Most investors want rules, policies, and procedures to prevent financial exploitation of the vulnerable
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Earlier this month, the Canadian Securities Administrators (CSA) released a statement encouraging Canadians to watch out for signs of financial abuse of seniors. Education has been a crucial pillar in regulatory efforts to combat senior exploitation, with informational resources and campaigns provided by both provincial and territorial watchdogs.
Now, the Investment Industry Regulatory Organization of Canada (IIROC) has published new findings revealing a broad desire for measures that align with and go beyond awareness efforts.
In a national survey of 1,000 investors conducted by The Strategic Counsel and commissioned by IIROC, an overwhelming majority voiced support for measures that ensure investment firms and advisors can act in cases where investors become vulnerable or need to be protected from financial exploitation while vulnerable.
One possible approach is to have a “trusted contact” for an investor’s account in case an advisor or someone at the firm believes the client has become vulnerable, or may be subject to attempted financial exploitation. An overwhelming 93% of respondents approved of such a policy.
Slightly fewer participants (89%) said they support a “temporary hold,” which would allow investment advisors and firms to temporarily pause account activity when they receive instructions that are out of character and not in the investor’s best interest, or raise suspicion of potential financial exploitation.
Regulatory safe harbours, which would shield investment advisors and firms from possible regulatory reprisal for actions taken to protect potentially vulnerable investors, would also be beneficial. Among the investors surveyed, 86% agreed with the creation of such a policy.
Overall, 92% said such regulatory tools must be in place for advisors and firms to be able to protect vulnerable investors.
“It is encouraging to see resounding support from Canadians for measures to safeguard vulnerable investors – particularly seniors – and protect them from financial exploitation," said Andrew J. Kriegler, IIROC's president and CEO. “This input from investors complements the comments we have heard from the investment industry on the need for tools like a regulatory safe-harbour to address the issues associated with Canada's aging population and vulnerable investors.”
Fewer than 25% of investors said they had already provided their investment advisors with details on a trusted contact, but 71% said they would provide such details if asked. The need for clarity and transparency during the development of any regulatory proposal was also underscored by investors; 90% agreed there’s a need to establish clearly defined circumstances under which advisors and firms can take protective action.
“We will continue our collaboration with the Canadian Securities Administrators (CSA) on proposals to provide the tools needed to protect vulnerable investors," Kriegler said
The CSA has also published a notice outlining proposed practices for registered firms to consider when engaging with older or vulnerable clients. Aside from reminding firms of their know-your-client and suitability obligations, the CSA notice discusses specific measures registrants can take in terms of:
- Account supervision;
- Complaint handling;
- Handling of powers of attorney and limited trading authorizations;
- Communicating with older or vulnerable clients;
- Reporting and escalating of issues; and
- Identifying trusted contact persons
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