You’re convinced your advisor has breached the rules and made you lose money. Now what?
Unfortunately, while it’s easy to make a complaint, the chances of recovering all of your losses are relatively low unless the breach is flagrant and easily proven. “The dispute resolution system is unsatisfying for everyone,” says FAIR Canada’s Neil Gross, a former securities lawyer who has defended both individuals and investment dealers.
You should also understand that the process is slow and the odds are against you. The role of the Mutual Fund Dealers Association (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) is to ensure that dealer firms and their employees follow the rules, and they can discipline rogue advisors. But they are not going to act as your champion: They exist primarily to support the industry, not consumers.
1. Make a written complaint to your advisor’s dealer firm. Provide a clear summary of your concerns and be as specific as possible. If you have supporting documentation, such as emails or notes from a meeting, include these with your complaint. You should expect a written response within 90 days.
2. You may also want to complain to your advisor’s regulator. To do this you’ll need to learn whether the dealer is under the jurisdiction of the MFDA or IIROC. Both regulators’ websites have instructions on how to file complaints.
3. If you’re not satisfied with the response you get from the dealer, you can make a complaint to the Ombudsman for Banking Services and Investments (OBSI). Be aware that OBSI is industry-funded, meaning it’s not a government agency or regulator. In 2014, it ordered financial compensation in just 41% of the 539 complaints, it resolved and the median amount paid to the complainants was just $8,300. So don’t get your hopes up.
4. If you’re trying to recoup investment losses from an IIROC dealer, you can also consider arbitration. The dispute-resolution firm ADR Chambers (adrchambers.com) will hear from both sides and then make a binding decision. You may be responsible for paying half the cost of this process.
5. If the amount of money you’re trying to recover is very large, consider taking legal action. But again, you should appreciate that going to court is expensive and time-consuming, and you can be sure the investment dealer will defend itself to the teeth. If they offer an out-of-court settlement, it might include a gag order to keep you quiet.
These steps apply in all provinces except Quebec, where the Autorité des marchés financiers (AMF) handles investor complaints. In Manitoba, New Brunswick and Saskatchewan, the provincial securities regulators can also order an investment dealer to pay compensation to a client. For more information on the dispute resolution process, visit the website for the Small Investor Protection Association.