On November 15, 2012, the Canadian Securities Administrators ("CSA") published proposed amendments to National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103") and the associated companion policy requiring a mandatory dispute resolution procedure.
The proposed amendments, if adopted, require all registered dealers and registered advisers outside of Québec to use the Ombudsman for Banking Services and Investments ("OBSI") as a service provider for their dispute resolution or mediation services obligations under section 13.16 (dispute resolution service) of NI 31-103. A complaint is defined as one that relates to the trading or advising activity of a registrant, raised within six years of the date when the client knew or reasonably ought to have known of the trading or advising activity, and involves a maximum claim of $350,000.
Dealers and advisers would be required to make the services of OBSI available to their clients for any complaint that falls within OBSI's mandate. If OBSI is unwilling or unable to consider the complaint, the firm would have to make another service provider available to the client. All client complaints are expected to be addressed under a registered firm's internal complaint handling policy. In circumstances where the firm's complaint handling policy does not produce an outcome satisfactory to the client, they may use an independent dispute resolution or mediation service. The proposed amendments clarify that a registered firm is only required to make one dispute resolution or mediation service available at its expense for each complaint.
The proposed amendments do not change that registered firms must pay for dispute resolution services. Under the current funding model, all participating firms pay a levy to OBSI based on their size or volume of business. The CSA has been working with OBSI to develop a fee model that will be fair to all registrants required to use OBSI's services for dispute resolution.
Firms that would be most directly affected by the proposed amendments are dealers and advisers registered outside Québec who are not members of either the Investment Industry Regulatory Organization of Canada or the Mutual Fund Dealers Association of Canada. Investment fund managers are only subject to section 13.16 if they operate under a dealer or adviser registration. The current Québec regime will remain unchanged following the consultation.
The proposed amendments are open for comment until February 15, 2013. Click here to download the full notice and request for comments on the proposed amendments.
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