Client Complaint Handling Rule and Guidance Note; and amendments to Dealer Member Rules 19, 37 and 2500 / Part B

09-0363
Type: Rules Notice> Guidance Note
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This Rules Notice is comprised of two parts. Part A relates to the Notice of Approval/Implementation of the new client complaint handling requirements, and Part B consists of guidance relating to the new requirements. 

Part B – Guidance Note

Guidance regarding Client Complaint Handling

Complaints Generally

The fair and timely handling of client complaints is vital to the overall integrity of the investment industry. Dealer Members should regard the handling of all client complaints as an essential element of the proper servicing of client accounts generally.  Addressing client complaints fairly and on a timely basis demonstrates to clients that their issues are dealt with seriously and enhances investor confidence in the industry. An effective framework for dealing with client complaints is in keeping with appropriate standards of professionalism for the industry.

As a result, it is important that Dealer Members establish policies and procedures to deal effectively with client complaints. Such policies and procedures must address the general requirements of Rule 2500, Section VIII, and the specific requirements of Rule 2500B regarding client complaint handling. Rule 2500, Section VIII, requires Dealer Members to provide a written response to all complaints made in writing. Further, where a written complaint does not relate to a matter within the scope of Rule 2500B, Rule 2500, Section VIII also requires that the Dealer Member resolve and respond to the complaint within a reasonable time frame.

Complaints subject to the requirements of Dealer Member Rule 2500B

General

Alleged misconduct

The types of allegations enumerated in the Rule are not an exhaustive list of all matters that may constitute alleged misconduct; other matters may constitute alleged misconduct. Alleged misconduct includes such other matters that relate to client accounts or client dealings with Dealer Members which are of a serious nature and warrant being dealt with through the formal complaint handling process.

Recorded expression of dissatisfaction

A recorded expression of dissatisfaction includes any written submission, electronic communication, or verbal recording.

Verbal expression of dissatisfaction

As set out in the Rule, verbal expressions of dissatisfaction alleging misconduct where a preliminary investigation indicates that the allegation may have merit are to be treated as a complaint subject to the Rule. Implicit in this requirement is the need for Dealer Members to expeditiously undertake a preliminary investigation in order to assess the merits of a verbal expression of dissatisfaction. It is expected that such a preliminary investigation will entail a summary assessment of the merits of a client complaint, and that it will not involve the type of investigation undertaken once a complaint is being dealt with under the formal complaint handling process.

Where a preliminary investigation of a verbal expression of dissatisfaction has been performed and the Dealer Member determines:

  1. that there is evidence to indicate that the client complaint may have merit, the complaint should be treated in the same manner as a recorded expression of dissatisfaction. In accordance with its normal investigative process, the Dealer Member may request that the client document the complaint in a recorded form, however a substantive response must be sent within the required timeframe whether or not a client has provided a documented complaint in response to such a request.
  2. that the nature of the client complaint is unclear or there is no evidence to indicate that the client complaint has merit, the Dealer Member shall request that the client document and submit the complaint in a recorded form. Where the client:
    1. documents and submits the complaint in recorded form, the complaint should be treated in the same manner as if it had originally been submitted as a recorded expression of dissatisfaction; or
    2. fails to document and submit the complaint in recorded form, the Dealer Member may exercise their professional judgment and terminate their investigation of the complaint.

Decision to not investigate a complaint or to terminate an investigation of a complaint

A sales supervisor / compliance staff or the equivalent may exercise their professional judgment in deciding whether a complaint requires an investigation. In assessing whether a complaint should be investigated, Dealers Members must consider whether the client would have a reasonable expectation that the complaint should be handled through the process outlined in the Rule. The decision and reason not to commence an investigation of a complaint must be fully documented and maintained in accordance with the complaint record retention requirements.

Complaints made by individuals who are not clients of the Dealer Member are not subject to the Rule, other than complaints submitted by a person authorized to act on behalf of a client. Written client authorizations, as well as formal legal documents, such as powers of attorney or court appointments, are acceptable forms of documentation for establishing a person’s authority to act of behalf of a client.

Designated complaints officer

The designated complaints officer is not a registered individual position. The purpose of the position is to ensure that the Dealer Member has someone with the requisite knowledge, experience and authority in place to manage the proper handling of complaints.

Dealer Members may choose to name the Ultimate Designated Person or Chief Compliance Officer or an individual acting in a supervisory capacity over the complaints process for the position of designated complaints officer.

Dealer Members are encouraged to make available to the designated complaints officer and their staff specific training relating to dispute resolution.

Complaint procedures / standards

Client access

The information provided to clients on an ongoing basis would include the first point of contact in submitting a complaint and the contact information for the designated complaints officer. The information provided may include the stipulation that the designated complaints officer should generally only be contacted when a complaint had been submitted and the client wishes to express concerns with the handling of the complaint. All client complaints must be handled by qualified sales supervisors/compliance staff or the equivalent. Under no circumstances should individuals who are the subject of a complaint handle complaints made against them.

Complaint substantive response letter - timelines

The ninety (90) calendar days timeline to provide a substantive response to clients must include all internal processes (with the exception of any internal ombudsman processes offered by an affiliate of the firm) of the Dealer Member that are made available to the client that involve but are not limited to the supervisory function / branch management, the compliance function, and legal review.

Complaint substantive response letter - OBSI information

Member firms must inform clients that OBSI will consider a client complaint at the earlier of:

  1. the date the complaint substantive response is provided to the client; or
  2. ninety (90) days after the receipt of the complaint.

This can be done, depending upon the status of the complaint, either as part of the substantive response letter or as part of any letter informing the client that the complaint will not be resolved within ninety (90) days.

Duty to assist clients in documenting complaints

Dealer Members should be prepared to assist clients in submitting a complaint, in particular if the client is handicapped in any way, is a senior with special needs or a language or a literacy issue is involved.

Complaint record retention

Records in a central, readily accessible place must be retrievable within two (2) business days and documents kept for an extended period of time must be retrievable within five (5) business days unless there are reasonable, extenuating circumstances.