As financial industry regulators zero in on issues related to incapacity and powers of attorney (POAs), advisors must tread cautiously and ensure they’re following best practices in this area, said Arthur Fish, partner at Borden Ladner Gervais LLP, at the Independent Financial Brokers of Canada’s spring summit in Toronto on Wednesday.
Fish noted that there have been numerous regulatory developments in recent months related to POAs, in response to concerns about the potential for financial exploitation in situations involving POAs.
The latest development came on Tuesday, with the Investment Industry Regulatory Organization of Canada (IIROC) releasing new guidance pertaining to dealings with senior clients. The guidance urges firms to adopt policies concerning POAs.
“You can see the regulators encroaching on this area, and coming closer and closer to imposing detailed rules on people,” Fish said. “The problem with detailed rules is they make it hard to do what we need to do for a living.”
Fish applauded the new IIROC guidance, since it gives advisors and firms an idea of what’s expected, without imposing prescriptive requirements.
“It’s helpful that we’ve got a regulator putting this out there in the form of recommended practices and directions, as opposed to hard rules,” Fish said. “It’s helpful, and it’s direct.”
With this issue clearly on the radar of regulators, Fish said advisors and firms should ensure they are implementing the recommended practices involving POAs and senior clients.
By demonstrating to the regulators that the industry is handling such situations carefully and responsibly, he said regulators will be more likely to consider their input when developing rules in this area.
“We need all of us, in our individual practices … to be coming up with our own policies and practices in the area, so that we can turn to the regulators and say ‘we’ve figured out what works, and you should be listening to us’,” Fish said. “This is our opportunity to get there before they get to us.”
Fish said he is encouraged that different regulators appear to be heading the same direction with respect to POAs. For instance, he said the Mutual Fund Dealers Association of Canada’s (MFDA) approach in this area appears to be similar to the one being taken by IIROC.
“They do seem to be moving kind of in parallel, and that’s good news,” he said. “The last thing we all need would be to have the [Ontario Securities Commission] with one set of rules and expectations, IIROC with a different one, and the MFDA with yet another.”