IFIC, FAIR Canada and the CCEL favour em­pow­er­ing firms and ad­vi­sors to stop sus­pected fi­nan­cial abuse

Investment Executive - - FRONT PAGE - BY JAMES L ANGTON

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”

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