Regulators focus on older, vulnerable clients

By Staff | June 21, 2019 | Last updated on June 21, 2019
3 min read
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An investor survey released today by the Investment Industry Regulatory Organization of Canada (IIROC) shows strong support for protections for older or vulnerable clients—specifically, the establishment of trusted contact persons, temporary account holds and safe harbour for firms and advisors.

An overwhelming majority of investors surveyed—93%—supported having a trusted contact person (TCP) listed on their accounts. A TCP is someone a firm or advisor can contact if they believe a client has become vulnerable or subjected to financial exploitation.

A similar proportion of respondents (89%) supported placing a temporary hold on an account if a firm or advisor receives instructions that raise suspicion of financial exploitation or that are out of character or not in the client’s best interest.

Read: Proceed with caution when aging seniors request account changes

There was also majority support (86%) for a regulatory safe harbour that would  provide protection for firms and advisors from possible regulatory sanctions if they contact a TCP, for example, or refuse to take instructions.

Despite the support demonstrated by the survey, it also revealed that investor awareness of these protective measures was low, and that investors would like more information. For example, 85% said they’d benefit from further information regarding the circumstances in which their advisors could contact their TCPs.

And, along with low awareness, the survey found low implementation of the protective measures. For example, only 22% of survey respondents had identified a TCP for their advisors to contact. However, 71% said they’d do so if asked.

(The proportion of respondents who had named TCPs may be underreported, the survey said, because 39% of those with advisors said they have a power of attorney (PoA) for investments, and of these, 39% said their PoAs and TCPs were the same person.)

Investors also highlighted the need for clarity and transparency in the development of any associated regulatory proposal, with about 90% agreeing on the need to establish clearly defined circumstances when advisors and firms can take protective action.

In 2016, IIROC recommended firms implement processes such as establishing TCPs and placing holds on accounts where financial abuse or diminished capacity is suspected. In a release, the regulator said that any future proposal associated with protecting seniors and vulnerable investors will build on those recommendations.

The release also said IIROC will continue to create member education webcasts to help firms and advisors protect clients, and will develop information resources to support conversations between advisors and clients.

For full details, read the IIROC survey.

About the IIROC survey: Between March 7 and 14, The Strategic Counsel surveyed 1,000 Canadian investors about their knowledge of and support for protection for vulnerable investors, including trusted contacts, temporary holds and regulatory safe harbour. Survey respondents were pulled from IIROC’s Investor Panel, an online pool of 10,000 investors created by IIROC to allow Canadians to provide their input directly into the regulatory process.

CSA publishes suggested practices

To help firms and advisors work with older or vulnerable investors, the CSA published Staff Notice 31-354 today, which offered suggested practices for working with such clients, specifically in the context of financial exploitation and diminished mental capacity.

A release noted that clients can become vulnerable due to changing needs and risks as they age; an illness or injury; or a physical, cognitive or psychological limitation. The staff notice included suggestions to identify and respond to these situations, and also discussed practices related to, among other things, the identification of TCPs, know-your-client and suitability obligations, POAs and client communication.

For example, regarding TCPs, the notice encouraged firms to develop policies and procedures for obtaining written client consent to contact named TCPs, as well as any restrictions on when the TCP can be contacted and the type of information that can be shared. Policies and procedures should also be developed for documenting discussions with TCPs, the notice said.

The notice complements IIROC’s guidance from 2016 and the Mutual Fund Dealers Association of Canada’s seniors webpage, the CSA said. “We encourage registered firms to consider developing and improving their written policies and procedures based on the suggested practices set out in this notice,” it said.

For full details, read the CSA staff notice.

Also read:

When your senior client wants to take on risk

When a senior client’s situation sparks suspicion

IIROC’s strategic plan includes protecting seniors staff


The staff of have been covering news for financial advisors since 1998.