Ellen Roseman: How to protect investors
- January 26, 2012 12:32 PM |
- By Ellen Roseman
Litigation is too expensive for most people. The costs far outweigh the amount at stake, especially since Canadian courts don't award punitive damages.
For everyone else, the alternative is informal mediation. About 15 years ago, the federal government set up an ombudsman system for banking complaints.
Each bank has its own ombudsman. There's also a higher-level ombudsman, which can investigate and get settlements for clients when the bank says no.
Later, the ombudsman took on investment complaints. It now works with all of Canada's investment dealers, who have to join and pay for the office's operations.
The Ombudsman for Banking Services and Investments was never popular with Canada's big banks and investment dealers. They don't like being told they made mistakes and they have to pay up.
After the 2008 stock market collapse, the ombudsman got a flood of complaints and hired more investigators. Some big banks didn't like the higher costs. Nor did they like the method used to calculate an individual's investment losses.
Royal Bank of Canada pulled out and hired its own ombudsman for banking complaints in 2008. TD Banking Group followed suit in 2011. They're still with OBSI for investment complaints, but they would leave in a minute if they could.
The federal government has said nothing about these two embarrassing defections. It could force the banks into staying with the ombudsman it set up 15 years ago, but hasn't done so.
OBSI is in a difficult position. At the end of December, it had 15 investment complaints that member firms were refusing to resolve. The clients were in limbo. Things were at a stalemate.
The federal government should step in to resolve the impasse with the big banks. Setting up a national securities regulator is outside its grasp, but taming the big banks is well within its powers.
The government said no in the 1990s when the banks wanted to merge with each other. Let's see it show the same leadership today.
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