To improve the protection of older and vulnerable clients, the Canadian Securities Administrators introduced Trusted Contact Persons (TCP) as part of the registrant’s obligations under National Instrument 31-103.
While our clients have the option to select a TCP or not, we are required to take reasonable steps to obtain the name and contact information of a TCP.
Through Client Focused Reform requirements, new tools and guidance have been provided about financial exploitation of older and vulnerable clients.
Financial exploitation means the use or control of, or deprivation of the use or control of, a financial asset of an individual by a person or a company through undue influence, unlawful conduct, or another wrongful act. A vulnerable client might have an illness, impairment, disability, or aging process limitation that places the client at risk of financial exploitation.
Both the B.C. Securities Commission and the Canadian Securities Administration release great publications to help educate the population about spotting the warning signs of scams.
Unfortunately, those that exploit our most vulnerable know they might not be equipped to recognize financial scams. We encourage all of our clients to utilize all tools and resources available to safeguard themselves.
We hope that by communicating regularly with our clients about fraud prevention we will assist with preventing financial abuse. Before a client embarks on any financial activity, we always encourage them to communicate with us.
In the past, if we received instructions from a vulnerable client that seemed out of the ordinary or irregular, we would certainly question the request and try to obtain clarity. The instruction may be to transfer an unusually high level of funds without details, unsolicited purchase of a speculative holding, or a transaction that was out of the ordinary.
If we felt that a trade/transfer was not appropriate we would explain that to the client and record our notes. However, at the end of the conversation, if the client still wanted to proceed with the initial instructions, we would be obligated to execute the instructions.
Fortunately, with the introduction of NI 31-103, we now have additional tools to protect our clients. This is achieved through two main components: Trusted Contact Person and Temporary Holds.
We have an obligation to ask all clients if they wish to appoint a Trusted Contact Person during meetings. This obligation certainly exists for those whom we would consider vulnerable; but also extends to all other clients as well.
Trusted contact person (TCP)
A trusted contact person is an individual determined by the client to whom we may contact in specified circumstances, such as if there are concerns about possible financial exploitation of our client who is vulnerable or about the client’s mental capacity to make decisions involving financial matters.
We can often get important information from a trusted individual regarding our client’s current condition. The TCP is the first of two main tools that will help us assess situations and protect our clients.
10 common TCP questions reviewed with clients
1. Is a TCP the same as a power of attorney?
A TCP is not the same as a power of attorney (POA) and does not replace a POA.
2. Can our client’s POA be the TCP?
TCP and POA are not the same, but they can be the same person.
3. Is a TCP required for every client?
Our clients have the option to elect a TCP or not, however, we are required to take reasonable steps to obtain the name and update TCP information as part of the Know Your Client (KYC) process.
In our files, we will document the discussion with the client and whether they would like to have a TCP on file. As our clients age, we encourage them to consider naming a TCP for further protection.
4. How do we record the TCP information?
We record the TCP information the same way we would record any client information through our systems. The information required for the TCP is first and last name, address, phone number, and relationship to the client.
Once the information has been documented, our client then signs to confirm the information.
5. Do we have to let the TCP person know that they have been named?
Although it is not required to let the TCP know they have been named, it is highly encouraged. It is important that your TCP knows you well and is aware of your personal situation so they can provide your Advisor with the information they may need.
6. Do I need to tell all my existing clients about TCP?
Yes, we have an obligation to take reasonable steps to obtain the name and contact information of a TCP for all existing clients.
7. Under what circumstances would we contact a TCP?
The Greenard Group would contact TCP in order to protect the client’s financial interests and assets in the following circumstances:
• If we notice signs of financial exploitation or if our client exhibits signs of diminished mental capacity, which we believe may affect their ability to make financial decisions relating to their account(s);
• To confirm our client’s contact information if we are unsuccessful in contacting our client after repeated attempts, particularly if our failure to contact our client is unusual; or
• To confirm the name and contact information of a legal guardian, executor, trustee, or any other personal or legal representative such as an attorney under a power of attorney.
The appointment of a Trusted Contact Person can be revoked at any time by contacting us.
8. What client information would be shared with the TCP?
Account information should NOT be shared with the TCP. The appointment of a Trust Contact does not grant the individual with any decision-making authority over the client’s account.
9. How can my client change their TCP?
Changing or revoking a TCP selection can be made at any time by contacting the Advisor team.
10. What are the criteria to be a TCP?
A TCP has to be at the age of majority. A TCP can be a resident of Canada or a non-resident of Canada.
Temporary Holds (TH)
The second main tool that we now have to protect clients is the Temporary Hold (TH), which allows us to place a temporary hold on the purchase or sale of a security, withdrawal or transfer of cash or securities from a client’s account, if we reasonably believe our client is exposed to financial fraud, being scammed, or is potentially getting the above circumstances.
Hopefully, we never have to put a TH on a client’s accounts. If we do, it is for the protection of our client’s best interests. Below we have outlined the escalation process of the TH.
Temporary Hold — escalation process
The escalation process begins when we have a reasonable belief that there is financial exploitation of a vulnerable client or where there are concerns about a client’s mental capacity to make decisions involving financial matters. When this happens, we are required to note any red flags and escalate issues to our Branch Manager immediately for further review.
Depending on the circumstance, the Branch Manager may engage National Supervision and/or Compliance for additional guidance. If the decision is to place a TH on the client’s account upon review, we will be required to take the following three steps:
Step 1 — We will be required to document the decision and conversations related to the escalation.
Step 2 — We have to provide to the client the notice of the TH and the reason for this temporary hold as soon as possible after placing the temporary hold.
Step 3 — Within 30 days of placing the TH and until the hold is revoked, the following must be completed:
• Revoke the TH, or
• Provide the client with notice of the decision to continue the TH and the reasons for that decision.
Wealth Advisors and Portfolio Managers have an obligation to talk to their clients regarding these recent changes. Both the Trust Contact Person (TCP) and Temporary Hold (TH) are two additional tools that are now available to protect our clients.
Kevin Greenard CPA CA FMA CFP CIM is a Portfolio Manager and Senior Wealth Advisor with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250.389.2138. greenardgroup.com
