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Douglas Melville is an essential cog in the regime that shields millions of Canadian investors from abuse by financial institutions.

The Ombudsman for Banking Services and Investments can secure compensation if you lose money due to bad advice, mistakes or unfair treatment.

But the process falls short of "access to justice" for aggrieved investors, as Ontario Superior Court Justice Bryan Shaughnessy pointed out in a recent decision.

The industry-funded ombudsman can't enforce payments or even compel member financial institutions to co-operate. And his recommendations are limited to claims of $350,000. Mr. Melville's biggest stick is to publish the names of firms that don't pay up – a "rather anemic remedy," Judge Shaughnessy suggested.

"A truly impartial and independent body would have control over its process," he declared bluntly.

And so the judge cleared the way for a class-action lawsuit against Industrial Alliance's mutual fund subsidiary, Investia Financial Services Inc., along with Money Concepts (Barrie) and other affiliated companies and individuals.

The case centres on allegations that financial advisers systematically pushed clients of modest means to borrow large sums of money to buy mutual funds. The defendants deny the allegations, which haven't been proven in court.

But the case highlights something much more important: that the patchwork of federal, provincial and self-regulation in the massive financial advice industry isn't working.

Faced with regulatory lapses, the courts are stepping up. Already this year Ontario judges have given the green light to three major class-action lawsuits targeting financial industry sales practices.

"The three cases all show the courts are prepared to let clients proceed in a class action where either the firm or the regulator has not done an adequate job," said Ottawa lawyer John Hollander of Doucet McBride LLP, who represents investors in the Investia case.

Earlier this month, another Ontario Superior Court judge gave the go-ahead to a class action against BMO Nesbitt Burns involving allegations of hidden fees on foreign exchange transactions in registered accounts, such as Registered Retirement Savings Plans. And an Ontario Court of Appeal judge has also cleared the way for a class-action suit against Investors Group subsidiary IG Investment Management Ltd. over losses suffered by investors due to alleged "market timing" of mutual funds.

The investor-adviser relationship is likewise attracting the attention of the Ontario Securities Commission. The OSC is exploring whether to impose a "fiduciary duty" requiring advisers to put their clients' interests first – a standard similar to what lawyers, accountants and other professionals face.

Naturally, the financial services industry wants less regulation, not more. Some major institutions already deem the ombudsman's moral suasion too onerous. Royal Bank of Canada and Toronto-Dominion Bank have pulled out of the banking complaints process entirely (although its brokerage subsidiaries remain in). In more than a dozen cases, firms have balked at paying settlements. TD's pullout last year forced a cut in OBSI's 2012 budget.

That prompted OBSI chair Peggy-Anne Brown to warn ominously last week that the ombudsman's survival is threatened by a "power struggle" between the interests of consumers and "large and powerful financial firms."

As Wednesday's annual RRSP deadline nears, Canadians are increasingly masters of their own financial destiny. But they're masters of a universe that's fraught with market risk and imperfect regulation.

Canadians are getting squeezed by a volatile stock market, meagre returns on savings products and a financial services maze that too many don't fully understand.

Many investors assume brokers and advisers have a duty to act in their best interests. But that's not the legal obligation, and the line is unclear when advisers are compensated through unseen fees charged by the producers of those financial products.

"There is no government-enforced standard or mandatory professional oversight for competent, ethical and professional behaviour," acknowledged the Financial Planning Standards Council, a not-for-profit group that oversees the Certified Financial Planner designation.

This matters now, more than ever, because policy decisions are shifting financial responsibility to individuals.

Workplace pensions are no longer the norm in the private sector as companies continue to scrap predictable defined benefit plans. Ottawa is essentially pushing an aging population into the arms of the financial services industry. RRSPs, tax-free savings accounts, registered education savings plans and the newly created pooled registered pension plans (for employees of small businesses) all encourage private savings, typically managed by financial advisers.

Shifting financial responsibility to individuals is a reasonable policy goal. But it doesn't absolve governments of the obligation to shield Canadians from harm.

The courts are sending a pointed message.

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