Although most financial advisors appear to be managing well with the fundamentals of the tough new restrictions on commercial electronic messages — now one year old — they need to remain vigilant about several potential hot spots, experts say. Failure to do so could lead to expensive fines and other enforcement measures.
Areas where advisors may unknowingly trip up under the new Canadian anti-spam legislation (CASL) include maintaining records relating to client consent, social media, communicating with financial product providers and looking for leads by searching the internet or by purchasing lists from marketing firms.
The CRTC, which enforces CASL, has yet to target a financial institution for violations, although it has handed down some hefty fines in other business sectors (See: A year on, anti-spam enforcement ramps up). But lawyers and industry experts say advisors still need to tread carefully, especially when pursuing leads.
"Just because you find things on the internet doesn't mean you can put together lists," says Adrian Liu, a lawyer at Borden Ladner Gervais LLP in Toronto. "[CASL] sets new ground rules for collecting emails [from the internet]."
Nonetheless, she adds "overall, [CASL is] still a low risk for the investment community." Lui says the CRTC's focus remains on "bad actors" and firms that ignore the law.
Dominic Jaar, national practice leader, Information Management Services at KPMG LLP in Montreal, says many financial services institutions have formal policies against conducting business with clients by email, partly to avoid such issues.
One area where many financial institutions do remain vulnerable, he says, involves advisors who sell a range of different products for financial services firms. These advisors may not have current clients who might be interested in these products, so advisors may buy lists of potential contacts — from businesses that specialize in compiling such lists for marketing purposes — to sell these products. "I think that is where the risk lies," Jaar says.
Another area where Jaar sees challenges is the management of requests to "unsubscribe" from email contact. CASL requires firms sending emails to provide an easy-to-use option for recipients to unsubscribe or stop receiving the emails. Jaar says that large organizations often have several departments that communicate with a client, yet many do not have a centralized customer relationship management system. So, while a client might ask to stop subscribing to emails through one department, that information may not be passed onto others, creating CASL exposure, Jaar explains.
There are also challenges related to the use of social media and the extent to which advisors can follow up with people they have connected with on social media. If someone "likes" a Facebook or LinkedIn posting that an advisor has written about investing, or re-tweets information an advisor has posted on Twitter or a blog, it remains to be seen if the advisor can later provide that person with updated information or solicit them as a client.
Liu notes that social media is still a "grey area" and one that the CRTC is "hemming and hawing" about when it comes to the use of social media sites such as Facebook or LinkedIn. Says Liu: "People don't know how to put parameters around that kind of action and we don't know if [the CRTC] will go after that."
In many cases, advisors report that their everyday practices are not overly affected by CASL, mostly because they took the time to prepare before the rules came into effect.
Independent financial advisor Aaron Keogh, of Windsor-based Greendoor Financial Inc., says that the preparation phase was more time-consuming than dealing with ssues that have arisen since CASL came into force. "The biggest thing we had to do was understand what CASL was," says Keogh, whose firm provides insurance, investment services and lifestyle planning.
Greendoor turned to their MGA, Kitchener-based Financial Horizons Group, and fund dealer, Windsor-based Sterling Mutuals Inc., which both provided help sheets and information about the legislation. "They broke down a lot of the legislation, because it is quite complicated," says Keogh.
Keogh and his colleagues have been relying, in particular, on a CASL provision that allows for a transition period for cases in which senders of emails already have existing business relationships with the recipients; under this rule, senders have three years to obtain the express consent of recipients to continue receiving email. Typically, implied consent includes a relationship in which clients have already provided their email contact information.
Keogh says that, in his office, the most important concern is not getting the consent, but managing the related record-keeping. "We want to ensure that we have the proper system in place to show who has given us express consent and who has not yet given us express consent," he says. "If, at any point in the future, somebody wants to revoke that consent, then we have to be sure that our systems are current and up-to-date to reflect those individuals."
Keogh says that CASL also seems to present some real concerns when it comes to communications between investment firms that supply financial products and advisors who may be interested in providing those products to clients.
"It's very important for those companies to be able to send that information to advisors because, as an independent advisor, it's my job to be aware of what's available out there," Keogh says. "If I'm not aware of something because that company has limitations on being able to even connect with me in the first place, then how am I able to do the best job for my client?"
Adds Keogh: "Hopefully, the regulators are not going to go on a witch hunt for companies that are doing business with clients and the clients want to receive that information — even if the advisor didn't happen to dot all of their I's and cross all of their T's and get everybody's express consent."
Susan Copland, managing director at the Toronto-based Investment Industry Association of Canada, who chairs the industry's anti-spam working group, agrees with Keogh that most everyday issues with CASAL seem to have been dealt with prior to its passage. "It's not nearly as bad as people thought," she says.
Friday: Litigation risks