Monday, August 8, 2016

Call for Action Protection of Vulnerable Investors

Kenmar have been recommending changes in SRO rules that would protect seniors and vulnerable investors for the past 4 years. The vulnerability of seniors is a well documented  issue.. We have requested changes to the NAAF that would include a trusted contact person to be named .We also want a rule that would allow dealers and dealing representatives (" advisors ") to take immediate, short-term protective action for the benefit of vulnerable clients who may have diminished capacity to give coherent instructions due to Alzheimer's/dementia, or other causes, or who may be facing improper influence, including elder financial abuse. A model protocol for taking protective action has already been accepted by FINRA in the U.S. in 2015 ( see link below).  Currently in Canada, investment dealers and dealing  Reps do not have the legal authority to refuse or delay carrying out instructions from clients even when there is good and just reason to believe the client exhibit diminished capacity or is being  exploited financially by others.

There is a crying need to provide a legal safe harbour to protect dealers and dealing representatives who take protective action in good faith . Kenmar believe such an initiative is entirely congruent with acting in the Best interests of clients. We urge regulatory action without further delay. Kenmar continues to oppose any regulatory actions that would permit stockbrokers to act as executors or trustees except for immediate family.

On January 22, 2016, the North American Securities Administrators Association (“NASAA”) adopted a model act, entitled “An Act to Protect Vulnerable Adults from Financial Exploitation.” This act seeks to facilitate coordination among securities regulators, broker-dealers, and adult protective services agencies in dealing with the financial exploitation of seniors and other vulnerable adults. The model act reflects the collective views of the NASAA membership, which consists of 67 state, provincial, and territorial securities administrators from the 50 states, D.C., Puerto Rico, the U.S. Virgin Islands, Canada and Mexico; however, it has no legal authority and is only meant to serve as a guidepost to individual jurisdictions. The model act may be adopted by state legislatures or regulators (with or without modifications) and has both permissive and mandatory components. The full text of the model act, along with background information is available on the Policymakers section of NASAA’s new website,, which launched in December 2015 and is designed to provide senior-focused resources to investors, caregivers, industry and policymakers.

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