoffairredresswhenthisiswarrantedwhichunderminesitseffectiveness.OBSI’sefficiencyisaffectedbyaprocessthatis,bynecessity,overlyreliantonnegotiatedsettlements.Itshouldneverthelesscontinuetoprioritiseimprovingthespeedofresolution.Ultimately,tobeaworldclassombudsman,OBSIshouldhavethemeansandabilitytosecureredressandtodevotemoreresourcestohelpingpreventcomplaintsandliftindustrystandards.This,inturn,willhelpimprovebothawarenessandstrategicimpact.

BackgroundThisevaluationwascommissionedbytheOBSIboard,inconsultationwiththeJointRegulatorsCommittee(JRC)oftheCanadianSecuritiesAdministrators(CSA)followingamendmentsbytheCSAtoNationalInstrument31-103RegistrationRequirements,ExemptionsandOngoingRegistrantObligations(“NI31-103”)whichtookeffectonMay1,2014.TheamendmentsrequirethatallregistereddealersandadvisersoutsideofQuébecmakeavailableOBSIastheirproviderofdispute-resolutionservices.Previously,onlymembersoftheInvestmentIndustryRegulatoryOrganizationofCanada(IIROC)andtheMutualFundDealersAssociationofCanada(MFDA)wererequiredtoparticipateinOBSIthroughtheirself-regulatoryorganisation’srules.Inaddition,manyinvestmentfirmsparticipatedinOBSIonavoluntarybasis,includingmostscholarshipplandealers.WiththeamendmentstoNI31-103,theCSAexpandedOBSI’smembershiptoincludethoseportfoliomanagers,exemptmarketdealers,andscholarshipplandealerswhoseclientsincludeindividualsandwhooperateoutsideofQuébec.Inconjunctionwiththeamendments,OBSIsignedaMemorandumofUnderstanding(MOU)withtheCSA.TheMOUprovidesforsecuritiesregulatoryoversightofOBSItoensureOBSIcontinuestomeetstandardssetbytheCSA,andforaframeworkforcooperationandcommunicationviatheJointRegulatorsCommittee(JRC).TheMOUrequiredOBSItocommenceanindependentevaluationofitsoperationswithintwoyearsoftheamendmentstoNI31-103comingintoforce.

PurposeofthereviewThisevaluationwaslimitedtoOBSI’sinvestmentmandate.Thetermsofreference(TOR)arecontainedinAppendix1(notethatsincetheTORwasprepared,theAuthoritédesmarchesfinanciershasbecomeasignatorytotheMOU).Insummary,thepurposewastoformconclusionsastowhether:

A. OBSIisfulfillingitsobligationsasoutlinedintheMOUbetweenitandtheCSA

B. anyoperational,budgetand/orproceduralchangesinOBSIwouldbedesirableinordertoimproveOBSI’seffectivenessinfulfillingtheprovisionsoftheMOU.


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Althoughthisevaluationreferstoearlierindependentreviews,itsTORdifferfrompreviousones.ThisevaluationprimarilyconcernstheinnerworkingsoftheOBSIandwhethertheCSAcanhaveconfidenceinOBSIasanombudsmanservice.Forthisreason,thereisafocusontheextenttowhichOBSImeetsinternationaldefinitionsandexpectationsofanombudsman(seeAppendix2foralistofreferences).

ApproachWeundertookextensiveconsultation,includingwithconsumerandinvestorgroups,complainants,industrygroups,regulators,self-regulatorygroups,theOBSIboard,currentandformerstaff,andthe2011independentreviewer(seeAppendix3).Theconsultationwassupplementedbyareviewof36investigationfiles,internalguidelinesandboardminutes;minutesoftheJRC;ananalysisofstatisticalinformation;asurveyofcomplainantswhoreceivedlowerthanOBSI-recommendedcompensation;areviewofwebsiteandothercommunicationscollateral;aswellasahighlevelcomparisonwithinternationalstandardsandothersimilarombudsmanservices,principallyintheUnitedKingdom,AustraliaandNewZealand.Wereceivedmorethan70suggestions.Naturallywedidnotagreewithallsuggestions;someweconsideredlessimportantrightnow;somedidnotappeartobewidelysupported;andothershavebeensupersededbyevents(e.g.systemicissuesprotocol).Nevertheless,suggestionsnotcoveredinthisreporthavebeensummarisedandpassedontoOBSI,respectingconfidentialitywhererequested.

ConclusionsThemainconclusionsandrecommendationsfromthisevaluationfollow.Moreminorrecommendationscanbefoundthroughoutthereportandmostaredependentonimplementingthemainrecommendations.Recommendationsaresetoutinsection16.Progresssincethe2011reviewIn2011,theindependentreviewerdescribedtwostories:ontheonehandanorganisationundersiege,facing“highlevelsof[stakeholder]anxietyandfuriouscondemnation”andwithkeystakeholders“campaigningforitsdemise”whilehavingmadeexcellentprogressinternally.Inearly2016,wefoundsimilarstories,justnolongerlifethreatening.Themajordifference,itseemedtous,wastheremarkableimpactofaneffectivegoverningbody.Greaterregulatoryco-ordinationandsupporthadalsohadabigimpact.Inaddition,OBSIhadcontinuedtomakeprogress,especiallyinclearingitsbacklogofcasesarisingfromtheglobalfinancialcrisis(GFC).Fromtheperspectiveofexternalevaluators,however,thinkingnotjustaboutOBSI’spastbutitsfuture,itremainedunabletodeliverthebenefitsexpectedofaninternationalfinancialservicesombudsman.Andinmanyrespectsithadfallenbehindintermsofstrategicinfluence.Thisevaluation’sdebatecentredlargelyoneffectiveness–howbesttogetrecalcitrantfirmstocompensatecustomersintheamountsthatOBSIrecommendedasfair.Since2011,OBSIhaduseditsonlytool–publiclynamingfirmsthathadrefusedtocompensatecustomers–18times.Someoftheconsequenceshadbecomeclear:reputationaldamagetobothOBSIandindustrymorethantothosewhowerenamed,andasystemthatenabledfirmstonegotiatedownfromOBSI-recommendedamountsofcompensation.


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Inthisdebate,OBSIremainedcaughtbetweentwoforces:consumerandinvestoradvocateswhowereambitiousforOBSI,andindustrygroupswhomostlyappearedtoquestion(ratherthanovertlyoppose)greaterinfluence.Andsotheunderlyingquestionswere:doesCanadawantanoptimally-effectiveinvestmentindustryombudsman?IsOBSIreadyforandcapableoffulfillingabiggerrole?OverallconclusionsWefoundthatthingswerecontinuingtoadvanceinternally.Inadditiontoachievementsalreadymentioned,OBSIhadastrongerfinancialbase;itsuseofmodellingtoestimatelossesforcompensationpurposeshadbeenimprovedandappearedtobeacceptedbymoststakeholders(althoughsomeaspectsofitsapplicationremaincontentious);andithadsuccessfullyimplementedtheexpansionofitsmandate.Further,newmemberindustriesweresomewhatgrudginglycomingtotermswithOBSIastheirexternaldisputeresolution(EDR)providerandwesawexamplesofexcellentoutcomesandindustryco-operation.Butwealsounfortunatelysawexamplesofcontinuingobstructivebehaviour(the2015yearendedwithsixfirmsrefusingtopay,affectingabout3.5%ofcomplainantswhosecaseswereinsidemandateandwhoweredeemedworthyofcompensation)andstrongevidenceoffirmspayinglessthanOBSIconsideredfair(approximately18%ofnon-backlogcaseswherecompensationwasrecommended).WeheardcriticismsofaspectsofOBSI’sdecision-makingapproachwithrespecttocalculatinglosses,criticismsthatpersistdespiteconsultationandpreviousreviewfindings,andthatappearedtohavemorphedintomythology.Wesaymythologybecausewelookedcarefullyforevidencetosubstantiatetheselong-heldconcernsbutfoundverylittlebasisforcriticisingOBSI’sdecisions.Infact,wethinkfirmsshouldhaveahighdegreeofconfidence.Clearlyacircuitbreakerisrequired.AndweheardconcernsaboutOBSI’simpartiality.Onthisscore,wethinkindustryimpressionsarecausedbysomemisunderstandingsandresistancetotheroleofanombudsmanandthewayinwhichOBSImayoccasionallyrespondtoitsrelativelyweakerabilitytosecurecompensationthanothercomparableombudsmanofficesinternationally.Ontheconsumer/investoradvocateside,weconsidertheywerejustifiedincriticisingwhathasbecomeanasymmetricmodel:withoutbindingauthoritytosecurefairredress,OBSI,despiteassiduouslyfairprocesses,hasamodelthatisweightedinfavouroffirmswhoarefreetoignoreitsrecommendationsandnegotiatealoweraward.This,andnot“low-ball”offersperse,isthemischief.Wealsosawanombudsmanwhoseefficiencywaslessthanoptimalbyinternationalstandards.InternationalcomparisonshavebeenusefulinrevealingwhereandwhyCanada’sinvestmentombudsmanisfallingbehindandwhythissituationisnotentirelywithinOBSI’spowertoremedy.However,itisimportantthatOBSIcontinuestofocusonthoseaspectsofefficiencyitcaninfluence.Althoughtherearedifferencesinhowombudsmencalculatetimeliness,wefeelconfidentinsayingthatOBSItakeslongertoresolvecasesthanombudsmenelsewhere.Wehaveidentifiedacoupleofminorareasinwhichtimelinesscanbeimproved,butweconsiderthemaincauseisanapproachthatisoverlyreliantonnegotiatedsettlements.Judicioususeofearlierwrittendeterminations,backedbyaclearpowertosecureredress,wouldspeedtheprocess.

Inotherrespects,wefoundthatOBSIhadslippedbehinditsinternationalpeersintermsofstrategicinfluenceandthevalueombudsmanofficescandeliver.Bythatwemeanusingintelligencefromcaseworktohelppreventandreducecomplaints;empowercustomersandfirmstoresolve


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complaintsmoreeffectively;improveinvestmentserviceprovision;andmakeproactivecontributionstopublicpolicy.Overall,althoughwehavemadealotofrecommendations,fundamentallyOBSIhasfairprocessesandanombudsman’sethos.WethinktheCSAcanhavesufficientconfidenceinittomovetothenextstep–exploringhowitcanbestassistOBSItosecurefairredressforallcustomers.Weconsiderhavingbindingauthorityisdesirable:improvedorganisationalandconsumerconfidence,efficiency,effectivenessandimpactwillfollow.Togivesomeindustrymembersconfidence,however,anindependentreviewofalimitednumberoffactorsusedtomakefinaldecisionsoncompensationduemayhelpbreakalong-runningcircuit.Theseincludevicariousliability;treatmentofoff-booktransactions;expectationsofadviserswheninvestmentsaretransferred;andcustomerresponsibility.Ingrainedresistancetotheombudsmanmodelwillbehardertoshiftbut,OBSIhavingmovedon,itistimeforallstakeholderstoenableittomoveahead.PerformanceagainsttheMOUInassessingOBSI’scurrentperformance,itisimportanttonoteacontextofnewnessandtransition:

• ithadbeenonly20monthssincetheextensiontoOBSI’smandate–insufficienttimeforthenewerindustrysectorstohavehadmuchexperienceoftheservice;andeightmonthssinceclearingabacklogofcomplaintsthathadbuiltduringtheGFC

• OBSIwasenjoyinganodoubtbriefrespitefromthepressuresofhighcomplaintvolumes,enablingittoputsomeofthatcapacityintocatch-upprojects

• thenewombudsmanhadonlyjoinedOBSIinSeptember2015:industrywascomplimentaryabouttheexcellentstartshehadmade–cautiouslyandrespectfullywaitingandseeing.

WefoundOBSI:

• hasaneffectivegovernancestructurethatgenerallyprovidesforfairandmeaningfulrepresentationonitsboardandcommittees,promotesaccountabilityoftheombudsman,andallowsOBSItomanageconflictsofinterest

• wouldenhancetheperceptionofbalancedrepresentationbyhavingoneofthecommunitydirectorpositionsreservedforapersonselectedfromnominationsbyconsumer/investmentadvocacygroups

• providesimpartialandobjectivedisputeresolutionservicesanditsprocessesarefairtobothregisteredfirmsandinvestors,buttheeffectivenessoftheserviceissub-optimalduetoitsinabilitytoassureredressforconsumersduetoitspuredispute-resolutionapproachtoitsroleratherthanavalue-enhancing,strategicone

• makesdecisionsthatareinlinewithinternationalpractice,takingintoaccountgeneralprinciplesofgoodfinancialservicesandbusinesspractice,andrelevantlaws,regulatorypolicies,guidance,professionalstandardsandcodesofpracticeorconduct

• hasimprovedtimelinessintheintakeandresolutionstagesofitsdisputeresolutionprocessandiscurrentlyimplementingacasemanagementsystem(CMS)thatwillhelpimprovetimelinessduringtheinvestigationphase

• isunlikelytoreachinternationaltimeframesforresolutionbecauseofits(currentlynecessary)almostexclusiveuseofnegotiatedsettlements

• islesslikelytobeabletomakeeffectiveearlierwrittenrecommendationswithouttheabilitytosecureredress


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• issufficientlywell-resourcedtocarryoutcoredisputeresolutionfunctionsanddealwitheachcomplaintthoroughlyandcompetentlyasitcurrentlyoperates

• hassufficientbudgetforitscurrentoperatingmodel,isbuildingappropriatereservesasabufferforfutureevents,employswellqualifiedandhighlyexperiencedstaffandismaintainingstafflevelstoresourceimportantdevelopmentprojects

• wouldultimatelybeabletodelivergreatervaluewithsimilarlevelsoffundingifitwasabletolifttheefficiencyofitsdisputeresolutionprocessbyensuringameansofsecuringredress

• hasdevotedmuchlessresourcetopublicawarenessandoutreachthansimilarombudsmanofficesinternationally,buthasdonewellinenablingaccesstothosepeoplewhoareawareofitsservices

• haseffectiveandadequateinternalcontrolstoensuretheconfidentiality,integrityandcompetenceofitsinvestigativeanddisputeresolutionprocesses

• hasappropriateandtransparentprocessesfordevelopingitscoremethodologiesfordisputeresolution

• sharesinformationandco-operateswithCSAmemberstofacilitateeffectiveoversightundertheMOUandshouldcontinuetoenhancethis

• hasundertakenpublicconsultationsinrespectofmaterialchangestoitsoperationsandservices,includingmajorchangestoitsTermsofReference(TOR)

• wasalreadyreviewingitsallocationmethodologyandfeesfollowingtwoyears’experiencewithitsexpandedmandate.

KeyrecommendationsOurrecommendationsaredesignedto:

• liftconsumerandindustryconfidenceintheombudsmanrole

• improvetheefficiencyofOBSI’sdisputeresolutionprocess

• improvetheeffectivenessofOBSI’sdisputeresolutionmandate

• enhanceOBSI’svalueandawareness.

Wesuggesttheprimarystrategiesforachievingthisare:

• enablingOBSItosecureandassureredressforconsumers

• ensuringdirectconsumerrepresentationingovernance

• ensuringeffectiveimplementationofthesystemicissuesprotocol

• employingawiderrangeofresolutions,principallyearlieradjudicativerecommendations

• enhancingknowledgemanagementsystems

• movingtowardsamorestrategicombudsmanapproach.


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InitiativesOfthe20recommendationsmade(andsummarisedinchapter16),thefollowingareofgreatestpriority:

• OBSIisenabledtosecureredressforcustomers,preferablybyempoweringittomakeawardsthatarebindingonthefirm,andonthecustomeriftheyaccepttheaward(infullandfinalsettlementofthecomplaint)

• OBSI’sconstitutionaldocumentsareamendedtoprovideforonenon-industrydirectortobenominatedbyconsumer/investmentadvocacyorganisations

• OBSIemploysasuitableindependentexperttoreviewitsapproachtothoseaspectsofitslosscalculationmethodologythatremaincontentious

• OBSIdevelopsguidanceforindustryonhowitwillimplementthesystemicissuesprotocol

• OBSIintroducestheoptionofmakingearlieradjudicativedecisions

• theOBSIboardadoptsastrategicapproachtoombudsmanship,incentivisingstafftousetheintelligencegainedfromcasestohelpavoidandreducetheincidenceofcomplaints.

ImplementationWeexpectthefollowingfactorswillbetakenintoaccountwhenassessingwhichrecommendationswillbeimplementedandwhen(i.e.overthenextthreetofiveyears):

• whethertherecommendationsrelyonhavingabettermeansofsecuringredress,e.g.bindingauthority

• whetheradditionalfundingand/orskillsarerequired

• whethertherearelikelytobesustainedreductionsindemand.


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1 Evaluationframework

Thisevaluationhasbeenconductedtakingthefollowingstandardsandrequirementsintoaccount(seeAppendix2forlistofreferences):

• MOUbetweentheCSAandOBSI(Appendix1)

• InternationalNetworkofFinancialServicesOmbudsmanSchemes(INFO):Effectiveapproachestofundamentalprinciples

• ISO10003:2007Customersatisfaction–Guidelinesfordisputeresolutionexternaltoorganizations

• OmbudsmanAssociation:GuidetoPrinciplesofGoodComplaintHandling

• Thomas&Frizonreport,producedfortheWorldBank:Resolvingdisputesbetweenconsumersandfinancialbusinesses:Fundamentalsforafinancialombudsman,producedfortheWorldBank

• AustralianSecuritiesandInvestmentsCommission(ASIC):RegulatoryGuide139:Approvalandoversightofexternaldisputeresolutionschemes

• AustralianTreasuryguideline:Keypracticesforindustry-basedcustomerdisputeresolutionschemes.

Astheevaluation’sTORhasoverlappingrequirements–betweenpartsA)theMOUandB)operationaleffectiveness–theelementshavebeencombinedintooneset.Similarly,internationalcomparisonsanddevelopmentssincethe2011reviewarewovenintothegeneraltextalthoughconclusionsaredrawninthesections14and15andintheexecutivesummary.OBSIhasalsoprovidedasummaryofprogressagainstthe2011recommendations(seeAppendix5).


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2 Roleandpurposeofanombudsman

2.1 InternationalguidelinesItisimportanttoreferinsomedetailtointernationallyacceptedguidelinesforfinancialservicesombudsmen.TheseguidelinesinfluenceourownexpectationsofanexemplaryombudsmanserviceandsettheframeworkforevaluatingOBSI’sserviceandunderstandingstakeholderexpectations.Inthissectionweconsidermattersofprinciple.EvaluationofthedetailsofOBSI’sservicefollow.WeusedtheOmbudsmanAssociation’s1statementofprinciples,extractsfromwhicharesetoutbelow,asonesuchframework(seeAppendix4forfulltext).

Industryombudsmanservicesthereforehelpengenderpublic,andindeedinternational,confidenceandtrustinindustry–inthiscase,Canada’sinvestmentindustry.ToquoteThomas&Frizon(2012,p.10)intheirreviewfortheWorldBank:

1FormerlytheBritishandIrishOmbudsmanAssociation

Theombudsmanmodelisusedtoresolvecomplaintsmadebysomeone‘small’(citizen/consumer)againstsomething‘big’(publicbodyorcommercialbusiness).Ombudsmanschemeproceduresaredesignedtoredressthedifferencebetweentheresourcesandexpertiseavailabletothecitizen/consumerandthoseavailabletothebody/business.…theoutcomeisnotaffectedbyhowwelleitherofthepartiespresentshis/her/itscase,andrepresentationbylawyers(orothers)isnotnecessary.Ombudsmanschemerecommendations/decisionsarebasedonwhatisfairinthecircumstances,takingaccountofgoodpracticeaswellaslaw.Theyarecommittedtoachievingredressfortheindividual,butalso,wheretheyidentifysystemicfailings,toseekchangesintheworkofthebodiesintheirjurisdiction,bothindividuallyandcollectively.Wheretheyidentifyinjustice,theyseektoputthisright.Intheprivatesector,ombudsmenusuallyhavethepowertomakerecommendationswhicharebindingonthebodiesintheirjurisdictionunlesssuccessfullychallengedthroughthecourts.


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Similarly,inAustralia,ASIC(2013,p.11),hasstatedinitsregulatoryguide:

Itisalsonowexpectedthatombudsmenwillhaveamorestrategicapproachtotheirworkincludingusingintelligencefromcaseworktohelp:preventandreducecomplaints;empowercustomersandfirmstoresolvecomplaintsmoreeffectively;improvetheprovisionoffinancialservices;andmakeproactivecontributionstogovernmentpolicy.Thiscanbeillustratedinthefollowingquotes.

Experienceshowsthataneffectivefinancialombudsmanbenefitsfinancialbusinessesandthestate,aswellasbenefitingconsumers:

• Consumershavegreaterconfidenceinfinancialserviceswhentheyknowthat,ifanythinggoeswrong,theywillbeabletotaketheirdisputetoanindependentbodythatwillresolvetheissuequicklyandinformally,withouttheconsumerneedingalawyer.

• Financialbusinessesbenefitbecause:consumersaremorelikelytobuyfinancialproducts;thecostofresolvingdisputeswithconsumersiskepttoaminimum;andunscrupulouscompetitorswhoactunfairlyareheldtoaccount.

• Thestatebenefitsbecause:redresscanbeprovidedatminimumcost;feedbackfromanombudsmancanhelpimprovefutureregulation;andconfidentconsumersaremorelikelytoplaytheirpartinhelpingtodevelopasoundfinancialmarket.

Webelievethatindustry-supportedschemesplayavitalroleinthebroaderfinancialservicesregulatorysystem.Theexistenceoftheseschemeshasprovided:

(a) aforumforconsumerstoresolvecomplaintsthatisquickerandcheaperthantheformallegalsystem;and

(b) anopportunitytoimproveindustrystandardsofconductandtoimproverelationsbetweenindustryparticipantsandconsumers.

Ombudsmanschemespubliclyfeedbackthegenerallessonsfromcasestheyhavehandled,sostakeholders(includinggovernmentregulators)cantakestepstoimprovethingsforthefuture.(OmbudsmanAssociation.n.d.)Financialombudsmen:helptosupportimprovementsandreducedisputes;helpfinancialbusinessesthemselvestoresolvedisputeswithconsumers…(Thomas&Frizon,2012,p.6.)…ombudsmanschemes[are]becomingmoreproactiveinusingcaseworkintelligencetohelpserviceproviderstoimproveandtaking–alongwithregulators–amorestrategicapproachtodealingwithdisputes(Gilletal,2013,p.3.)


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2.2 ConsultationinsightsWefoundthatconsumerandinvestoradvocacygroupssupportedthewiderombudsmanrolesofprevention,improvement,systemicinvestigationandbindingdecisions,andwereambitiousforOBSItoembracetheserolesinadditiontocoredisputeresolution.FirmsandindustrygroupsgenerallyhadasomewhatlessambitiousagendaforOBSI.Theywantedtimely,cost-effectiveandexpertdisputeresolution.Somehadresidualconcernsaboutindustryknowledge.SomechallengedOBSI’simpartiality,holdingtheviewthat“levellingtheplayingfield”betweenfirmsandcustomerscreatedaconsumerbias(seesection5.2.1).SomefearedthathavingawidermandatethatincludedbindingauthorityandsystemicissueswouldturnOBSIintoaregulator(discussedbelowin2.3).OthersopposedbindingauthoritybecauseofresidualissueswithOBSI’scompensationapproachandbecauseitwouldturnOBSIintoatribunal(section4).Biggerfirmstendedtoconsideranexternalombudsmanwaslimitedinthevalueitcouldaddgiventhemuchhighernumberofcomplaintsthesefirmsresolvedthroughtheirowninternalcomplaintsprocedures.Thatsaid,mostnotedthatanexternalombudsmanwashelpfulinresolvingcomplaintsforclientswhoneededahigherperceiveddegreeofindependenceorwhopresentedareputationalrisk(e.g.fromsocialmediacampaigns).Theyalsosawitasacost-effectivealternativetothecourts.Ontheotherhand,stakeholderssharedcommongroundinacknowledgingthatanombudsmanmaybeabletoaddgreatervaluethroughamorestrategicfocusonhelpingpreventandreducetheincidenceofcomplaints.Thisisexploredfurtherinsection9.Toquoteonebank’sinternalcomplaintsresolutionstaffmember:

Giventhecommongroundandconsistencywithinternationalexpectations,werecommendthatOBSI’sboardsupportsastrategicapproachtoombudsmanship.Suggestionsastothepotentialaddedvalueservicesaremadethroughoutthereport,particularlyinsection9,andsummarisedinsection16.

