On December 19, 2013, the CSA published amendments to National Instrument 31-103 Registration Requirements,
Exemptions and Ongoing Registrant Obligations (NI 31-103) and its Companion Policy 31-103CP. These amendments
require that all Exempt Market Dealers (EMDs) outside of Quebec use the Ombudsman for Banking Services and
Investments (OBSI) as their sole provider of dispute-resolution services by August 1, 2014.
The PCMA sits down with the OBSI Ombudsman: Doug Melville to discuss this new rule and OBSI’s strategy.
On December 19, 2013 the Canadian Securities
Administrators (CSA) published amendments
to National Instrument 31-103 Registration
Requirements, Exemptions and Ongoing Registrant
Obligations (NI 31-103) and its Companion Policy
31-103CP. These amendments require that all
Exempt Market Dealers (EMDs) outside of Quebec
use the Ombudsman for Banking Services and
Investments (OBSI) as their sole provider of dispute-resolution services.
OBSI’s website contains useful information
about who they are and what they do, and we
recommend all PCMA members familiarize
themselves with how to register with OBSI to ensure
they are compliant with NI 31-103.
Since the CSA’s announcement, PCMA has
been receiving inquiries from members regarding
specific aspects of OBSI’s process and structure
as it relates to exempt market dealers. We sat down
with OBSI’s Ombudsman, Doug Melville, to put these
questions to him.
PCMA: Does OBSI have the processes and people
in place to handle exempt market complaints?
Absolutely. OBSI has investigated complaints
involving exempt products for many years now, coming
from our MFDA members who are dually-licensed.
The sector is not new to us as an organization.
In terms of our staff, OBSI’s experienced
and professional team is drawn from a variety of
fields and disciplines such as securities dealing,
law, accounting, and regulatory compliance and
enforcement. Most worked for investment dealers
before joining OBSI. I personally have experience
dealing with exempt products, from when I worked
in investment banking and retail distribution. My own
history with the industry goes back a long way and
I have several colleagues at OBSI who have also
worked in the exempt market space.
Even with all this experience, we want to make
sure we bring the most up-to-date knowledge to the
table when we take on the new members as a result
of NI 31-103. Members of our senior management
team have already taken the CCO Education Series
offered by the EMDA (now PCMA). In addition, many
OBSI staff members are currently enrolled in exempt
market products course. Of course, we are also in
regular dialogue with the exempt market industry,
including PCMA, as well as securities regulators, in
order to identify the relevant issues well in advance of
the regulatory deadline for your members to join OBSI.
PCMA: What does it mean that OBSI uses a
“fairness standard”? How is this different from
regulators’ “suitability” standard?
OBSI makes decisions based on what’s fair
to both the complainant and the firm, taking into
account general principles of good financial services
and business practices, the law, regulatory policies
and guidance, and any applicable professional body
standards, codes of practice, or codes of conduct.
There are times where a regulator might find that no
regulatory breach has occurred, but OBSI finds that
compensation is owing to the investor for reasons of
fairness. Similarly, there are times when the opposite
occurs. It really depends on the individual facts and
circumstances of a case. It is important to note that
the absence of a regulatory investigation or finding
does not mean that no problem occurred; regulators
have discretion as to whether or not to investigate
an issue, whereas OBSI is required to consider every
investor complaint that comes in our door.
PCMA: What is OBSI’s methodology for assessing
the suitability of exempt products. How will the
OBSI value exempt securities and determine
Exempt market dealers may not be aware that
over the course of 2011 and 2012, OBSI undertook
an extensive public consultation on our investment
suitability and loss assessment methodology
as applied in the majority of complaints. The
consultation gave greater transparency to the
approach we take and also resulted in a series of
enhancements made to our methodology as a result
of stakeholder feedback.
We intend to conduct a similar exercise on a
proposed methodology for exempt market complaints.
We will develop a position paper in consultation with
third-party experts, including from industry, and