Canada’s large banks are under scrutiny for alleged high-pressure sales practices that put profits over customers.
The Ontario Securities Commission (OSC), the province’s security regulator, and the Canadian Investment Regulation Organization, Canada’s investment industry watchdog, announced Tuesday a joint review into the sales culture and environment within the banks’ branches.
It follows a CBC investigation in March that found some evidence that employees at the Big Five banks are under pressure to push products, including mutual funds, and services that are harmful to consumers.
In the initial phase of the review, which is expected to take place over the next few months into 2025, the regulators will aim to identify and determine the scale of possible issues, according to a news release.
“Canada’s banks are steadfast in their commitment to providing advice that is clear, transparent and aligns with helping customers reach their financial goals,” said Maggie Cheung, spokesperson of the Canadian Bankers Association, the voice of more than 60 domestic and foreign banks in Canada.
“Banks and their employees take comprehensive steps to comply with consumer-protection measures and embrace the responsibility of putting customer needs at the centre of all product and service recommendations.”
Investor rights advocates have long been calling on the regulators to take action on bank sales practices.
“We certainly welcome this review,” said Jean-Paul Bureaud, CEO of advocacy group FAIR Canada, in an interview.
In 2017, FAIR Canada wrote an open letter to members of the Canadian Securities Administrators demanding greater investor protection against performance targets and other compensation-related practices that led to consumers being placed in unsuitable financial products.
A year later, the Financial Consumer Agency of Canada found in its own probe that bank branches have become “stores” that sell advice and products, increasing the risk that consumers’ interests are not always given priority.
“The regulators have been working hard, introducing reforms to try to better protect investors,” said Bureaud. But “if the (bank) culture is not aligned with the regulatory obligations or expectations, you’re not really protecting consumers.”
In Tuesday’s announcement, the OSC also encouraged individuals with additional information or concerns to come forward through its whistleblower program, which awards up to $5 million for tips that lead to successful enforcement action.
