The requirement that a registered firm provide its clients with an independent dispute resolution or mediation service as provided for in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) has been deferred for an additional two years from September 28, 2012 to September 28, 2014. In CSA Staff Notice 31-330 Omnibus/Blanket Orders Extending Certain Transition Provisions Relating to … the Obligation to Provide Dispute Resolution Services, published in early July 2012, the Canadian Securities Administrators explain that they are continuing to review this requirement and are considering amendments, which will be published for comment at some future date.
The CSA have not indicated the timing or specific content of this publication, but they have signalled that one option they are considering is requiring that all registrants become members of the Ombudsman for Banking Services and Investments (OBSI). Members of the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) are already participant firms of OBSI, as are most registered scholarship plan dealers. The Report of the 2011 Independent Review of OBSI is available on the OBSI website and contains additional background on OBSI, including various recommendations for improvements. The authors of this Report conclude by recommending that mandatory participation in OBSI is necessary in order to ensure the on-going viability of OBSI.
TRANSITION DOES NOT APPLY TO FIRMS REGISTERED AFTER SEPTEMBER 28, 2009
Firms that were registered for the first time after September 28, 2009 do not enjoy the benefit of the transition and therefor must comply with the dispute resolution requirements set out in NI 31-103. The drafting of the applicable decisions of the various CSA members providing for the new transition period make this result clear by stating that the transition only applies to firms that were registered on September 28, 2009. We question the CSA’s policy rationale for this position, which puts a higher burden on new registrants (since 2009) and may be very confusing to investors.
REMINDER CONCERNING DISPUTE RESOLUTION AND COMPLAINT REPORTING REQUIREMENTS IN QUÉBEC
Registered firms in Québec are deemed to comply with the requirement in NI 31-103 concerning independent dispute resolution and complaint handling if they comply with the requirements under Québec legislation, which requirements are in force. Québec requires firms to use the Autorité des marchés financiers’ (AMF) dispute resolution service. In addition, all registered firms in Québec must file a complaints report twice a year – by July 30 (for the period from January 1 to June 30) and by January 30 (for the period from July 1 to December 31). This report is filed via the AMF’s Complaint Reporting System, at www.srp-crs.ca. Even if no complaints are received, a firm must file a nil report for each reporting period. Failure to file a report exposes a firm to administrative penalties imposed by the AMF.
Although no reporting on complaints is required in any of the other jurisdictions in Canada, other than for members of IIROC, NI 31-103 requires that all registrants set up a system to document and respond to client complaints made about products or services offered by the firm or any representative. This requirement has been in force since September 28, 2009. We note that it does not apply to registered investment fund managers in respect of the activities undertaken pursuant to that registration.