Insights & Articles

OSC Publishes Initiatives Aimed at Protecting Seniors

by Clarke Tedesco

On March 20, 2018, the Ontario Securities Commission (OSC) published its Seniors Strategy,[1] the purpose of which is to outline initiatives that the OSC is pursuing in relation to older individuals, recognizing that the financial lives of older Canadians have grown increasingly complex relative to previous generations. 

This short article will outline the highlights of the Seniors Strategy. The Seniors Strategy outlines proposals only – the policy items discussed have not been approved or implemented at the time of publishing. The OSC’s proposed strategy addresses several different topics, including:

• The financial exploitation of seniors;
• Marketing practices for market participants;
• The Ombudsman for Banking Services and Investments (OBSI);
• Cooperation amongst regulators; and
• Research and education.

Background

The Seniors Strategy states that its creation was driven by changes to the financial situation of seniors, including:

• Decreased reliance on public pensions and increased reliance on less stable income sources such as employment, private pensions and savings;
• Increasing debt levels;
• Increasing percentage of assets held in real estate; and
• Persistent challenges with financial planning, education, literacy and numeracy.

In short, increased reliance on non-guaranteed sources of income makes financial literacy and investment knowledge increasingly important and, where that knowledge is lacking, makes seniors more vulnerable.  As set out in the Seniors Strategy, because cognitive changes (while they affect individuals differently) often occur with age, they tend to affect more greatly those who rely most on their savings.  Those cognitive changes are compounded by the effects of increased social isolation, and make some seniors more vulnerable to undue influence and fraud. 

Substance of the Seniors Strategy

The OSC has broken down the Seniors Strategy into four different initiatives:

1. 1.  Policy
2. 2.  Operations
3. 3.  Research
4. 4.  Education and outreach

1. Policy

In arriving at its policy proposals, the OSC attempted to balance the concerns of various stakeholders.  On one hand, a concern exists amongst stakeholders that older investors are disproportionately susceptible to financial exploitation and fraud as a result of the influence that arises out of increasing reliance on others as people age.  On the other hand, the OSC recognized the difficulties faces by registered firms in spotting and avoiding that exploitation. 

A framework for addressing financial exploitation and cognitive impairment

As part of its mandate, the OSC has released a framework for addressing financial exploitation and cognitive impairment.  The basics of that framework are as follows:

• Temporary hold on disbursements of funds or securities – a mechanism that would permit firms to temporarily suspend disbursements where there is a reasonable belief that exploitation might be occurring.  The proposed mechanism would not prevent the sale of securities, just the subsequent disbursement of funds;
• Safe harbours – a proposal to provide ‘safe-harbour’ from certain regulatory requirements to registered firms that place a temporary hold on funds or disclose personal information to a trusted contact or third-party organization;
• Trusted contact persons – a proposed regulatory requirement that registered firms make efforts to obtain the name and contact information of a trusted contact for new and existing non-institutional clients.  The firm would then be able to reach out to this trusted contact if it has concerns about a client’s behaviour or transactions in the client’s account;
• Guidance on suggested practices for engaging with older clients – the OSC will provide continued guidance, through the use of Staff Notices, for suggested practices for registered firms when engaging with older clients. 

Addressing confusing and misleading titles, designations and marketing practices

The OSC addresses concerns that credible-sounding titles, such as Vice-President, Seniors Specialist, or Wealth Manager might be potentially confusing and misleading to older individuals because they indicate a level of qualification, experience or competence that might not actually be present. 

While the Seniors Strategy does not provide any specific policy proposals in that regard, it references a proposal, originally made in Consultation Paper 33-404, Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives, to standardize titles used by client-facing representatives.  The OSC, along with the other members of the Canadian Securities Administrators (CSA), believes that clarification of business titles will strengthen public confidence in registered firms. 

Strengthening OBSI

OBSI is a non-government organization mandated to provide independent dispute resolution services at no cost to consumers when they are unable to resolve their complaints with their banking services or investment firms.  OBSI reports that nearly 50% of complainants are over the age of 60.  The OSC is considering options to strengthen OBSI’s ability to secure redress for investors.[2]  Recently, CSA members released Staff Notice 31-351, which established the view of CSA members that a firm’s repeated failure to compensate clients in a manner consistent with OBSI recommendations may be viewed as an indication of problems with that firm’s complaint-handling practices. 

Breaking down silos

The OSC also plans to improve investor protection by working with other regulators and organizations with mandates for the protection of seniors in order to develop comprehensive strategies and solutions that will prevent seniors from ‘falling through the cracks’.  For example:

• “Know your client” obligations: the roles played by the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA) are key to investor protection.  The OSC and CSA are considering proposals to enhance obligations owed by registered firms to clients, such as whether a ‘one-size-fits-all’ approach to the collection of KYC information is appropriate;
• Powers of attorney: a report by the Law Commission of Ontario highlighted several areas for improvement of the current system regarding powers of attorney, including a lack of proactive monitoring mechanisms, which can make early detection and prevention of abuse difficult;
• Privacy laws and disclosures of client information: While PIPEDA generally prohibits the disclosure of confidential information without consent, a registered firm may be able to make disclosure to the Public Guardian and Trustee without running afoul of privacy legislation based on certain exceptions.  However, guidance on the exceptions is vague.  The OSC would be willing to assist in providing additional guidance regarding the application of the exceptions.  The lack of a nationally coordinated elder protection service (such as exists in the United States) hinders protection efforts; and
• Probate fees and jointly-owned accounts:  the OSC expressed concerns regarding advice given to seniors, as a part of the estate-planning process, to place their assets in jointly-held accounts to avoid probate or estate fees on death.  Such arrangements can increase the risk of financial exploitation by the joint account holder. 

2. Operations

OSC Staff currently interacts with the elderly through multiple channels, including the OSC’s Investor Office, the Inquiries and Contact Center, and its enforcement branch.  The OSC is seeking to improve its interaction with seniors in several ways.

• Training and education – the OSC intends to provide training and education to Staff members that interact with older individuals;
• Dedicated staff for older investor inquiries – the OSC seeks to train members of its Inquiries and Contact Center in elder issues, and to direct those who self-identify as seniors to those employees;
• Applying a new lens to its work – the OSC will take steps to encourage all of its branches to approach their initiatives with consideration to the implication of that work for older investors; and
• Resources and materials for staff – the OSC seeks to provide additional resources and materials for its Staff for communicating with older individuals.

3. Research

The Seniors Strategy highlights the importance of continuing research into the investment sphere, including trends facing investors and investor behaviour.  The OSC hopes that continuing research will allow it to fine tune its policy and outreach measures for older Ontarians. 

4. Education and outreach

The OSC plans to develop educational plans for older Ontarians, as well as their networks of family and friends.  In addition, the OSC plans to provide education and outreach to registered firms and advisors for dealing with elder Ontarians.  The planned outreach programs include:

• White label materials for firms (such as forms, discussion guides and educational materials that reflect best practices);
• A resource hub on GetSmarterAboutMoney.ca, an education resource operated by the OSC;
• Discussion guides, to be provided to older Ontarians to help prepare them for investing;
• Resources for families, friends and caregivers;
• Education and outreach strategy for new Canadians;
• Community outreach; and
• Online education and outreach – in addition to GetSmarterAboutMoney.ca, the OSC will use social media, the Investor News newsletter and Re: Investing, a digital contact center that allows the OSC to respond directly to questions about investing, financial planning and fraud.