By: Conflicts Analytics Lab – Securities Team

You may have chosen to work with an investment advisor directly through your banking institution or sought advice from a representative from an investment corporation. Investment advisors cannot guarantee that your investment will work out. However, they have a responsibility to ensure that investments and investment strategies they recommend are suitable for their clients (you!).

So, what does suitability mean in this context?

Suitability generally encompasses two things:

1. An advisor knowing the essential features of an investment product (including risks and costs), also known as “Know-Your-Product”.

2. An advisor noting and acting in accordance with “Know-Your-Client” factors. 

When assessing whether an investment is suitable or not, a few factors about the client must be taken into consideration – these include, primarily, but are not limited to:

• Age
• Net worth and earnings
• Investment knowledge
• Investment objectives
• Risk tolerance (Lamoureux, Re Quicklaw). 

Investment advisors have a duty to “know their client” in terms of their personal and financial situation relating to how well suited a particular investment is.

Of course, your personal or financial situation can change between the time you begin and finish working with an investment advisor. Advisors are required to perform a new suitability assessment when material changes occur, like a job loss or retirement; this assessment records the same factors as the ones recorded when you first meet with an advisor. This is to ensure that investment recommendations are aligned with the clients’ situation especially in terms of risk tolerance, financial means and investment objectives.

When a recommended investment is wholly unsuitable, it can pose a number of problems. For one, there is usually a high chance of significant losses or very low returns on investments. This leads to much distress on the investor’s part and can leave them in an unfortunate situation.

How Can I Make a Complaint?

You may wish to pursue a claim through MFDA or IIROC, depending on the organization your investment advisor is a part of. You can also go through traditional court, but this path is usually most suited for complaints where the actions of the investment advisor are nearly criminal in nature.

The OBSI (Ombudsman for Banking Services and Investments) and ADRBO (ADR Chambers Banking Ombuds Office) are independent organizations that facilitate the complaint process for when consumers wish to escalate their complaints against their investment advisors. Currently, only OBSI hears complaints regarding investment suitability, and has their own complaint process set out.

First, you must discuss your complaint with your bank or investment firm first (depending on where your investment advisor came from)- before proceeding further, it is necessary that you make your formal complaint to the individual first.

If the issue is not resolved, then you must escalate your complaint at the institution to a higher level. The firm typically has 90 days to resolve your complaint.

If the issue is still not resolved, you must determine whether or not the firm participates in the OBSI’s process- this can be done by navigating OBSI’s search tool. 

If they are a participating firm AND you are not content with the answer give to you by the firm regarding your complaint or haven’t given you a response at all within 90 days, then you may contact the OBSI. However, there is a time limit. From the time the firm gives you their final response, you have 180 days to bring your complaint to the OBSI. This complaint can be submitted online here.  

Because investigating investment suitability complaints is within OBSI’s mandate, they will be able to investigate your specific case. Then, you must provide consent for the OBSI to contact your firm to discuss your complaint prior to opening an independent investigation as well as provide all information regarding your complaint. After this, an investigation opens. When it has concluded, the OBSI makes a recommendation that can either result in compensation or no compensation. 

It’s important to keep in mind that an investment is not unsuitable solely based on the fact that money was lost from it. Investment advisors cannot guarantee outcomes; they can only recommend the most optimal strategies to fulfill your investment objective. Therefore, it is entirely possible that you lose money on an investment recommended by your advisor that is suitable. 

How Much Compensation Am I Eligible For?

Whether you are owed compensation depends not only on the recommendation that the OBSI makes, but also on whether, in the event compensation is recommended, the firm agrees to compensate you. 

Generally, the OBSI will calculate the performance of the unsuitable investment and the position that you, as the client, would have been in had you suitably invested.  If the unsuitable investments performed worse than how suitable investments would have, then that difference in value is what’s known as your financial harm. 

Once this amount is calculated, it is considered whether you can bear some degree of responsibility for the harm. Once this is determined, then a final decision is made regarding the monetary amount that the OBSI believes the firm should compensate you for.

Conclusion 

There are solutions available for instances where an investment is recommended to someone through a trusted investment advisor, and the investment ends up not working out for the client. Trying to figure out whether your advised investment was suitable for you or not can be a difficult task.

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Disclaimer: The information provided in this response is for general informational purposes only and is not intended to be legal advice. The content provided does not create a legal client relationship, and nothing in this response should be considered as a substitute for professional legal advice. The information is based on general principles of law and may not reflect the most current legal developments or interpretations in your jurisdiction. Laws and regulations vary by jurisdiction, and the application and impact of laws can vary widely based on the specific facts and circumstances involved. You should consult with a qualified legal professional for advice regarding your specific situation.