2.3 Comment–relationshiptoregulatoryroles2.3.1 Systemicissues

TheJRChasnowdevelopedasystemicissuesprotocolwithOBSI.Thesubstanceofthisisdiscussedinsection3.2.4.1.Inthissectionwelayoutourgeneralviewsontheroleofombudsmenandregulatorsinthecontextofindustryconcernsaboutombudsmenbecomingmoreregulatoryinnatureiftheyhaveasystemicinvestigationresponsibility.Anombudsmanseekstodeterminewhetherthereisaproblemand,ifso,ensureitisresolvedfairly.Incarryingoutitsrole,anombudsmantypicallyworksco-operativelywiththepartiesbutalsohas

Recommendation1:

ThattheOBSIboardsupportsastrategicapproachtoombudsmanship,incentivisingstafftousetheintelligencegainedfromcasestoprovidesuitableadditionalservicestoparticipatingfirmsandguidancetocustomers.

Weusedtohavereallygoodtrendingdiscussionsbackwhenallbankingcomplaintswereintheoneorganisation.Therewasmorevalueinthewaytheylookedatcomplaints.


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toolstoincentiviseco-operation.Onamoremacrolevel,whenanombudsmanhasaviewofthewholeindustry,asOBSIhasforinvestments,itaddsvaluebyidentifyingwiderissues,oftenatanearlystage.Experienceandcontextualknowledgeoftenenablesittoidentifywhetheranissuepotentiallyaffectsmorecustomersthantheoriginalcomplainant,inotherwords,whetheritisapotentialsystemicissueandwhetheritissignificant.Theannualreportsofinternationalombudsmanofficesrevealsignificantbenefitsfromsystemicissuesinvestigations,includingprompting:

• betterwaysofcommunicatingwithcustomerstoavoidproblems

• improveddisclosure

• improvementstosystemsandprocesses

• improvedtraining

• identificationofgapsinthelaw.Inourexperience,resource-constrainedregulatorsfinditmoreefficienttoinvestigatepotentiallyserioussystemicissuesthemselvesanddelegatelessseriousmatterstoanombudsman.Arrangementssuchastheseareefficientandpromotepublicconfidenceintheregulator,thelaw,therelevantsectorandtheombudsman.Formalisingthearrangementsinthelaworthroughprotocolshelpsensureissuesarenotmissed.Thisiscommonpracticeinternationally.Providedthereisadefinitionof“serious”andaclearinvestigationprotocolforsystemicissues,industryshouldnotbeconcernedaboutanombudsmanbecomingaregulator.Theprimaryaimsaretoidentify:

• whetherthereis,infact,aproblem

• howmanypeoplehavebeenaffected

• whethertheproblemishistoric(inwhichcasehowlongithasexisted)

• whetheritcouldhappenagainandhowtopreventthat

• whatisneededtoputaffectedpartiesright.Itisusuallyonlywherethematterismaterialorwherefirmsrefusetoco-operatethatitisnecessarytorefermattersmoreformallyforregulatoryintervention.Firmsmayalsochoosetoself-reporttotheregulator–manyregulatorshaveaco-operationpolicytoencouragethis.2.3.2 Contributiontopublicpolicy

Anombudsmanmayalsouseitsexperiencetoinformpublicpolicy.WeunderstandOBSIprovidesperspectivesinformallybutconsideritwouldbetterdemonstrateOBSI’sexpertise,valueandindependenceifitcommentedmoreformallyonproposedlegislationandregulations.Thiswouldsupplementitsresponsibilitytoproactivelyinformregulatorsaboutsystemicissues.

Recommendation2:

ThatOBSIincludesapublicpolicyfunctionwithinitsstakeholderrelationsteamtoprepareformalsubmissionsonrelevantregulatoryorlegislativeproposals,andrespondtoregulatoryrequestsforadviceontheeffectivenessofexistingregulation.


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3 Governance

OBSI’sgovernancestructureshouldprovideforfairandmeaningfulrepresentationonitsBoardofDirectorsandboardcommitteesofdifferentstakeholders,promoteaccountabilityoftheOmbudsman,andallowOBSItomanageconflictsofinterest.

3.1 AchievementsOBSIhasmadesignificantprogresssincethelastreview,muchofwhichisduetogovernancechangesandsubsequentgovernancepractice.Despiteitsunusual,andinourview,ratherlargeboard,OBSIwouldmakeanexcellentcasestudyinthevalueandinfluenceofboards.Toquoteonerelativelynewboardmember,theboardischaracterisedby“rigourandhighstandards”and“thepassionforlivinguptothemandateisexceptional”.Havinginterviewedmostboardmembers,reviewedminutesandpolicies,assessedprogress,andlistenedtotheviewsofotherstakeholders,weagree.Majorachievementsinclude:

• establishingeffectiveboardroompractice:decisionsaremadeunanimouslyfollowingopendiscussion;andtheboardconductsdirectorperformancereviewsandboardeffectivenessreviews

• developingarigorousdirectorselectionpolicyandprocess

• improvingmanagementoversight,directionandmentoring,especiallywithrespecttoaddressingthebackloganddevelopingthenewchiefexecutive/ombudsman’sperformanceagreement

• engenderingculturechangewithintheorganization–empoweringmanagementtotakeaction,forexample,byusingOBSI’slong-held(butuntil2011seldom-used)namingandshamingpowers

• engenderinggreaterregulatoryconfidence,resultinginthedecisiontoawardOBSIthesoleresponsibilityforresolvinginvestment-relatedcomplaints,andexpandingitsmandate

• steeringtheorganisationthroughtheexpansionofitsrole

• ensuringithastheresourcestooperateefficientlyandplacingaclearpriorityonclearingthebacklog

• recruitingthenewombudsman.

3.2 KeyissuesKeyissuesraisedthroughconsultationandourownobservationsfollow.3.2.1 Independence

OBSIisanindependentnot-for-profitcorporation.Itisapprovedasadisputeresolutionschemebyregulators,butindependentofthem.OBSIhasitsownboardofdirectorsandby-laws.Theby-lawsstipulatethattheboardhasnoinvolvementindisputeresolutionandthatdirectorsactinthebestinterestsoftheorganisation.Somecustomersorconsumerrepresentativessubmittedthat,tobetrulyindependent,OBSIneededtobeastatutoryscheme.Internationallythereisarangeofeffectivemodels.TheUnitedKingdom’sFinancialOmbudsmanService(FOSUK)isastatutoryombudsmanwhilemostfinancialsector


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disputeresolutionservicesinAustraliaandNewZealandareindustry-based,butapprovedbygovernment.TheAustralianFinancialOmbudsmanService(FOSAustralia)hasaspecificmandatefromitsfinancialregulator,ASIC,toinvestigatesystemicissuesandresolvehardshipcases.Inourviewitisnotnecessarytobeconstitutedasastatutoryschemetobeeffective.Rather,anombudsmanofficemustbeconstitutedasademonstrablyindependentorganisationandgivensomeformofgovernmentalreinforcementoftheombudsman’sauthority.Regulatoryoversight,throughtheJRC,issomewhatmoreformalthanweareusedtoseeing.This,however,appearstobeappropriategiventherecentextensiontoOBSI’smandateandearlierindustryviews.OurreviewoftheminutesshowedtherelationshipbetweentheJRCandOBSIisconstructive.WealsoconsidertheJRChasbeeninstrumentalinliftingsomeofthevalueOBSIprovides,particularlythroughrequiringmoredetailedquarterlystatisticaldata.Theself-regulatorybodies(SROs),IIROCandMFDA,whoalsositontheJRC,havebeenparticularlyhelpfulinassistingwiththeadministrativetaskofensuringthatmembers’feesareinvoicedandpaid.Inotherjurisdictionsthishasbeenlefttotheombudsman,causingaconsiderableadministrativeburden.3.2.2 Boardcomposition

ConsumerandinvestmentadvocacygroupsvoicedstrongconcernsaboutthelackofconsumerorinvestoradvocacyrepresentationonOBSI’sboard.Inessence,theywouldliketoseeatleastoneconsumer/investordirectornominatedbythesegroupsastheyconsidertheboardhasnosuchinput.Thisisconsistentwiththe2011independentreviewrecommendation(TheNavigatorCompany,2011,p.9)tobringa“consumervoice”totheboard.TheInternationalNetworkofFinancialServicesOmbudsmanSchemes(INFO),EffectiveApproachestoFundamentalPrinciples(2014)state:

Similarly,theAustralianTreasury(2015,p.12)initsguidelineonkeypracticesforindustry-basedcustomerdisputeresolutionstates:

Membersofanygovernancebodyareanyofthefollowingwhichcommandspublicconfidenceintherelevantcountry:

• appointedbythelegislature,thegovernment,thefinancialregulator(s)orabodythathasonlypublic-interestmembers;or

• abodywithbalancedmembership–forexample:- onethirdeachfromthefinancialregulator(s),thefinancialindustryand

consumerbodies;or- equalnumbersfromthefinancialindustryandconsumerbodieswithan

independentchair;oramajorityareindependentmembers.


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Underitsby-laws,OBSIisnotlimitedtoanyparticularnumberofdirectors.Rather,itmusthavethreeindustry-nominateddirectorsandaminimumoffour(onemorethantheindustrydirectors)communitydirectors.Theorganisation’sofficers,includingthechair,maybeanexistingdirectorbut,ifnot,theminimumcomplementwouldbeeight.Thechairactsasacommunitydirectorbutisnotabletoexerciseacastingvote.Theboardmayalsohavecommittees,whosemembersmayincludenon-directors.Currentlytheboardhasthreecommittees:GovernanceandHumanResources,FinanceandAudit,andStandards(althoughinrecentyearsthiscommittee’sfunctionhasbeendischargedbythewholeboardbecauseofthenatureoftheissuestheboardhasbeenaddressing).OBSIcurrentlyhas10directors:fourmembers’termsexpiredrecentlyandtheyhavebeenreplaced.Theby-lawsenvisagestaggeringofterms,sotolosefourexperiencedmembersatoncemightordinarilybeaproblem,exceptOBSI’sboardislargeandoneofthenewmembershasextensiveexperiencewiththeorganisationhavingformerlybeenonOBSI’sConsumerandInvestmentAdvisoryCouncil(CIAC).WithrespecttotheINFOguidelines,OBSIhasamixedmodel,butisconsistentinhavingamajority(seven/ten)ofindependent(meaningindependentofindustry)members,includinganindependentchair.Directorsareselectedbasedonaskillsmatrix.Communitydirectorscomefromavarietyofbackgroundsandgeographiclocations,butarecharacterisedbystronggovernanceexperience.Theyalsobringbackgroundsinacademia,communityorganisations,law,businessandaccounting.Noneisnominatedbyconsumerorinvestoradvocacygroups.Fivesubmitterssuggestedthatcommunitydirectorsshouldhavenoindustrybackground.Weconsiderthecurrentlimitationondirectors,i.e.thattheynothavebeenemployedinindustryfortwoyears,tobesufficient.Itislikelythissuggestionisrelatedtoconsumeradvocacyrepresentationandthatourrecommendationinthisrespect(Recommendation3)providesanappropriatecounter-balance.Nordoweagreewithtwosubmitterswhosuggesteddirectorsbelimitedtotwo,twoyearterms.Weconsiderthecurrentarrangementisappropriateasittakessometimetolearnabouttheorganisationandtheindustry.Alldirectorsinterviewedimpressedwiththeirpriorexperienceanddedicationtodoingtherightthingbytheorganisation.WenoteinparticularthatitwastheindustrymemberswhoencouragedOBSI’sboardtobuildreservesratherthanimmediatelyreturnanysurplustomembersinordertoputtheorganisationonasounderfinancialfooting.Byallaccountstheboardhasbeenimpressiveineffectingaturnaroundsincethelamentablegovernancesituationrecordedinthe2011reviewandwearesomewhatreluctanttorecommend

2.7 Wheretheofficeisestablishedasacompany,theoverseeingentitymusthaveabalanceofconsumer,industryand,whererelevant,otherkeystakeholderinterestsinvolvedingovernance.

2.8 Representativesofconsumerinterestsontheoverseeingentitymustbe:a)capableof

reflectingtheviewpointsandconcernsofconsumers;andb)beapersoninwhomconsumersandconsumerorganisationshaveconfidence.


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anytinkeringwithwhatappearstobeasuccessfulformula.However,wehavemadeafewobservationsandrecommendationsbelow.Thegovernancestructureappearslarge.Therearemanydirectors,thereisastrongweightinginfavourofnon-industryrepresentatives,andnoconsumer(ratherthancommunity)voice(thiscomesinformallythroughtheCIAC).TheCIAC,whichisusefulinextendingOBSI’sreachintothecommunityandbringingconsumerviewstotheboardtableuptotwiceayear,shouldnotbeseenasasubstituteforaconsumervoiceontheboard.Weagreewiththe2011recommendationtohaveaconsumervoiceontheboard.Thereisnoeasywaytosubstituteforthepersonwhosefirstquestioncomesfromaconsumeradvocacyperspective.Accordingly,werecommendthatoneofthecommunitypositionsbereservedforaconsumer/investmentadvocateandthatthisbebasedonnominationsfromconsumergroups.Thenomineesshouldbesubjecttothesameselectionprocessasindustryrepresentatives,screeningfortheirabilityandwillingnesstoactinthebestinterestsoftheorganisation,ratherthanasasectoradvocate.Weacknowledgethatthecurrentboardhasworkedexceptionallywellandthatthisisinlargepartduetotheskillsofahighlyeffectivechair.Thissituationshouldbeabletocontinuewithaconsumeradvocatedirectoraboard.Inotherrespects,wesuggesttheboardconsiderswhetheritisnecessarytohavesomanymembers.Havingaconsumeradvocateboardmembermayreducetheneedformorethaneight,althoughwealsorecognisethebenefitsofhavingnationwiderepresentationandaccesstoasuitablywiderangeofskills.WedonotagreewithsomesubmittersthattheCIACanditsrolebeformallyincorporatedintotheby-laws.Weconsiderby-lawsshouldenablemaximumorganisationalflexibilityandnewonesshouldonlybecreatedwhenabsolutelynecessary.AlthoughweconsidertheCIACshouldremain,iftherecommendationtoappointaconsumer/investoradvocaterepresentativeisaccepted,OBSI’sboardwillneedtorethinktheCIAC’sroleandhowitcanbestaddvalue.Untilaconsumerrepresentativeisappointed,werecommendinvolvingtheCIACintheprocessofdevelopingthenextstrategicplanbyrequesting:

• writtenadviceonwhattheCIACconsiderstobethekeyissuesfromaconsumer/investorperspective

• invitingaCIACrepresentativetoparticipateintheboard’sstrategicplanningmeetingandpresentitspaper

• invitingaconsumer/investoradvocatetotheboard’sstrategicplanningmeeting.

Asanaside,wedonotconsideritnecessaryfortheCIACtopublishanannualreport,assuggestedbyonesubmitter,althoughitwouldbehelpfulforOBSI’sannualreporttoreferencesomeoftheissues,intelligenceandopportunitiestheCIAChasbroughtfordiscussion.


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3.2.3 BoardandCIACtransparency

OBSIcommissionsindependentreviewsandproducesanannualreportwhichincorporatesareportfromthechairaswellasfinancialstatements.Thesereportsareattractiveandcontainnovelwaysofpresentinginformation.Inourviewtheinformationandinsightsprovidedinthisreportcouldbeenhancedtoincreasetransparencyandaddevengreatervaluetostakeholders.Gooddevelopmentsinternationallyinclude:publishingtheombudsmanservice’sstrategicframeworkandannualplans(includingobjectives,initiativesandKPIs);andreportingagainstthoseKPIsandinitiatives.FOSAustraliaisaparticularlygoodmodelbecauseofitsreadabilityandtransparencyandbecauseithasclearlylightedonarangeofKPIsofmostsignificancetoitsstrategicobjectives.OBSI’snextstrategicplanisscheduledforcompletionbySeptember2016.Thisissensibleandgivesthenewombudsmanachancetoformherownrecommendations.WethereforerecommendthatOBSIpublishesitskeystrategicobjectives,initiativesandperformancemeasuresalongsideprogresstowardsthese.Someconsumerandinvestmentadvocatesubmitterscalledforarangeofadditionaltransparencymeasuresthatweconsidereddemonstratedanunusuallackoftrustintheboard.Forexample,therewasacallfortheboardtopublishitsminutesasitusedtodosometimeagoandforboardcommitteestoalsopublishminutes.Havingreviewedsimilarinternationalombudsmanservices,onlyone,FOSUK,makesitsboardminutespubliclyavailable.Wedonothaveastrongviewonpublishingboardminutes,butarenotconvincedthatdoingsowouldenhancetheeffectivenessofgovernanceorbebestpracticeinternationallyfromatransparencyperspective.Inanyevent,boardscanalwayschoosewhattheymakepublic.Accordingly,weleavethistotheboard’sdiscretion.Wedo,however,recommendthatboardcommitteesprovidemoredetailabouttheiractivitiesintheannualreport.

Recommendation3:

ThatoneofthecommunitydirectorpositionsonOBSI’sboardbereservedforaconsumer/investoradvocateandthatthisappointmentbebasedonnominationsfromconsumer/investoradvocacygroups.

That,untilaconsumerrepresentativeisappointed:

• theCIACisaskedtopresentapaperoutliningkeyissuesfromaninvestorperspectivefortheOBSIboard’snextstrategicplanningmeetingandtoparticipateinthatmeeting

• theOBSIboardinvitesaconsumer/investoradvocatetoattendthestrategicplanningmeeting.


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3.2.4 TermsofReference

Consumerandcommunitysubmittersraisedthefollowingmatters:

• lackofbindingauthority

• removalofOBSI’sabilitytoinvestigatesystemicissues

• carvingoutofsegregatedfunds

• six-yearlimitationperiod

• $350,000compensationcap

• 180-dayperiodforcustomerstosubmittheircomplainttoOBSI

• frequencyofindependentreviews

• specifyingresolutiontimeframes

• inclusionofreferencetopromotingawareness.Becauseofthesignificanceofthediscussiononbindingauthority,itiscoveredinsection4.3.2.4.1 Systemicissues

TheJRChasnowfinalisedOBSI’srolewithrespecttosystemicissues,anditsMOUwithOBSIhasbeenamended.TheprotocolrequiresOBSI’schairtoinformtheCSAdesignates,inwriting,ofanypotentialsystemicissueOBSIidentifiesandtoprovidesufficientdetailaboutwhyitconsidersthemattertobesystemic.OBSImustdosowithin30daysofidentifyingtheissue.Systemicissuesaredefinedintheprotocoltoencompass:

Recommendation4:

ThatOBSIenhancestransparencybypublishinginitsAnnualReport:

• keystrategicobjectives,initiativesandperformanceindicators,andprogressagainstthese

• moreinformationaboutboardcommitteeactivities.

a) multiplecomplaintsagainstaregisteredindividual(s)aboutproductsorservicesprovidedtoinvestors

b) multiplecomplaintsagainstthesameregisteredfirmaboutsimilarproductsorservicesprovidedtoinvestors,or

c) thesamecomplaintagainstmultipleregisteredfirmsinaregistrationcategoryand/oraboutsimilarproductsorservices

whichappearlikelytohavesignificantregulatoryimplicationsortoraiseconcernsabouttheregistrant’sfitnessforregistration.


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ThisprotocolineffectrequiresOBSItobealerttopotentialsystemicissuesandtodistinguishthosematterswhicharemoreserious(i.e.thatarelikelytohavesignificantregulatoryimplicationsorraiseconcernsaboutaregistrant’sfitnessforregistration)fromthosewhicharemoreminor(forexample,improvementstoprocessesortodisclosure).Inaddition,itmusthaveundertakensufficientenquirytobeconfidentthatapotentiallyseriousproblemhasoccurred.Althoughtheprotocolisnotexplicit,weassumeOBSIwillidentify,enquireintoandresolvemoreminorsystemicissueswithouttheneedtoreferthesetotheCSAdesignates.ThiswillrequireadefinitionofwhatOBSIconsiderstobeseriousandaguideforfirmsonhowitwillimplementtheprotocol,includingitsinitialenquiryprocess.Wewouldexpectthisresponsibilitytoliewiththeombudsman.WeconsideritpreferableforafinancialservicesombudsmantohaveformalinvestigativepowersforsystemicissuesenshrinedinitsTOR:theprotocol,however,isastepforward.Havingreviewedtheprotocolweconsideritcouldbeenhancedbyexpandingthedefinitionofsystemicissuestoincludeissuesarisingfromasinglecomplaint.Financialservicesproductsarecomplex,issuescanbehardtodetect,andcustomersneedtotrustrepresentationsandpromisesmadebyfirms.Itisnotunusualforsystemicissuestobeidentifiedbyoneparticularlyknowledgeableandconscientiousperson,asASIC(2013)envisagesinitsregulatoryguideline:

ThisisamatterfortheCSAtoconsider.

Recommendation5:

• ThatOBSIproducesaworkingdefinitionforwhatconstitutesamatterthatis“serious”enoughtoreferforregulatoryattention,andaguideforfirmsonhowitwillimplementthesystemicissuesprotocol.

• ThattheCSAextendsthesystemicissuesprotocoltoincludecomplaintsraisedbyasinglecomplainant.

120. Whileseveralcomplaintsordisputesofthesametypemayindicateasystemicproblem,wedonotbelievethatitissufficienttodefineorclassifyasystemicissuebyreferenceonlytothenumberofcomplaintsordisputesaschememayhavereceived.

121. Asystemicissuemaybeidentifiedoutoftheconsiderationofasinglecomplaintor

dispute.Thisisbecausetheeffectoftheparticularissuewillclearlyextendbeyondthepartiestothecomplaintordispute.Someexamplesofasystemicissueincludewherethereisamistakeinhowinterestiscalculatedorthereisamistakeinhowafeeisapplied.Alternatively,asystemicissuemayonlybecomeevidentaftertheschemehasreceivedmultiplecomplaintsordisputesthataresimilarinnature − forexample,whereaparticularintermediaryhasmis-soldfinancialorcreditproductstoanumberofconsumers.


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3.2.4.2 Segregatedfunds

ConsumerandinvestorgroupsubmitterswereconcernedthattheOBSIboardhaddecidedtocarveoutsegregatedfundsfromtherangeofproductscoveredbytheombudsman.Theirprincipalconcernappearedtobewhetheritwaspossibletofairlyconsideraportfolioifapartofthatportfoliohadbeenremoved.OBSIdoes,infact,includesegregatedfundsinitsportfolioassessments,butanyclaimsforlossesneedtobeseparatelyinvestigatedandresolvedbytheOmbudsmanforLifeandHealthInsurance(OLHI).Thisraisesconcernsaboutwhetherbothofficeswillconsidermattersthesameway;whetherOLHIhasaccesstolossadjustmentmethodologiesassophisticatedasOBSI;andaboutthefactthatcomplainantsmaybeputtotheeffortofgoingthroughtwodisputeresolutionprocesses.Although,historically,therehasnotbeenmuchinteractionbetweenthetwoombudsmanoffices,thenewOBSIombudsmanhasmetwithhercounterpartandagreedtoconductajointinvestigationwhenasuitablecasearises.Acloserlinkispreferableforcomplainantswhoshouldnothavetodealwithmultipleagenciesfortheirinvestmentportfolios.Intheabsenceofanyplanstohaveacommondisputeresolutionservice,werecommendthetwoombudsmencontinuedevelopingthisrelationshipandthattheydevelopacommonapproachtoidentifyingandquantifyinglosses.Astherelationshipdevelops,wewouldalsoexpecttoseejointpromotionoftherespectiveombudsmanservices.

Asanaside,Thomas&Frizon(2012,p.24&p.38)observed:

ObservingtheUKmodel,inparticular,itisclearthereareconsiderablebenefitsfromhavingoneservice,notleastineconomiesofscaleandscope,consistencyofapproach,consumerawarenessandaccess,andabilitytodelivervaluetoallstakeholders.

Recommendation6:

ThattheOBSIandOLHIchiefexecutivesdevelopajointapproachtoidentifyingandquantifyinglossesassociatedwithsegregatedfunds.

