FAIR Focus
June 2022
In this month’s newsletter, we highlight regulatory changes that will help protect seniors and vulnerable investors from financial abuse. We also discuss proposed changes to improve annual fee statements to help you better understand and see all the fees you pay on your investments. In addition, we outline new rules banks must follow to treat Canadian customers fairly, which take effect on June 30.

Is enough being done to protect vulnerable investors? 
In late 2017, FAIR Canada issued a joint report on vulnerable investors. It proposed concrete measures to combat elder abuse, financial exploitation, inappropriate influence, and diminished mental capacity among investors.

In recognition of World Elder Abuse Awareness Day on June 15, it is worth reminding ourselves of the progress we’ve made on this challenging and uncomfortable topic. 
These new requirements help bring Canadian regulations alongside those existing in the United States since early 2018.
On December 31, 2021, new regulatory requirements reflecting two important recommendations from FAIR's report came into force. First, they require dealers to make reasonable efforts to obtain the name and contact information of someone you, as the client, would consider to be a trusted contact person (TCP). This includes getting your written consent to contact your TCP. Second, they allow authorized individuals within the financial firm to place temporary holds on trades, or payments from your account, if they have reason to believe you may be vulnerable to exploitation or inappropriate influence.
These two regulatory tools, however, are not mandatory. When it comes to placing a temporary hold, your dealer cannot do so unless certain conditions are met. These include documenting the reasons, providing you with notice, and periodically reviewing your situation to determine if the hold is still appropriate. Until the hold is withdrawn, they also must let you know every 30 days their reasons for continuing the hold.
These new requirements help bring Canadian regulations alongside those existing in the United States since early 2018.
One outstanding question is whether governments will need to get involved to provide legal safe harbours. This would shield any dealer acting in good faith from potential lawsuits for damages, or violating the vulnerable investor’s privacy rights. This is a complex area and various approaches have been adopted in the U.S. to address this critical question. Time will tell whether similar measures are needed in Canada to protect dealers that take protective action to help their vulnerable investors. 

For more information on elder financial abuse and the new tools to protect vulnerable investors, see the following:

Understanding the Total Costs of Your Investments
Beginning July 15, 2016, your investment advisor has been required to send you a statement showing the fees they receive, either directly or indirectly, from you each year. Do you know, however, these annual statements do not include the total costs of your investments? The statements only include fees received by your dealer, but not the expenses you paid to fund management companies.

This problem was first flagged in the ground-breaking Fair Dealing Model Concept Proposal released by the Ontario Securities Commission in January 2004. At the time, the OSC correctly noted that the true source of the money to pay fund management fees comes from you—the investor. 
Do you know how much you pay in fees when you invest
and how these fees affect your returns?
After a series of further consultations and delays requested by industry, real movement on this issue began this year. On April 28, 2022, Canadian securities and insurance regulators proposed rules to improve annual fee statements by requiring they include all your investment fees and costs. This will affect investors who purchase mutual funds, exchange-traded funds, or segregated funds (individual variable insurance contracts or IVICs).
If adopted, the proposed rules will also recommend a new prototype statement that helps you better understand the various fees and shows the total amount you paid in a clear, accessible and easy to read format.
FAIR Canada intends to comment on this proposal, including emphasizing the need to present important information to investors in a way that’s easily understood. We will also be urging regulators to implement the proposal as soon as possible. After all, investors have been waiting 18 years to see where their money is going when it comes to fees. 
For more information on fees, view our helpful resources:

New Protections to Treat Bank Customers Fairly
New consumer protection rules, to ensure Canadians are treated fairly when dealing with banks, will come into effect on June 30.
Among other things, banks will have to do the following:
1.    Give you more information about your day-to-day banking to help you make informed and timely decisions. This includes providing you with:
  • Electronic alerts: Informs you when you are about to go over your credit limit, or have insufficient funds in your account to make a payment. This should help you avoid having to pay wasteful fees.
  • Renewal reminders: Reminds you about renewing or canceling bank products or services, including letting you know about any rates or fees that may apply. For example, if you have a credit card with an annual fee and the first-year fee is waived, your bank must notify you before the annual fee kicks in.
  • Optional product agreements: Sends you separate agreements for optional products and services, such as credit card insurance. This should help improve your understanding of how the product works, how much it costs and how you can cancel it.
2.    Implement streamlined complaint processes for dealing with customer complaints. Under the new rules, banks will only have 56 days from when you raise a complaint to try to resolve the issue. Under the old rules, they had up to 90 days.
3.   Ensure the products or services they provide are appropriate for your financial needs.
4.   Provide you with a credit or refund for any charges or penalties that you did not agree to, or were not made aware of.
5.   Implement internal processes so that their employees can report wrongdoing and ensure the bank is complying with the consumer protection rules.
If you have any questions about the new protections, reach out to your bank. To find out how to make a complaint against a bank, read: How to make a complaint to a financial institution.

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