Review of the IIROC Arbitration Program 

22-0187
Type: Rules Notice> Request for Comments
Rule connection:
IIROC Rules
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Executive Summary

Investors’ access to a fair, expeditious and cost-effective dispute resolution process with IIROC Dealer Members (Dealers) fosters confidence in capital markets and the financial services industry. Investors have several options available to them to address their disputes with Dealers. One of them is an arbitration program available to the clients of Dealers pursuant to section 9502 of the IIROC Rules1 , which requires that Dealers participate in binding arbitration at a request of a client (Arbitration Program).

The Arbitration Program has been in place for nearly 30 years and was last reviewed in 2011. In 2020, IIROC asked an independent working group of representatives of investor advocates, investment industry and arbitration professionals familiar with the Arbitration Program to review the current program (Working Group).

We publish the Working Group’s recommendations on the Arbitration Program and welcome comments from all stakeholders. In addition, stakeholders are invited to comment on the role of the Arbitration Program in the current dispute resolution framework, its coexistence with other dispute resolution options available to investors, in particular, the free dispute resolution services through the Ombudsman for Banking Services and Investments (OBSI).

IIROC is supportive of OBSI. Our intent is for the Arbitration Program to provide an alternative dispute resolution option for suitable claims, not to draw away from OBSI. The Arbitration Program is distinctive from OBSI and is designed to be an alternative to litigation with a focus on complex and large claims. For that reason, IIROC is considering making the Arbitration Program available only for claims that fall outside of the OBSI limit. This limitation will apply in all jurisdictions except Québec, where not all investors have access to OBSI services.

How to Submit Comments

Comments on the Recommendations should be made in writing and delivered by March 6, 2023 to:

General Counsel’s Office

Investment Industry Regulatory Organization of Canada
Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
[email protected]

Commentators should be aware that a copy of their comment letter will be made publicly available on the IIROC website at www.iiroc.ca.

  • 1Previously Dealer Member Rule 37.1, and section 9502 of the Interim Investment Dealer and Partially Consolidated Rules of the New Self-Regulatory Organization of Canada after January 1, 2023.

1. Investor Dispute Resolution Alternatives

A client wishing to resolve a dispute with a Dealer can choose from several options, beyond their Dealer’s internal complaint handling process, including:

  • OBSI,
  • Arbitration Program, or
  • civil courts.

For disputes involving Dealers registered with the Autorité des marchés financiers (AMF) in Québec, clients may also be able to pursue conciliation or mediation offered through the AMF.

2. IIROC Arbitration Program Background

IIROC began operating the Arbitration Program in British Columbia in 1993 on a pilot basis and extended it to Québec in 1996 and to other provinces in 1999. We last made material changes to the Arbitration Program in 2011. As part of those changes, the maximum award was increased from $100,000 to $500,000 and claimants were empowered with an ability to choose whether an arbitrator could award costs against a losing party.

IIROC designated two independent arbitration firms as administrators of the Arbitration Program - ADR Chambers and Canadian Commercial Arbitration Center, and each is responsible for cases arising in their assigned jurisdictions.

Every arbitration case is presided over by a sole arbitrator, selected by the parties from a list provided by the Arbitration Program administrator. Arbitrators are typically retired judges or practising lawyers with experience and specialized knowledge in arbitration and investment-related matters.

Procedurally, arbitration resembles court proceedings, with pre-hearing discovery (oral or written), motions, experts, witnesses and arguments by the parties before an independent decision-maker; yet these procedural tools and timelines are flexible and tailored to the parties’ individual needs. In recent years, the average claim amount in the Arbitration Program has been close to the maximum of $500,000.

Arbitration proceedings are non-public; they are confidential between the parties and the arbitrator. At the end of the process, the arbitrator renders a written decision, which provides the parties with grounds for their decision. The decision is final and binding on the parties.

Arbitration has been traditionally seen as an alternative to litigation, offering a faster, more flexible and less costly option. The Arbitration Program has focused on complex cases that typically involve large amounts, are more suitable for adversarial fact-finding and require court-like procedural tools.

3. Arbitration Program Review & Recommendations

Between January 2020 and July 2022, the Working Group conducted a substantive review of the Arbitration Program. It concluded that there continues to be a niche and a need for the Arbitration Program as an option in the current dispute resolution framework available to investors in Canada.

The Working Group identified 1) accessibility, 2) costs and 3) procedures as major areas of focus and made 17 concrete recommendations to enhance the Arbitration Program and make it a truly viable dispute resolution option.

The Working Group recommendations consist of three parts:

  • Part 1 provides the recommendations for immediate implementation (subject to IIROC’s internal review and approvals),
  • Part 2 sets out the recommendations for a pilot program (where further research, internal and external approvals and testing may be required before their final implementation), and
  • Part 3 contains the recommendations calling for additional stakeholder input.

4. Request for Comments

IIROC invites comments on all 17 recommendations made by the Working Group, which are found in the Appendix.

In particular, as recommended by the Working Group, IIROC seeks stakeholders’ views on Part 3, i.e.:

  • publishing arbitration decisions,
  • increasing the maximum award (currently $500,000), and
  • shortening the time required to commence an arbitration claim (currently 90 days after the client’s complaint to their Dealer).

In addition, IIROC invites comments on the role of the Arbitration Program in the investor dispute resolution framework generally (for background, please see the Introduction to the Working Group’s recommendations, pp. 3 – 8 of the Appendix) and its coexistence with other available dispute resolution options, in particular, OBSI.

In January 2021, the Ontario’s Capital Markets Modernization Taskforce recommended granting OBSI the powers to make binding decisions and increasing OBSI’s compensation maximum from $350,000 to $500,000. Similar recommendations were made in the 2022 Independent Evaluation of the OBSI Investments Mandate in June 2022. In October 2022, the Canadian Securities Administrators announced that they are developing a proposal for comment that contemplates providing OBSI with binding authority.

To avoid the potential overlap and confusion with the services offered by OBSI, in particular for lower-value claims by unrepresented complainants, IIROC is considering making the Arbitration Program available only for the claims above the OBSI limit. This limitation will apply in all jurisdictions except Québec, where not all investors have access to OBSI services.

We encourage stakeholders to specifically comment on:

  • the potential for investor confusion,
  • the appropriateness of a multi-dispute resolution service provider model for investors and its impact on investor choice and decision-making, and
  • the potential for added complexity in an already complex dispute-resolution landscape.

On receipt and consideration of comments, IIROC will determine what changes will be needed to enhance the Arbitration Program and whether any changes to the arbitration rules and/or procedures or any other aspects of the Arbitration Program will be required to maximize stakeholder benefits. We anticipate completing the review of the Arbitration Program in the first half of 2023.

5. Appendix

Appendix IIROC Arbitration Program Working Group Recommendations

Other Notices associated with this Consultation:

MFDA and IIROC have consolidated

As of January 1, 2023 the MFDA and IIROC have come together as New Self-Regulatory Organization of Canada (New SRO).

New SRO has assumed the regulatory responsibilities of the MFDA and IIROC.

We have set up an interim website for updates and information related to the New SRO including:

  • Executive Management
  • Governance
  • New SRO Rules
  • Member Application
  • Investor Office and the Investor Advisory Panel
  • Information concerning mutual fund dealers registered in Québec
  • Complaints
  • Careers

Enforcement proceedings, membership lists, continuing education, investor education resources and any other information not set out above continue to reside on www.mfda.ca and www.iiroc.ca.