Mostombudsmenstartedcoveringasinglesector(suchasbankingorinsurance).Thenumberofcombinedombudsmen,coveringallsectors,hasgrownovertime–firstintheUnitedKingdomandthenIreland,NetherlandsandFinland–withothersconsideringmovinginthatdirection.”Anombudsmanwithpartialcoverageisbetterthannoombudsmanatall.But,eveniftheombudsmanonlycoversasinglesector(suchasbankingorinsurance),itishelpfulifallthefinancialbusinessesinthatsectorarecoveredbyoneombudsman.Itisunhelpfulifafinancialombudsmancoversonlythemembersofaparticularnationalindustryassociation–especiallywhere:

• thereismorethanoneassociation(sothatthereismorethanoneombudsman);or

• foreign-ownedfinancialbusinessesarenotmembers(creatinggapsincoverage).


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3.2.4.3 Six-yearlimitation

UnderOBSI’sTOR,OBSIcannotconsideramatterifthecomplainthasbeenmadetoaparticipatingfirmmorethansixyearsafterthetimethecomplainantkneworreasonablyoughttohaveknownoftheproblemorissuegivingrisetothecomplaint.Atermofsixyearsisconsistentwithmostotherinternationalombudsmanservices,butparticipatingfirmshavequestionedwhetheritshouldbemoreconsistentwithprovincialcourtjurisdictionswhereweunderstanditisbecomingincreasinglycommontoreducethelimitationperiodtotwoyears.Bearinginmindthatombudsmanservicesareestablishedtoenhanceaccesstojustice,thatinvestmenttimehorizonsarelong,andthatitwasonlyrelativelyrecentlythatOBSIintroducedasix-yearperiod,itmaybetoosoontoreducemandatorytimeframes.However,asnoinformationisavailableonwhichtobaseaninformeddecision,werecommendgatheringinformationaboutthelengthoftimebetweenthegenesisofaproblem,theclientnoticingitandacomplaintbeinglaid.Thedatashouldcoveratleastatwo-yearperiod.Arecordofcasesruledoutsidemandateattheenquiriesstagebecausetheyexceedthesix-yearlimitationperiodshouldalsobekept.OBSIshouldthenanalysethedata,reviewinternationalpracticeanddecidewhetheritistimelytoreducethelimitationperiod.

3.2.4.4 Compensationcap

OBSI’scompensationcap,at$350,000,hasremainedthesamesince2002.Judgingbythenatureofcompensationclaimsmade,veryfewapproachthisamountandonlyonecaseinvolvedcappingtheamountrecommended(althoughthefirmultimatelypaidthefullamountofloss,approximately$75,000morethanthecap).Thereisnowayofknowing,however,whetherandhowmanycomplainantsmayhavebeendeterredfrommakingcomplaintsforlargersumssimplybecauseofthecap.OBSI’smandateisnotrestrictiveinthatitallowscomplaintsofanysize;itisonlylimitedwithrespecttotheamountofcompensationitcanrecommend.ComplainantscanthereforeoptwhethertheywanttogothroughtheOBSIprocessortakeaclaimforalargeramounttocourt,orifIIROCmembers,accessthearbitrationserviceitoffers.Independentlawyersweconsultedadvisedthatclaimsneededtobeover$500,000beforetheywereworthpursuingincourt.IIROCarbitrationlimitscompensationto$500,000butisnotfreetotheclient.Costsaresplitbetweentheparties.ItisunclearwhyIIROCoffersanalternativerouteandwhy,initsbrochureoncompensation,itplacesOBSIthirdonitslistofpathwaysforseekingcompensation.Itisalsounclearwhythereisa$150,000differenceincompensationcapsbetweenarbitrationandOBSIasitseemsunlikelythemarginalcostofarbitrationwouldbeasmuchasthis.HavinganalternativewouldseemunnecessaryifOBSI’scompensationcapwerecloserto$500,000andithadbindingauthority.It

Recommendation7:

ThatOBSIrecordsinformationwheninvestigatingacaseaboutthelengthoftimebetweenthegenesisofaproblem,theclientnoticingitandacomplaintbeinglaid.Datashouldalsobecollectedattheenquiriesstageaboutcasesruledoutsidemandateforexceedingthesix-yearlimitationperiod.Datashouldcoveratleasttwoyearsbeforedecidingwhethertoreducethecurrentsix-yearlimitationperiod.


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wouldalsoreduceconfusionforconsumers.Wealsonotethatoneofthenewparticipatinggroupsfeltacompensationcapof$500,000wouldbemoreappropriatebecauseofthesizeofinvestorportfoliosintheirindustry.Thatsaid,nothinglimitsfirmsfrompayingabovewhatOBSIcanaward.Comparingcompensationamountsinternationally,FOSUKhasacapofGBP150,000(approximatelyCAD280,000),FOSAustralia,AUD309,000(approximatelythesameinCAD)andNewZealandschemesNZD200,000(approximatelyCAD176,000).OBSI’scompensationcapwouldnotseemtobeoutofalignmentalthoughwedidnotcompareaverageinvestmentportfoliosacrossthecountries.Wenote,however,thatFOSAustralia’sTORreflectASIC’srequirementtoreviewthecompensationcapeverythreeyearsbasedonthehigheroftwospecifiedindices,thereforeensuringtheamountstaysapproximatelyinlinewithinflation.Weconsiderthistobebestpractice.Onthefaceofit,theredoesnotappeartobeacompellingneedtoincreasethecompensationcap.Ontheotherhand,thereseemsnoreasonwhythecompensationcapshouldbeallowedtodriftrelativetoinflationandgrowthininvestmentportfolios.WethereforerecommendthatOBSIreviewsitscompensationcaprelativetoIIROC’sarbitrationschemeandtothepointatwhichacaseisworthbringingtothecourts.WealsorecommendthatOBSI’stermsofreferencebeamendedsothatthecompensationcapstaysinlinewithinflation.

3.2.4.5 180-dayperiodforlodgingcomplaints

WereceivedtwocomplaintsaboutthemannerinwhichOBSIhaddealtwithcasesthatwereoutsidethe180-dayperiodfollowingafirm’sdecisiontobringacasetoOBSI.ThecomplaintswerethattheperiodwasnotlongenoughandthatOBSIshouldexercisegreaterdiscretion.Asix-monthperiodisnotunreasonable.TimeframesinNewZealandandtheUKvaryfromtwotosixmonths,whileFOSAustraliahasatwo-yeartimeframe.OBSIisnotprecludedfromusingitsjudgementtoextendthetimeframesinsuitablecases,apointthedeputyombudsmanmakesinhis2015annualreview.OurreviewoffilessatisfiedusthatOBSIwas,byandlarge,exercisingitsjudgementappropriatelyandthatcustomersweregivenadequateopportunitiestoexplaintheirsituations.3.2.4.6 Frequencyofindependentevaluations

SevensubmitterssuggestedOBSIshouldbesubjecttoindependentevaluationsthree-yearlyratherthaneveryfiveyears.Weconsiderfive-yearlytobesufficientprovidedanombudsmancommissionsindependentreviewsoftheirdecisionsmorefrequently.Itisnotuncommontosubmitasmallsampleofdecisionstoanindependentreviewereveryyear,ortwo-yearly.Wethinkthisisgoodpracticeandprovidesbothfirmsandcustomerswithindependentassuranceoverthequalityofdecision-makingaswellasvaluablefeedbacktostaffonopportunitiesforimprovingresolutionpractice.WerecommendthatOBSIsubmitsasmallsampleoffilestoanindependentreviewerforevaluationononetotwooccasionsinbetweenformalfive-yearlyevaluations.

Recommendation8:

ThatOBSIreviewsitscompensationcaptobringitclosertotheIIROCarbitrationlimitandamendsitstermsofreferencetorequirethecompensationcaptobeadjustedinlinewithinflation,onathreeyearlybasis.


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3.2.4.7 Inclusionofdisputeresolutiontimeframes

FivesubmitterssuggestedincludingspecificinvestigationtimeframesinOBSI’sTOR.OBSI’sinvestmentcaseresolutiontimeframesaresetbytheboardandmaychange.WeconsiderthatboardandJRCoversightissufficient.TwosubmittersalsorecommendedOBSI’snon-financialdatabeauditedinthesamewayasthefinances.Wedonotthinkitisnecessarytomakethisaspecificrecommendation,buttheboardcouldconsiderincludingnon-financialsintheAuditandFinanceCommittee’stermsofreference.ThiscouldincludeKPImeasuresstipulatedintheannualplansuchastimeliness,consumersatisfactionandawareness.3.2.5 Ombudsmanandorganisationalaccountability

Theombudsmanhasanindividualperformanceagreementthatsetsoutherobjectivesfortheyear.Theseareconfidentialtotheombudsmanbuthavingreviewedthesewecanattesttothefactthattheyareclear,appropriateandmeasurableforthecurrentyear.Forfutureyears,werecommendenhancingtheombudsman’saccountabilitybyensuringthestrategicplaniscascadeddownthroughanannualplantoherperformanceagreement,andbyhavingawidersetofannualkeyperformanceindicators(KPIs),e.g.clientsatisfaction,firmsatisfaction,staffengagement,complaintsreceivedaboutOBSI’sservice,publicawareness,financialperformanceandproductivitymetrics.Toenhancetransparency,andinadditiontoRecommendation4,werecommendprovidingmoreinformationaboutcasesclosed;andaddingatablethatreportsworkflow,includinghowmanycaseswereonhandatthestartoftheyear,thenumberofnewcasesreceived,thenumberofcasescompletedandthenumberofcasesonhandattheendoftheyear.Butreportingisnotjustaboutaccountability.Itisalsoanopportunitytodemonstrateorganisationalimpact.Accordingly,werecommendOBSI:• reportsawiderrangeofresolutionsachievedbeyondfinancialcompensation:eventhough

theremayhavebeennofinancialloss,theremayhavebeenpoorserviceorotherfactorsthatledtosomeinconvenienceordissatisfactionthatwasultimatelyrecognisedinsomeway.Inthesecircumstances,aninternationalombudsmanwouldtypicallyreportonsuchwiderremedies,includingapologies,repaymentoffeespaidandanyinternalresponsesfirmsmayhavetakensuchasstafftraining

• overtime,evaluatestheimpactofitsdecisionsbycollectingcasestudiesfromindividualcomplainantsandreportinganyimprovementsfirmshavemadetotheirprocesses.

Inotherrespects,itisgoodpracticetoenablecustomerstomakecomplaintsaboutanombudsman’sprocessandservice.Mostotherinternationalombudsmanwebsiteswevisitedenabledconsumerstomakeacomplaint,andprovideddetailsoftheprocess.Wetherefore

Recommendation9:

ThatOBSIsubmitsasmallsampleofdecisionstoanexternalreviewerononeortwooccasionsbetweenformalfive-yearlyevaluations.


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recommendOBSIdevelopsaprocessforenablingconsumerusersofitsservicetomakeacomplaintaboutOBSI’scomplaintsresolutionserviceandpublishesthatonitswebsite.

Recommendation10:

ThatOBSI:

• preparesastrategicplanthatcascadesintoanannualplanandtheombudsman’sperformanceagreement,thatcontainarangeofKPIs

• publishesatableintheAnnualReportthatsummarisesworkflows

• reportsthewiderrangeofresolutionsachievedbeyonddirectfinancialredress

• developsaprocessforenablingconsumerusersofitsservicetomakeacomplaintaboutOBSI’sowncomplaintsresolutionserviceandpublishesthatonitswebsite.


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4 Securingredress

TheTORforthisevaluationrequiresanassessmentofOBSI’seffectivenessandthereasonsforsettlementsbelowamountsrecommended.AccordingtoThomas&Frizon(2012,p.9),foranindustryombudsmanschemetoengenderconsumerconfidenceandbeeffectiveitmustbeable“inpracticetosecureredressforconsumers”.

MuchofthedebateinCanadahasfocusedonwhetherOBSIshouldhavebindingauthority.Thecruxoftheissue,however,iswhetherOBSIcan,inpractice,secureandassureconsumersofredress,andwhether“namingandshaming”powershavebeeneffectiveinfulfillingthisrequirement.

4.1 CurrentsituationThemajorityoflargecompanies,andthosewhorespondtoreputationalrisks,typicallyagreetopayatleastaproportionofOBSI’srecommendedcompensation.However,OBSI’sonlytoolinthefaceofafirmrefusingtocompensateaffectedcustomersistopublicly“nameandshame”thatpartybypublishingthefactoftherefusal.Namingandshamingisexpectedtodeterothersfromrefusingtoabidebytheombudsman’sdecisiontoawardcompensationandincentivisecompliance.Tobeeffective,therefore,wewouldexpecttoseeareductioninthenumberofdefaultsasaproportionoftotalcasesresolvedovertime.Wewouldalsonotexpecttoseeunintendedadverseconsequences.WecouldfindnoevidencethatnamingandshaminghadimprovedthebehaviourofthosewhowereatriskofoutrightrejectingOBSI’sdecisions.Attheendoffiscal2015,sixcaseswereheadedinthisdirectiondespiteOBSIhavinguseditsnamingandshamingpowers18timessince2011anddespiteacontinuingreductioninthenumberofcasesitwasdealingwith.Themoreworrying(unintended)consequencewasthatfirmshadworkedoutthatifOBSIcouldnotrequirethemtopay,they(thefirms)effectivelyheldthebalanceofpower,enablingthemtonegotiatedowntheamountofcompensationpaidtoaffectedcustomers.ThequantumofrecommendedcompensationisajudgementcallandOBSI,evenwithitssophisticatedlosscalculations,stillhastomakejudgementsabouthowmuchofthelossesclientsshouldbear.ThisisthemajorreasonfirmsdisagreewithOBSI’srecommendations(see4.2.1below).AnanalysisofOBSI’sdataappearedtoshowaweightinginfavouroffirms.AnditappearedthatsomefirmstreatedOBSI’srecommendedcompensationastheirupperlimit,anamounttobenegotiateddownfromunlesstheyhadalreadymadeanofferbeforethecasehadbeenreferredtoOBSI.Forexample,in2015,23(18%)ofthe131non-backlogcasesthatOBSIassessedasdeservingcompensation,receivedlessthanOBSIrecommended.Thesameproportion,18%,receivedmorebuttheoveralldifferencesindollarvalueswerestark:thosereceivinglessreceived,onaverage,

Thetitle‘ombudsman’shouldonlybeusedforanexternalbodythatcomplieswithombudsmanprinciples–includingindependenceandeffectiveness–andwhichisableinpracticetosecureredressforconsumers.A‘pretend’ombudsmanwilldamageconsumertrust.


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$41,300lesswhilethosewhoreceivedmore(typicallywhenafirmwasreinstatinganoriginaloffer),received,onaverage,$13,000more.ItwasthereforeevidentthatalthoughOBSI’sprocesshelpedeffectsettlement,italsoenabledfirmstoawardlowerthanrecommendedcompensation.And,thebalancewasweightedinfavouroflossesratherthangains,byafactorofmorethanthreetimes.Evenifpublishingrefusalstocompensatehadbeeninitiallyeffective,weunderstandithaslostimpact:mediainterest,forexample,isreportedtohavewanedwitheachsuccessiverefusal.Mediainterest,inanyevent,waslikelytohavebeencounter-productive.Allfactorsconsidered,publishingrefusalsisoflimitedutilitybecause:

• customersrecovernoneoftheirlosses

• customersmayloseconfidenceinOBSIbecausetheyhavenotreceivedwhateithertheyorOBSIconsidertobeafairoutcome

• thebroaderpubliclosesconfidenceinOBSI:publishingrefusalstaintsnotonlythefirmbutOBSIasthereportsarepublicdemonstrationsofineffectiveness

• confidenceinregulatorsandSROsisunderminediftheyarenotseentobebackinguptheactionsoftheirappointeddisputeresolutionservice

• thewiderindustry’sreputationistainted,loweringconfidenceandpotentiallythepropensitytoinvest.

Insum,namingandshaminghasfailedtodeterundesirableconduct,hasincentivisedsomefirmstomakeloweroffersandfailedtoleveltheplayingfieldforatleast18%ofconsumerswhosecasesweredeemedworthyofcompensation.MuchofthedebateinCanadahasfocusedon“low-balling”–thatis,firmsmakingexcessivelylowoffersofcompensation.Butinourview,thisisnotthemischief.Rather,themischiefissystemic–thesystemenablesconsumerstobeputinaweakerposition,contrarytothepurposeofanombudsmanscheme.4.1.1 Reasonsforloweroffers

Thereasonsgivenforloweroffersbeingmadeinthe43(inclusiveofbacklog)casesin2015arerecordedintable1.


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Table1:Reasonsforlowoffers

Reason Firms(N) Firms(%)DisagreedwithOBSI’scalculationwithrespecttoclientresponsibility 13 30Didnotwanttopayrecommendedamount 5 11Vicariousliability 5 11GenerallydisagreedwithOBSI’sconclusions 5 11DisagreedwiththeKnowyourClient(KYC)conclusion 5 11Errorsandomissions(E&O)liabilityinsurerwouldnotpayforavoluntarysettlement

4 9

DisagreedwithOBSIbenchmarkused 4 9Disagreedwithsuitabilityconclusion 2 5Other 1 2Total 43 100**Doesnotequal100%duetoroundingSome30%offirmswhomadeloweroffersdisagreedwithOBSI’sviewsonthecustomer’scontributiontolosses.ThisisconsistentwithindustryconcernsaboutOBSIhavingaweightingtowardsconsumers.Lawsandcodesdonotgenerallycreateobligationsforclientsbeyondnotcommittingdishonestyoffences.Ascribingandquantifyingacustomer’sresponsibilitytomitigatelossesisthereforeamatterofjudgementalthoughthereappearstoberemarkableconsistencybetweeninternationalombudsmenbasedonareadingoftheircasenotes.Inthatrespect,wedidnotfindanythingunusualinOBSI’sdecisions.Moreimportantlygiventhesizeofsomerecommendedsettlementsininvestmentcases,disagreementsovermatterssuchaswhoshouldpayincasesofvicariousliability,andwhenerrorsandomissions(E&O)liabilityinsurersrefusetopay,areboundtocausetoughnegotiations.Thatsaid,firmsneedtoensureombudsmandecisionsareincludedintheirE&Ocover.4.1.2 Clientviews

WesampledclientswhohadreceivedlesscompensationthanOBSIrecommendedtoassesstheirexperienceandthepotentialimpactonOBSI’sreputation.Tenpeopleresponded.Themajorityofclientsreportedbeingpleasedtohavereceivedsomethingback(somethingbeingbetterthannothing)andwerecomplimentaryaboutOBSI’sstaffandefforts.Butmostreportedfeelingtheywereinaweakerbargainingpositionandsaidtheyhadsimplycavedin.Representativeresponsesarereportedbelow.


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Ontheonehand,itappearsthatOBSIcurrentlylacksboththemoralsuasionandthetoolstoachievefairredress.Ontheotherhand,itcouldbearguedthatatleastcustomersgetsomecompensationwhen,absentafreedisputeresolutionservice,theymightotherwisehavereceivednothingatall.Thekeyquestion,then,is:“Isbetterthannothing,goodenough?”Inanombudsmancontext,wethinknot.4.1.3 Conclusiononeffectiveness

HavingfoundthatOBSI’scurrentprocessandsanctionshavenotstoppedfirmsrefusingtocompensate;thattheyenableloweroffers;andareliabletoproduceresultsthatare“betterthannothing”,wehaveconcludedthatpublishingrefusals,whilepartlyeffective,iscounter-productive,likelytoleadtoworseoutcomesandunderminesthecredibilityoffirmsandregulatorsaswellasOBSI.Theseareharshwords,becausewealsorecognisethatOBSIobtainssomeverygoodresults:mostfirms(82%)payatleasttherecommendedamount(64%paytherecommendedamount,18%above),andmostpartiesworkhardtomakethesystemwork.

“Thecompensationwas$10000lessthanrecommendedbyOBSI.HoweverIwasunabletoaffordalawyertohandlethematterincourtinordertofightforthefullamount.Ididn'tfeelequippedtonegotiatebackandforthonmyownwiththefirm.Iwasgladtowalkawaywithsomething.”

“Iwasnotsatisfiedbutatleastitwassomethingafteralongperiodoftime.Ididcometorealizetwoveryimportantthings.First,inthisdayandagewhenthefinancialindustryhasgrownandincludesnowmanyfacets,thefactthatiftheydonotcomplywithyourruling,theonlypoweryouhaveistopublishtheirname.Itbecamemorethanevidentthattheyreallydon'tcare.Theyarenowsolarge,thereisnoshameattachediftheyarenamed.Secondly,thesystemneedsadjusting.TherearetwoagenciesIIROCand[OBSI]dealingwiththesamecaseandusingumpteenmanhourstodoso.IIROChasthepowertoenforcebuttheydonotdealwithcompensation.ThereforethelittleguyJoepublicsuffers.Isabettersystempossible?CanOBSIbegivenmorepowertoenforce????”“ItseemedtheeasywayoutatthetimeIwastiredofthestress”“IacceptedtheresolutionasIdidnothavetheenergyorpatiencetocontinue.OverallIfeelthatIwasundercompensatedforthedamageinflicted.Myexperiencewithfinancialfirmshasbeennegativeandfinanciallycostly.Unfortunatelywhenoneisworkingandbusywithotherprioritiesoffamilyandchildrenonedoesnothavetimetofocusonsuchthings(Thatiswhywepayinvestmentadvisers).”“0%satisfactionwiththeoutcome].My[relative]wasleftwithanoutrageousamountofdebtafterbeingtrickedintoinvesting$200,000.00worthofherhomeintohighriskaccounts.Sheislowincomeandwillhavetopayoffthesedebtsfortherestofherlife.TheOBSIrecommendedover$100,000.00bepaidbacktoherbutshereceivedlessthan$50,000.00fromtheinstitution.”


