CSA introduces proposed amendments to NI 31-103 aimed at enhancing investor protection for vulnerable clients

Publication March 2020

The Canadian Securities Administrators (CSA) recently published for comment proposed amendments to National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations (the Amendments) taking aim at eradicating financial exploitation among vulnerable investors, and seeking to provide a measure of certainty and clarity to registrants when faced with situations involving aging clients and/or clients suffering from diminished mental capacity. 

The Amendments were jointly developed by the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) and will remain open for comment until June 3, 2020.

If adopted, the Amendments would impose positive obligations on investment advisors, when dealing with vulnerable clients, to:

  • Take reasonable steps to obtain contact information of a Trust Contact Person (TCP) from a vulnerable client;
  • Take reasonable steps to obtain the written consent of a vulnerable client to contact the vulnerable client’s TCP in certain situations; and
  • Clarify that it is permissible to place a hold on a transaction where the advisor has a reasonable belief that financial exploitation of a vulnerable client is occurring.

Subject to the nature of comments received, the CSA anticipates that the proposed amendments will come into force at the same time as the Client Focused Reforms relating to enhanced “Know Your Client” (KYC) requirements. The complete Amendments can be found here.

 


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