The Ontario Securities Commission (OSC) published OSC Staff Notice 11-779: Seniors Strategy in late March to wide acclaim from investment industry associations, self-regulatory organizations, and seniors and investor advocates. Yet, the initial impact is expected to be relatively modest, as implementing the various proposals will come neither quickly nor easily.
The OSC’s initiative calls for a mix of policy measures, educational endeavours and outreach designed to help the investment industry and regulators become better equipped to deal with seniors’ issues. These include cognitive decline, the increased threat of exploitation that seniors face and seniors’ reduced ability to recover from financial harm.
Notably, the OSC’s Seniors Strategy recommends policies that are relatively uncontroversial – and highlights reforms already in the works.
The strategy document indicates that the OSC will seek to introduce requirements for investment firms and/or financial advisors to obtain information for a “trusted contact” from their clients and that those firms be provided with a legal “safe harbour” that would enable them to halt the distribution of client monies in cases in which there are suspicions that some form of financial abuse or exploitation is taking place.
These measures, which are being adopted in the U.S. and elsewhere, are designed to recruit the investment industry into the fight against the exploitation of seniors by empowering firms to intervene to help prevent client harm. In Canada, the industry has expressed its support for these ideas.
Following the release of the OSC’s Seniors Strategy, the Investment Funds Institute of Canada (IFIC) was quick to praise the proposals, stating that these measures “will better enable advisors to take steps to protect clients when [advisors] have concerns about signs of exploitation or diminished judgment.”
Investor advocates also are supportive. A report that the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) and the Canadian Centre for Elder Law (CCEL) published jointly in November called for similar steps.
Yet, even though there’s broad support for improving the protection of senior investors, the details of any new regulatory policy typically take a good deal of effort to iron out. That’s because the details often determine the day-to-day impact of new policies on the industry’s front lines – and the ultimate efficacy of the policies themselves.
This is especially the case as it relates to the issue of establishing a safe harbour for firms. For example, the Seniors Strategy document notes that there are privacy issues to be resolved when firms utilize a “trusted contact” or place a hold on an account because of suspicion of possible client exploitation.
FAIR Canada’s and CCEL’s joint report also made clear that any new legal protections for the investment industry should be accompanied by mandatory training to ensure that advisors are equipped to identify signs of possible abuse. Whether regulators will seek to impose training requirements as part of safe harbour provisions or what they would entail is not yet clear.
The OSC’s strategy document indicates the regulator intends to provide further guidance for advisors in engaging and communicating with senior investors, and spotting signs of diminished cognitive ability in clients and evidence of possible abuse.
Although the specifics have yet to be announced, the OSC states it intends to publish its guidance in the coming year and aims to “develop a regulatory framework that will address issues involving financial exploitation and cognitive impairment.”
The other major policy initiatives cited in the Seniors Strategy include efforts that already are in progress and aren’t necessarily specific to seniors. The document states that regulators will take action to deal with the confusing array of titles and credentials that are used in the investment business, and support strengthening the Ombudsman for Banking Services and Investments (OBSI) to improve investor confidence.
Consumer and investor advocates favour action on both of these issues, yet neither of these promises are new. The Canadian Securities Administrators (CSA) has been attempting to address the use of confusing and misleading titles and credentials in the industry as part of a set of “targeted reforms” that the regulator has been working on for the past few years. In addition, Ontario’s provincial government recently released a proposal for regulating the use of certain titles for advisors as part of an effort to regulate financial planning.
Similarly, the commitment to support reform at OBSI has been on regulators’ radar since the latest independent review of the ombudservice, which recommended that OBSI be given binding decision-making power.
Although regulators have expressed support for a strong OBSI, they have yet to make any commitments to substantive change. In fact, FAIR Canada, the Public Interest Advocacy Centre, CARP and Kenmar Associates Inc. wrote a joint letter to the regulators that oversee OBSI in February, demanding action on the independent review’s recommendations, which were published in June 2016.
The OSC’s Seniors Strategy doesn’t advance the ball much in this area, stating only that the CSA is “examining options to strengthen OBSI’s ability to secure redress for investors” and that it will look at how the dispute-resolution process could deal with seniors’ issues “more appropriately.”
Moreover, the OSC’s Seniors Strategy makes no mention of other controversial policy possibilities, such as adopting a “best interest” standard, which investor advocates continue to seek in order to enhance investor protection – including protection for seniors.
Along with much tougher conduct standards, FAIR Canada maintains that regulators and other policy-makers also should improve complaint-handling rules for firms and develop better mechanisms for reporting and tracking incidents of elder abuse and fraud.
In addition, FAIR Canada’s and the CCEL’s joint report noted that one of the biggest weaknesses in the fight against elder abuse in Canada is the lack of a dedicated agency to receive and examine cases of suspected abuse. For example, there’s no Canadian equivalent of the Adult Protective Services agencies that take on these cases in the U.S. As a result, firms in Canada may not see much point to getting involved on behalf of their vulnerable clients.
On this issue, the OSC states, it welcomes discussions with firms and governments about ways to “co-operate to address these concerns.”