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However,wehavefoundthat,contrarytointernationalexpectationsofanombudsman,OBSIisnotabletoleveltheasymmetricplayingfield.NorcanOBSIanditsoverseers,theregulators,assurethepublicofOBSI’sabilitytosecureredress.Amoreeffectivemechanismforsecuringfairredressisthereforerequired.Absentthat,wewouldexpecttheinvestmentindustrytoriskgreatergovernmentinterventionandhighercompliancecosts.4.2 BindingauthorityinpracticeFinancialindustryombudsmanservicesinCommonwealthcountries(UK,Australia,NewZealand,India)typicallyhavethepowertomakebindingdecisions.Thisisalsotrueinotherjurisdictions.Inmostinstances,thedecisionsarebindingonfirmsbutcustomersretaintherighttopursueamatterinthecourtsorelsewhereiftheydonotagreewiththedecision.Customersare,however,typicallyboundbythedecisioniftheyaccepttheombudsman’sdecision.Thisisintendedtopreventconsumersrelitigatingtheircomplaintsinotherforums.Onceaccepted,determinationsusuallyremainconfidentialtotheparties.FOS-UKisacreatureofstatuteandParliamentmadeFOS-UK’sawardscourt-enforceable(bytheconsumer).TheFinancialConductAuthority,theUK’sregulatorcan,anddoes,takeactionagainstbusinessestheyregulatethatrefusetodowhattheOmbudsmanhasdetermined.TheUKalsohasaFinancialServicesCompensationScheme–asafetynetforcustomersofregulatedfinancialbusinessesthatareunabletopaywhattheyowe.AustraliahasonestatutoryEDRserviceinthefinancialservicessector–theSuperannuationComplaintsTribunal(SCT).Thisbeganoperatingin1994,pursuanttotheSuperannuation(ResolutionofComplaints)Act1993.Consistentwithbeingatribunal,itsrecommendationsarebindingonbothpartiesandenforceablebyASIC.SCTdecisionscanbeappealedbyeitherpartytotheFederalCourtonquestionsoflaw.ItisalsosubjecttojudicialreviewbytheFederalCourtandcomplaintscanalsobemadetotheCommonwealthOmbudsman.Wheretheserviceisnotstatutorybutregulatory,orgovernmentapprovalisrequiredtooperateasanexternaldisputeresolutionservice,asintheAustralianandNewZealandombudsmanschemes,thepowertomakebindingdecisionsistypicallyrequiredforapprovalbutitiscontractual.Inotherwords,itisaconditionofmembership.Suchauthorityisacceptedasacorecomponentofanombudsmanservicebutdoesnotgivetheombudsmanservicethestatusofatribunal.Thisisbecausethedecisionsbindonlyoneparty,thememberfirm,andbecauseofthecontractualnatureoftherelationship.InNewZealand,anEDRschemenotonlyhasbindingauthority,butitcanrefusemembershipifaschemeparticipantdoesnotabidebytheEDRdecision.BecausetherearemultipleEDRschemesinNewZealand,schemeswillshareinformationaboutrecalcitrantfinancialserviceproviders(FSPs).OtherschemeswillnotadmitanFSPasamemberifthereareoutstandingcompensationawards.ThiseffectivelymeansanFSPrisksnotbeingabletotrade:anFSPcannottradeunlessitisregistered,anditcanonlyremainregisteredifitisamemberofanEDRscheme.Ifaschemeexpelsafirmfornon-payment,itsdocumentedprocessistoreportthemattertotheregulator,theFinancialMarketsAuthority(FMA).InpracticeitwouldalsoreporttotheFinancialServiceProvidersregistrar.TheregistrarwouldthennotifytheFSP,givingit20daystoshowthatitisamemberofanEDRscheme.InJune2014,theFMAwasalsogiventheabilitytodirectderegistrationifbeingregisteredgavethemisleadingimpressionthattheFSPwasregulatedbyNewZealandlawortheFSPwasotherwisedamagingtheintegrityorreputationofNewZealand’sfinancialmarketsorlaws.Asat22July2015theFMAhaddirectedtheRegistrartoremovetwoentitiesduetotheirdisputeresolution


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schememembershipbeingcancelledposttheFMAissuingaNoticeofIntentiontoissueadirectiontotheRegistrar.Itisimportanttonote,however,thatregistrationdoesnotequatetolicensing.TheAustraliansystemissimilar:foranEDRschemetobeapprovedbyASIC,itmustbeabletomakebindingdecisions;FSPsmustbelicensed;andmembershipofanapprovedEDRschemeisaconditionofthatlicence.IfanFSPfailstocompensateasdirected,itmustbegiventheopportunitytocomply.IftheFSPrefusestodoso,FOSAustraliawillnotifyASIC,whichwillthentakeappropriateaction.Thisactionmayincludevaryinglicenceconditions;imposingaconditionontheFSP’slicencethatrequiresongoingcompliancewiththeEDR’srulesanddecisions;andsuspendingorrevokingthelicenceforthefailureto“conductbusinessefficiently,honestlyandfairly”.FOSAustraliaalsohasamemorandumofunderstandingwiththeCreditandInvestmentOmbudsman(CIO)regardingoutstandingcasesanddeterminations.Havingbindingauthority,withstrongregulatoryback-upandpenaltiesfornon-compliance,hascreatedincentivesonFSPstocomply.Tothebestofourknowledge,NewZealandEDRschemeshaveonlyneededtoreportoverseas-basedFSPs.Further,thereisnoevidencetosuggestthathavingbindingauthorityhasledtodifficultieswithfirms–allschemesreporthavingverygoodco-operationfrommostparticipantFSPs.4.3 AppealingbindingdecisionsAllombudsmanofficeswearefamiliarwithhaveputinplaceprocedurestoenablereviews,notappeals,andprincipallythroughinternalreviewprocesses.Thesereviewprocessesareclearlyoutlinedonwebsites.Complainantscontinuetoretaintherightnottoacceptanombudsman’sdecisionandtotakealternativeaction,e.g.throughthecourts.ThequestionofwhetherthereshouldbeanappealrightwasconsideredbyNewZealand’sFinanceandExpenditureCommitteewhentheFinancialServiceProviders(RegistrationandDisputeResolution)Act2008(FSPAct),whichrequiredFSPstobelongtoanEDRscheme,wasattheBillstage.TheMinistryofBusiness,InnovationandEnterprise’sguidelinesforpartiesseekingministerialapprovalasanEDR(MBIE,N.D.p.9)state:

Theguidelineswentontodistinguishbetweenanappealandareviewprocess,andtodiscouragesubstantivereviewsorappeals.

119. TheFSPActdoesnotrequireschemestoprovideappealrightstoanoutsideforum,suchastheDistrictCourt.TherewassomediscussionofappealrightsbytheFinanceandExpenditureCommitteewhichconsideredtheBillprecedingtheFSPAct.Itwasdecidedthatappealrightsandreviewprocesseswouldreducefinalityandwouldunderminethelowcostnatureofthescheme.However,anumberofFSPsconsideredthereneededtobesomebasicreviewrights.Accordingly,schemesmayconsiderinternalmechanismsforreviewingdeterminations.


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ReviewinAustraliaisinternal,andconductedbyadecision-makerwhowasnotinvolvedintheoriginalcase.Ombudsmandecisionsarejudiciallyreviewable.FOSUK,beingastatutoryschemehasaslightlydifferentprocessbuttheprincipleofhavingnosubstantiveappealremainsthesame.

4.4 Issueswithimplementingbindingauthority4.4.1 Meansofimplementation

BindingauthorityappearstobemorecontentiousinCanada,possiblybecauseombudsmanofficeswerenotsetupwiththispowerfromthestart.InsomerespectsitcouldbearguedthattheinvestmentindustryinCanadahasneverhadanindustryombudsman’soffice.Rather,ithashadadisputeresolutionservicethatoperateswithanombudsman’sethos.Incontrast,financialservicessectorombudsmeninAustraliaandNewZealandwereestablishedwiththeabilitytomakebindingdecisions:asnotedearlier,compliancewithombudsmandecisionswasaconditionofmembership.Morerecently(2008inNewZealand,after16yearsofhavingvoluntaryindustryombudsmen)bindingauthoritywasacknowledgedinregulatoryguidelinesissuedeitherbyregulatorsorgovernmentministries,followingtheintroductionofarequirementforprovidersofretailfinancialservicestoberegisteredorlicensedandtobelongtoanEDRscheme.DeterminingexactlyhowCanadacanimproveOBSI’sabilitytosecureredressforconsumersisabiggertaskthancanbeaccomplishedinthisevaluation.However,itappearstherearetwomainoptions:

• OBSIwouldnothavecontractualbindingauthoritybutwouldrevokeafirm’smembershipfornon-complianceandreportnon-compliantfirmstotherelevantregulatorwhowouldthentakeactionbasedonasetofpotentialstatedconsequences,includingpreventingthefirmfromtrading

• OBSIwouldhavebindingauthorityinitsownright,basedonitsmembershipcontract.

120. Forclarity,underareviewprocessadecisionmaybeconfirmedorrevoked,butmaynotbevaried.Anappealisareconsiderationofthedecisionbasedonthemeritsofthefacts(substantiveappeal),orontheprocess(proceduralappeal).Anappealbodyorcourtmaysubstitutetheinitialdecisionwithoneofitsown.

121. Ifanyreviewprocessesareprovidedforinascheme,itisimportantthatthereare

clearrulesforrefusingreviewsbasedonthesubstantivemeritsofthecase,asallowingsuchreviewsmayleadtoanunnecessarilyprotractedprocess.Thiswouldunderminethepurposeofdisputeresolutionschemesasasimple,lowcostmethodofresolvingcomplaints.Consumerdisputeresolutionschemesgenerallydonotprovideforreviewsorappealsforthatreason…

122. ItmaybepossibleforcomplainantsorFSPmemberstoseekjudicialreviewofthe

decision-maker’sdecision.Privateorganisationscanbesusceptibletojudicialreviewiftheyareexercisingapublicfunctionunderstatute.


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Thesecondoptionismoreconsistentwiththeombudsmanconceptinthatitissimplerandquicker–itdoesnotrelyonanotherpartytotakeactionandismoreimmediatelyproportionateinitsconsequences(doesnotautomaticallyresultinregulatoryattention).Moreover,bindingauthorityappropriatelyreinforcestheroleoftheombudsman’soffice:therewouldseemtobelittlepointinhavinganombudsmaniftheycannotmakeandsecurethosedecisions.Thereare,however,riskswithbindingauthority.Thegreatestpotentialriskisanincentivetointroducemoreformalprocessesanddetailedinvestigation,especiallywheretheawardsarelargeorwheretheymayhaveasignificantimpactonthefirmorindividualadviser.Thiscanbemanagedthroughbuildinggoodjudgementaboutwhichprocessismostlikelytoeffectresolutioninagivensituation:astheOmbudsmanAssociation’sprinciplesforgoodcomplainthandlingstate,anombudsmanneedstobe“Firmonprinciples,flexibleonprocess”.ItwouldalsonotbesurprisingifsomepartiesfearedtheimpactofbindingauthorityonOBSI’sculture.Asnotedearlier,OBSIiscurrentlyhighlysettlement/negotiationfocusedandwewouldnotexpectthattomarkedlychange(althoughwewouldliketoseesome“stiffening”ofthiscultureinanyevent–seechapter6.6.2).ThemajorityoffirmsrespectOBSI’sdecisionsandthereisnoneedtochangethatrelationship:bindingauthorityaidsefficiencyandeffectivenessinsecuringfairredressforthe18%ofcaseswherecompensationisawardedbutfirmsareunwillingtopayattherecommendedlevel.Otherombudsmenwithadjudicativepowerscan,anddo,chooseamongstresolutiontoolstodeterminethemostproportionateandexpeditiousapproach,whilealsomaintainingconstructiveworkingrelationships.Ultimately,noprocessorpowers–moralsuasion,publishing,bindingdecisionsorotherwise–willstopthosewhocannotpayfromdefaulting.Bindingdecisionsare,however,likelytobemoreeffectivethannamingandshamingwhenfirmscanpay,buteitherrefusetopayorwanttopayless.Similarly,theycanbeeffectivewhencustomersarebeingunreasonable;forexample,whentheyhaveexcessivelyhighexpectationsoftheamountofcompensationdue,ordonotacceptanycontributoryfault.Issuingabindingdecisionwhensettlementnegotiationsbecomeprotractedcanalsoimproveefficiency:theactofpresentingawrittendecisioninitselfcanfacilitatesettlement.WeconsiderthebenefitsofhavingtheabilitytomakebindingawardsoutweighthedisadvantagesandthereforerecommendthatOBSIbeenabledtosecureredressforcustomers,preferablybyempoweringittomakedecisionsthatarebindingonthefirm,andonthecustomeriftheyaccepttheawardedcompensation.4.4.2 Appealrights

IntheCanadiancontext,someindustrypartiesconsultedarguedthatCanadacouldnotintroducebindingauthoritywithoutarightofappeal.Thisappearedtobebasedontwofactors:a)thatbindingauthoritywouldeffectivelymakeOBSIatribunal,andb)thatCanadianswereusedtohavingarightofappeal.Asnotedin4.4above,internationally,financialservicesindustryombudsmenarenotconsideredtobetribunalsbecausetheirbindingauthorityiscontractualandbecausetheybindonlyoneparty.WecannotcommentontheCanadianculturalcontextbutwecansaythatThomasandFrizon(2012,43-44)alsodonotconsiderappealrightstobenecessaryifthereissomelegalcompulsiononfinancialbusinessestobelongtoadisputeresolutionschemeandjudicialreviewisthereforeavailable.


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Judicialreviewisconcernedwithprocedural,notsubstantive,fairness.Inthatrespect,itdiffersfromarightofappealexceptwhentheissuesarepurelylegalones.Itwouldberareforanawardtobeoverturnedonitsmerits,providedthepositionreachedwasonethatwasopentoareasonabledecisionmaker.Ifadecisionweretobesubstantivelyappealedtoanyotherauthority,forexamplethecourtsoranindependentarbiter,itwouldeffectivelynegatethepurposeofanombudsmanandunderminetheombudsman’sauthority.Havinganappealprocesswouldalsounderminethepurposeofombudsmanoffices:fair,fastandinformalresolutionasanalternativetothecourtsystem.WeunderstandjudicialreviewwouldnotbeanappropriateoptiongivenOBSI’scurrentmandate,howeverweconsiderthatsomeformofreviewratherthanappealisdesirable.Wethereforeconsiderthataninternalreviewprocessshouldbeestablishedalongsidebindingauthority.4.4.3 Coverage

AnyextensiontoOBSI’smandatewouldneedtobelimitedtoinvestmentsgiventhatthebankingsectorhascontestableprovisionofEDRservices.Ourviewsoncompetitionamongstdisputeresolutionservicesarenotpartofthisreview.WesimplynoteThomas&Frizon’s(2012,p.24)observationthat“mostombudsmenstartedcoveringasinglesector(suchasbankingorinsurance).Thenumberofcombinedombudsmen,coveringallsectors,hasgrownovertime–firstintheUnitedKingdomandthenIreland,NetherlandsandFinland–withothersconsideringmovinginthatdirection.”

Recommendation11:

ThatOBSIisenabledtosecureredressforcustomers,preferablybyempoweringittomakeawardsthatarebindingonthefirm,andonthecustomeriftheyaccepttheaward,accompaniedbyaninternalreviewprocess.

Iffinancialbusinessesarecompelledbylawtobecoveredbythefinancialombudsmanandthatombudsmanmakesbindingdecisions,someoversightbythecourtsmayberequired…Butthatdoesnotrequireafullappealtothecourtsonthemeritsofthecase.Itisenoughthatthecourtcanrequiretheombudsmantoreconsiderthecaseifitcomestotheconclusionthattheombudsmanfailedtofollowafairprocedure.


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5 Independenceandstandardoffairness

OBSIshouldprovideimpartialandobjectivedisputeresolutionservicesthatareindependentfromtheinvestmentindustry,andthatarebasedonastandardthatisfairtobothRegisteredFirmsandinvestorsinthecircumstancesofeachindividualcomplaint.Whendeterminingwhatisfair,OBSIshouldtakeintoaccountgeneralprinciplesofgoodfinancialservicesandbusinesspractice,andanyrelevantlaws,regulatorypolicies,guidance,professionalstandardsandcodesofpracticeorconduct.

5.1 OverviewThefileswerevieweddemonstratedconsiderableattentiontofairnessinreachingdecisionsaboutwhetheracomplainant’scasewaswithinOBSI’smandate,whetherthecomplainantwaseligibleforcompensation,andtheextenttowhichcomplainantsthemselvescontributedtothelosses.Wefounditnecessarytogetadditionalclarificationaboutthemeritsofadecisioninonlyonecase.OBSI’soutcomes,withconsumersreceivingcompensationin43%ofcases,areconsistentwiththoseininternationaljurisdictions.In2015,FOSUKreportedcompensationratesrangingbetween25%and45%dependingontheinvestmentcategoryandAustralia’sCIO48%.FOSAustraliadidnotpublishitsequivalentoutcomesfortheinvestmentcategory.However,asnotedinthepreviouschapter,OBSI,withoutbindingauthoritytosecurefairredress,infactoperateswithinanasymmetricprocess.ItisweightedinfavouroffirmswhoarefreetoignoreOBSI’srecommendationandnegotiatealoweraward.Ifthisinherentimbalancewerefirstaddressedbygivingconsumersbetterredress,thenOBSIcouldbemorefairlyassessedastoitsoverallobjectivityandimpartiality.5.2 ConsultationinsightsWhenconsumerscomplainedaboutlackoffairness,thiswasusuallyinthecontextoftheirowncases,andthelackofsuccesstheyhadexperienced.SomeputthisdowntothefactthatOBSIwasindustry-funded,allegingalackofindependence.Wefoundnogroundsforthisallegation.Infact,OBSIwassimilarlyaccusedbysomemembersofindustryforbeingweightedtowardsconsumers.Thisisareasonablytypicalstateofaffairsforombudsmanoffices–conceptionsoffairnessvary.Anombudsmantypicallyaddressesthistensionbyhavingprocessesthatareconsistentwiththeprinciplesofnaturaljustice;byprovidingclearandwell-arguedreasonsfortheirdecisions;bybeingconsideredandconsistentintheirdecision-making;andbybeingasdispassionateashumanlypossible.OBSI’ssuccessintheseendeavoursisdiscussedinsection6.Inthissectionwediscussarangeofconcernsconsidered,primarilybyindustry,toconstituteevidenceoflackoffairness:

• thelanguageof“levellingtheplayingfield”

• investigatingmorewidelythantheoriginalcomplaint

• investigatingmattersapparentlyclearlyoutofmandate

• advocatingforclientswhennegotiatingsettlements

• providingaviewtoclientsonsettlementoffersprofferedbyfirms

• decliningtoprovidelosscalculationspreadsheets

• meaningoffairness


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• consistencybetweenindustryandOBSIstandards

• acceptingcomplainants’statementsasfact.5.2.1 Thelanguageof“levellingtheplayingfield”

Somesubmittersconsideredthatthenotionof“levellingtheplayingfield”betweenconsumersandfirmsmeantthatOBSIwasautomaticallybiasedinfavourofconsumers.Frankly,thisisthepurposeofanombudsmanservice–toensurethatpeoplewhoarelessknowledgeablethanthefirmstheydealwithareabletoputtheircase,beheardandreceivesomeformofredressifappropriate.Thatisnotthesamethingas“bias”inanimpropersense.Norisitaninvitationfortheombudsmantoadvocateonbehalfofconsumers.Welookedcarefullyforanyevidenceofsystemicweightinginfavourofcomplainantswhenreviewingfilesandprocesses,butfoundnothinginpracticetosupportthisbelief.Itispossiblethatconcernsarosemorefrommisunderstandingsormisplacedexpectationsaboutanombudsman’srole.Rather,consistentwithgoodombudsmanpractice,wefoundOBSIstaffweretrainedtoensurethecomplaintwasclear,andthatrelevantinformationwasgatheredandpresentedinawaythatenabledbothpartiestoidentifytheissuesandunderstandeachother’sperspectives.Itisnotuncommonforconsumerstostruggletoknowwheretheproblemlies.Ontheotherside,firmssometimesneedhelpsteppingasidefromtheirindustryknowledgetoexplainthingsinawaythatconsumerscanunderstand.Speakingwithstaff,itwascleartheyspentasmuchtimeensuringconsumersunderstoodthefirm’sperspectiveastheotherwayaround.Indeed,weweremadeawareofinstanceswhereOBSIhadresolvedaproblembyprovidingcomplainantswithaclearerexplanation. 5.2.2 Investigatingmorewidelythantheoriginalcomplaint

OnecomplaintaboutinvestigatingtoowidelyinvolvedanassertionthatOBSIinvestigatesmattersthathaveneverbeenraisedbycomplainantsinthefirstinstance.Itisappropriateandbestpracticeforombudsmentolookcarefullyatcomplaintstodeterminetheexactnatureandcauseoftheproblemsthatconsumerspresentwith.Forexample,complainantscommonlydonotunderstandwhytheyhavelostmoney.Inthesecircumstancestheymaynotdirectlycomplainabouthavingbeengivenunsuitableadviceandyetthismaybeanappropriatestartingpointforaninvestigationintoinvestmentlosses.Weexpectinvestigatorstokeeptheireyesopentothepossibilitythatotherproblemsmayhaveoccurred,andifspotted,wewouldexpecttheseissuestobeinvestigated.Nottodosowouldbeaderogationofduty.WedidnotseeexamplesinthefilesweexaminedofOBSIembarkingonageneral“fishingexpedition”,deliberatelylookingforwiderproblems.Tomixmetaphors,wedon’tdenyinvestigatorsmayheaddownrabbitholesfromtimetotime–butsuspectanysuchoccurrencesarerare.5.2.3 Investigatingmattersoutofmandate

Rulingacaseoutsidemandateisaseriousmatterasitdeniesaccesstotheservice,andpotentially,tojustice.Suchdecisionsarethereforenottakenlightlyandarenormallyreservedforseniorstaff


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members.Inaddition,mattersofjurisdictionarenotalwaysstraightforwardtodetermine,especiallywhereinvestmentsareinvolved.OBSIclosed21casesasoutsidemandatein2015havingopenedthemasinvestigations.Thiswas5.5%ofallcasesclosed,alowpercentagecomparedwithotherinternationaljurisdictions.InAustralia,forexample,some17%ofcaseswereruledoutsidejurisdiction.ThisissimilartotheNewZealandexperiencewherebetween8%and19%ofcaseswereruledoutsidemandate.OBSI’sconsumerassistanceofficers(CAOs)areabletoscreenoutobviouscasesbutanycasesinvolvingjudgementcallsaremadebythedeputyombudsman.Earlyseniormanagementinvolvementenablesefficientaswellasfairdecision-making.5.2.4 Advocatingforclients

Maintaininganunbiasedapproachtosettlementnegotiationsiscriticalforbothclientandfirmconfidenceintheprocess.Weweretoldofaninstancewhereaninvestigatorusedphrasessuchas“dealerslietoo”and“it’snotabouttheaccountholders,it’saboutthechildren”.Thefirmswhocomplainedaboutinvestigatorsappearingsympathetictotheclient’ssituationalsoconcededthatitwasnotawidespreadproblem.Rather,theyhadconcernsaboutasmallnumberofinstances.Itisnoteasytoinvestigatesuchhearsaywellaftertheevents.However,itwouldbeanunderstandablyhumanresponseinOBSI’scircumstances,wherestaffknowOBSIistheonlychannelforredressandafirmisnegotiatinghardtoreducecompensation.Nevertheless,ombudsmanstaffhavetotakegreatcaretoremovetheemotionandremainneutral.Wehaveraisedthesecommentsasamatterformanagementtoaddress.Wenotethatprovidingindividualmonitoringandcoachingwillbeeasieronceatelephonerecordingsystemisintroduced.5.2.5 Providingaviewtoclients

Somefirmsconsideredthatinvestigatorsshouldpassonfirms’offersforcompensationwithoutgivingaviewtocomplainantsonthefairnessofthoseoffers.Wedonotagree.Anombudsmanserviceischargedwithensuringfairoutcomesforthosewhohavebeenfoundtohavesufferedlosses.Consumersarenotalwayswell-placedtoknowwhetheranofferisfair:wheninvestigatorsprovideinformationonhowOBSIapproachescompensation,theyenabletheconsumertomakeaninformedchoice.Inahighproportionofthecaseswesaw,theadvicesuggestedafirm’sofferwasfairandnofurthercompensationwasdue.Thegeneralpracticeinternationallyisfirstlytomakeconsumersawareofanyofferabusinessputsforward.Ifforsomereasontheinvestigatorcannotassesshowfairtheofferis(perhapsbecausetheyhavenotyetstartedinvestigatingthecomplaintorhaveinsufficientinformation)theywouldputtheoffertotheconsumerbutwithoutgivinganopinion.Itwouldthenbefortheconsumertodecidewhethertoaccepttheoffer.Iftheconsumerdoesnotaccepttheoffer–orwouldratherwaitfortheservice’sviewonit–theinvestigatorwouldcarryonlookingintothecomplaintandthengiveanopinion.5.2.6 Decliningtoprovidelosscalculations

SomefirmscomplainedOBSIhaddeclinedtoprovidedetailsoflosscalculations.WefoundthissurprisingasitisOBSI’sstatedandpublishedpolicytodoso(see2015AnnualReport).AlthoughsomeresidualconcernsaroundOBSI’slosscalculationmethodologyremain,themainadvantageof


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itslosscalculationmodellingisthatitallowsthevariouspartiestoagreeontheunderlyingassumptions.Weencourageescalatingconcernstothedeputyombudsmanifproblemsarise.5.2.7 Meaningoffairness

DespiteOBSIpublishingaguideon“fairness”,thereappearsstilltobesomeconfusionaboutitsapproach,especiallyforfirms.UnderitsTOR,theombudsmanisrequiredtoresolvemattersinaccordancewiththefairnessstatement.Themostrelevantstatementsare:

Thisapproachisconsistentwithotherombudsmanservices.ToquotetheThomas&Frizon(2012,p.11):

OurreviewoffilesraisednoissuesaboutOBSI’sapplicationofthefairnessmandate.However,givenfirms’concerns,theearlierrecommendation(9)thatOBSIemploysanexternalexperttoreviewasmallsampleofcasesinbetweenformalfive-yearlyreviewsshouldalleviatethissituationbyprovidinggreaterassuranceoncasedecisions.Greateruseofwrittendecisionswouldalsoassist(seesection6).SomeindustrygroupsandparticipatingfirmscomplainedthatOBSInolongerprovidedawrittenanalysisofwhatitconsideredtobethewrong-doingortherationaleforitscompensationcalculations.Somefirmssaidtheyweresurprisedbytherecommendations.AlthoughitisOBSIpolicytogivefirmsoralexplanations,thismaynotalwaysbesufficientparticularlyifthefirmwantstheopportunitytomakeaconsideredresponse.Thissituationislikelyaconsequenceofmovingtoamoresettlement-orientedapproach.Writtendecisionscanalsobeturnedintocasenoteswhich,astheybuild,assistwithperceptionsofconsistency.5.2.8 Consistency

AnumberofsubmittersraisedconcernsaboutOBSI’sapproachtoissuesbeingpotentiallyinconflictwithindustryorregulatorystandardsandthelaw.Thisisarecurringtheme,reportedin2011.

