Eight new Access to Justice Fund grants aim to better understand and protect vulnerable investors

The funded investor rights projects range from hands-on help for individual investors at a first of its kind legal clinic, public legal education and information for seniors about their legal rights when it comes to investing, and a broad range of research exploring: supported decision making; vulnerable investor protective action; remedies under the Ontario Securities Act for corporate misreporting; investor vulnerability and disciplinary action by self-regulatory bodies; investor rights and remedies in Canada; and the experience of low-income families and group plan RESPs.
August 3, 2016

Eight new Access to Justice Fund grants aim to better understand and protect vulnerable investors

The Law Foundation of Ontario has awarded eight grants totalling more than $700,000 in the area of investor rights through its national Access to Justice Fund (ATJF).

“Investing can be complex, even for those with a high level of financial literacy,” explains Linda R. Rothstein, the Foundation’s Board Chair. “More and more people are feeling the financial pressure to invest in the market — not to get rich but just to be able to afford their retirements or pay for their child’s education. The connection between investor rights and access to justice may not be immediately apparent,” Ms. Rothstein adds, “but in fact the investor rights projects being funded demonstrate that there is a significant gap in knowledge, protection, and access to services for investors in Canada, especially for vulnerable investors.”

The funded projects range from hands-on help for individual investors at a first of its kind legal clinic, public legal education and information for seniors about their legal rights when it comes to investing, and a broad range of research exploring: supported decision making; vulnerable investor protective action; remedies under the Ontario Securities Act for corporate misreporting; investor vulnerability and disciplinary action by self-regulatory bodies; investor rights and remedies in Canada; and the experience of low-income families and group plan RESPs.

Factors that can make an investor vulnerable may include a low level of financial literacy, the inability to converse in English or French, dementia or other health issues, little to no savings, and dependence on return on investments for their retirement or other circumstances, such as a disability.

This was the Foundation’s first round of granting dedicated specifically to investor rights. Leading up to the call for applications, Foundation staff conducted research and consulted with experts in the field of investor rights and financial literacy to understand the landscape and develop criteria for the call.

The decision to provide funding in this area was initially precipitated by the cy-près award in Lawrence v Atlas Cold Storage Holdings Inc, in which the court order stated that the primary, although not exclusive, use of the cy-près award should be the protection of investor rights. Funds received from other cy-près awards received by the Foundation also supported granting in this area.

About the Access to Justice Fund (ATJF)

The Law Foundation of Ontario’s Access to Justice Fund (ATJF) is a distinct and permanent fund that makes grants to projects that improve access to justice across the country. The Foundation created the ATJF in 2009 after receiving a $14.6 million cy-près award from Cassano v. TD Bank. To date, the ATJF has received 15 cy-près awards and supported more than 100 grants worth over $15.2 million.

Courts have continued to approve The Law Foundation of Ontario as a fitting and accountable recipient of both fixed and residual cy-près awards given its experience and expertise in granting, broad access to justice mandate, and prudent financial management. This allows the Foundation to develop additional calls for funding and make grants through the ATJF.

Funded grants to advance the protection of investor rights in Canada

Osgoode Hall Law School
Investor Protection Clinic and Living Lab, $98,959

In this joint project, Professor Poonam Puri of Osgoode Hall Law School and FAIR Canada will create the first legal clinic of its kind in Canada to provide individual investors with free assistance when they have suffered a loss due to fraud or other wrongdoing. The clinic will be staffed by law students, under the supervision of Professor Puri. Data on the nature of the complaint and the remedy sought, as well as the type of information and assistance provided, will be collected from clients and will be used to inform the work of the clinic and how best to provide assistance to harmed investors. A plain language grievance guide, which will include information about investment products, the various regulatory and self-governing bodies, how to submit a complaint, and how to report possible wrongdoing by an advisor or a firm, will also be developed and made available to the public.

British Columbia Law Institute, Canadian Centre for Elder Law Division (CCEL)
Investing with Supported Decision Making: Protecting the Rights of Vulnerable Investors, $100,000

British Columbia is one of a very few jurisdictions that allows for Supported Decision Making. Unlike Substitute Decision Making, in which a person is given legal authority (either by way of a Power of Attorney or Guardianship) to make decisions on behalf of an adult with diminished capacity, Supported Decision Making is a voluntary relationship whereby a person, or a network of people, assists another person to make, communicate, and implement his or her own decisions. The person being supported retains full legal capacity to make decisions. This research project will engage with investors from disability communities in BC and Ontario who are using Supported Decision Making during the investment process to create the first legal research of its kind to address Supported Decision Making in this context. It builds on an earlier CCEL research study commissioned by the Law Commission of Ontario, which was the first socio-legal research worldwide to review and evaluate the experience of Supported Decision Making. The project will produce a suite of tools, which will help the various stakeholders better understand Supported Decision Making and the adult’s and supporter’s rights and responsibilities under a Supported Decision Making legal regime.

