Suitability, re-assessment of vulnerable consumers key in re-opening of Canadian financial services firms – Reuters


TORONTO(Thomson Reuters Regulatory Intelligence) – *To read more by the Thomson Reuters Regulatory Intelligence team click here:

TD Bank, CIBC and Bank of Montreal are seen in the financial district as the provincial phase 2 of reopening from the coronavirus disease (COVID-19) restrictions begins in Toronto, Ontario, Canada June 24, 2020.

Compliance obligations related to suitability and the protection of vulnerable financial consumers are likely to evolve as Canada moves through pandemic-related uncertainty. Worsening unemployment is expected to further affect economic conditions in Canada. In addition to monitoring sales practices for existing groups of vulnerable clients, regulators are likely to scrutinize how financial services firms deal with other segments of the population that are experiencing financial hardship.


Provinces and territories in Canada are gradually re-opening after months of restrictions on social movement that shut down large parts of the economy. In Ontario, where Toronto, Canada’s largest financial center is located, lockdowns in place since March were recently lifted[here], and most businesses have been permitted to resume operations.

However, business will be far from normal for the foreseeable future, especially for companies that depend on commuter traffic. Many employers, particularly financial services firms in Toronto, are erring on the side of caution. Several of Canada’s largest banks have said that they will allow most of their employees to work from home for the rest of the year[here].

Months of social distancing have hurt the economy. Much of the damage, including high unemployment and financial hardship, are expected to have longer-term effects on businesses and household finances, especially among individuals affected by unemployment.

Financial analysts at Canadian banks are painting a starkly pessimistic picture. Both the Royal Bank of Canada[here] and the Canadian Imperial Bank of Commerce have said in forecasts that the Canadian economy is in recession and that recovery will be slow and uncertain[here].

In its most recent quarterly economic outlook, Toronto-Dominion (TD) Bank described a regional economy hammered by the pandemic and dramatically lower oil prices. “Near-zero” consumer spending and manufacturing operations that have sat idle for months are expected to mark Canada’s “worst back-to-back economic contraction in modern times.”

TD Bank predicts that younger Canadians will be most affected by unemployment and pandemic-related economic downturn. Similar views were echoed in a recent research note by the Brookings Institute, a research group that conducts social science research on economic development and metropolitan policy. Brookings said that youth, particularly young women and ethnic minorities, are likely to bear the brunt of the impending economic crisis. These groups will be among the most vulnerable to unemployment and financial hardship[here].


Current and developing economic conditions necessitate a review of client risk profiles, measures for the protection of vulnerable financial consumers and suitability. Over the past few months, Canadian regulators have said that they will monitor financial consumer protection issues throughout and after the pandemic[]. The Financial Consumer Agency of Canada (FCAC) has been paying closer attention to the sale of unsuitable investment products and other practices that could threaten vulnerable consumers, such as high-pressure sales tactics and inadequate fee disclosure.

Compliance with relevant Know-Your-Client (KYC), Know-Your-Product (KYP) and suitability requirements has traditionally been a high priority for securities regulators and self-regulatory organizations in Canada, featuring prominently in enforcement and rulemaking every year. In 2019, suitability and the protection of vulnerable customers comprised the majority of enforcement actions taken by the Investment Industry Regulatory Organization of Canada (IIROC).

Scrutiny of suitability practices and compliance measures to protect vulnerable financial consumers is likely to intensity if economic conditions in Canada worsen. Financial services firms should review their current practices and ensure that they are updated to reflect ongoing developments. Financial advisors may need to revisit suitability assessments for clients that have lost their jobs. More broadly, firms will also need to redefine who constitutes a vulnerable financial consumer to include younger demographics affected by unemployment. Overlooking these emerging market developments could land firms in regulatory crosshairs.

(Helen Chan is a Regulatory Intelligence Expert for Thomson Reuters Regulatory Intelligence, based in Hong Kong. She can be reached at

This article was produced by Thomson Reuters Regulatory Intelligence – – and initially posted on Aug 10. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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