Indecidingwhetherornottoupholdtheconsumer’scomplaint,theombudsmanwilltakeintoaccountthelaw,anyindustrycodeandgoodindustrypractice.Butthedecision/recommendationwillbebasedonequity–whattheombudsmanconsiderstobefairinthecircumstancesofthecase.

Intheperformanceofitscomplaint-handlingmandate,OBSIwill:

Resolvecomplaintswithaviewtowhatisfairandreasonableinthecircumstancesofeachindividualcomplaint.

Resolvecomplaintsusinganinformal,non-legalisticapproachtakingintoaccountgeneralprinciplesofgoodfinancialservicesandbusinesspractices,law,regulatorypoliciesandguidance,professionalbodystandardsandanyrelevantcodeofpracticeorconductapplicabletothesubjectmatterofthecomplaint.


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OBSI’sfairnessmandaterequiresittotakeaccountofindustrystandardsaswellasthelawandindividualcircumstances.Ourreviewoffilesshowedthatitdiddoso.Sowewereleftpuzzledabouttheconcerns,andwhytheyhadpersistedforsolongandparticularlysinceOBSIandSROshavedifferentmandates.OBSI’sapproachtoanumberofthemorecontentiousissues–vicariousliability,treatmentofoff-booktransactions,dealerA/dealerBmatters(expectationsofadviserswheninvestmentsaretransferred)andcustomerresponsibility–arecoveredinapolicydocumentonitswebsiteandinmoreextensiveinternalguidance.Althoughsomefeedbackcamethroughmeetingswithindustrygroupsitwasverydifficulttotellhowwidespreadtheconcernswere.Thismatterisalsocoveredinsection6.6.3below.5.2.9 Acceptingcomplainants’statementsasfact

Inreviewingthefiles,wecameacrossoneinstancewhereitmayhaveappearedOBSIundulyfavouredthecustomer.Thiswasnotactuallythecase,buttheexplanationtothefirmmayhavecausedittodoubtOBSI’simpartiality.Acasewentagainstafirmaftertheinvestigatordecidedtheypreferredthecomplainant’sevidence.Inwritingthedecision,theymentionedthefirm’sinabilitytoproduceanyfilenotesorwrittenevidenceoftheirposition.Ultimately,thiswasnotthedecidingfactor–thecomplainant’sviewwasindependentlycorroborated–butcouldhavecreatedtheimpressionthatOBSIdidnotbelievethefirm’ssubmissions.Infact,OBSIhadcarefullyinvestigatedmanyofthecomplainant’sclaimsandfoundherwantinginsomerespects.Thefirmwasnodoubtawareofthis.Amorecarefulbalancingofthefactors,andaclearstatementthat,inthiscase,irrespectiveofthefirm’ssubmissions,theindependentcorroborationwasthemostpersuasivefactor,wouldhavehelpedallayperceptionsofimpartiality.Wenote,however,thatalthoughthiscasedidnotturnonthematterofdocumentation,firmshaveagreaterresponsibilityforrecord-keepingthancustomersanditisnotunusualforombudsmentoholdfirmstoahigherstandardofproof.


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6 Timelyperformance

OBSIshouldmaintainitsabilitytoperformitsdisputeresolutiononatimelybasisanddealwithcomplaintswithoutunduedelay,andshouldestablishprocessesthataredemonstrablyfairtobothparties.

Mattersoffairnesshavebeenaddressedabove.Thissectioncoverstimelinessandfactorsthatenabletimelycasehandlingatallstagesoftheprocess.

6.1 CurrentperformanceAsofMay2015,OBSIhadeliminatedthebacklogofcomplaintsarisingfromtheGFC,atremendousachievement.Only58backlogcasesneededcompletingin2015.Fromthisyear,therefore,andcoupledwithanewcasemanagementsystem,alloldcasesshouldbethroughthesystemandaveragecompletiontimeframesshouldcontinuetoreduce.Thisisimportantasbothfirmsandcustomersexpressedconcernsabouttimeliness.OBSI’scurrenttimelinessbenchmarkistocomplete80%ofinvestmentcasesin180days,excludingdelays.Excludingdelays,andincludingbacklogcases,OBSIachieved84.6%in2014/15.Anequivalent2013/14comparisonwasnotavailablebutifboththebacklogcasesanddelaysareremoved,OBSIcompletedvirtually100%ofcaseswithinthe180daysinbothyears.Includingdelays,OBSIachieved64.3%closurewithin180daysin2014/15comparedwith41.1%in2013/14.Thisshowsgoodprogresswhichhasoccurredmostlyattheinitialintake/assessmentandresolutionphases.Investigationtimeframesareyettoshowanimprovement.

6.2 CurrentmeasurementprocessWewerestruckbytheextraordinarilydetailedwayinwhichOBSIrecordsandreportsondelays.Thesearerecordedateachstepoftheprocessandareaccompaniedbyanequallydetailedsetofguidelinesandinstructionsforstaff.ItappearsOBSIstartedtrackingdelayswhenitsbacklogstartedtoclimbanditwasunderconstantcriticismforthetimeitwastakingtoresolvecases.Wecanunderstandthis,havingseenthepressureOBSIwasunder–itsprocesswasbeingextendedbyotherpartiesandyetitwastakingtheblame.However,whileremovingdelaysmaybeausefuldefensivestrategyandhavebeenusefulhistoricallyinrevealingwherethedelaysoccur,thereisnoindicationthesystemhasbeensuccessfulinobtainingbehaviourchange:in2014,61%ofcaseswerefoundtohavebeenaffectedbydelayscomparedwith59%ofcasesin2015,animprovementofonlytwopercentagepoints.Moreover,thesystemisopentogamingandtooeasytouseasanexcuseforlackofprogress.Wewouldprefertoseemanagementandstafffocusingonproactivestrategiesformanagingdelays,takingchargeoftheprocessandgettingstakeholderstorespond.Morebenefitwillbegainedbykeepingcasesmoving(ratherthanlookingbackwards).Wealsoconsideritisonlyappropriatetoremovedelayswhenreportingpubliclyiftherehasbeenaclearunderstandingbetweenthepartiesthatacaseneedstobesuspendedforareasonableperiodoftimeduetoillnessorsomeotherextenuatingcircumstances.


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Internationally,timelinessisreportedforpublicpurposesinclusiveofdelaystoshowhowlongcasesactuallytaketoberesolvedfromaconsumer,orclient,andfirmperspective.WethereforerecommendthatOBSIrevertstoitsformerpracticeofincludingdelayswhenpubliclyreportingontimeliness.

6.3 InternationalcomparisonsItisdifficulttocompareOBSI’scurrentresolutiontimeswithotherombudsmanservicesbecausemeasurementparametersvary.Manyombudsmanservicesstartmeasuringtimelinessfromthepointatwhichacomplaintisacceptedforregistration(thatis,itisconsideredlikelytobewithinmandatebutbeforefurtherinformationhasbeengathered)andothersfromthepointatwhichconsentisreceived.Yetothersuseworkingdaysratherthancalendardays.Somewaituntiltheyhavereceivedafinalresponsefromcustomersonawrittenreviewbeforeclosingthecase.Mostdonotdifferentiatebetweeninvestmentandothertypesofcomplaintsforthepurposesoftime-reporting.Andsomeombudsmanservicesundertakemoreinvestigationthanothers.OBSIstartstheclockoncealltheinformationisgatheredandreadyforinvestigation.Thisistypicallylaterthanotherombudsmanoffices.CasesareclosedwhenOBSIissuesitsdecision–thiscanbeearlierthanotheroffices,particularlyatthe“viewletter”stageasotherofficesmaygivecomplainantsatimeframeforresponseandnotclosethecaseuntilthishaselapsed.Intotal,therefore,OBSI’stimeframeof180dayscoversashorterpartofanombudsman’stotalprocess.ComparingOBSIwithFOSUK,thelatterstartsmeasuringfromthedateitreceivestheconsumer’scomplaintandacceptsitasonethatitcanconsider(inOBSI’sprocessthiscouldaddsome54daysonaverage,exclusiveofdelays,tooveralltimeframes).Theendpointiscaseclosure,whicheithermeansithasissuedafinalombudsmandecision,thepartieshaveaccepteditsviewatanearlierstage,ortheconsumerhaswithdrawntheircomplaint.Itdoesnotremovedelays.Usingthismeasure,FOSUKclosed44%ofinvestmentandpensionscomplaintswithinthreemonths(90days)in2014/15.FOSUKwillbechangingitsstandardsandreportingtocomplywiththeEuropeanUnionDirectiveonAlternativeDisputeResolution(2013/11/EU)thatrequirestimetobemeasuredfromwhenacompletecomplaintfileisreceived(i.e.alltheinformationneededtoinvestigatethecomplaint,similartothewaythatOBSInowmeasuresitstimeliness)untilitgivesitsfirstview.TheEUdirectivebenchmarkis90days(approximatelythreemonths).FOSUKexpectstoachievethis.OBSIwouldlikelycompletecasestotheviewletterstage(abouthalfthecases)inclosetothistimeframe.FOSAustralia’stimeframesforstrategicmeasuresarefocusedonthetimelinessofitsactivedisputehandlingafteranyinternaldisputeresolutionperiod.Theclockstartsrunningwhenanunresolveddisputeisacceptedforinvestigation/resolution.Theclockstopswhenadispute’sstatusmovesto“closed”:fordisputesresolvedbyagreementthisiswhenFOShasconfirmedwithbothpartiesthataresolutionhasbeenreached.Insomecircumstancesitmaykeepacaseopenuntilithasasignedresolutionagreementfrombothparties.

Recommendation12:

ThatOBSIonlysuspendsacasewiththeagreementofbothaffectedpartiesandreportstimelinessinclusiveofdelaysforexternalpurposes.


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Usingthisdefinition,FOSAustraliaclosed83%ofalldisputes(includingbankingcases)in180daysin2015.FromJune2015toFebruary2016,95%ofallcasesclosedin180days.Althoughnotdirectlycomparable,itisprobablethatboththeAustralianandUKombudsmenareresolvingcasesmorequicklythanCanada.Weacceptinvestmentcomplaintswouldhavelongertimeframesthanbankingastheyare,onaverage,morecomplex.InFOSUK’s2015AnnualReport,forexample,itreportedclosing69%ofcurrentaccountcomplaintsinthreemonthscomparedwiththe44%forinvestmentcomplaints.However,FOSUKseemsconfidentthatallcomplaints,includinginvestment-relatedones,willmeetthenew90-daytarget.OurreviewsuggeststhatOBSIiscorrecttocontinuetargetingtimelinessasamatterofstrategicimportance.Wedonotbelieve,however,thatitcanachievebestpracticeinternationaltimeframeswithoutthesameabilitytobringcasestoaclosebymakingbindingdecisions.NordoweconsiderOBSIshouldcompromisethequalityofitsinvestigativework.

6.4 Handlingenquiries

6.4.1 Obtainingcustomerconsent

Consumerassistanceofficers(CAOs)areOBSI’sfrontlineforpublicenquiriesandhandlethecomplaintprocessuntilacaseisassignedtoaninvestigator.Whereacomplainthasnotbeenthroughthefirm’sinternaldisputeresolutionprocessthecomplainantisreferredbacktothefirm.Ifthecomplainanthasreceivedafinalviewfromthefirm,theyareaskedtofilloutacomplaintformandreturnit.Theyarethenaskedtocompleteawaiverandgiven21daystoreturnthis.Theefficiencyofthisprocessisdependentoncomplainants’responsiveness.Werecommendreducingtimeframesbysendingouttheconsentformatthesametimeasthecomplaintform.Thishasthepotentialtospeedtheprocessbysome10daysonaverage,excludingdelays.AlthoughthiswouldnotimpactonOBSI’stimelinessmeasure(asthisdoesnotincludetheCAOprocess),itwouldimprovethecustomerexperience.

Anindependentexplanationfromthefinancialombudsmancanoftensortthingsoutstraightaway.So,byhandlingenquirieseffectively,ombudsmencanpreventmanyofthemturningintofull-blowncomplaintsaswellasplayingaroleinconsumerfinancialeducation.Andfinancialombudsmenreceiveenquiriesfromfinancialbusinessesaswell.Abusinessmayreceiveacomplaintandacceptthatithasnottreatedthecustomerwell–butbeunsurewhatredresswouldbefair.Advicefromtheombudsmancanoftensettlethingsthereandthen.Thefinancialombudsman’sprocedureshouldincludeenquiry-handling,sothatsomeproblemscanberesolvedbeforetheyturnintofull-blowncases.

Thomas&Frizon(2012,p.11)


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6.4.2 Obtaininginformationfromfirms

CAOsobtaincomplainants’filesfromfirmsuponacceptanceofacomplaint.ThiscanresultininformationarrivingatOBSIearlierintheprocessbutalsorisksinefficiencyasmoreinformationmayberequestedthanisnecessary.ItwouldbebetterforCAOstofocusonmandatedecisionsandseeksufficientinformationforthatpurpose.Thefirm’sfinalresponseshouldsufficeinmostcasesatthispoint.Detailedfilerequestswouldthenbemadebyinvestigatorsoncetheywereclearaboutthenatureoftheissuesandevidencerequired.Basedontherelativelylowpercentage(5.5%)ofinvestigationsruledoutofmandate(otherombudsmanservicesinternationallyhavefiguresupto16%),CAOsappeartobehighlyeffectiveinscreeningthesecomplaints.Askingtwoadditionalscreeningquestionsofcomplainantsmayhavesavedonlytwoorthreecomplaintsfrombeingassignedforinvestigation:

• Hasthecomplainantalreadyenteredintoasettlementagreementwiththefirm?

• Isthecomplainantalsopursuingtheircomplaintincourtorinanotherforum?SomefirmshavetheimpressionthatOBSIdoesnotruleasmanycasesoutofmandateasothers.Thismaybebecausetheycannotseethatcomplaintsarebeingruledoutatanearlystage(theyarenotreported).ReportingearlymandatedecisionsisusefulinmonitoringwhethertheTORremainrelevant,andwhethertheyarepreventingaccessibilitytoOBSI’sservices.Werecommendmonitoringandreportingoncomplaintsruledoutofmandateattheenquiriesstage.6.4.3 Earlyresolution

AsnotedinthequotationfromThomas&Frizon(2012),anenquiriesdivisioninombudsmanservicescanbehighlyeffectiveinhelpingresolvecomplaintsatanearlystage,withouttheneedforinvestigation.Thisincludesbygivingasimpleexplanation,providinginformationorbyreferringpeopletoamoreappropriateservice.WehavenodoubtthishappensandrecommendthatOBSIformallyreportsonhowenquiriesareresolved.6.4.4 CAOsandsystemicissues

CAOsareoftenwellplacedtopickuponpotentialsystemicissues.NowthattheJRC’ssystemicprotocolhasbeenfinalised,CAOs(aswellasinvestigators)willneedtobetrainedinwhattolookforandenterproductandissueinformationintothenewCMS.WethereforerecommendthatCAOscaptureadditionalinformationfrompeoplecallingtomakeenquiries,includingtheproductsandissuescomplainedofandtherelevantfirms.WealsorecommendCAOs(aswellasinvestigators)receivetrainingintheidentificationofpotentialsystemicissues.6.4.5 Advicetofirms

AlsoasstatedbyThomas&Frizon(2012,p.11)andnotedabove,afinancialombudsmanhelpsresolvecomplaintsatanearlystagebyprovidingadvicetofirmsonappropriatelevelsofredress.ThismaynotbeaproperrolefortheCAOtotakebecauseseniorinvestigativestaffwillknowmoreaboutamountspaidtoresolveacomplaint.However,atleasttwoschemesinNewZealand(theBankingOmbudsmanSchemeandFinancialServicesComplaintsLimited)haveintroducedearlyadviceservicesforfirms.Inourexperience,thesearewellreceivedbyparticipatingfirms.Providingadvicenotonlybenefitsconsumersthroughearlierresolution,butdemonstratesacommitmenttoreducingcomplaintsbyempoweringfirmstobetterresolvetheirowncomplaints.Italsocomplementsguidancenotesandgeneratesideasfornewones.WethereforerecommendOBSIimplementsanearlyadviceserviceforparticipatingfirms.


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6.4.6 Referraltointernalombudsmen

SomeparticipatingfirmsquestionedwhetherOBSIhadchangeditspolicyregardingreferringcomplainantsbacktoaninternalombudsman(IO)forinternalresolution.Itappearspossiblethatmorecomplaintswerereferredbacktofirmsduringthebacklogdays.OBSI’scurrentpracticeisasfollows:

OBSI’sprocessisthereforelargelyinthehandsofcomplainants,whichweconsidertobeappropriate.However,weweremadeawarethatatleastoneIOhadstarteddirectlyapproachingclientswhosecomplaintshadbeenacceptedbyOBSItoofferthemtheopportunityofanIOreview.And,itappearedotherswerecontemplatingfollowingsuit.WecouldseethatIOswererightlyproudofthejobtheydid;however,underOBSI’sTORitisabletoacceptacomplaintforinvestigationif90dayshaveelapsedsincethecomplaintwasmadetothefirmandthecomplainantasksOBSItoinvestigate.OBSIcandecidethatthefirmhasnothadsufficientopportunitytoresolvethecomplaintbutthedecisionisforOBSItomake.IOs,therefore,mayneedtobetterpromotetheirservicesinternallyordevelopprotocolsforearlierreferraltotheiroffices.Thatsaid,itisalsointhebestinterestsofresolutionforfirmstoofferexternaldisputeresolutionearlyintheprocess,forexamplewhenitbecomesclearthatacustomerwouldprefertodealwithanorganisationthatisnotpartytothecomplaint.Andfirmsmustallowcustomerstheopportunityofexternalresolution.Wedonotconsiderdirectinterventiontobegoodpracticenomatterhowwell-meaningtheapproachisintendedtobe.Wealsoendorsetheobservationmadeinpreviousreviewsaboutthepotentialforcustomerconfusionwhenfirmsusetheword‘ombudsman’.Itappearsthetermisusedinternallytosignifyindependenceandauthority,butweagreewiththe2011reviewfindingthatisliabletomisleadcustomersintobelievingtheyarereceivinganinvestigationthatisindependentofthefirm.We

OBSIwillrefercomplainantstotheIO/compliancedepartmentiftheyhavenotcompletedtheinternalprocessatthefirm.

Incaseswherethecomplainanthasreceivedafinalresponsefromthefirm’sbusinessunitandhastheoptiontobypasstheIOandcomestraighttoOBSI,itwillaskthecomplainantiftheyhavealsoescalatedthecomplainttotheIO.IfthecomplainanthasalsofiledwiththeIO,OBSIwilladvisethecomplainanttheyhavetheoptiontocomestraighttoOBSI.[Thisavoidsbothombudsmanofficesinvestigatingatthesametime].IfthecomplainantwantstheIOtoreviewthecomplaint,OBSIadvisesthecomplainantthatOBSI’sfilewillbeplacedonholduntilithearsbackfromthem.OBSIreiteratestothecomplainantthattheycancomebacktoOBSIiftheyarenotsatisfied.IfthecomplainanthasnotfiledacomplaintwiththeIOanddoeswanttogothroughthem,OBSIescalatesthecomplaintatthatpoint.Ifatanypoint,thecomplainantwantstobypasstheIOandcomestraighttoOBSI,itproceedsaccordingly.


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wouldliketoseeanamechangeinordertoclearlydifferentiateOBSI;howeverweappreciatethatthetermombudsmanisusedmuchmorewidelyinNorthAmerica.

6.5 InvestigationOurreviewofthefilesshowedOBSIinvestigators,forthemostpart:

• wereabletoidentifythekeyissuesinacomplaint

• tookathoughtfulandplannedapproachtoinvestigating

• requestedrelevantadditionalinformation

• escalatedmattersappropriatelytomoreseniorstaffwhenneeded;forexample,whensettlementnegotiationsbecamedifficultorprotracted,orwhenfinejudgmentcallswererequired

• keptfirmsandcustomersapprisedofprogressandtheirthoughtsonwheretheinvestigationwasheading

• wererespectfulandpatientintheirdealingsevenwhenpartieswereadversarial

• explainedtheirviewswell.6.5.1 Staffguidanceandtraining

OBSIhasdevelopedathree-week,structuredinductionprocessspecificallyforinvestigativecontractorsandpermanentstaffwhostartedwhilethebacklogwasbeingaddressed.Eventhoughturnoverisnowlowandformalinductionprocessesarenotruninthesameway,thestructuredapproachremainsusefulasaguide.OBSIhashighlyspecifiedinvestigationprocessguidelinesandformstoassiststaff.ItsnewCMSwillembedtheprocessinthesystemalongwithmaximumtimeframesforeachstep,basedonthe180-daystandard.Thesystemisflexibleandwillallowstafftocutoutunnecessarysteps.However,oneriskofembeddingthe180-daystandardisthatstaffwillworktothemaximumtimeallowable.Althoughstaffknowtheyareexpectedtocompletecasesmorequickly,wesawevidenceinthefilereviewthatstaffplannedbackwardsfromthe180-dayendpoint.ThenewCMSmayhelpavoidthis(itembedssomeshortertimescalessuchascompletingviewlettersin90days),butestablishing

Recommendation13:

ThatOBSI:

• issuesconsentformsatthesametimeascomplaintforms

• monitorsandreportsoncomplaintsruledoutofmandateattheenquiriesstage

• formallyreportsonhowenquiriesareresolved

• enablesCAOstocaptureadditionalinformationfromcallersmakinginitialenquiries,includingthenameofthefirm,theproductandissuesofconcern

• givesCAOstrainingintheidentificationofpotentialsystemicissues

• implementsanearlyadviceserviceforparticipatingfirms.


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differentpathwaysandinternaltimelinessKPIsforthedifferent(A,B,C)levelsofcomplexitymayalsoprovidebetterguidanceandincentivisemoretimelycasecompletion.OBSIhasalsodevelopedconsiderableamountsofwrittenguidanceforstaffoncommonissuessuchassuitabilityassessmentandassessingcredibility.WealsonoteOBSIisdevelopingaself-directed,onlinetrainingprogramme.ThisshouldprovideOBSItheopportunitytostreamlineitscontentguides.Weexpectthiswillultimatelydevelopintoanelectronicknowledgemanagementsystemthatenablesstafftodrawonthefullknowledgetheyneedtoperformtheirroles.Suchasystemwouldincludemanuals,guidelines,policies,employees’knowledge,industry/productknowledge,directoriesandnetworks.Werecognisethisisamajorundertaking,butsuggestitasthenextstepfollowingimplementationoftheCMS.WethereforerecommendthatOBSIdevelopsabusinesscaseforaknowledgemanagementsystem.

6.5.2 Otherobservationsfrominternationalexperience

Withrespecttotheefficiencyoftheinvestigativeprocess,mostfinancialombudsmanserviceselsewherefacedbacklogsandaverylargeincreaseinthenumberofdisputesrequiringinvestigation.InadditiontoanumberofinitiativessimilartoOBSI’s,commonresponsesincluded:

• havingaseparateteamdealwithlowervalue,morestraightforwardcomplaints

• delegatingauthoritytospecially-selectedadjudicativestafftomakedecisionsonmorestraightforwardcomplaints

• assigningseniorstafftoassistwiththeearlyassessmentstagesofacomplaint.Eventhoughbacklogshavenowsubsidedinmostombudsmanservices,theseinnovationsarebeingusedtoimproveefficiencyundermorenormalworkloads.WenotethatOBSIalreadyhasconsiderableseniorinvolvementattheearlystagesandweunderstandithaspreviouslyexperimentedwithhavingaseparateteamdealwithlowervaluecomplaints.In2015,OBSIresolved33Clevel(lowestlevelofcomplexity)investmentcomplaints–only10%ofallcasesresolved.AssuminglevelCisalsosynonymouswithlowervalueandeasiertoresolve,suchasmallnumberwouldnotjustifyaseparateteam,butweagreethatthealternativeofassigningthesecasestoCAOs,withthesupportofanexperiencedseniorinvestigatorwithdelegatedsigningauthority,maybeanefficientalternative.ThiswouldalsoprovideanexcellenttraininggroundforCAOskeenonmovingintoinvestigativeroles,andpotentialsuccessionforaseniorinvestigatortomanagerialroles.ItisalsolikelyconsistentwiththedecisionthatCAOstakegreaterresponsibilityforinvestigatingjurisdictionalcasesonthebankingside.OnesubmittersuggestedOBSIdevelopafast-trackprocessforhardshipcases.OBSIhasindicatedthereareinsufficientsuchcasesontheinvestmentsidetodevelopaspecificprocess,andthatitscurrentprocessenablesittoprioritisecasesappropriately.Wesuggestitkeepsthisoptionunderreview.

