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September 2018
FAIR Focus
Fall is Around the Corner
We look forward to autumn colour leaves, cooler temperatures and local harvest crops. We also look forward to progress that would enhance consumer protection such as:
  • Implementing binding decision-making at OBSI
  • Enhancing consumer protection in banking including designating OBSI as the sole ombudservice for banking complaints
  • The banning of deferred sales charges and embedded commissions at discount brokerages (also known as order execution only brokerages), whilst we prefer a full embedded commission ban
  • Implementing reforms so that Canadians can obtain financial advice that is in their best interests
  • Implementing recommendations to help address elder abuse and diminished mental capacity
We will continue to work on behalf of Canadian financial consumers on these and other issues.

The Team at FAIR Canada
FAIR Canada Calls on the Government to Ensure Consumer Protection in Banking

FAIR Canada calls on the Government of Canada, as part of its comprehensive review of the consumer protection framework for banking consumers, to implement reforms to the Bank Act so that there is one, independent, national ombudservice for banking complaints and to designate the Ombudman for Banking Services and Investments (OBSI).

The Bank Act currently permits banks to choose the external dispute resolution (EDR) provider that will handle complaints that are not resolved to the consumer's satisfaction through the bank's internal processes. FAIR Canada agrees with the World Bank that permitting such a system presents severe risks that a bank will favour the EDR service they consider likely to give them the best deal, creating one-sided competition, and undermining independence and impartiality.

Since these provisions were enacted, we continue to see banks leave OBSI for ADRBO, with the Bank of Nova Scotia's being the bank to most recently announce such a move. We call on the government to end the ability of banks to choose their own umpire as this results in unfairness to consumers and prevents there from being an adequate consumer protection framework.

FAIR Canada has  reviewed both EDR providers currently approved by the Financial Consumer Agency of Canada - the Ombudsman for Banking Services and Complaints (OBSI) and ADR Chambers Banking Ombuds Office (ADRBO). OBSI is the sole dispute resolution provider for investment complaints but there are two for banking complaints. We have serious concerns about the conflicts of interest, misaligned incentives, and level of transparency and accountability at ADRBO.

"Canadians deserve to have their complaint resolved by a body that meets international standards, that is independent of the financial industry, and that governs and serves the public interest, in a manner that is fully transparent and accountable and is accessible to Canadians", says Marian Passmore, FAIR Canada's Director of Policy and COO. "Canadians who go to ADRBO to have their complaint addressed are not on a level playing field with those who go to OBSI to have their complaint resolved. This fundamental unfairness should not be permitted to continue".

FAIR Canada has previously made this request to the Minister of Finance, most recently in its September 2017 submission in response to its consultation relating to the federal financial sector legislative framework and in its joint public statement with the Public Interest Advocacy Centre in March 2018 in response to the Financial Consumer Agency of Canada's report "Domestic Bank Retail Sales Practices Review."
For details on FAIR Canada's review of OBSI to ADRBO, please see this  2018 Comparison.

Open Letter to CSA Seeks Clarification on Client Focused Reforms

FAIR Canada has written a letter  to the CSA regarding the proposed Client Focused Reforms seeking clarification so that we can better understand how firms must address in the best interest of a client conflicts of interest in four common scenarios: Embedded Commissions Only MFDA Dealer; Commuting the Value of a Pension; Leveraged Investing; and Exempt Market Dealer Offering Only Related Party Products. We also wish to know how CSA members will be able to ensure from a compliance and enforcement perspective that firms are complying with the requirements to address conflicts in the best interest of the client.

FAIR Canada Comments on CSA Update on Director and Audit Committee Member Independence

Frank Allen, Executive Director of FAIR Canada, said: "While FAIR Canada welcomes the CSA's determination that it is appropriate to maintain the existing approach to determining director and audit committee member independence,  we are disappointed that the CSA choose not to extend these independence rules and principles, which benefit investors and our capital markets and justify the CSA's conclusion not to change them, to other issuers such as venture issuers and group scholarship plan trusts, and thereby further increase confidence in these areas of our capital markets."

FAIR Canada Comments on Proposed MFDA Sanction Guidelines

FAIR Canada has provided comments in response to the MFDA's consultation on proposed MFDA Sanction Guidelines. FAIR Canada believes the Sanction Guidelines should be drafted so as to inclusively apply to both Members and Individual registrants since misconduct can involve both dealer firms and individuals. As well FAIR Canada calls for the expectations of the public to be included as a consideration in determining appropriate sanctions.

Click  here for full submission.

FAIR Canada Welcomes appointment of a Federal Minister for Seniors

FAIR Canada applauds the appointment of the Honourable  Filomena Tassi as the new Minister for Seniors.

FAIR Canada looks forward to collaborating with Minister Tassi on issues such as the prevention of investment fraud against seniors and other vulnerable Canadians, the prevention of elder abuse, undue influence and financial exploitation and putting in place appropriate frameworks so that financial institutions and financial firms play a positive role in addressing elder abuse and diminished mental capacity.

FAIR Canada on MFDA Expanded Cost Reporting

FAIR Canada welcomes the MFDA's Discussion Paper's attempt to improve cost reporting requirements and the level of client understanding of their total costs of investing.

FAIR Canada supports disclosure that lets investors know prospectively what the costs will be, what costs they have actually incurred (regardless of the type of investment or registrant) and the cumulative impact of the actual costs on investment returns. FAIR Canada believes investors would be best served by eliminating conflict of interests rather than by more fulsome disclosure of the costs of conflicted compensation. The absence of conflicts of interest should be the goal.

Any expansion of disclosure must ensure that (i) the expanded disclosure is tested by an appropriately qualified independent third party with investors (and this testing is made public) to ensure it is meaningful, comprehensible and in their best interest.

With the CSA Client-Registrant Reforms inclusion of cost as an element of suitability, it will be important for there to be disclosure of total costs prior to a client engaging with a firm and prior to a firm recommending an investment product.

We urge the CSA, MFDA and IIROC to benchmark to leading jurisdictions, and to test proposed disclosure with investors so that disclosure is in the best interests of investors. "How" costs are disclosed should be given as much consideration as "what" costs are disclosed. Quality, simplicity and comprehensibility need to be key considerations as well as likely impact on investor decision-making and behaviours.

We believe that consideration of expanded cost disclosure is in its formative stages as regulators need to reflect on the policy goals of expanding cost disclosure, the optimal means of achieving these goals and consider factors such as what the impacts will be of the CSA's Reforms to Enhance the Client-Registrant Relationship as well as the CSA's Mutual Fund Fee Reforms. The focus should be on the best interests of investors, and improving investor protection and investor outcomes.

Click  here for full submission.

Media FAIR in the Media

Globe and Mail -  Scotiabank joins RBC, TD in dropping ombudsman to resolve customer complaints

Investment Executive - CARP calls for feds to designate OBSI "single, binding dispute resolution body"

Advisor.ca -  FAIR Canada favours banning embedded commissions to meet best interest standards

Wealth Professional - 
FAIR Canada seeks answers from CSA

Investment Executive - 
FAIR Canada seeks clarity on Client Focused Reforms

Investment Executive -  The debate over CRM3

Investment Executive - A Trust Betrayed 
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