Regulators urged to boost protection for vulnerable investors

Action is required to combat the increase in financial abuse cases

Regulators urged to boost protection for vulnerable investors
As the silver population of Canada grows rapidly, so do the cases of financial abuse against these vulnerable investors.

The Canadian Centre for Elder Law (CCEL) and FAIR Canada are calling for Canadian securities regulators to tackle the rampant cases of financial abuse in the country. In their joint report, the two institutions outlined six recommendations that will ensure the protection of vulnerable investors, including those with mental incapacity, from financial exploitation.

FAIR Canada director of policy and COO Marian Passmore said one of the recommendations is for regulators to put in place a conduct protocol that establishes the procedures on how financial players can identify and protect their vulnerable clients.

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"Older Canadians, advocates and the investment industry have told us they all support having a conduct protocol in place which balances investors right to make their own choices, with the reality that investment firms are in a unique position to prevent or stop financial exploitation of vulnerable investors or respond to help those who show signs of diminished mental capacity," she said.

Additionally, there is a proposal to require investment firms to obtain identification and contact details of a trusted contact person for each client. The goal is to have someone they can reach out to in cases of suspected abuse.

There is also the suggestion to allow authorized individuals within an investment firm to place a temporary hold on trades and disbursements of funds when there are telltale signs of abuse.

The report also underscored the importance of providing a legal safe harbour for investment firms and financial service providers who reach out to appropriately report suspicions of financial abuse or mental incapacity.

The two institutions also brought up the necessity to conduct specific education and training programs for all investment firms particularly in areas of elder abuse, undue influence, and mental capacity issues.

CCEL senior fellow and staff lawyer Laura Tamblyn Watts said the recommendations are designed to aid the industry in fulfilling its part in abuse prevention.

"Financial service providers are worried that if they report their concerns they will face liability or regulatory sanctions for breach of privacy or for not following client instructions.  If they do not report, they fear getting sued for that too," she said.

Meanwhile, the Investment Funds Institute of Canada (IFIC) president and CEO Paul Baroque lauded these suggestions, noting that IFIC has been calling for two of the outlined recommendations.

"We are encouraged to see that the report’s recommendations reflect the input of IFIC and its members on several fronts, particularly the need for a regulatory safe harbour, authorization to place temporary holds on trades and disbursements, clear regulatory guidance, and the importance of advisor education,” he said.

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