Regulators moving slowly on investor concerns

“We have made progress in some areas but we still have work to do.” That’s the latest self-assessment by the Ontario Securities Commission, from a follow-up report more than a year after it hosted a Town Hall to gauge investor opinion.

Based on the feedback from that meeting in May 2005, which included the IDA, MFDA, and the Ombudsman for Banking Services and Investments, who co-authored the report, the OSC says that many investors don’t know their rights or what recourse they have when they have a complaint. The report also notes that the confusing and awkward complaints process has resulted in “a lack of trust in the system.”

Not much has changed in that time. For the most part, regulators have taken only small measures to address investor concerns or produced proposals for change. Many of those changes outlined in the 16-page report focus on improving the lines of communication, not only between the regulators and investors but amongst the regulators themselves.

In a release accompanying the report, OSC vice-chair Susan Wolburgh Jenah says the report discusses their progress and their plans for the coming months. “This progress should be viewed as the end of the beginning, not the beginning of the end. Our organizations will continue to develop solutions to address investors’ concerns in these areas — we still have work to do.”

So far, the regulators say they have tried to open up the lines of communication by providing “plain language” print and online communications and transferring investor calls directly to the appropriate SRO.

Their most tangible effort to date involves extending the current two-year limitation period for investor lawsuits. The limitation period was reduced to two years from six in a number of provinces last year, including Ontario, Alberta and Saskatchewan. Regulators are calling on the Ontario government to clarify the Limitations Act in the hope it will “settle any doubt that the limitation clock is paused when an investor makes a complaint.” The changes to the act would also allow potential litigants the flexibility to set their own limitation period to promote out-of-court settlements.

The securities commission is also looking at requiring firms to identify a designated “client complaints officer” to act as the main point of contact for investors.

On the issue of transparency, OBSI is developing a guide to help investors better understand its dispute resolution process. The organization is also considering publishing its recommendations in full. Currently, the process is mostly confidential, with OBSI publishing only select case-studies that strip the names of the parties involved.

The regulators are also looking at developing a central registry that would collect all registration and disciplinary information currently stored separately with each organization. However, no timeline or plan was given for this initiative.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(07/26/06)