Recommendation14:

ThatOBSIdevelopsabusinesscaseforaknowledgemanagementsystem.


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6.6 ResolutionIncreasingly,accordingtoGilletal(2012,p.76),moderndemandsforspeedyresolutionandageneralpreferenceforinformalityhaveledombudsmentousefacilitatedornegotiatedmethodsofresolution:

Negotiatedsettlementscanindeedbequicker,especiallywherebothpartiesarereasonable.Butnegotiatedsettlementscanalsocausetheresolutionprocesstobecomeprotractediftheinvestigatorisnothighlyskilled,wherethepartieshavebecomeentrenchedanddeterminedto“win”,andwhentheyarenotbackedbythepowertorequireredress.Anombudsman,however,needstousearangeofresolutiontools–facilitation,negotiatedsettlements,decisions–toprovideforaproportionate,flexible,efficientandeffectiveresponse.Theymustalsoensuretheirinvestigatorsdevelopjudgementastowheneachofthetoolsisbestused,particularlywhenanearlywrittendraftdeterminationisthebetterpath.Assetoutinthetablebelow(noteitexcludes49caseseitheroutofmandate,voluntarilywithdrawnorclosedfornon-response/poorconduct),nearlyhalfofallclientswhosecaseswereinsidemandatereceivedOBSI’sviewatanearlystage–theseallinvolvedcaseswhereOBSIdeterminednocompensationwasdue.Theremainingcasesinvolvedmorein-depthinvestigationandresolution.Table2:Methodsusedinresolvingcases(2015)

Resolutionmethod Number %insidemandateViewletter 163 48.7Facilitatedsettlement 162 48.3Settlementrecommendation 4 1.2Writtenrecommendation 6 1.8Total 335 100

6.6.1 Viewletters

IfOBSIconsidersaclienthasnotsufferedanylosses,itwillprovidethisviewalongwithabriefexplanationinaletter,invitingthecomplainanttoproducenewevidencewithin30days,ifsuchevidenceexists.Thecaseisclosedimmediatelytheviewletterisissued.OBSIreportsthatcomplainantsrarelyrespond.Althoughthisisquiteunusualinourexperience,thelowresponsecouldbeindicativeof:highqualityOBSIcommunicationduringtheprocess;culturaldifferences;thepotentiallylengthycomplaintprocessinCanada(customersmaybereadytogiveuphavingbeenthroughatleasttwolevelsofinternaldisputeresolution);and/orthequalityofearlierinternalresolution.Basedonourfilereviewanddiscussionswithstaff,complainantshavemanyopportunitiestopresentnewevidenceandtochallengeviewsbeforetheletterisissued,andsotheprocessappearstobefairandeffective.Littleisknownaboutcustomersatisfactionatthispointassurveysdonotdistinguishsatisfactionatthedifferentpointsatwhichacasewasresolved.ThisissomethingOBSImaywishtoconsiderwhenreviewingitscustomersurveys.Typically,thosecomplainantswhose

…thenotionthatombudsmanschemeswillneedtoshifttowardsgreaterinformalityremainsvalid;pressurestoachievegreatertimeliness,dealwithhighercaseloadsandcopewithrestrictedfundingmeanthatgreaterinformalityislikelytobeinevitable.


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casesareruledoutofmandateareleastsatisfiedandsoitcanbeusefultoseparatethesecasesoutwhenanalysingresultsformanagementpurposes.Thisisbecausethereislittleanombudsmancaninfluenceinthiscontextotherthantrytosetappropriateexpectations,providegoodserviceandanexplanation,and“saynonicely”.6.6.2 Facilitatedsettlements

OBSIresolvesalmostallremainingcasesthroughfacilitatedsettlements.In2015,sixrecommendationswerewrittenwhenthefirmrefusedtosettleandinafurtherfourcases,amoredetailedletterorrecommendationwaswrittenwhenthecomplainantdeclinedOBSI’ssettlementrecommendation.At2.6%ofcasesclosed,thisisunusuallylow.Accordingtootherinternationalombudsmen,investmentcases,withtheirhighervalueredress,oftenlendthemselvestoearlierwrittendeterminations.InFOSUK’scase,27%ofinvestmentcasesrequiredaformalombudsmanview(comparedwith14%ofbankingcases);FOSAustraliaresolvednearly19%ofcasesacceptedforinvestigationbywrittendetermination;andAustralia’sCIO,23.5%.InitsAnnualReport,FOSUK(2015,p.76)noted,“complaintsinvolvingpensionsandinvestmentswerefarmorelikelytorequireanombudsman’sdecision.Thesecomplaintsofteninvolveverylargesumsofmoney–andpeople’sfinancialsecuritycandependontheoutcome.”Weagreetherearebenefitsinfacilitatingsettlementswithouttheneedformoredetailedreports.However,webelieveOBSIshouldconsiderincreasingtheuseofmoreformalwrittenadjudications.Theseareparticularlyusefulwheneitherorbothpartiesareentrenchedandunlikelytosettle.Comparedwithotherjurisdictions,weconsiderthatCanada’sombudsmangoestoextraordinarylengthstoeffectsettlement.WeunderstandthatOBSIrepresentsthelastandonlyopportunityformanyclientstoreceivesomeformofredress.Nevertheless,wewereunconvincedthatallthetimespentnegotiatingwouldleadtodifferentoutcomes.Andweconsiderprovidinganearlierwrittenrecommendation,withtimeframesforresponse,maybejustaseffectiveinfacilitatingresolution.WethereforerecommendthatOBSIintroducesearlierwrittenrecommendationsinappropriatecases.Wealsorecommendexpandingsettlementlettersinsomecases–nottoafullinvestigationreportandnotforinitialviews.Thisisbecausesomefirmscomplainedtheycouldnotseethattheirsubmissionshadbeentakenintoaccount.Wethinkitwouldbeparticularlyusefulwhensettlementshadtobeescalatedwithinthefirmforsignofftopeoplewhohadnotbeeninvolvedinpriordiscussions.Itwouldalsoprovidearecordforseniormanagementandotherstouseforfuturecasesandforconsideringwhethertheycouldmakeinternalimprovementstohelppreventthesamethingshappeningagain.Further,becausebothconsumersandfirmsreportedbeingunclearaboutthenegotiatedsettlementprocess,werecommendthatOBSIproducesashortguideforbothpartiesonhowthenegotiatedsettlementprocessworks,theirroleintheprocess,howtheirviewswillbetakenintoaccountandwhattoexpect.Whileaguidehasbeendevelopedforfirms,theresolutionprocessdescribedwasoutdated(therewasnoreferencetonegotiatedsettlements)andmaywellhavecontributedtonewfirms’lackofclarity.Itisimportantthatwebsiteresourcesbekeptupdated.


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6.6.3 Losscalculation

Asnotedearlier,itappearsthereismuchgreateracceptanceofthelosscalculationmethodologynowthanin2011.WedidnothearanychallengetoOBSIcalculatinglosses,andsomefirmshaveadoptedOBSI’sapproaches,includingaskingOBSItocalculatelossestoassistwithinternalresolution.Disappointingly,however,wedidhearofresidualconcernswithsomeaspectsofitsapproach.Weagreewiththe2011independentreviewfindingsthatOBSI’slossadjustmentmethodologyleadstheombudsmanworld.Approachesarealsoconsistentwithunderlyinginternationalpolicies(e.g.theuseofindices,opportunitycost).Useofamodelbringsallpartiesontothesamelevel,enablingthemtoagreeonunderlyingassumptionsandinputs.Themodelalsoensurespricesarerelevanttothetimeatwhichthestockwasheld.Inthisrespectitaddressesoneofthe2011industrycriticismsthatOBSImaderecommendationswiththebenefitofhindsight.Themodelisalsoneutral,andproducesresultsthatfavourneitherside.Firmsreportedresultsthatwerebothlowerandhigherthantheirownestimates.Afurtherbenefitisthatitisquicktoproduceresults.InterestinglywereceivedonecommentfromafirmcomplainingaboutOBSIusingthemodelearlyinaninvestigationprocess.However,inourexperienceitcanbeefficienttodeterminewhetheracustomerhassufferedanylossesearlyon:iftherearenolosses,itislikelynocompensationisdueandaviewcanbegivenmorequickly.OBSIhascontinuedtorefineaspectsofthemodel,incorporatingproxiessuchasMorningstardataforfees.ItalsohasdirectaccesstoBloombergdataandcannowfeedtaxassumptionsintothemodel.Everythingshould,therefore,pointtoexcellentprogress.Andsoitwaspuzzlingtofindsomefirmsandindustrygroupsraisingafewoldchestnuts–whetherlosseswereoffsetbygainsonotherholdingswithinaportfolio;off-booktransactions;“dealerA/dealerB”(i.e.apportioninglosseswhentheinvestmentportfoliotransfersfromonefirmtoanother);vicariousliability;apportionmentoflossestocustomers–issuesthatwerethesubjectofextensiveconsultationin2012andshouldhavebeenwellsettledbynow.Someoftheconcernsappearedtobehistoric–i.e.theyaroseoncasesclosedsometimeago.Othersarosefrommisinformationormisunderstandings.Butothersindicatedmorefundamentalmisgivings.WerecommendthatOBSIprovidesadditionalguidanceonitslosscalculationapproachesandmakesthatavailableonthewebsite.Thiswillbehelpfulforfirmswhenexplainingissuestotheir

Recommendation15:

ThatOBSI:

• reintroducesearlierwrittenrecommendationsinappropriatecases

• expandssettlementletters,whereappropriate,toincludetherationaleforthefinalsettlementamount

• developsashortguideforfirmsandconsumersonhowthenegotiatedsettlementprocessworks.


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customers;helpcustomersdecidewhethertopursueacomplaintwiththeombudsman;andprovideatremendousresourceforthoseinvolvedinfinancialliteracyeducation,includingthemediaandfront-linefinancialadvisoryservices.Betterfirmandcustomerunderstandingwouldalsobefacilitatedbyincreasingthenumberofcasenotesavailableonthewebsite.IntheUK,FOSpublishesitsfinaldecisions,ordeterminations.Thesenamethecompaniesinvolved,butkeepthenamesofcomplainantsconfidential.Suchdecisionsarehelpfulbutnodoubtcontroversialforparticipatingfirmseventhoughtheyclearlyshowbothoutcomes–whenthefirmwasintheright,andwhennot.However,wethinkguides–eveniftheyaremadeshorter,pithier,morerelevant(byaddingillustrativecasenotes)andmoreeasilyaccessible(theyarehardtofind)–andcasenotesareunlikelytosettlesomefirms’residualissues.Itisclearthatsometypeofcircuit-breakerisrequiredastheseconcernsmayinterferewiththerecommendationthatOBSI’sabilitytosecureredressisimproved.WethereforerecommendthatOBSIsubmitsasampleofdecisionsinvolvingcompensationthatfirmsconsidertobecontentious,alongwiththerelevantguidelines,toanexpertwithacknowledgedrelevantlegalandtechnicalindustryexpertise.

Recommendation16:

ThatOBSI:

• turnsitscurrentpolicydocumentsintoshortguideswithcasestudiestoexplainitsapproachestokeylosscalculationpolicies

• increasesthenumberofcasestudiesonitswebsite

• submitsasampleofdecisionsinvolvingcompensationthatareconsideredbyfirmstohavebeencontentious,alongwiththerelevantguidancematerials,toanindependentexpertauthority.


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7 Feesandcosts

OBSIshouldhaveafair,transparentandappropriateprocessforsettingfeesandallocatingcostsacrossitsmembership.

OBSIhasaclearprocessforsettingfeesandallocatingcostsacrossitsmembership.Considerablecareistakentoavoidcross-subsidisationbetweeninvestmentandbankingwhilemaintainingsomeflexibilityofstaffresource.WeunderstandOBSIisreviewingthewayitchargesforitsservices.ThisisappropriateinlightofthefactthatOBSIhasreceivedmuchlowercomplaintvolumesthanoriginallyanticipatedfromthenewareasaddedin2014.Inourview,theboardmadethecorrectdecisiontomaintainfeesat2014levelsforthe2015year,anduseanypotentialsurplustobothreplaceOBSI’sagedcasemanagementsystemandbuildreserves.WeadviseOBSItocontinueusinganallocation-basedmethod–amovetouserpayswouldbeadministrativelyburdensome,andriskitsnot-for-profitstatus.Nevertheless,itwouldbepossibletobuildanallocationsystemthattookintoaccountaparticipatingfirm’suseoftheservice.Forexample,bysettingaminimumfeeforallmembers,andthenincreasingfeesforthosefirmsthathadmademoreuseofthesystemthanothersinthepreviousyear.Indevelopingthiskindofsystem,OBSImaywishtobuildinincentivesforfirmstosettleatanearlierstage.Twowaysofdoingthisaretoweightcasesbasedeitheronthecomplexityratingorthestageatwhichacasewasclosed.Inthelatterscenario,theweightingforacasethatclosedafteraninitialviewletterwouldhavealowerweightingthanonethatsettled;thehighestweightingbeingreservedforacasethatwentthroughtoafulldetermination.OnesubmitteraskedforOBSItopubliclydiscloseitsfeemodel.Itisusualforanombudsmantodisclosethecomponentsoftheirmodelandweexpecttherewillbegreatertransparency,ifneeded,duringconsultationwithindustryaboutanyfuturerevisedfundingmodels.


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8 Resources

OBSIshouldhavetheappropriateresourcestocarryoutitsfunctionsandtodealwitheachcomplaintthoroughlyandcompetently.

8.1 FundingInourview,OBSIisadequatelyresourcedforthenumberofcasesitispresentlyreceivinganditscurrentstageofdevelopment.Itreceivedanadditionalnearly$1millionfromnewmemberswithoutthecorrespondinganticipatedincreaseincases.Basedonourexperience,newlyparticipatingfirmscanexpecttwothings:thatinitialuseoftheombudsmanwillbelowandthatcomplaintswillincreaseovertimeascustomerslearnaboutOBSI.OBSImadebudgetarysavingslastyear,primarilythroughreleasingcontractorsrequiredtoaddressthebacklog,deferredspendingonCMS,andsavingsfromtemporarystaffvacancies.Nowthatvacantpositionshavebeenfilled,andfundshavebeenassignedtothenewcasemanagementsystem,wewouldexpecthigherexpenditurethisyear,asbudgeted.Investigativeefficiencysavingsmaynotmaterialisebefore2016/17.Eventhen,weconsidersavingsshouldbechannelledintodeliveringondevelopmentinitiatives(includingthoserecommendedinthisreport)sothatOBSIcanimprovetimelinessandcreategreatervalueforstakeholders.Wedonot,therefore,recommendanyreductioninfeesbefore2017/18,andthenonlyifOBSIisabletoobtaintheefficienciesenvisagedthroughhavingbindingauthority,andneitherinvestmentnorbankingcasenumbersshowsignsofescalating.ThepicturewilllikelybecomeclearerbythetimeOBSIdevelopsitsstrategicplan,butcomplaintsinJanuary2016wereup22%onthesameperiodin2015andatthattimethereappearedtobeeverypossibilitycomplaintnumberswouldcontinuetoincreasegiventhevolatileenvironmentforinvestmentandtheextraordinarilylongbullrunthemarketshaveexperienced.Wealsoacknowledgethelargenumberofrecommendationsinthisreportthatwillrequireresourcing.

8.2 Staff8.2.1 Levels

OBSIwaswell-resourcedforitsinvestmentmandatewhenwevisitedinJanuary.Ithadacomplementof15investigators,threemanagersandsixinvestmentanalysts.Ofthese,onemanagerwastemporarilyworkingexclusivelyontrainingforthenewCMSsystemandthreeinvestigatorsweretemporarilyworkingpartiallyorfullyonbankingcasestoserviceanincreaseinthesecases.Averagecase-loads,at7-9perinvestigator,seemedlowbyinternationalstandardsalthoughthisisdifficulttoassessasstaffatotherombudsmanofficesaremorelikelytohavearangeofcases,ratherthanbeingexclusivelyfocusedoninvestment(whichisacknowledgedtobemorecomplex).WeagreewithOBSI’scurrentstrategyofmaintainingstaffatexistinglevels.Itisnoteasytorecruitsuitablenewstaffifandwhendemandrises;itisefficientforstafftobetransferredacrossmandatesasdemanddictatesanditprovidesgooddevelopmentalopportunities.OBSImusttakethispotentiallyshort-livedopportunitytoimplementitsnewsystemsandundertakeprojectsthatwillenhanceitsefficiency.8.2.2 Qualifications

OBSIhashiredstafffromanimpressiverangeofrelevantbackgrounds,includingdirectlyfromindustryandinternaldisputeresolutionoffices.Staffprofessionalbackgroundsinclude:lawyers(4),CharteredProfessionalAccountant,CharteredFinancialAnalyst(4),CFAcandidates(3),Fellowsof


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theCanadianSecuritiesInstitute(2),CertifiedFinancialPlanners(4),CharteredInvestmentManagers(4),DerivativeMarketSpecialist,CertifiedForensicInvestigator,andCertifiedMediator.OBSIisfortunatetohaveagoodproportionofsenior,experiencedstaff.Thereisalmostnosubstituteforexperienceindisputeresolution.Itcantakemanyyearstodevelopthefullrangeofskills,knowledgeandjudgementrequiredtoresolvecasesefficientlyandwell.Thesecompetenciesincludeindustryandproductknowledge;skillsintheareasofdisputeresolution,investigation,negotiation,relationshipmanagement,writtenandoralcommunication,numeracy,listening,anddealingwithstressedandsometimesunreasonablepeople;and,ofparticularimportancetodisputeresolution,theabilitytoremainneutral,respectfulandresolution-focused(non-adversarial).8.2.3 Capability

Asidefromfeedbackfromnewparticipatingfirms,whichwediscussbelow,weheardsomeresidualconcernsaboutconsistencyofdecision-making.Naturally,someinvestigatorswillbelessexperiencedthanothers,butwenoteOBSIprovidesextensiveandregulartraining,bothonthebasicsofdisputeresolutionandoncontent-relatedtopics.OBSIhastwoall-staff,two-daymeetingsperyearthathaveastrongfocusontraining.Theyalsorun“lunchandlearn”sessionstwotothreetimespermonth,individualstaffarecoachedbytheirmanagersandhavetheirowndevelopmentplans.Inaddition,staffareexpectedtoseekadvicefrompeerswithspecialistexpertiseandtoseekpeerreviewasappropriate.Outsideexpertsandstakeholders(e.g.SROs)arealsobroughtintohelptrainstaffasappropriate.WealsonotethatOBSIisplanningtointroduceaprocessofevaluatingstaffperformanceattheendofeachcase.Thisisanexcellentinitiativeandwillbeconductedbyindividualstaffandtheirmanagerswhencasesareclosed.Thesewillbuildarichpictureofstrengthsanddevelopmentneeds,andbeusefulforindividualannualperformancereviewsaswellasforidentifyingcommonorganizationaltrainingneeds.Werecommendalsointroducingwidercasedebriefsatinvestigativestaffmeetingssothatallstaffcanshareinthelearningfromindividualcases.Lessonsorinsightsinclude:whatwentwellandnotsowellfromaninvestigative/resolutionperspective;whatinvestigatorscouldhavedonedifferentlytoenablemoretimelyorhighqualityresolution;whatlessonstheremaybeforthewiderpublicorfirms;opportunitiesforFAQsandguides;andwhichcaseswouldbeinstructiveforpublishingonthewebsiteordisseminatingmorewidely.Wealsosuggest,givensome(limited)residualconcernsaboutindustryknowledge,thatitwouldbeworthwhileforOBSIto“bringtheoutsidein”moreoften.Thatis,increasethenumberoftimesindustryandfirmstaffcomeintoOBSI’sofficestosharethelatestindustrydevelopmentsoranyindustryinsightstheyfeelmayhelpOBSI’sunderstandingofissues.8.2.4 Newlyparticipatingindustries

Considerablepreparationwasundertakenforthe2014extensionofOBSI’smandate.Despitethesepreparations:

• onegroupcomplainedthatithadbeennecessarytoeducateOBSIonitsindustryduringrelevantinvestigations

• anothersaidithadpreparedawholeseriesofcasestudiestohelpmembersunderstandOBSI’sapproachtofairness.


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WewouldhaveexpectedalearningcurveforOBSI.Similarly,inamatureandco-operativeenvironment,firmsandindustrygroupswillreachoutandensuretheirombudsmanunderstandsthenuancesoftheirindustrysothattheycanworkwiththecommonobjectiveoffairresolution.Wethinkindustrydidtherightthingintakingtheinitiative.WealsothinkitwouldbebetterifrelationshipsweresufficientlyopenthattheindustrygroupfeltitcouldraiseanyconcernsdirectlywithOBSI.Inthisrespect,werecommendthatOBSIincludesquestionsinitsplannedparticipantfirmsurveyaboutwhethertheyconsiderOBSIhastheappropriateindustryknowledgetofairlyresolvecomplaintsandwhethertheyconsiderOBSIapproachableandopentofeedback.Theothergroup’sinitiativebeautifullyillustratesthevalueofcasestudiesandtheextentofassistancenewparticipatingfirmsrequire.WhentheNewZealandgovernmentrequiredallprovidersoffinancialservicestojoinadisputeresolutionscheme,therelevantschemesrespondedbymakingtrainingindisputeresolutionavailableinadditiontostandardinformationabouthowtheirservicesworked.Itispossiblethatindustrygroupsand/orSROsareseentohavethisroleinCanada;however,wesuggestthereisvalueinthepartiesworkingtogether,givenOBSI’sindependentdisputeresolutionexpertise.Accordingly,werecommendthatOBSIexploresparticipatingfirms’interestinattendingtrainingsessionsondisputeresolutionandonOBSI’sapproachestodifferenttypesofcases.

Recommendation17:

ThatOBSI:

• introducescasedebriefsatinvestigativemeetingsenablingallstafftoshareinthelearningfromindividualcases

• includesquestionsinitsplannedparticipantfirmsurveyaboutwhetherfirmsconsiderOBSIhastheappropriateindustryknowledgetofairlyresolvecomplaintsandwhethertheyconsiderOBSIapproachableandopentofeedback

• exploresparticipatingfirms’interestinattendingtrainingsessionsondisputeresolutionandonOBSI’sapproachestodifferenttypesofcases.


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9 Accessibility

OBSIshouldpromoteknowledgeofitsservices,ensurethatinvestorshaveconvenient,well-identifiedmeansofaccesstoitsservices,andprovideitsservicesatnocosttoinvestorswhohavecomplaints.

Inevaluatingaccessibility,wehaveconsideredthefollowing:

• resourcesavailableforstakeholders

• useofthewebsiteandsocialmedia

• analysisofdata

• outreach.OBSIprovidesitsservicesatnocosttoinvestors,enablesconsumerstocontactitviaarangeofchannels,andprovidesaccesstointerpretationandtranslationservices.Relativetootherombudsmanservices,however,OBSIhasnotdevotedmuchresourcetoimprovingaccessibilityandawarenessofitsservice.Inshort,thisareaisripefordevelopment–fewresourcesareavailable,thewebsitehaslimitedand,insomecases,outdatedinformation,websitehitsarerelativelylowandOBSIcarriesoutrelativelylittleoutreach.Weareawareoftheviewthatpromotingawarenessissimply“drummingupbusiness”.Weagreethatawarenessforthesakeofitshouldnotbethefocus;besides,itistypicallyineffective.Rather,weconsiderthefocusshouldbeonprevention:sharingtheinsightsandlessonslearntfromdisputesresolvedtohelpallstakeholdersavoidmistakes,reducecomplaintsandknowwhattodo.Tellingthehumanstories–thecautionarytales,thesuccessstories,andprovidingusefulguidanceiswhatfirmsandtheircustomerstypicallyvalue.WethereforerecommendOBSIdevelopsapreventionstrategythatincorporates:

• suggestionsfromthefollowingsections

• plannedgeneralomnibusawarenesssurvey

• responsesfromaplannedparticipantfirmsurvey

• informationfromimprovedcustomersurveys.

