February 2025

This month’s newsletter dives into some hot topics in banking and investing that you won’t want to miss. Have you ever questioned whether your bank’s advice is genuine or just a sales pitch? Banks are under scrutiny as regulators investigate the integrity of their sales practices. Additionally, we’ll discuss the critical need for a straightforward, fair complaint-handling process that ensures investment firms can’t just walk away from investor claims. Our What’s New section puts the spotlight on an edgy new campaign by the B.C. Securities Commission (BCSC) featuring a video on AI investment scams that will leave you both informed and entertained. Read on!

Are Bank Branch Customers Getting Real Advice – Or Just a Sales Pitch?

The Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) recently announced a review of high-pressure sales practices at Canadian bank branches, particularly concerning mutual funds. They encourage anyone with information to contact them directly.

Additionally, the OSC is offering financial compensation to those who provide information about potential violations of Ontario securities law through their Whistleblower Program.

Concerns about improper bank sales practices have been raised before. In 2017, FAIR Canada warned federal regulators about their potential negative impact on Canadians. In 2018, the Financial Consumer Agency of Canada reviewed retail bank sales practices and found that banking culture prioritizes selling products and services and rewarding bank employees based on their sales performance. The review concluded that this sales-driven culture could increase the risk of mis-selling and violate conduct expectations around how bank employees treat customers.

Here’s how a bank’s sales culture can harm you:

Conflicts of Interest

Sales targets create conflicts of interest. When bank employees are rewarded for selling specific products and pressured to meet sales targets, they may not recommend what’s best for you. Instead, they might steer you into unsuitable or complex, high-cost investments that benefit them more than you. In other words, they prioritize their financial interests ahead of yours.

Misleading Job Titles

To sell more products, many bank employees inflate their titles and expertise when speaking with customers. For example, some call themselves “financial advisors” when they are just mutual fund salespeople. Using these types of titles can mislead customers and lead to poor financial decisions that can harm you.

Limited Product Choices

Bank branch employees are often under pressure to sell only bank-owned investment funds, rather than other investment funds that may be better for you. These bank-owned funds might not be transferable to other financial institutions. If you decide to move your account, you could face capital gains taxes. Employees may also steer you towards bank products with higher commissions or fees within the limited selection of bank-owned mutual funds.

Reviewing banks’ sales practices is a chance to promote better outcomes for Main Street investors who invest through a bank’s local branch. We look forward to seeing the results of this review and hope it will include meaningful recommendations that drive real change.

Time to Finally Improve the Complaints Process

FAIR Canada has been calling for improvements in how investor complaints are resolved for more than a decade.

Recently, we commented on CIRO’s proposal to modernize its arbitration program. This program offers investors an important avenue to resolve disputes with investment firms, alongside other options such as filing a complaint with the Ombudsman for Banking Services and Investments (OBSI) or pursuing lawsuits.

While CIRO’s proposal includes some good ideas—such as making the program more affordable for the average investor—it also contemplates limiting eligibility to individuals with claims of $350,000 or more. FAIR Canada opposes this restriction.

Investors should be free to choose the dispute resolution method that suits them best. CIRO should not limit access to its binding arbitration program based on claim size. Such a limitation could undermine investor confidence in the complaint-handling system and prevent them from effectively resolving their complaints.

Moreover, this restriction could disadvantage investors with claims under $350,000 by forcing them to rely on OBSI, which lacks the authority to make binding recommendations. Currently, if a firm disagrees with an OBSI decision, it can simply reject the process and avoid resolving the complaint. This situation may leave clients empty-handed, or sometimes lead them to accept settlements far below what OBSI considers fair.

FAIR Canada and others have urged regulators to improve the OBSI complaint process, including making OBSI’s recommendations binding. Although it seems as if regulators are listening, some in the investment industry continue to lobby against these improvements. 

For instance, some industry stakeholders are advocating for reducing the limitation period for clients to bring complaints to OBSI. The six-year limitation period is important because financial issues are complex and often take time to fully understand. Reducing this period would disadvantage investors, particularly those with low financial literacy or language barriers.

This group also calls for a right of appeal to a third party, overlooking that any due process concerns would be resolved through a court review process. Their push for an appeal makes the complaint resolution process more expensive, slower, and more challenging for everyday investors to hold firms accountable.

At its core, the pushback from the industry highlights their discomfort with levelling the playing field between investment firms and Canadian investors because firms have benefitted from that imbalance.

We call on governments, CIRO, and the CSA to resist industry efforts to weaken proposals that would grant average investors access to binding complaint processes. Binding decisions are essential for ensuring fairness, restoring public trust, and holding firms accountable.

“We’re Not All F**ked” – Spotting AI Investment Scams

Scammers use AI to trick investors with deepfakes, chatbots, and fake reviews. The BCSC is fighting back with a bold, new campaign, called “We’re Not All F**ked.” It highlights how you can recognize and avoid AI-driven frauds!

Learn more about AI deepfake scams, crypto scams, and protecting yourself at avoidAIscams.ca.

You can also find an uncensored version of the video here.

Throughout the year, FAIR Canada (Canadian Foundation for the Advancement of Investor Rights) submits many comment letters on various important policy and regulatory matters that have an impact on investors. Read more about our investor advocacy work.

We’d Love to Hear From You!

Do you have feedback on our newsletter or suggestions for topics you’d like us to write about? Your input is valuable and will help us improve our newsletter content for loyal subscribers like you. Please email us at info@faircanada.ca with your comments and/or suggestions.

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To learn more about our advocacy for investors, visit FAIRCanada.ca