IIROC 2019 Policy Priority Updates and Vulnerable Investors

IIROC 2019 Policy Priority Updates and Vulnerable Investors

July 19, 2019

BY Valerie Le Blanc

This post was co-authored by Valerie Le Blanc and Kristen Weedmark

On April 9, 2019, the Investment Industry Regulatory Organization of Canada (IIROC) released the Policy Priorities—Update Report. The report outlines the policy priorities that IIROC anticipates implementing or publishing for comment over the next 12 months.

The policy updates include:        

• Guidance clarifying the use of electronic signatures to evidence the execution of agreements, contracts, and contents or notifications to clients (effective March 26, 2019);
• Plain Language Dealer Member Rules Rewrite Project (“Plain Language Project”) to rewrite current Dealer Member Rules into plain language. Notice of Approval or re-publication of Request for Comments is expected in July 2019;
• Guidance Review Project to revise IIROC’s Guidance Notes for consistency with the Plain Language Project;
• Continuing Education Requirements: This project consists of amendments to the continuing education rules to address inconsistencies, modernize and simplify the continuing education program, and respond to comments received as part of an ongoing review of IIROC’s continuing education program. Request for Comments closes August 26, 2019.
• Development of a proposed guidance for Electronic Delivery of Client Documents to facilitate the ability of Dealer Members to electronically deliver client documents. The Guidance is expected to be published in the summer of 2019.
• Regulatory Framework for Addressing Financial Exploitation and Cognitive Impairment among Older and Vulnerable Investors. This initiative consists of amendments to the Dealer Member Regulatory Resources and has been introduced to prevent the financial exploitation of vulnerable investors through obtaining trusted contact person information, placing temporary holds on trades and disbursements, and operating under a legal safe harbour. IIROC is working with the Canadian Securities Administrators and the Mutual Fund Dealers Association to develop a regulatory framework to address these areas where a Dealer can accommodate and protect vulnerable investors. Proposed amendments to this Framework are currently under consideration.

The 2019 policy updates respond to IIROC’s May 2016 Three-Year Strategic Plan to address issues raised including technological change, a changing regulatory and legislative landscape, evolution in investor demographics, and a decline in retail investor ownership of individual securities.

IIROC’s Policy Priorities and the 2017 FAIR Canada and CCEL Report on Vulnerable Investors

In November 2017, the Canadian Centre for Elder Law (CCEL), along with the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada), published the Report on Vulnerable Investors: Elder Abuse, Financial Exploitation, Undue Influence, and Diminished Mental Capacity. One of the key findings of the Report on Vulnerable Investors was that “[Canadian] investment firms and their representatives lack guidance on how to recognize, respond, and/or report elder abuse and neglect, undue influence, or diminished mental capacity issues.”

The report made six recommendations for how the securities regulatory regime in Canada could better equip financial services representatives to protect vulnerable investors, including:

• Obtaining the contact information of a Trusted Contact Person (TCP). This recommendation is reflected in IIROC’s Regulatory Framework for Addressing Financial Exploitation and Cognitive Impairment among Older and Vulnerable Investors;
• Temporary delay on trades and disbursements in order to address situations where elder abuse, undue influence, or diminished mental capacity is suspected. IIROC’s Framework for Addressing Financial Exploitation and Cognitive Impairment among Older and Vulnerable Investors also responds to this recommendation by proposing amendments to allow Dealers to place temporary holds on trades and disbursements in order to protect vulnerable investors;
• A legal safe harbour. FAIR Canada and the CCEL report recommended the implementation of a legal safe harbour for investment firms and advisors from regulatory and civil liability if they act in good faith and exercise reasonable care in deciding to disclose information to a designated TCP, or when placing a temporary hold on trades and disbursements;
• Mandatory Education and Training. The FAIR Canada and CCEL report recommended that “Firms should be required to ensure that their representatives and staff have competency-based training in the areas of elder abuse, undue influence, mental capacity issues, enduring powers of attorney and ageism and have the required proficiencies.” IIROC’s 2019 Policy Priorities outline a strategy for increased education and training. The strategy includes the development of webcasts and other materials to raise awareness about the issues facing seniors and other valuable investors. This strategy increases the amount of education and training for Dealers and enhances the procedures to follow in situations where financial exploitation or diminished capacity may be suspected.

Inclusive Investing Project

The CCEL is currently working on the Inclusive Investing: Respecting the Rights of Vulnerable Investors Through Supported Decision Making Project. This project examines how vulnerable investors are using supported decision making in the investment process.  The research builds upon the FAIR Canada and CCEL Report. The aims of this project include enhancing the understanding of and access to supported decision making in the investment context, and identifying how Canadian investment advisors, adults, and their supporters can incorporate supported decision making into the investment process while guarding against undue influence and financial abuse.  

IIROC’s 2019 Policy Priorities to develop a regulatory framework to address financial exploitation among vulnerable Investors, to create plain language resources, and to enhance Dealer Member training and education, among others, will help to inform the CCEL’s ongoing research for this project.

For more information on the Inclusive Investing: Respecting the Rights of Vulnerable Investors through Supported Decision-Making Project, please consult our project page.