Concerns such as this have become top of mind for the securities sector, with older adults, advocates, financial firms and regulators in agreement that something needs to change.  In response, the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) and the Canadian Centre for Elder Law (CCEL) undertook a one-year project to understand the key concerns from stakeholders, look at international laws and best practices and make recommendations.

On November 16, FAIR Canada and the CCEL released their report aimed at helping the investment firms in these situations, while at the same time helping protect vulnerable adults who are at risk of elder financial abuse, financial exploitation, undue influence and diminished mental capacity. 

 “In this report we are calling on securities regulators, and in the investment industry to really engage on these issues.  There is broad consensus amongst seniors, advocates and the investment industry that there needs to be protocols in place which balance an investors’ right to make their own choices, with the reality that the investment firms are in a unique place to prevent or stop financial exploitation of vulnerable investors”, says Marian Passmore, COO and Director of Policy at FAIR Canada, and a co-author of the report. 

“These recommendations also help the investment industry as they try to play a role in abuse prevention. This report offers some key practical solutions, which includes recommending a ‘Legal Safe Harbour’ for reporting concerns”, says Laura Tamblyn Watts, Senior Fellow and Staff Lawyer at the CCEL.  “However, the securities regulators need to create a clear ‘Conduct Protocol’ so investment firms know what to do and how to do it, in order to qualify from the legal exemption.”

The report makes 6 recommendations to Canadian Securities Regulators:

1. Require investment firms to make reasonable efforts to obtain the name and contact information of a Trusted Contact Person for each client, who can be contacted in case of suspicion of abuse or diminished mental capacity, so long as they themselves are not suspected of financial abuse or exploitation of the client.
2. Allow authorized individuals within an investment firm to place a Temporary Hold on Trades and Disbursements of funds or securities when there is a reasonable suspicion of financial abuse – that has occurred, is occurring or will be attempted – or where the client has lost the capacity to provide instructions.
3. Provide a Legal Safe Harbour for investment firms and financial service providers who reach out to appropriately report suspicions of financial abuse or mental incapacity.
4. Create a Conduct Protocol that defines key terms and sets out the steps firms and financial services representatives should take to identify and protect vulnerable clients. This Conduct Protocol will require that investment firms mandatorily report suspected financial abuse of vulnerable investors to the appropriate securities regulator.
5. Mandate Specific Education and Training for all investment firms in the areas of elder abuse, undue influence, mental capacity issues, enduring powers of attorney and ageism and have the required proficiencies.
6. Require that Investment Firms Become Familiar with Outside Resources and Responders and learn how and when to appropriately refer a case of suspected elder financial abuse, undue influence or diminished mental capacity to local responders.

The report is accompanied by an easy-to-read Executive Summary. In addition, here are some Quick Facts about Elder Abuse, Financial Exploitation and Undue Influence. Please see the case studies of the most common scenarios used in the consultation process.

The post Report On Vulnerable Investors: Elder Abuse, Financial Exploitation, Undue Influence And Diminished Mental Capacity first appeared on British Columbia Law Institute.

People don’t often think about the investment industry as being impacted, but the reality is that financial services firms serve millions of senior investors. As older adults experience dementia or other conditions that affect their cognitive capacity, they can be at higher risk of undue influence or financial exploitation.

In this context, financial advisors may want to take protective action in cases where they believe a client has lost capacity or is subject to undue influence. But in Canada, there is currently no regulator-approved protocol to define what actions financial advisors can actually take.

To address this issue, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) and the Canadian Centre for Elder Law have launched a joint one-year project funded by the Law Foundation of Ontario Access to Justice Fund. This Project will consider the development of a conduct protocol and a practical mechanism for Canadian financial services firms and their investment representatives to take urgent, short-term protective action for the benefit of vulnerable consumers.

Marian Passmore, COO and Director of Policy at FAIR Canada, explains what this project is all about:

Why did you want to do this project?

Marian: Loss of capacity issues and financial elder abuse are concerns that will become more prevalent given the increasing number of people who will be older in our society. When people have declining abilities, that affects their capability to deal with their finances appropriately, and the financial services industry is one of the front lines where these issues may be detected.

For example, people subject to undue influence may be giving instructions for making riskier investments than they would normally do or convinced by unscrupulous “advisors” to make such investments, or they may engage in unusual transactions on their account which could be the result of someone they trust actually exerting undue influence.  We wanted to do this project so that vulnerable financial consumers can be better protected and to also help the financial services industry in detecting and addressing this issue.

This is an issue where all the stakeholders appear to have aligned goals of helping to protect their clients and making sure that those who come into contact with clients have the right training to address the issues properly so that client harm is minimized.

Why is this a problem now for the financial services industry in Canada?

Marian: Right now the financial services industry is caught between a rock and a hard place. If representatives are getting instructions from their clients that they think might be subject to undue influence or that the person is not capable of providing informed instructions, they may have to choose between breaching either their regulatory requirements (by not carrying out the client’s instructions) or privacy legislation (of not disclosing personal information to a third party) in order to try to help protect the client.

We want to make sure that the right protocols and education are put into place so that the financial services industry can address these issues in a way that does not breach their requirements and also protects the individuals involved to the extent possible.

What have you accomplished so far on this project?

Marian: We have done a lot of research on what other jurisdictions have done in order to inform what we think will work in the Canadian context. The United States is the furthest along in terms of legislative changes to address the issue, but they have different structures than we do so we have to look at the Canadian context and figure out what will work here. There likely needs to be a “Made in Canada” solution.

You are leading consultations across Canada: who do you want to hear from?

Marian: We are speaking to a very broad cross-section of stakeholders: community stakeholders, those who represent vulnerable investors, the financial services industry, regulators, staff from the Public Guardian and Trustee, and privacy experts.

We want to hear first-hand about people’s experiences and industry practices now in order to make sure that we know what the roadblocks are both from the consumers’ perspective and the financial industry’s perspective. We want to get people’s input on what they think the proposed solutions should be, whether they think the legislative framework chosen in the United Sates would assist in Canada or if any changes need to be made in the Canadian context. I would also like to hear from people about what technology is being used now to protect individuals and what role they think technology could play in the future.

What is next?

Marian: We are going to consult until mid-June and we hope through our webinar and in-person consultations in Toronto, Vancouver, and a national webinar to get a lot of feedback. People are encouraged to provide us with written comments that they may have by June 19, 2017. Our final report will be ready by the end of August.

Upcoming consultations:

• CARP (Canadian Association of Retired Persons) – June
• Investor Advisory Panel of the Ontario Securities Commission – June 14
• A webinar will be hosted by Elder Abuse Ontario on June 20, 2017 from 11 am – 12:30 pm EDT. Register here

For more information: visit our project page and download our consultation paper.

To participate in our consultations please contact:
Laura Watts at 647-969-6793
lw@elderconcepts.com

While financially supported by the Law Foundation of Ontario Access to Justice Fund, FAIR Canada and the CCEL are solely responsible for all content.

The post Protecting Older Investors: A Joint Project of FAIR Canada and the CCEL first appeared on British Columbia Law Institute.