FAIR Focus
July 2022
In this issue, we discuss the latest independent review of the Ombudsman for Banking Services and Investments (OBSI). We highlight how regulators are cracking down on crypto trading platforms that do not comply with securities laws, and help explain how robo-advisors work and how they may help you invest. We are also glad to introduce a new staff member to our team.

It’s Time for Regulators to Act and Strengthen OBSI 
FAIR Canada is asking regulators and governments to move quickly to strengthen the OBSI. This includes enabling the OBSI to make final decisions on investors’ complaint resolutions with financial institutions.

The latest independent review of the OBSI’s investment complaints mandate made it abundantly clear that urgent action is needed on this issue.
Alarmingly, the review found that over a five-year period, investors received almost $3 million less from investment firms than the OBSI had recommended.
“We fully support granting the OBSI authority to issue decisions that are binding on its members,” said Jean-Paul Bureaud, Executive Director, FAIR Canada. “It’s time for regulators to introduce mechanisms to make this long-awaited recommendation a reality.”
 
The OBSI handles disputes that cannot be resolved directly between participating financial services firms and their customers. It is an independent, non-profit organization that is free for consumers to use.
 
The review concluded that granting the OBSI binding decision-making authority would be one way to address the problem of low-ball settlements, where an investment firm offers to settle a complaint for a lower amount than recommended by the OBSI. Alarmingly, the review found that over a five-year period, investors received almost $3 million less from investment firms than the OBSI had recommended.
 
The recommendation to empower the OBSI with binding authority is not new. It repeats recommendations made by two previous independent reviews and, more recently, a government task force in Ontario. It would also bring Canada’s complaint-handling system in line with international best practices.
Key Points to Help Improve Investors’ Complaint Process
 
The review addresses and debunks unfounded claims about the OBSI and makes several additional important recommendations, including:

  • Improving how the OBSI reports systemic issues to regulators and, equally important, how regulators respond to these issues.

  • Speeding up the complaints process by requiring firms to provide documents to the OBSI within two weeks, or risk being called out for delaying the process.

  • Requiring the OBSI to anonymously post case summaries on its website to improve public transparency and accountability.

To keep their public commitments, regulators and governments must act with a sense of urgency and establish a strong financial services complaint-handling body in Canada, with binding decisions. The time for action on these issues is now. Financial consumers in Canada deserve nothing less.

For more information on the OBSI and what to do if you have a complaint against a financial institution, please visit:


Beware of the Crypto Hype
Last February, we witnessed what may have been the height of the crypto marketing hype. There was no less than four crypto asset platforms running expensive Super Bowl ads, urging investors to avoid missing out on “the next big thing.”

Things have certainly changed since then. Crypto asset values have plunged dramatically, and slick celebrity-filled ads have all but disappeared. For example, Bitcoin hit an 18-month low in mid-June, and Ethereum was down about 75% by the end of June, compared to its November all-time high.

This has left many retail investors, who were caught up in the crypto hype, with a difficult choice: either cut their losses or hang on in the hopes of a recovery.
Crypto trading platforms that fail to play by the rules raise serious investor protection concerns—this should not be taken lightly.
If you’re thinking of investing in cryptos, be aware that crypto trading platforms may be subject to securities law, depending on the type of crypto assets traded or how the platform stores your assets. Platforms trading cryptos considered to be securities must register, or be recognized by securities regulators, and must comply with securities laws.

The rules are designed to protect you and your investments. Crypto trading platforms that fail to play by the rules raise serious investor protection concerns—this should not be taken lightly.

For example, in June, the Ontario Securities Commission (OSC) sanctioned two foreign-based crypto trading platforms for failing to register and comply with securities laws. The OSC hit both platforms with substantial monetary penalties, and permanently banned one of them from taking part in Ontario’s capital markets.

The latest enforcement report from Quebec’s securities regulator, the Autorité des marches financiers (AMF), provides another example. The report details substantial penalties and orders to freeze assets, issued for crypto-related violations.

These are steps in the right direction that signal to crypto trading platforms, and others in the crypto industry, that they need to comply with securities laws if they wish to operate in Canada.
Before considering investing in crypto assets, be cautious—don’t believe the marketing hype and make sure the platform is registered to do business in Canada. Check the following:



Is a Robo-Advisor Right for You?
Are you one of the growing number of individuals considering becoming a self-directed or do-it-yourself investor? If so, you may be wondering whether using a robo-advisor to build your portfolio is right for you.

Robo-advisors, also known as online advisors, are automated, online platforms that help you create investment portfolios. They use online questionnaires to gather details about your investment goals, assets, income, debt, and risk tolerance. Based on your answers, the robo-advisor uses an algorithm to create and manage your investment portfolio.

There are benefits and drawbacks to using robo-advisors. Two key features of robo-advisors that may make them attractive are:

  • Lower fees: The fees are much lower than using traditional full-service human advisors. When using a robo-advisor, however, the level of human interaction is limited. Note the amount of access you have to a human advisor will depend on which robo-advisor service you choose.

  • Low/no minimum investment: Traditional full-service human advisors usually require a much higher minimum investment amount compared to robo-advisors.

Before using a robo-advisor, decide what is best for you by asking yourself:

  • What investments does the robo-advisor offer; for example, exchange-traded funds, mutual funds, and/or stocks?

  • What fees will you have to pay?

  • How much human interaction will be available? For instance, will you be able to talk to a human advisor, ask questions, or change your portfolio?

  • Will you be comfortable allowing the robo-advisor to make investment decisions for you?

For more information, please visit:




FAIR Canada is Expanding its Team!
We are pleased to welcome Tasmin Waley on our team. Tasmin will be working as our new Policy Counsel, where she’ll be contributing on important regulatory and policy issues that affect investor rights.

Before joining FAIR Canada, Tasmin was Strategic Policy Counsel at the Law Society of Ontario and Senior Legal Counsel at the Canadian Bankers Association.

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