New Rules to Enhance Protections for Seniors and Vulnerable Investors

According to a recent Canadian Securities Administrators survey, one in three (29%) Canadian adults personally know an older adult who has experienced some form of financial abuse. This is a staggeringly high number that amounts to approximately 11.02 million people that know someone who has suffered financial exploitation.

Concerned regulators have developed new rules to help vulnerable investors from being exploited. These new rules are scheduled to come into effect on December 31, 2021, to allow the financial industry time to make changes to their systems and processes to accommodate the collection of data. The rules will allow for the naming of a Trusted Contact Person (TCP), and will allow a firm to place a Temporary Hold (TH) on a transaction. Under this rule:

  • registrants will be required to take reasonable steps when opening an account to obtain the name and contact information of a TCP and update TCP information as part of the Know Your Client (KYC) process.
  • regulatory guidance has been established for registrants who place a temporary hold on transactions, withdrawals or transfers.

What is a Trusted Contact Person (TCP)?

A TCP is someone who can be contacted by an adviser or firm under specified circumstances, such as when the firm has been having a difficult time contacting their client; when there may be issues of a client experiencing diminished capacity; and if there is a concern the client is being financially exploited. The TCP does not have authority to make transactions on the account but may be in a position to potentially help prevent the exploitation from occurring.

Consumers need to be aware that naming a TCP is optional, but can be very beneficial.

Who should you consider to be your TCP?

  • Someone who knows you well enough and you can rely on to act in your best interest
  • Someone who does not necessarily have a financial interest in your affairs
  • The individual named as a TCP cannot also be cited as the attorney in the client’s power of attorney (POA) document.

What is a temporary Hold (TH)?

In the event that a client asks the firm to carry out a transaction ( e.g. sell funds), and the firm has a reasonable belief that their client is being financially exploited, or that a client lacks mental capacity to make an informed decision, a hold can be put on the transaction request so that the firm can determine, perhaps with the assistance of the TCP, the right course of action.

When is this helpful?

For the Consumer

When an adviser has been working with a client for many years and notices changes in behaviour or atypical decision-making, which may have a negative impact on their financial situation. Having a TCP can offer a second level of support and further protect the client from potential financial harm.

We also know that 91 per cent of Canadians face perceived barriers that prevent them from discussing financial matters with older adults. By the nature of the work they do and the relationship they have with their clients’, financial advisers are well-positioned to discuss the importance of naming a TCP.

For the Industry

One of the roles of the regulator is to make sure those who are working in the industry are doing the right thing for their clients and making sure the institutions themselves are less likely to be caught in a situation where something might go wrong. While some organizations have been taking steps to lessen the chance that older or more vulnerable clients are not financially exploited, there has not been formal guidance until now. The guidance being established will ensure there is clarity and consistency when dealing with older or vulnerable clients and so that there are no gaps between what one firm does and what a different firm might do.

When can the firm collect this data?

  • When opening a new client account
  • During a client’s annual review
  • When financial circumstances have changed and updates are being made to the Know Your Client (KYC) form

Four simple steps – Here’s what you, as a client, need to do to name a TCP

  1. Identify an individual that you would like to name as a Trusted Contact Person.
  2. Advise them of the responsibilities and confirm with them that they are willing to take on this role.
  3. Provide the individual’s name and contact information such as their phone number and email to you adviser/firm.
  4. Provide written consent to your adviser or firm that they may contact the TCP in specified circumstances.