MFDA issues guidance on serving vulnerable clients

SRO recommends asking clients for a trusted contact person, putting temporary holds on suspicious transactions

As the average life expectancy continues to rise, seniors are becoming a rapidly growing demographic in Canada, expected to account for about 25% of the population by 2036, according to Statistics Canada.

On Friday, the Mutual Fund Dealers Association of Canada (MFDA) issued guidance on serving senior and vulnerable clients, noting that clients above the age of 65 account for 21% of all households serviced by MFDA dealers and 34% of assets under management.

The MFDA has recommended dealers ask clients to name a trusted contact person (TCP) when they open an account, and update the client’s TCP information periodically. A TCP should generally not be someone who has an interest in the client’s account, such as a power of attorney (POA), the MFDA noted. But, while dealers should encourage their clients to name different individuals as their TCP and POA, the MFDA acknowledged this may not be possible in every situation. 

In 2016, IIROC recommended its advisors implement a similar process.

Additionally, the MFDA has recommended that dealers implement policies and procedures to place a temporary hold on transactions when there is reasonable concern that a vulnerable client is being financially exploited, or concerns about the client’s mental capacity. 

When a dealer decides to place a temporary hold, the client should be notified as quickly as possible, as well as the TCP and/or POA where appropriate. The temporary hold should last only as long as it takes to address the concern before a dealer decides to complete or disallow the transaction. 

The MFDA said it will continue to develop guidance and resources regarding financial exploitation and diminished mental capacity among seniors and vulnerable clients. Further discussions regarding guidance in this area will take place at the MFDA’s third Senior Summit on Oct. 30.

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