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Letter Summary:
The Ombudsman for Banking Services and Investments (OBSI) is seeking input from stakeholders and the public in relation to their approach to calculating investor losses in cases involving unsuitable sales of illiquid exempt market securities. This consultation is focused on assessing the process they currently use and helping them determine whether there are better alternative approaches they should adopt in such cases.
Overview of the Council’s Comments:
OBSI is seeking input from stakeholders and the public in relation to their approach to calculating investor losses in cases involving unsuitable sales of illiquid exempt market securities. They are seeking input from stakeholders and other interested parties on the processes they currently use to help them determine whether there are better alternative approaches they should adopt in such cases.
The CAC generally agrees with OBSI’s method of assigning a value of zero to such securities, requiring investors to return them to the firm. They emphasize the need for clarity on how OBSI determines the end value, as firms could unintentionally benefit from selling the securities later. They also stress that investors should not misuse OBSI’s position as a safeguard against normal market losses.
Regarding the general approach of assigning a zero value, the CAC suggests that this is reasonable but calls for exceptions where necessary. They highlight the need for OBSI to consider cases involving captive dealers that have limited investment options and to clarify their methodology for evaluating alternative investments. This would help ensure fair outcomes for both consumers and firms involved in these transactions.