Vulnerable Investor Protective Action and Legal Safe Harbour Project

Overview

FAIR Canada and the Canadian Centre for Elder Law engaged in a joint one-year project funded by the Law Foundation of Ontario regarding the interplay of investment securities, elder financial abuse, mental capacity and good faith third party notifications.

The project considered the development of a conduct protocol and a practical mechanism that will allow Canadian financial services firms and investment advisors to take urgent, short-term protective action for the benefit of vulnerable consumers in two critical situations:

1. where market conditions or other situations exist which requires an immediate financial decision or action that involves the consumer’s investments or savings including bank accounts (for example, to safeguard the consumer’s investment capital or income) but the consumer appears to lack the mental capacity necessary to make financial decisions about their investments or bank/savings accounts due to dementia or other forms of diminished mental capacity; and
2. where the consumer has provided instructions (such as, for example, to liquidate positions and withdraw or transfer funds), and the advisor or firm have reason to suspect or ought to suspect that the consumer is being subjected to elder financial abuse, undue influence or both.

Background

Financial services firms and investment advisors may wish to aid in situations of suspected elder financial abuse, mental capacity concerns or undue influence, but cannot due to concerns regarding breach of confidentiality obligations governed both by their Securities Regulations, and the Personal Information Protection and Electronic Documents Act (PIPEDA).

Financial service firms are already concerned about a Catch-22: either they report suspected issues and may possibly be sued for the breach of disclosure of confidentiality or privacy, (including the risk that they have alerted the abuser accidentally) or they do nothing and risk being liable for failure to prevent the abuse or taking instructions from someone who may not have the mental capacity to give them.

Financial service firms may be confused or unclear of how to navigate the various provincial or territorial laws governing notification of a third party, privacy requirements in the financial sector, substitute decision-making or supported decision-making regimes and reporting of elder abuse and neglect. This project will address these concerns and make recommendations, as appropriate, across the provincial  and territorial systems in place.

Objectives

This project seeks to better understand the issues of all stakeholders, including the financial services sector, the investment regulators, older adults and their supporters including those involved in preventing and responding to elder abuse and neglect, mental capacity and undue influence and the elder law community. This project will ensure that the consumer has their self-determination respected, including the right to make ill-advised or risky decisions, while exploring the balancing of individual vulnerable consumers’ rights to privacy.

A key outcome of this project will be the development of recommendations, including a practical framework, to allow for positive steps to be taken in these vulnerable types of financial situations and for the investment community to play a positive role in their client’s lives, without increasing risks to the individual consumer.

The project is made possible by a grant from the Law Foundation of Ontario, Access to Justice Fund.

Related blog posts

Protecting Older Investors: A Joint Project of FAIR Canada and the CCEL

Report On Vulnerable Investors: Elder Abuse, Financial Exploitation, Undue Influence And Diminished Mental Capacity