9.1 BuildingfirmandindustrysupportParticipatingfirmsarethemostimportantsourceofreferralandawarenessbecauseitiswhenproblemsarisethatcustomersaremostlikelytoneedinformationaboutthefirm’sdisputeresolutionpathwaysandoptions.FirmsthereforeneedtoofferOBSItocustomersasaservicewhenanindependentreviewwillassistresolution.However,asonefirmsaid,“itishardertoreferacustomertoOBSIwhentheyhaveneverheardofit”.ParticipatingfirmsarerequiredtoinformtheircustomeraboutOBSI,particularlywhentheyaregivingcustomerstheirfinalviewsoncomplaints.Itisdifficulttoknowwhatpercentageoffirmsareroutinelyreferringcustomers,butevidencefromOBSI’sownsurveyingshowsthatsome52%ofrespondentsreportedfindingoutaboutOBSIthroughtheirownresearch,with35%indicatingtheyfoundoutthroughtheirinvestmentfirm.Inallcaseswereviewed,firmshadgiventherequisitewarning,andoneSROconfirmeditsauditsshowedmembersweredoingso;therefore,weexpect


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respondentswereindicatingtheyalreadyknewaboutOBSIbeforereceivingthefirm’sfinalresponse.TheymayevenhavecontactedOBSIbeforegoingthroughtheinternaldisputeresolutionprocess,butthisinformationisnotcurrentlyrecorded–ausefuldevelopmentawaitingthenewCMS.Inourexperience,oneparticularlycost-effectivewayofbuildingawarenessandimprovingaccessibilitytoombudsmanservicesistofirstchannelpeopletothewebsite.Todothisrequires:

• buildingwebsitecontentandresources(casestudies,guidancenotes,FAQs,brochures,newsletters,news,reports,statisticaltrendsetc.)

• keepingthewebsitecurrent,simple,lively,easilyaccessibleonalldevicesandtoasmanystakeholdersaspossible,includingthosewhosefirstlanguageisnotEnglishorFrench,thosewithdisabilities,theelderly

• buildinglinkages–toandfromrelevantorganisations,websites,firms

• usingsocialmediatochannelpeopletothewebsite

• buildingfirmandindustrysupport

• makingiteasytosubmitacomplaint.AsOBSI’swebsiteisrelativelyundeveloped,werecommendthepreventionstrategyplanincludesanobjectiveofincreasingwebsitevisits.ThisisanareainwhichtheCIACmaybeabletoassist.Wealsorecommend:

• obtainingdemographicdatafromawiderrangeofpeoplewhocontactOBSI–atpresentthedemographicdataisbasedonthe30%ofcustomerswhosecomplaintshavebeenresolvedandwhorespondtothepost-closurecustomersurvey

• incorporatingthecapacityforcustomersurveyrespondentstomakeopen-endedcomments–thesecanbevaluableinelicitingideasaboutserviceimprovements

• overtime,developingaddedvalueservicessuchas:

- informationaboutcommonproblemsacrosstheinvestmentsector

- insightsoneffectivedisputeresolution

- informationonapproachestospecificissues(usefulalsoforclientsinmakingtheirdecisionsaboutwhethertopursueacomplaint)

- trainingonmattersofcommoninterest,suchasdealingwithunreasonablecomplainantconduct.

Recommendation18:

ThatOBSI:

• developsapreventionstrategythatsetsouthowitwillassistcustomersandfirmsavoidandreducecomplaints

• obtainsdemographicdatafromawiderrangeofcomplainants

• includesopen-endedquestionsincustomersurveystocapturequalitativefeedback

• overtime,developsarangeofadded-valueservicesandproductsforfirmsandconsumers.


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10 Systemsandcontrols

OBSIshouldhaveeffectiveandadequateinternalcontrolstoensuretheconfidentiality,integrityandcompetenceofitsinvestigativeanddisputeresolutionprocesses.

10.1 ConfidentialityOBSIhasanominatedprivacyofficerandaprivacypolicyonitswebsite.Itreportsthatithashadnobreachesofitspolicy,andonlyonepotentialbreachthatwasinvestigatedtwoyearsagoandfoundnottobeproblematic.Ifstaffsuspectabreachmayhaveoccurred,theyarerequiredtoreportittotheirmanagerwhowilltheninvestigateandreporttoseniormanagement.IndiscussionswithOBSImanagement,theyagreeditwouldbeusefultodocumentthereportingchainforsuspectedbreaches.ThiswillhavebeencompletedinApril2016.Asadetail,wenoteitisremarkablyeasytosendemailstothewrongperson.OBSIhasinstructedstafftodisabletheauto-populatefeatureforemailaddresses.Itmayalsowanttoenhanceprotectionbyactivatingthefunctionsthat:

• giveusersasecondchancetoconsiderbeforesending

• introduceadelayfactor,enablinguserstocancelanemailwithinaspecifiedtimeframe.10.2 QualitycontrolOBSIhasgoodqualitycontrolprocessesandisplanningtofurtherimprovethese.Practicesinclude:

• providingdetailedguidelines

• preparationofinvestigationplanswhicharethendiscussedwithmanagers

• regularmanagementcatch-upswithstaff

• readyaccesstomanagersandpeerexperts

• managementreviewofallviewletters

• quarterlypeerreviewofamanager’sdecision.Theanalystteamisalsouniquelyplacedtocommentonconsistencyofdecision-making.Inaddition,wenoteandsupporttheplannedmanagementinitiativesofintroducingcallrecordingandashortevaluationofeachcaseasitisclosed.


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11 Coremethodologies

OBSIshouldhaveappropriateandtransparentprocessesfordevelopingitscoremethodologiesfordisputeresolution.

OBSIhassoundandwell-documenteddisputeresolutionmethodologies.Ithasalsopublishedsomeguidesonimportantmatters,suchasitsapproachtosuitability,onitswebsite.Alotmoreinformationaboutitsprocessesandapproachisavailableinternally.Asrecommendedearlier,ifthisinformationwassharedmorebroadly,intheformofshort,digestibleguidesandFAQs,webelievetherewouldbemuchgreaterroomformutualunderstanding,alsoenhancingtheperception(andreality)ofconsistencyinapproach.Inourexperience,makingguidesavailableonapproachestodifferenttopicsalsohelpsfirmstoresolveissueswithconsumersthemselves,andithelpsconsumerstoseewhetheritisworthwhilemakingacomplainttotheombudsman.Finally,preparingguidesalsodemonstratesOBSI’stechnicalproficiency–notonlyforfirmsbutforthemedia,whowillbemorelikelytoviewOBSIasasourceofexpertiseandseekcommentontopicalmatters.


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12 Informationsharing

OBSIshouldshareinformationandcooperatewithCSAMembersthroughtheCSADesignatesinordertofacilitateeffectiveoversightunderthisMOU.

OBSImeetsandsharesinformationquarterlywiththeJRC.Overtime,OBSI’sreportshavebecomemoredetailed,andwewouldhopeofmoreusetotheJRC.Currentlyanalyticalreportsareintheformoftablesandrawdata–theycouldbemademorereadilydigestibleifaccompaniedbyashortreportsettingoutthemaininsightsandobservations;andmoremeaningfuliftheycontainedcomparisonswithpreviousyearsandperiods.Asstatisticaldataiscompiledquarterly,summarieswouldalsobeofinteresttowiderstakeholdersandwerecommendpublishingstatisticaldataonthewebsiteatleastsixmonthly,ifnotonaquarterlybasis.

Recommendation19:ThatOBSIpublishesstatisticaldataandtrendsonitswebsiteatleastsix-monthly,ifnotquarterly.


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13 TransparencyOBSIshouldundertakepublicconsultationsinrespectofmaterialchangestoitsoperationsorservices,includingmaterialchangestoitsTermsofReferenceorBy-Laws.

Since2011,OBSIhasundertakentwomajorconsultations.Thefirstconcerneditslosscalculationmethodology.ThesecondconcernedarangeofchangestoitstermsofTOR.Thesewerehandledprofessionallyandreceivedanumberofsubmissionswhichwereconsideredbytheboard.WearenotawareofanymaterialchangestoeitheritsTORorBy-Lawsthatweremadewithoutconsultation.


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14 ProgresssincepreviousreviewsOBSI’sownreportagainstprogressfromthe2011independentreviewisattachedasAppendix5.Thereportwascompletedinpreparationforthecurrentreview.Boardsarenotexpectedtoagreewithallrecommendations.Althoughtherehasbeennoformalreportingagainstthe2011report,itisclearthatprogresshasbeenmade.Afewrelevantrecommendationsremainoutstanding,themoreimportantonesbeingoutsideOBSI’scontrol.Keyachievementsare:

• governancereformshavebeenmadeandboardroomcultureisclearlyoneinwhichdirectorsactinthebestinterestsofOBSI

• substantialconsultationonthelosscalculationmethodologyhasoccurredandstepshavebeentakentoaddresstheimpressionthatitwasunfairlyassessingcomplaintswithhindsight(firmsdidnotcomplainaboutthisinourconsultations)

• theJRChasbeenformed,givingOBSI:muchimprovedregulatorysupport;regulatoryoversightoffunding/budgeting;andgreatercertaintyofsurvivalthroughbeingawardedthemandatefordisputeresolutionintheinvestmentindustry

• efficiencyhasimprovedwitheliminationofthebacklogofcomplaintsthathadbeenafeatureformanyyears

• OBSI’sTORwereamendedtochangethelimitationperiodtosixyears

• processesandtemplateshavebeenrefinedtoensureOBSIhasaddressedfairnessstandardsandthatthesearerecordedonfiles

• recordsarekeptofsettlementdiscussionswithfirms,includingguidancegiven

• OBSIcanreadilyextractdataaboutparticipatingfirms’timeframesforresponsestorequestsforinformation(seediscussionatsection6.2)

Outstandingmattersinclude:

• seekingagreementofgovernmentandregulatorstoestablishabindingpowerforombudsmandecisions

• establishingalimitedappealmechanismforombudsmandecisions

• establishingaworkloadmodeltomanagebudgetedfundinglevelsatarealisticlevel(pending)

• discussing,withinternalombudsmen,theuseoftheterminternalombudsmantosuggestarenamingtoavoidconfusion

• publishingcasedecisionsonthewebsite(thismatterisoutstandingfrom2007)andagainrecommendedinthisreport.


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15 Summaryofinternationalcomparisons

Comparisonswithotherfinancialombudsmanservicesinternationallyhavebeenincludedthroughoutthisreport.Insummary,althoughtheboardandCSAcantakecomfortinthequalityofOBSI’sdecision-makingonindividualcases,OBSIcurrentlylagsbehinditspeersintermsofitsgeneraleffectiveness,efficiencyandstrategicimpact.Tobecomparable,OBSImust:

• havetheabilitytoobtainredressforconsumerswhohavesustainedlossesthroughafirm’swrong-doingormistake

• continuetoimprovetimeliness

• widenitsrangeofresolutionstoincludeearlierwrittenrecommendationsanddeterminations

• collectinformationtoevaluatetheimpactofitsdisputeresolutionoutcomes

• publishadditionalinformationtofirmsandconsumersaboutitsprocessesandapproachestocommonissuesonitswebsite

• supportindustryinternaldisputeresolutionthroughtraining

• provideadvicetoparticipatingfirmsonindividualcomplaintsbeforeexternaldisputeresolution

• publishmorecasestudiesonitswebsite

• publishmoreinformationontrendsandissues

• makesubmissionsonregulatoryproposals

• increaseitsoutreach.


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16 Summaryofrecommendations

Strategicrecommendations

Recommendation1:

• ThattheOBSIboardsupportsastrategicapproachtoombudsmanship,incentivisingstafftousetheintelligencegainedfromcasestoprovidesuitableadditionalservicestoparticipatingfirmsandguidancetocustomers.

Recommendation2:

• ThatOBSIincludesapublicpolicyfunctionwithinitsstakeholderrelationsteamtoprepareformalsubmissionsonrelevantregulatoryorlegislativeproposals,andrespondtoregulatoryrequestsforadviceontheeffectivenessofexistingregulation.

Recommendation11:

• ThatOBSIisenabledtosecureredressforcustomers,preferablybyempoweringOBSItomakeawardsthatarebindingonthefirm,andonthecustomeriftheyaccepttheaward,accompaniedbyaninternalreviewprocess.

Recommendation14:

• ThatOBSIdevelopsabusinesscaseforaknowledgemanagementsystem.Recommendation16:

• ThatOBSIturnsitscurrentpolicydocumentsintoshortguideswithcasestudiestoexplainitsapproachestokeylosscalculationpolicies.

• ThatOBSIincreasesthenumberofcasestudiesonitswebsite.

• ThatOBSIsubmitsasampleofdecisionsinvolvingcompensationthatareconsideredbyfirmstohavebeencontentious,alongwiththerelevantguidancematerials,toanindependentexpertauthority.

Governancerecommendations

Recommendation3:

• ThatoneofthecommunitydirectorpositionsonOBSI’sboardbereservedforaconsumer/investoradvocateandthatthisappointmentbebasedonnominationsfromconsumer/investoradvocacygroups.

• That,untilaconsumerrepresentativeisappointed:- theCIACisaskedtopresentapaperoutliningkeyissuesfromaninvestorperspectiveforthe

OBSIboard’snextstrategicplanningmeetingandtoparticipateinthatmeeting- theOBSIboardinvitesaconsumer/investoradvocatetoattendthestrategicplanning

meeting.


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Termsofreferencerecommendations

Recommendation8:

• ThatOBSIreviewsitscompensationcaptobringitclosertotheIIROCarbitrationlimitandamendsitstermsofreferencetorequirethecompensationcaptobeadjustedinlinewithinflation,onathreeyearlybasis.

Operationalrecommendations

Recommendation4:

• ThatOBSIenhancestransparencybypublishinginitsAnnualReport:- keystrategicobjectives,initiativesandperformanceindicators,andprogressagainstthese- moreinformationaboutboardcommitteeactivities.

Recommendation5:

• ThatOBSIproducesaworkingdefinitionforwhatconstitutesamatterthatis“serious”enoughtoreferforregulatoryattention,andaguideforfirmsonhowitwillimplementthesystemicissuesprotocol.

• ThattheCSAextendsthesystemicissuesprotocoltoincludecomplaintsraisedbyasinglecomplainant.

Recommendation6:

• ThattheOBSIandOmbudsmanforLife&HealthInsurancechiefexecutivesdevelopajointapproachtoidentifyingandquantifyinglossesassociatedwithsegregatedfunds.

Recommendation7:

• ThatOBSIrecordsinformationwheninvestigatingacaseaboutthelengthoftimebetweenthegenesisofaproblem,theclientnoticingitandacomplaintbeinglaid.Datashouldalsobecollectedattheenquiriesstageaboutcasesruledoutsidemandateforexceedingthesix-yearlimitationperiod.Datashouldcoveratleasttwoyearsbeforedecidingwhethertoreducethecurrentsix-yearlimitationperiod.

Recommendation9:

• ThatOBSIsubmitsasmallsampleofdecisionstoanexternalreviewerononeortwooccasionsbetweenformalfive-yearlyevaluations.

Recommendation10:

• ThatOBSIpreparesastrategicplanthatcascadesintoanannualplanandtheombudsman’sperformanceagreement,andthatcontainsarangeofKPIs.

• ThatOBSIpublishesatableintheAnnualReportthatsummarisesworkflows.

• ThatOBSIreportsthewiderrangeofresolutionsachievedbeyonddirectfinancialredress.

• ThatOBSIdevelopsaprocessforenablingconsumerusersofitsservicetomakeacomplaintaboutitsowncomplaintsresolutionserviceandpublishesthatonitswebsite.


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Recommendation12:

• ThatOBSIonlysuspendsacasewiththeagreementofbothaffectedparties,andreportstimelinessinclusiveofdelaysforexternalpurposes.

Recommendation13:

• ThatOBSIissuesconsentformsatthesametimeascomplaintforms.

• ThatOBSImonitorsandreportsoncomplaintsruledoutofmandateattheenquiriesstage.

• ThatOBSIformallyreportsonhowenquiriesareresolved.

• ThatCAOscaptureadditionalinformationfromcallersmakinginitialenquiries,includingthenameofthefirm,theproductandissuesofconcern.

• ThatCAOsreceivetrainingintheidentificationofpotentialsystemicissues.

• ThatOBSIimplementsanearlyadviceserviceforparticipatingfirms.Recommendation15:

• ThatOBSIreintroducesearlierwrittenrecommendationsinappropriatecases.

• ThatOBSIexpandssettlementletters,whereappropriate,toincludetherationaleforthefinalsettlementamount.

• ThatOBSIdevelopsashortguideforfirmsandconsumersonhowthenegotiatedsettlementprocessworks.

Value-addedandawarenessrecommendations

Recommendation17:

• ThatOBSIintroducescasedebriefsatinvestigativemeetingsenablingallstafftoshareinthelearningfromindividualcases.

• ThatOBSIincludesquestionsinitsplannedparticipantfirmsurveyaboutwhetherfirmsconsiderOBSIhastheappropriateindustryknowledgetofairlyresolvecomplaintsandwhethertheyconsiderOBSIapproachableandopentofeedback.

• ThatOBSIexploresparticipatingfirms’interestinattendingtrainingsessionsondisputeresolutionandonOBSI’sapproachestodifferenttypesofcases.

Recommendation18:

• ThatOBSIdevelopsapreventionstrategythatsetsouthowitwillassistcustomersandfirmsavoidandreducecomplaints.

• ThatOBSIobtainsdemographicdatafromawiderrangeofcomplainants.

• ThatOBSIincludesopen-endedquestionsincustomersurveystocapturequalitativefeedback.

• ThatOBSIovertime,developsarangeofadded-valueservicesandproductsforfirmsandconsumers.

Recommendation19:

• ThatOBSIpublishesstatisticaldataandtrendsonitswebsiteatleastsix-monthly,ifnotquarterly.


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Appendix1:IndependentevaluationTermsofReference

TheEvaluatorwillreporton:(A)whetherOBSIisfulfillingitsobligationsasoutlinedintheMOUbetweentheParticipatingCSAMembersandOBSI;and,(B)whetheranyoperational,budgetand/orproceduralchangesinOBSIwouldbedesirableinordertoimproveOBSI’seffectivenessinfulfillingtheprovisionsoftheMOU.TheEvaluatorwillevaluateoperationsandproceduresapplicabletothehandlingofinvestmentcomplaintsinvolvingparticipatingfirmswhoserelevantregulatorisaParticipatingCSAMember,IIROCand/ortheMFDA,includingtheeffectivenessofcomplaintresolution.TheEvaluatorwillevaluateinvestmentcomplaintcasefilescompletedsinceJanuary1,2014(the“ReviewPeriod”).DuringtheReviewPeriod,OBSI’sinvestigationfileswerepursuedintwocategories:casesthathadbeenbackloggedsincepriortoNovember1,2013(“BacklogCases”),andcurrentcasesreceivedafterNovember1,2013(“CurrentCases”).TheEvaluatorwillconsidercasescompletedduringtheReviewPeriodincludingBacklogCases,butwillfocusprincipallyonCurrentCasescompletedduringtheperiod.TheEvaluatorwillensurethatthefilesincludedintheirreviewsampleincludefileswiththefollowingcharacteristics:outofmandatefollowinginvestigation,nocompensationrecommended,lowsettlementamount,andrefusalofrecommendationresultinginpublication.Inadditiontoexaminingcasefiles,theEvaluatorwillundertakeinterviewswithkeystakeholdersincludingparticipatingfirms,complainants,consumer/investorgroups,regulatorsandOBSIstaff.Interviewsmaybeconductedpersonally,inwritingorbytelephoneandmayincludetheuseofsurveys.TheEvaluatorwillbegivenreasonableaccesstoinformation,meetings,communications,andOBSIstaffforthepurposesoftheEvaluation.OBSIwilluseitsbesteffortstofacilitateandcoordinateaccesstoformerstaffmembers.AccesstoanymaterialsorstaffmustpertaintotheReviewPeriod.A.ObligationsundertheMOU

Withrespecttorequirement(A)setoutabove,theEvaluator’sreportmustincludeanalysesandconclusionsonthefollowingstandardssetoutinArticle2oftheMOU:

a) Governance–OBSI’sgovernancestructureshouldprovideforfairandmeaningfulrepresentationonitsBoardofDirectorsandboardcommitteesofdifferentstakeholders,promoteaccountabilityoftheOmbudsman,andallowOBSItomanageconflictsofinterest.

b) IndependenceandStandardofFairness–OBSIshouldprovideimpartialandobjectivedisputeresolutionservicesthatareindependentfromtheinvestmentindustry,andthatarebasedonastandardthatisfairtobothRegisteredFirmsandinvestorsinthecircumstances


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ofeachindividualcomplaint.Whendeterminingwhatisfair,OBSIshouldtakeintoaccountgeneralprinciplesofgoodfinancialservicesandbusinesspractice,andanyrelevantlaws,regulatorypolicies,guidance,professionalstandardsandcodesofpracticeorconduct.

c) Processestoperformfunctionsonatimelyandfairbasis–OBSIshouldmaintainitsabilitytoperformitsdisputeresolutiononatimelybasisanddealwithcomplaintswithoutunduedelayandshouldestablishprocessesthataredemonstrablyfairtobothparties.

d) Feesandcosts–OBSIshouldhaveafair,transparentandappropriateprocessforsettingfeesandallocatingcostsacrossitsmembership.

e) Resources–OBSIshouldhavetheappropriateresourcestocarryoutitsfunctionsandtodealwitheachcomplaintthoroughlyandcompetently.

f) Accessibility–OBSIshouldpromoteknowledgeofitsservices,ensurethatinvestorshaveconvenient,well-identifiedmeansofaccesstoitsservices,andprovideitsservicesatnocosttoinvestorswhohavecomplaints.

g) Systemsandcontrols–OBSIshouldhaveeffectiveandadequateinternalcontrolstoensuretheconfidentiality,integrityandcompetenceofitsinvestigativeanddisputeresolutionprocesses.

h) CoreMethodologies–OBSIshouldhaveappropriateandtransparentprocessesfordevelopingitscoremethodologiesfordisputeresolution.

i) Informationsharing–OBSIshouldshareinformationandcooperatewithCSAMembersthroughtheCSADesignatesinordertofacilitateeffectiveoversightunderthisMOU.

j) Transparency–OBSIshouldundertakepublicconsultationsinrespectofmaterialchangestoitsoperationsorservices,includingmaterialchangestoitsTermsofReferenceorBy-Laws.

B.OperationalEffectiveness

Withrespecttorequirement(B)setoutabove,theEvaluator’sreportmustsetoutanalysesandconclusionsincluding:

a) Reportonprogresstowardstherecommendationsfromthepreviousindependentreviews.

b) Ahigh-levelbenchmarkingexercisethatcomparesOBSItootherfinancialOmbudsmanschemesorequivalentincomparableinternationaljurisdictions.

c) Ahigh-levelevaluationofOBSI’soperationswithreferencetoitstermsofreference,internalpoliciesandprocedures,fairnessstatementandlosscalculationmethodologies.AdetailedassessmentoflosscalculationmethodologiesemployedbyOBSIisnotrequired.

d) AnanalysisofOBSIgovernance,includingparticularreferencetostakeholderrepresentationonOBSI’sboardofdirectors.

e) AnanalysisofthereasonsforsettlementsbelowamountsrecommendedbyOBSI.


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Deliverable(s)

TheEvaluatorwillpresentafinalreporttoOBSIandmakeseparatepresentationstoOBSISeniorManagement,OBSI’sBoardofDirectors,andajointmeetingoftheOBSIBoardofDirectorsandtheJRC.Timeline

TheEvaluatorwillregularlyupdateOBSIonitsprogressandimmediatelydiscloseanymaterialissuesthatcouldhinderitsabilitytocarryoutaneffectiveindependentevaluation.AfullprojecttimelinewillbepresentedbytheEvaluatortoOBSIforconsiderationandapproval.ThefinalpresentationtotheOBSIBoardofDirectorsandJRCwilltakeplaceatameetinginMay2016.Workonthereviewcouldbegininlate2015orearly2016.


