Finance Committee on March 13th, 2012

[David Phillips]

Disclosure can always be helpful. I'm not thoroughly familiar with those provisions, but....

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

568.

[David Phillips]

Okay. Thank you. We'll look at it.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you very much, sir.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Jean.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Mr. Melville, you levy fees on banks based on the volume of their capital size and volume of business. Is there a difference in the fees that you charge and what ADR Chambers would charge?

[Douglas Melville]

Our charges are based upon a formula that was developed that allocates it amongst all the players based on their volume market share in the marketplace.

With ADR Chambers, there's not the same degree of transparency as to how they do that. I suspect it was probably a combination of a retainer on their part plus probably something on a per-complaint basis. That would be my guess, but I'm not sure of the answer to that.

[Scott Brison, Liberal, Kings—Hants, NS]

Okay.

In the U.S. and the U.K., I understand there's a statutory requirement in each case for an independent bank ombudsman.

[Douglas Melville]

Yes.

[Scott Brison, Liberal, Kings—Hants, NS]

What other countries take that approach?

[Douglas Melville]

Pretty much all of the countries that you would see as comparable to Canada have a statutorily underpinned ombudsman. We're really one of the last of our kind, where we were an industry-created body in the form of a non-governmental organization. Most, over time, evolved to become statutory. Some would say that after a 16-year run, we've done very well here, getting this far, given the inherent tensions in the role.

Australia, New Zealand, South Africa, the U.K., and Ireland are the older standing ones, but you're now seeing the movement around the world of looking at consumer protection through an ombudsman structure as being quite popular. Hong Kong and Taiwan actually just launched offices in the past three or four months. It's really catching on. Eastern Europe is now moving to it.

The goal is the flexibility to be able to have a non-judicial type of process to get at the fairness of complaints.

[Scott Brison, Liberal, Kings—Hants, NS]

So your quarrel is not with your costs, or rather the costs of an ombudsman being covered by the banking sector, it's the ability of banks to choose one over another. That's your quarrel, is it?

[Douglas Melville]

Absolutely. I think it's about the independence of the function, to not have to be beholden to a firm that hires you on an annual or contractual basis.

I think the fact that the funding comes from the industry is no different from what you'd see at CDIC, OSFI, or other regulatory-type bodies. It's really how you function that is the test of independence.

[Scott Brison, Liberal, Kings—Hants, NS]

How would the governance that you provide, as the Ombudsman for Banking Services and Investments, differ in application from a statutory or effectively government regulatory approach funded by government as opposed to by industry, as it is provided in some other countries?

Secondly, are there differences in approach between OBSI and ADR Chambers that...? Are there differences in approaches, or any cases you can cite?

[Douglas Melville]

I think the difference between our structure and the statutory one is primarily around flexibility. If you're a regulator, your job is to apply statute in regulation. We are asked to take on a mandate of finding fairness in the circumstances, which as you can appreciate is very specific to individual fact situations. We're designed with the flexibility to find the right outcome.

Regulators require clarity of regulation to be able to apply their regulation to the many situations they encounter. What you end up with is a very rule-based approach to market conduct regulation and to the resolution of consumer complaints. It's hard, if you don't anticipate what the problems may be and encapsulate that sense in regulations. It takes away some of the flexibility.

As to the differences between our office and ADR Chambers, again the lack of transparency makes observations difficult, but I would speculate that they fall into three big categories. One is the approach to systemic investigations. Those are investigations in which a single complainant may indicate that there are other customers affected by the same type of complaint. We have in our mandate the ability to look at those, investigate them, and recommend that the firm compensate the clients who may have been affected. If they refuse to do so, then we bring it to the attention of the regulators. It's still a private, confidential investigation—

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Douglas Melville]

—but that's not something that ADR Chambers is currently empowered to do.

[Scott Brison, Liberal, Kings—Hants, NS]

Finally, concerning the brokerage arms of the banks, this function is largely provided through the provincial securities commission—

[Douglas Melville]

That's correct.

[Scott Brison, Liberal, Kings—Hants, NS]

—which is a statutory agency, in this case provincial. So the clients of the brokerage arms of the banks are really the consumer side of it. The regulatory framework is provided by the provincial securities commission.

[Douglas Melville]

Under securities rules, the firms must participate in our service, yes.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to ask a quick question of Mr. Sommers. You said you only became aware of this a week ago. How did you become aware of it?

[Tyler Sommers]

I personally became aware of it via an email.

[Shelly Glover, Conservative, Saint Boniface, MB]

Who was the email from?