The Canadian Investment Regulatory Organization (CIRO) is proposing reforms to its Arbitration Program. The Investment Industry Regulatory Organization of Canada (IIROC), one of CIRO’s predecessor organizations, had previously sought comments on the program, which were based on recommendations made by an independent working group. Comments on the proposal are due on January 31, 2025.
The Arbitration Program is available now to claims by clients of investment dealers under $500K and is relatively flexible in terms of its rules and procedures to suit the parties involved. Arbitration awards are final, and the program is like a court’s fact finding and adjudication process, including discoveries, examinations, expert evidence and legal arguments. Parties must pay both the administrator and arbitrator fees, typically split 50% between the parties. The Arbitration Program has had low uptake, which the working group speculated was a result of the lack of awareness of the program and its costs. CIRO believes the program still has value for complex disputes that typically require more formal and adversarial procedures, and if it were to be closed, investors may not have any option but go to court.
CIRO is proposing to make several changes to the existing Arbitration Program, in response to the working group recommendations and comments received on the original IIROC proposal. It proposes, for example, to make the Arbitration Program available to clients of both investment dealers and mutual fund dealers.
The consultation describes the potential interaction between the Arbitration Program and the dispute resolution available through the Ombudsman for Banking Services and investments (OBSI). OBSI staff usually investigates complaints and makes compensation recommendations based on documents and interviews with the parties and can make non-binding recommendations up to $350K (there is a proposal to increase this limit to $500K). CIRO is currently proposing to limit access to the Arbitration Program to claims below the OBSI compensation maximum, to ensure that investors are aware of and try to resolve their claims through OBSI first. CIRO has posed specific consultation questions relating to access to the Arbitration Program for claims outside of OBSI’s mandate or that have been withdrawn from OBSI. The upper award limit of the Arbitration Program would be raised to $1 million, or higher on consent of the parties.
CIRO also poses questions relating to the appropriate limitation period, which is currently set at two years. It also proposes to set the ultimate claim resolution limit to 12 months.
As costs have been identified as a factor in contributing to low usage, CIRO proposes to:
- fund reasonable costs of case management and mediation (available for all claims);
- set reasonable arbitrators’ fees and offer fixed fee arbitration options; and
- refer unrepresented litigants to legal clinics and lawyers offering pro bono services.
Finally, as a transparency measure, CIRO proposes to publish enhanced statistics about the usage of the Arbitration Program, including case volumes by region, type of dealers involved, time to resolution and detailed key issues, as well as select anonymized case studies.
November 29, 2024