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Appendix2:References

1. AustralianCreditandInvestmentOmbudsmanScheme.2015.AnnualReport.Retrievedfromhttp://www.cio.org.au/publications/annual-report-on-operations/

2. AustralianSecuritiesandInvestmentsCommission(ASIC)RegulatoryGuide139.2013.Approvalandoversightofexternaldisputeresolutionschemes.Retrievedfromhttp://download.asic.gov.au/media/1240742/rg139-published-13-june-2013.pdf

3. BankingOmbudsmanScheme.2015.AnnualReport.Wellington,NewZealand.Retrievedfromhttps://bankomb.org.nz/ckeditor_assets/attachments/291/annual_report_2014-15.pdf

4. TheTreasury(Australia).2015.Keypracticesforindustry-basedcustomerdisputeresolution.Canberra:CommonwealthofAustralia.Retrievedfromhttp://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/key%20pract%20ind%20cust%20dispute%20reso/Documents/PDF/key_pract_ind_cust_dispute_resol.ashx

5. EuropeanCommission.2013.DirectiveonConsumerAlternativeDisputeResolution(ADR)2013/11/EU.Retrievedfromhttp:/eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:165:0063:0079:EN:PDF

6. FinancialOmbudsmanService.2015.AnnualReview.Melbourne,Australia.Retrievedfromhttps://www.fos.org.au/publications/annual-review/

7. FinancialOmbudsmanService.2015.AnnualReport.London,UnitedKingdom.Retrievedfromhttp://financial-ombudsman.org.uk/publications/ar15/index.html

8. FinancialServicesComplaintsLtd.2015.AnnualReport.Wellington,NewZealand.Retrievedfromhttps://www.fscl.org.nz/2015-annual-report

9. GillC.,WilliamsJ.,BrennanC.,O’BrienN.2013.ThefutureofOmbudsmanschemes:driversforchangeandstrategicresponses.Edinburgh:QueenMargaretUniversity.Retrievedfromhttp://eresearch.qmu.ac.uk/3251/

10. Insurance&FinancialServicesOmbudsmanScheme.2015.AnnualReport.Wellington,NewZealand.Retrievedfromhttp://www.iombudsman.org.nz/assets/Uploads/ISO-2015-Annual-Report.pdf

11. InternationalNetworkofFinancialServicesOmbudsmanSchemes.2014.EffectiveApproachestoFundamentalPrinciples.Retrievedfromhttp://www.networkfso.org/independence.html

12. MinistryofBusiness,InnovationandEmployment(MBIE)(n.d.)GuidelinesforapplyingtobecomeanapproveddisputeresolutionschemeundertheFinancialServiceProviders(RegistrationandDisputeResolution)Act,2008.Wellington,NewZealand.Retrievedfromhttp://www.consumerprotection.govt.nz/for-business/compliance/selling-credit-or-consumer-loans/financial-dispute-resolution/guidelines-dispute-resolution-scheme

13. OmbudsmanAssociation.2007.BIOAGuidetotheprinciplesofgoodcomplainthandling,2007.Retrievedfromhttp://www.ombudsmanassociation.org/docs/BIOAGoodComplaintHandling.pdf


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14. OmbudsmanAssociation.(n.d.).Principalfeaturesofanombudsmanscheme.Retrievedfromhttp://www.ombudsmanassociation.org/about-principle-features-of-an-ombudsman-scheme.php

15. TheNavigatorCompany.2011.IndependentReviewoftheOmbudsmanforBankingServicesandInvestments.Retrievedfromhttps://www.obsi.ca/en/resource-room/reference-documents/independent-review

16. Thomas,D.,&Frizon,F.2012.Fundamentalsforafinancialombudsman:ApracticalguidebasedonexperienceinwesternEurope.TheWorldBank.Retrievedfromhttp://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resources/Financial_Ombudsmen_Vol1_Fundamentals.pdf


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Appendix3:Contributorstotheevaluation

InadditiontoOBSI’sombudsman,managementandstaff,thefollowingpeopleororganisationsparticipatedintheevaluation.

Regulators CanadianSecuritiesAdministrators(CSA)JointRegulatorsCommittee(JRC)OntarioSecuritiesCommissionBritishColumbiaSecuritiesCommissionAlbertaSecuritiesCommissionAutoritédesmarchésfinanciers

Self-regulatorygroups InvestmentIndustryRegulatoryOrganisationofCanada(IIROC)MutualFundsDealersAssociationofCanada(MFDA)

Industryorganisations InvestmentIndustryAssociationofCanada(IIAC)InvestmentFundsInstituteofCanada(IFIC)PortfolioManagementAssociationofCanada(PMAC)RegisteredEducationSavingsPlanDealersAssociationofCanada(RESPDealersAssociation)FederationofMutualFundDealers(FMFD)

Investor/consumeradvocacygroups

CanadianFoundationfortheAdvancementofInvestorRights(FAIRCanada)NeilGross(FAIRCanada)SmallInvestorProtectionAssociation(SIPA)AndrewTeasdale(SIPA)OntarioSecuritiesCommission,InvestorAdvisoryPanel(IAP)UrsulaMenke(IAP)KenKivenko,KenmarAssociates

Firms CanaccordInvestorsGroup

Internalombudsmanoffices

CIBCRBCScotiaTDBMO

Complainants/privatesubmitters

Confidential(7)ArtRossBKennedyLarryElfordPeterWhitehouseDMcFaddenMsPorterDavidFieldstoneHaroldBlanesandAlanBlanesHaroldGellerMildredJagdeo

Boardmembers(atthetimeofthereview)

FernandBélisle(chair)AdrianBurnsLouiseMartelIanLightstoneAngelaFerrante


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SteveGaskinJanisRivenScottStennettKevinRegan

OBSIadvisory JuliaDublin(chair)CIACmembers

Formerstaff DouglasMelville(OBSIOmbudsman)TylerFleming(Director,InvestorOffice,OntarioSecuritiesCommission)

Others PhilKhoury(2007and2011independentreviewer)


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Appendix4:ExtractsfromtheOmbudsmanAssociation“PrincipalFeaturesofanOmbudsmanScheme”

Ombudsmenoffertheirservicesfreeofcharge,andarethusaccessibletoindividualswhocouldnotaffordtopursuetheircomplaintsthroughthecourts.Theyarecommittedtoachievingredressfortheindividual,butalso,wheretheyidentifysystemicfailings,toseekchangesintheworkofthebodiesintheirjurisdiction,bothindividuallyandcollectively.Theycangenerallyundertakeasingleinvestigationintomultiplecomplaintsaboutthesametopic,thusavoidingduplicationandexcessivecost.Theyareneutralarbitersandnotadvocatesnor“consumerchampions”.Theynormallyaskthebodyconcernedandthecomplainanttotrytoresolvecomplaintsbeforecommencinganinvestigation.Theyusuallyseektoresolvedisputeswithoutresorttoformalinvestigationswherethisispossibleanddesirable.Wheretheyidentifyinjustice,theyseektoputthisright.Intheprivatesector,ombudsmenusuallyhavethepowertomakerecommendationswhicharebindingonthebodiesintheirjurisdictionunlesssuccessfullychallengedthroughthecourts.Thecostoftheirservicesisnormallymetbyachargetothebodiesintheirjurisdiction.Mostareestablishedby,orasaresultof,statute,andtherelevantindustryorsectorisobligedtoparticipateinthescheme.Inthemajorityofcases,theprincipalfeaturesofanombudsmanschemeare:Ombudsmanschemesresolvecomplaints.Theyarenotregulators,thoughsomeoftheirdecisionsmaybeseenasprecedentsandhavewidereffect.Theombudsmanmodelisusedtoresolvecomplaintsmadebysomeone‘small’(citizen/consumer)againstsomething‘big’(publicbodyorcommercialbusiness).Ombudsmanschemeproceduresaredesignedtoredressthedifferencebetweentheresourcesandexpertiseavailabletothecitizen/consumerandthoseavailabletothebody/business.Accesstoombudsmanschemesisfreeforcitizens/consumers,andtheyarenotatriskofanorderforcosts.Ombudsmanschemeshandleenquiriesaswellascomplaints,becausedealingwithanenquirymayheadoffacomplaint(forexample,byresolvingamisunderstanding).Thecitizen/consumerfirstcomplainstothebody/business,accessingtheombudsmanschemeifdissatisfiedwiththebody/business’sresponse(orifitdoesnotrespondwithinareasonabletime).Whendealingwithcomplaints,ombudsmanschemesseektoachieveafairresolutionattheearliestpossiblestage–ratherthanworkingtowardsanassumedfuturehearing.


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Ombudsmanschemesuseflexibleandinformalprocedures–resolvingcasesbymediation,recommendationordecisionasappropriate.Ombudsmanschemesdonotjustrelyontheevidencethepartiesvolunteer.Theyactivelyinvestigatecases(usingtheirspecialistexpertise)–callingfortheinformationtheyrequire.Sotheoutcomeisnotaffectedbyhowwelleitherofthepartiespresentshis/her/itscase,andrepresentationbylawyers(orothers)isnotnecessary.Ombudsmanschemerecommendations/decisionsarebasedonwhatisfairinthecircumstances,takingaccountofgoodpracticeaswellaslaw.Ombudsmanschemespubliclyfeedbackthegenerallessonsfromcasestheyhavehandled,sostakeholders(includinggovernment/regulators)cantakestepstoimprovethingsforthefuture.Becausethereisaflexibleandinformalprocess,andrepresentationisnotnecessary,thecostsofanaverageombudsmancasearesignificantlylessthananequivalentcaseinacourtortribunal.


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Appendix5:Progressagainst2011IndependentReview

Strategicrecommendations

Recommendation Status

RecommendationOne.SeekendorsementbytheregulatorsandacceptancebyindustryofthebasicframeworkofOBSIlosscalculationmethodology.

Complete.StakeholderconsultationcompletedinNovember2012.Consultationsinvolvedpublicationoftwoconsultationpapers,participationinanindustryworkinggroup,solicitationofopinionsfromexpertsinlossvaluationandthelaw,threeinformationsessions(oneforeachofthepublic,IIROCmembersandMFDAmembers),andconsultationswithsecuritiesregulators,industryparticipants,investorrepresentatives,andOBSI'sindependentConsumerandInvestorAdvisoryCouncil.AlthoughtheregulatorsdidnotformallyendorseOBSI’slosscalculationmethodologytheydidnotindicateobjection.OBSI’sBoardissueditsdecisionsresultingfromtheconsultationsinNovember2012.

RecommendationTwo.Establishajointindustry/regulatorstandingadvisorypanelforOBSItorefercontroversialtechnicalmattersindispute(principleonly,notindividualcases),suchasaspectsoflosscalculation.

Incomplete.However,adhocdiscussionstakeplacewiththeSROswhenappropriate(e.g.DealerA/Bcases,losscalculations).

RecommendationThree.SeekagreementofgovernmentandregulatorstomakemembershipofOBSIbyallbanksandinvestmentfirmscompulsory.

RecommendationFour.SeekregulatorybackingandindustryagreementtobindingpowerforOmbudsmandecisionsovermemberfirms.

Incomplete.Strategydevelopmenttobegininfiscal2016.

RecommendationFive.EstablishalimitedappealmechanismforOmbudsmandecisions.

Incomplete.Navigatorenvisionedathird-partyappealprocessviaatripartitepanel(typicallywithalegallyqualifiedindependentChair,aknowledgeableindustrypersonandaconsumer/investoradvocatewithappropriateskills)asusedinAustralianFOSoranappropriatelyqualifiedsingleAppealsOmbudsman.However,withrespecttoappealsweshouldconsiderthatattheendofOctober2011,OBSIreceivedaletterfromtheCanadianSecuritiesAdministrators(CSA),theInvestmentIndustryRegulatoryOrganizationofCanada(IIROC),andtheMutualFundDealersAssociationofCanada(MFDA)concerningtheresolutionoftwenty-onecomplaintsconsideredtobestuckatimpasseasofthedateoftheletter(severalhavesincebeenresolved).


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Atthedirectionoftheregulators,OBSIidentifiedaone-timemethodofindependentreviewofthesecaseswithaviewtobringingthemtoaresolution.In2012,firmswereofferedtheopportunitytohavecredibleandexperiencedformercommissionersoftheOntarioSecuritiesCommission(OSC)provideanindependentassessmentofthefilesinquestion,atthefirms'expense,basedonstandardsconsistentwithOBSI'sTermsofReference.IfOBSIhadunfairlyconsideredthefactsofthecaseorourinvestigationfindingswereobjectivelyflawed,thereviewerwouldsaysoinhisorherreportonthematter.Onlyonefirmtookuptheofferforanindependentreview.Ultimately,thereviewerupheldOBSI’sconclusionsandrecommendationandthefirmagreedtopaythefullrecommendationfor$228k.Severalofthestuckcasesresolvedwithoutindependentreview.OBSIpublishedtheremainder.Therehasbeennofurtherworkonathird-partyappealprocesssincetheconclusionofthestuckcases.

RecommendationSix.ThattheOBSIBoardberestructuredtoincludeanindependentChair,aconsumervoiceandtoinvolveallDirectorsinalldecisions.

Complete.Governancereformundertakenandcompletedin2012.

RecommendationSeven.ThatOBSIestablishregulatoryoversightofannualfunding/budgeting.

Complete.JRCoversightperMOU.FCACrequirementisforOBSItopubliclypostinformationitssourcesoffundingforitsfunctionsandactivitiesasanECB.

RecommendationEight.ThatOBSIcontinueitsworktoimproveitsefficiency,givingthisprominenceintheannualreportandprovidinganannualupdateofinitiativestoimprovebothcostandtimeefficiency.

Complete.Efficiencyisacontinuingthemeinallpolicyandproceduraldevelopmentandreview.Recentin-progressexamplesincludeinvestigationprocessrenewal,investigationreporttemplatedevelopmentandfirmfilerequestprocessrenewal.Seealso,CarlyRianprocessimprovementreport2014.Manyoftherecommendationsinthereporthavebeenadoptedorareinprocessofdevelopmentandimplementation.


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Continuousimprovementrecommendations

RecommendationNine.ThattheproposedreformoftheOBSIBoardbeusedasanopportunitytoclearlycommunicatetoallstakeholdergroupsthatwhileOBSIDirectorsshouldbringtheirknowledgeoftheirconstituentgroupstotheBoardtable,oncethere,theyarenolongeradvocatesforanyexternalgroupandareobligedtoactasfiduciariesintheinterestsoftheOBSI.

Complete.Seegovernancereform.

RecommendationTen.ThattheOBSImanagementandtheBoardestablishaworkloadmodelthatcanbeusedtomanagebudgetedfundinglevelsatarealisticlevel–movingbothupanddownasappropriate-andthatthismodelbeusedtoprovideannualpresentationsonfundingadequacytotheRegulatorsJointForumDisputesResolutionCommittee(orsimilar)–seeRecommendationSix.

Incomplete.Strategydevelopmentpending.

RecommendationEleven.ThattheOBSI,initsprocessesofcontinuousreviewofthePolicy&ProceduresManual,templatesandstafftrainingmaterials,ensurethateveryeffortismadetoavoidcreatingtheimpressionthatOBSIisunfairlyassessingcomplaintswiththebenefitofhindsight.Theproceduremightincludeastandardsetofparagraphsforcommunicationattheoutsetofaninvestigationthatreachesbackaconsiderabletime.

Complete.OBSIpoliciesreflectthatfirmpolicies,businesspracticesandstandards,rulesandregulationsineffectatthetimeofthemattersinquestionareconsideredinassessingeachcomplaint.

RecommendationTwelve.ThatOBSIamenditsTermsofReferencetolimittheageofcomplaintsitispreparedtoinvestigatetosixyearsfromwhentheconsumerbecameawareoroughttohavebecomeawareofthebasisforthecomplaint.

Complete.TORsupdatedtoincludesix-yearlimitationperiodinDecember2013.

RecommendationThirteen.ThatOBSIrefineitsproceduresandtemplatestoensurethatwhererelevant,OBSIhassatisfieditselfthatafirm’spracticeandproceduremeetsbasicstandardsofthelaw,applicablecodesandreasonablefairnessandthatthisassessmentisrecordedonthefile.

Complete.OBSI’spoliciesandproceduresspecifythatrulesandregulationsbeconsideredinconjunctionwithfirmpolicyandprocedure,codes,standardsandgoodbusinesspracticesandfairnessoverall.Thefactorsconsideredarerecordedininvestigationworkingdocumentationandinreportsasappropriate.

RecommendationFourteen.That,whereOBSIstaffareinvolvedindiscussingaparticipatingfirm’sofferwithacomplainant,arecordbekeptonfileofthenatureofthatdiscussion,anyguidanceprovidedandifknown,theconsumer’sreasonsforanacceptanceorrejectionoftheoffer.

Complete.I-Sightactionitemsandotherfilenotesareretainedtoreflectconversationswithclients.


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Renewedrecommendations

RecommendationFifteen.ThatOBSImeetwithparticipatingfirmsthathaveaninternalOmbudsman’sOfficefunctiontodiscussthisnamingproblemandtosuggestare-naming/redescriptionoftheinternalfunctiontoreduceconfusionbyconsumersbetweenthefirm’sinternalfunctionandOBSI.

Incomplete.

RecommendationSixteen.ThatOBSIprogressivelypublishonitswebsiteacollectionofde-personalizedInvestigationReportstobeusedasaresourcebystakeholders.

Partiallycomplete.Annualreportcasestudiespublishedinthereportandselectcasespostedinthe“CaseStudies”sectionofthewebsite.However,postingshavenotnecessarilybeencontinuous.

RecommendationSeventeen.ThatOBSIrevisititsiSightrecordkeepingwithaviewtoenablingreadyextractionofdataastoparticipatingfirms’timeframesforresponsetorequestsforinformationorotherassistance.

Complete.Yellowfinreportingtoolhasimprovedi-Sightreportingflexibility.CMSreportingfunctionalityexpectedtoberobust.


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Appendix6:Independentevaluators

DeborahBattellwastheprincipalindependentevaluator. From2009to2015,DeborahwasNewZealand’sBankingOmbudsman.PriortothatsheworkedasaregulatoratNewZealand’sCommerceCommission,firstheadingitsFairTradingbranchandthenitsCompetitionBranch.DeborahalsospentsixyearsatKPMGNewZealandasastrategicmanagementconsultant,specialisinginindependentreviewandevaluation.DeborahholdsanMBAfromVictoriaUniversityofWellingtonaswellasaBachelorofArts.ShecompletedmediationtrainingthroughLEADR(LawyersEngagedinAlternativeDisputeResolution)inAustralia.ShebelongstoNewZealand’sInstituteofDirectors.DuringhertimeasBankingOmbudsman,Deborahmodernisedthescheme’soperationandlifteditsimpactwhilealsodealingwithaconsiderableinfluxofcases(waitinglistof521atitspeakanda225%increaseincasesrequiringinvestigation).Theschemeresolvedmorethan700investment-relatedcasesduringthattimeanddevelopedrelatedtechnicalguidelines.Italsocommissionedtworeviews–firstlybyChapmanTripp(lawfirm)andthenbyCameronRalph.AsamemberofINFSOS(InternationalNetworkofFinancialServicesOmbudsmenSchemes)andexecutivememberofANZOA(AustraliaNewZealandOmbudsmanAssociation),Deborahgainedconsiderableknowledgeofmodernombudsmanschemes,disputeresolutionandthefinancialservicessector.ShehasalsoparticipatedininternationalstudiesofombudsmanschemesundertakenbyQueenMargaretUniversityinEdinburgh.Deborahhaspresentedatconferencesandpublishedarticlesonthetopicoforganisationalreviewaswellasombudsmanpractice.Whileaconsultant,shestudiedevaluationwiththeFederalDepartmentofFinanceinAustralia.Deborahhasevaluatedtheeffectivenessofmorethan20organisations,includingpubliclyfundedorganisations,wheretheprimaryaimsweretodeterminewhetherthefunderswereobtainingvalueformoneyandwhethertheycouldhaveconfidenceinthegovernanceandmanagementoftheorganisations.SinceleavingtheBankingOmbudsmanrole,shehasundertakenastrategicandgovernancereviewofNewZealand’sFinancialServicesFederation,advisedtheMinistryofFinanceinDohaoneffectiveconsumerprotectionaspartofaninternationalteamledbyStrategy&,andadvisedagovernmentdepartmentonhowtoimproveitscomplaintshandlingprocesses. NikkiPenderassistedwiththeevaluation.NikkiholdsaBachelorofLawsdegreefromVictoriaUniversityofWellington(VUW)andaMasterofAdministrativeLawandPolicyfromtheUniversityofSydney.ShehasalsocompletedpaperstowardsaGraduateDiplomainFinanceatVUW’sBusinessSchool.Nikkihasbeenalawyersince1989andhaspractisedinbothNewZealandandAustralia.Sheisaseniorpubliclawandlitigationspecialistwithexperienceworkinginboththeadjudicativeandinquisitorialjurisdictions.NikkiisaformerCrownCounsel.ShehasactedforregulatoryagenciesinNewZealandandAustraliaandhasadvisedbusinessclientsontheirgovernmentinteractions.Shehasalsoadvisedclientsinvolvedinregulatoryenquiriesandcomplaints.Nikkihasservedonprofessionaldisciplinaryandcomplaintsbodies,havingbeenastandardscommitteememberfortheNewZealandLawSociety,a


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CodeCommissionerforWellingtonCricket,anadvisertotheInternationalEducationAppealAuthorityandamemberoftheNewZealandInternationalEducationReviewPanel.StephenFranksprovidedcommentandadvice.Stephenisaprominentlawyer,expertincompanyandsecuritieslaw,andlawreform.AfterearlygeneralpracticehespenttwoyearsasanInvestigatingOfficerinNewZealand’sOfficeoftheOmbudsmen(thentheonlyoneoutsideScandinavia).HejoinedmajorlawfirmChapmanTrippin1979andbecameapartnerin1981.StephenservedasChairmanofthefirm'sNationalBoard.StephenhadsixyearsinParliament,thenfourbackasaconsultantwithChapmanTrippbeforeestablishinginJuly2009aspecialtylawfirm,FranksOgilvie(CommercialandPublicLawLimited)tofocusattheintersectionofgovernmentandcommerce.Otherrelevantexperienceincludes:

• lawyerformanyindustrypeakbodiesincludingTrusteeCompaniesAssociation,NewZealandStockExchange,StockandStationAgents’Association(auctioneersbody),predecessortotheInstituteofFinanceProfessionalsNewZealand

• principaladvisorin1991establishmentoftheNewZealandStockExchangeinvestorandlistedcompanysurveillance,complaintsanddisciplinarybody

• memberofsupervisory,complaintsanddisciplinarybodyoftheNewZealandStockExchangefornineyearsincludingfouryearsasdeputychairmanbeforebecomingamemberofparliament

• primaryauthorofthereformed(andstillmostlycurrent)1991ListingRulesoftheNewZealandStockExchangeafterreviewofthesecuritieslawandexchangecodesandpracticeprescriptionsoftheNewYork,Sydney,London,andZurichstockexchanges

• principaladviserintheestablishmentoftheNewZealandFuturesExchange

• 2009independentreviewerofthecodegoverningtheoperationoftheNewZealandElectricityandGasComplaintsCommission

• 2011scheduledindependentrevieweroftheconsumerprotectionCodeofBankingPracticefortheNewZealandBankers'Association

• 2014independentreporterontheroles,structureandfunctioningofNewZealandTelecommunicationsForum(theindustrypeakbody).

StephenhasalsobeenamemberoftheSecuritiesCommission,theCounciloftheInstituteofDirectorsinNewZealand,andtheNewZealandStockExchange'sMarketSurveillancePanel.In2009/10heservedontheMinisterofEnergy’sexpertadvisorygroupontheelectricitymarketstructure. Nikki holds a Bachelor of Laws degree from Victoria University of Wellington and a Master of Administrative Law and Policy from the University of Sydney. She has also completed papers towards a Graduate Diploma in Finance at VUW’s Business School