Regulators must strengthen OBSI

Canada has become very good at reviewing the Ombudsman for Banking Services and Investments (OBSI). It has been much less good at fixing it.

That is the backdrop to the latest independent external review of OBSI, now underway and led by Phil Khoury of CRKhoury. The review is part of the organization’s regular cycle of independent assessments.

Khoury is no stranger to this file. He conducted the first two independent reviews of OBSI, in 2007 and 2011. The 2011 review was the first to recommend that OBSI be granted binding authority.

Deborah Battell repeated the recommendation in 2016. Poonam Puri did the same in two separate 2022 reviews — one of OBSI’s investment mandate, one of its banking mandate. Fifteen years on, Khoury is back to assess what has come of all of it.

OBSI matters because it is where investors and banking customers turn when the firm’s internal complaint process has failed them. For most consumers, that is not a convenience. It is the difference between a real route to redress and none at all.

There has been progress. On Nov. 1, 2024, OBSI assumed its role as the single external complaints body for federally regulated banks, ending nearly two decades of fragmented dispute resolution on the banking side.

That is a meaningful reform and deserves to be recognized as one. But it did not give OBSI binding authority over banking complaints. And it did not address the investment-side problem that has haunted every serious review of the organization.

The current review is broad in scope. It examines OBSI’s banking and investment mandates, governance, complaint-handling timelines, loss-calculation methodology, regulatory interaction and international benchmarking. It also takes up the question of why some cases settle below OBSI’s recommendation.

The comment period closed on April 24. The original April 3 deadline was extended after consumer-side groups flagged that the original window favoured well-resourced firms.

Twenty-six public submissions are now posted, alongside four confidential. The makeup itself is a finding. Industry pushback is sparse. Roughly half the submissions came from individuals, several with names withheld. The rest came from organized consumer and investor-protection bodies whose patience is running short.

Binding authority

OBSI investigates a complaint, assesses what happened and recommends compensation. But it cannot generally compel a firm to pay. A bank or investment dealer can reject the recommendation or offer less.

The consumer can take the lower amount, sue or walk away. For seniors and vulnerable complainants, that is not a real choice.

OBSI’s 2025 annual report puts numbers to the consequence. Between 2021 and 2025, 20 investment cases settled for less than OBSI recommended, leaving consumers short by $795,178.

Over those same five years, 39% of investment cases with recommendations above $100,000 ended in low settlements — exactly where consumers are least able to treat litigation as a realistic alternative. That is not theoretical leverage. It is leverage showing up in outcomes.

The submissions reflect that imbalance. Most acknowledge that OBSI does useful work and is more accessible than court. The criticism is aimed at the structure around it: delays before consumers reach OBSI, the absence of finality when they do, limited systemic follow-through, the secrecy that surrounds settlements and the weak consumer voice in governance.

Binding authority is the dominant recommendation. The Ontario Securities Commission Investor Advisory Panel has been making it since 2012. FAIR Canada calls OBSI a trusted and established organization but says it cannot be a world-class ombud service while its decisions remain non-binding. That is not a fringe view. It is the view of every party with a consumer-protection mandate.

Delay is the second theme. The dealer complaint process can take months, and optional internal appeals add more time and confusion. Submissions recommend cutting the dealer response period from 90 days to 60 and suspending limitation periods so consumers do not lose legal rights while working through the firm’s machinery.

Accessibility is the third. The Public Interest Advocacy Centre and the Investor Protection Clinic both point to low public awareness of OBSI. If consumers do not know OBSI exists, the right to complain is more theoretical than real.

Several submissions note that the 2013 removal of OBSI’s independent systemic investigation authority left a serious gap. A complaint system that resolves one file while ignoring a repeated failure is not learning from its own evidence.

Non-disclosure agreements (NDA) drew unusually sharp criticism. The concern is straightforward. If consumers must remain silent to receive compensation, other consumers and the public lose information about recurring harm. NDAs may close an individual file. They bury the conduct that produced it.

OBSI commissions these reviews to satisfy obligations to securities and banking regulators. The reviewer’s job is to find the gap and prescribe the cure. Implementation rests elsewhere — with the Canadian Securities Administrators and the provincial governments that must pass enabling legislation for investment cases, and with the federal government for banking.

The Khoury review will produce careful recommendations. So did the five reviews before it. Each time, regulators acknowledged the gaps and processed the remedies until little of them remained.

A sixth review repeating familiar recommendations is not progress. In Canadian financial regulation, the review has stopped being a step toward reform. It has become a substitute for one.

This article has been updated.