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Dealing With Seniors And Other Vulnerable Clients ACCP Conference May 6, 2013

Dealing With Seniors And Other Vulnerable Clients ACCP Conference May 6, 2013. Topics. What is a vulnerable client? Vulnerable Clients & Investment Decision-making SRO Approach Seniors as Clients Common Regulatory Issues (recent cases). What is a Vulnerable Client?.

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Dealing With Seniors And Other Vulnerable Clients ACCP Conference May 6, 2013

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  1. Dealing With Seniors And Other Vulnerable Clients ACCP Conference May 6, 2013

  2. Topics • What is a vulnerable client? • Vulnerable Clients & Investment Decision-making • SRO Approach • Seniors as Clients • Common Regulatory Issues (recent cases)

  3. What is a Vulnerable Client? • Not just confined to Seniors • Can include those individuals who are easily influenced, limited in investment knowledge and/or experience, unable to make sound and independent decisions. • Other examples include: • Disability • Language and Literacy • Financial Means

  4. Investment Decision-making:Areas of Vulnerability • Cognitive limitations • Loss of “ability to doubt” • Isolated socially and desire company • May be more willing to entrust decisions to others • Have strong values about politeness in dealing with others • Often avoid reporting or complaining • Memory issues • Open to claims of quick profits to bolster their retirement savings (senior specific) • Controlling/influential Family/friends directing accounts

  5. Seniors & Cognitive Impairment • Seniors projected to be 25% of the population in 2036 • 1 in 11 Canadians over 65 currently has dementia • The numbers of Canadians living with dementia may rise to 1.1 million by 2036, absent medical advances

  6. BC Securities Commission Report March/12- Report on Canadians over 50 • 20% are vulnerable to high risk investment offers • 40% don’t understand the relationship between risk and return • Only 25% have realistic expectations of current rates of return • 26% would look further at a clearly fraudulent investment offer or don’t know how they would respond

  7. BC Securities Commission Report (cont’d) Greater vulnerability of seniors due to: • Little savings for future • Low interest rates • Low market returns • Lack of understanding • Sheer number approaching retirement

  8. SRO Approach IIROC • Express Strategic Priority (since 2011) - issues relating to seniors/vulnerable investors • Enforcement’s operational improvements • Case Selection Criteria MFDA • MFDA Strategic Plan 2012 – 2014 • Enforcement – senior/vulnerable client case tracking, screening guidelines • Compliance Examinations – criteria in sampling for high risk securities, exempt products and leveraging • Member Education and Investor Education

  9. Seniors as Clients • Need to be aware of on-going KYC obligations • Critical to update documented KYC when circumstances change • proper Trading Authority where necessary • Greater importance of certain factors as client ages: • Time Horizon • Risk Tolerance – Inability to recover from loss of principal • Investment Objectives • Income and Liquidity –to address financial needs (eg. health care) • potential estate planning considerations

  10. Common Regulatory Issues • Know your Client • Suitability Obligations • egs. use of leverage, DSC, complex products • Re Gareau [2011] IIROC No. 53 -Saskatchewan • Harding [2011] IIROC 65 – Ontario • De Vuono, 2012 MFDA – British Columbia • Personal Financial Dealings/Conflict of Interest • Daniel Edward Smith [April 2013] IIROC – BC. – Settlement • Levine, 2013 MFDA - Ontario

  11. Questions ?

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