Dealing With Seniors And Other
Vulnerable Clients
ACCP Conference
May 6, 2013
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Topics
• What is a vulnerable client?
• Vulnerable Clients & Investment Decision-making
• SRO Approach
• Seniors as Clients
• Common Regulatory Issues (recent cases)
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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
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Investment Decision-making:
Areas of Vulnerability
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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
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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
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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
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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
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SRO Approach
IIROC
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Express Strategic Priority (since 2011) - issues relating to seniors/vulnerable
investors
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Enforcement’s operational improvements
– Case Selection Criteria
MFDA
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MFDA Strategic Plan 2012 – 2014
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Enforcement – senior/vulnerable client case tracking, screening guidelines
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Compliance Examinations – criteria in sampling for high risk securities, exempt
products and leveraging
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Member Education and Investor Education
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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
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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
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Questions ?
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