IFIC, FAIR Canada and the CCEL favour empowering firms and advisors to stop suspected financial abuse
IFIC, FAIR Canada and the CCEL agree on the need to protect seniors from financial abuse.
the investment industry and investor advocates don’t often agree on much, but they are aligned regarding the growing need to do more to protect vulnerable senior investors.
New Brunswick’s Financial and Consumer Services Commission (FCNB) published a consultation paper on combating the financial abuse of seniors late last year. In early February, the Investment Funds Institute of Canada (IFIC) weighed in with recommendations to the FCNB — as did the Canadian Foundation for the Advancement of Investor Rights (a.k.a. FAIR Canada) and the Canadian Centre for Elder Law (CCEL) in a joint submission.
Unlike many policy issues in which the industry and investor advocates are on opposite sides, the two factions are on the same page on the subject of dealing with the financial abuse of seniors. Both sides favour empowering financial services firms and financial advisors to intervene to help stop suspected financial abuse of senior clients and to report it.
In particular, both the investment industry and investor advocates agree that firms should be provided with a legal “safe harbour” so they can report possible incidents of abuse without fear of legal repercussions. Both sides also agree that regulators should mandate training for industry personnel in spotting elder abuse, cognitive decline and how to deal with these issues among clients.
IFIC reports that it’s developing a tool kit for advisors, set to launch in June, to educate them in various aspects of these issues, including legal and regulatory considerations; planning for clients’ cognitive deterioration; and guiding advisors through potentially difficult conversations with clients about these issues.
In addition, IFIC’s submission to the FCNB acknowledges that compulsory action is needed and states that basic education in identifying signs of deteriorating mental capacity and best practices for dealing with this issue should be part of advisors’ basic licensing requirements.
Furthermore, IFIC’s input suggests that the Mutual Fund Dealers Association of Canada and the Investment Industry Regulatory Organization of Canada should consider defining criteria that would trigger continuing education (CE) obligations regarding elder abuse. For example, CE requirements would kick in for an advisor when a defined proportion of his or her client base reaches a certain age.
The need for more industry training also is highlighted in FAIR Canada’s and the CCEL’s joint submission to the FCNB, which notes that research they conducted revealed consensus that mandatory education is needed for firms and advisors regarding all forms of elder abuse, not just financial abuse, and that regulators should set requirements in this matter.
In addition, FAIR Canada and the CCEL published a joint report in November 2017 that states that industry training in elder abuse should be a condition of any new legal protections for the industry.
In the U.S., there is a movement afoot to provide legal safe harbours for tackling and reporting suspected elder abuse. The North American Securities Administrators Association (NASAA), a group of U.S. state and Canadian provincial regulators, has developed model legislation that sets out legal protections and mandatory reporting obligations for financial services firms within which financial abuse is suspected. Several U.S. states have adopted the NASAA approach, and the U.S. Financial Industry Regulatory Authority has introduced its own mandatory reporting requirements.
IFIC’s submission to the FCNB suggests Canadian financial services firms should have their own safe harbour. In fact, that submission states that firms require greater certainty about the measures they can take when they suspect a client is a victim of financial abuse.
IFIC’s submission notes that “[this] sometimes comes down to deciding which rule to break: do [firms] refuse to execute instructions immediately, or do they breach privacy?”
Typically, firms err on the side of withholding clients’ funds until the firm can be sure abuse isn’t taking place, IFIC’s submission states, adding that greater clarity on this matter is needed: “Financial advisors and dealers seeking to do the ‘right thing’ by their clients deserve to have clear guidance to follow.”
Along with more training in sniffing out elder abuse and added legal protection for firms and advisors reporting such abuse, FAIR Canada’s and the CCEL’s joint submission to the FCNB states that firms should be required to try to get clients to designate a “trusted contact” whom advisors could turn to if they suspect a client is suffering financial mistreatment.
The joint submission also recommends that protocols be developed to require firms to report suspected abuse to securities regulators. Yet, there’s widespread recognition that Canada lacks a dedicated agency to take on cases of suspected elder abuse.
IFIC’s submission to the FCNB states that “one of the biggest deterrents to reporting financial abuse and exploitation is the lack of resources to respond to suspected cases [of elder abuse].”
That submission points out that firms aren’t equipped to investigate suspected elder abuse. Although they can report possible fraud to the police, “there’s no agency [that] firms can turn to with confidence about cognitive decline or exploitation by a power of attorney, family member or caregiver.”
FAIR Canada’s and the CCEL’s joint report warns that without a specific agency devoted to taking on these cases, firms and advisors may not see much point in taking action to protect clients’ assets. Thus, the organizations’ joint submission to the FCNB states that a dedicated public agency may need to be created.
“One of the biggest deterrents to reporting financial abuse is the lack of resources to respond to suspicions”