The report highlights the challenges that registrants face when providing financial services to elderly clients and other clients who may demonstrate signs of vulnerability to financial exploitation and/or mental incapacity. Demographic trends suggest that in the coming years registrants may encounter an increasing number of vulnerable or incapable clients.

The primary regulatory response to these trends has been to provide registrants with guidance on how to identify signs of vulnerability, exploitation, and incapacity, and to respond to such concerns through the use of trusted contacts and temporary holds. Although client protection is doubtless an important policy objective, securities regulators must continue to recognize the importance of client autonomy and property rights as a countervailing objective. A balance must be struck between these policy goals.

Not all elderly clients are vulnerable, and not all vulnerable clients are elderly. Similarly, not all clients who demonstrate signs of impairment or diminished capacity are incapable of making decisions concerning financial matters. Regulators must avoid creating a second tier of investor by pursuing the goal of client protection at the expense of client autonomy in decision making.

To encourage the protection of client autonomy and property rights, regulators should give serious consideration to providing registrants with a form of ‘safe harbour’ or other statutory defence to rely on when providing financial services to vulnerable clients. The aim of this article is to open a dialogue with regulators and legislators on these protections.

Click here to read the report.