When an investor feels unfairly treated by a stockbroker, and the issue is not resolved through direct discussion with the member firm, the next step often involves pursuing a formal dispute resolution mechanism. The options available in the Canadian securities industry for handling such disputes include:
* Rescission of the objectionable trades:
* This would involve canceling or reversing the trades in question. However, rescission is rarely granted and typically occurs only if there is clear evidence of fraud or legal impropriety. It is not the best initial course of action for dispute resolution.
* Payment from the Canadian Investor Protection Fund (CIPF):
* The CIPF protects clients of member firms in the event of the firm's insolvency, not disputes over trades or treatment by a broker. Therefore, this is not applicable in this case.
* Independent arbitration:
* Arbitration is a widely recognized method of resolving disputes in the securities industry. It involves an independent arbitrator reviewing the case and issuing a binding decision. It is particularly suitable for cases where discussions between the investor and the firm have not resolved the issue.
* Investigation by the Ombudsman for Banking Services and Investments (OBSI):
* OBSI offers a dispute resolution service for clients of financial institutions, including investment dealers. However, OBSI's findings are non-binding, meaning they cannot compel the member firm to act or pay compensation. Arbitration, on the other hand, provides a binding resolution.
Why Arbitration is the Best Option:
Independent arbitration is a more definitive course of action because it results in a binding decision that both the investor and the broker must adhere to. Arbitration is designed to handle precisely the type of disputes described in the question and ensures a fair process overseen by an impartial third party.
References:
* Canadian Securities Course Volume 1:
* Section on Dispute Resolution and Investor Protection: Arbitration is discussed as a key method for resolving disputes where the investor seeks a binding resolution.
* Role of the Canadian Investor Protection Fund: The CIPF is explained as providing coverage for insolvency, not dispute resolution.
* Role of the Ombudsman for Banking Services and Investments (OBSI): OBSI is explained as offering non-binding recommendations, making it less suitable for cases where binding decisions are needed.