Canadian Foundation for the Advancement of Investor Rights (FAIR Canada)
Vulnerable Investor Protective Action and Legal Safe Harbour, $100,000

FAIR Canada will conduct a comparative study of legislative and regulatory initiatives in different jurisdictions that allow financial services firms and investment advisors to take immediate, short-term protective action for the benefit of vulnerable customers who may have lost capacity to give coherent instructions due to dementia, or other causes, or who may be facing undue influence, including elder financial abuse. In consultation with financial services stakeholders and organizations that support vulnerable groups, the project will also develop a model protocol for taking protective action and, if warranted by the research, a statutory and regulatory framework establishing a legal safe harbour or similar mechanism for Canada. Currently, financial services firms and advisors do not have the legal authority to refuse or delay carrying out instructions from clients even when there is reason to believe the client lacks capacity or is being taken advantage of financially. This aim of this project is to provide a clear protocol setting out the circumstances in which protective action should be taken and what action is appropriate and to develop a legal safe harbour or other practical mechanism to protect firms and advisors who take protective action in good faith.

Your Money… For the Rest of Your Life!, $97,612

Éducaloi is a leading public legal education and information organization in Quebec and has been assisting people aged 50 and over for many years. This project will create and pilot a plain language legal information kit and workshop in English and French that will help to reduce the financial vulnerability of seniors and give them the information and confidence to have their investment decisions respected. Éducaloi will address three topics dealing with investor rights, in particular those of senior investors: legal duties and responsibilities of financial and investment professionals; investment fraud and legal recourses; and powers of attorney and protection mandates. Material will be developed and distributed in partnership with le Fédération de l’Âge d’Or du Québec and Mouvement d’éducation et de défense des actionnaires.

Fondation du Barreau du Québec
Vulnerable Investors and the Enforcement of Securities Laws, $91,723

This project, which will be carried out by a research team under the direction of Professor Stéphane Rousseau, Business Law and Governance Chair at the Université de Montréal, will examine the decisions of the principal Canadian self-regulatory bodies – the Investment Industry Regulatory Organization of Canada (IIROC), the Mutual Fund Dealers Association of Canada (MFDA), and the Chambre de la sécurité financière (CSF) – over the last five years in Ontario and Quebec, with a view to determining whether and to what extent vulnerability is taken into consideration in disciplinary proceedings against dealers and their representatives. To date, decisions of self-regulatory bodies have not been fully analyzed in relation to the types of investors involved and, in particular, their vulnerability. The project will also hold roundtables with representatives of regulators, investor groups and intermediaries. The issues, findings and potential solutions proposed at the roundtables will inform the project’s final report, which will include recommendations for regulators and decision-makers and will contribute to a better understanding of how standards of conduct are enforced in the context of wrongdoing against vulnerable investors.

SEED Winnipeg
Group RESP Research and Education Project, $92,500

Low-income families are over-represented in Registered Education Savings Plan (RESP) Group Plans. While much of the academic literature focuses on the value of group plan RESPs as a means of increasing the educational attainment of children from low-income families, the rules, regulations and fees that apply to them, as well as the risks and restrictions, are often unclear and not well understood. Once enrolled in group plan RESPs, low-income group plan subscribers may face difficult decisions about whether to withdraw from their plans and forfeit contributions or to continue contributing to an investment plan that does not meet their needs. SEED, in partnership with the Legal Help Centre of Winnipeg, Momentum in Calgary, and academics from Menno Simons College and Queen’s University, will research the experience of low-income Group RESP subscribers and the regulatory context in which these plans are sold. The project will also develop and pilot public legal education and information materials on group plans tailored to address the needs of both low-income investors and community-based service providers. The ultimate aim of the project is to produce objective analysis and plain language information to help investors make informed choices about their RESP investments and to understand and exercise their rights.

University of Ottawa, Faculty of Law, Common Law Section
Strengthening Investor Rights: Company disclosures and compensation caps, $59,096

This research project, led by Professor P.M. Vasudev of the University of Ottawa will examine the remedies available for investors under the Ontario Securities Act for corporate misreporting in both prospectuses and continuous disclosures and will explore avenues to strengthen investor rights in these cases. The research will compile and analyze trends and outcomes in securities class actions over the past 10 years. Surveys and workshops with various stakeholders including investor associations, law firms, regulatory agencies, and corporate governance think-tanks, will also be conducted to gather feedback on the challenges and issues in dealing with corporate misstatements. The ultimate goal of the project is to develop appropriate, evidence-based policy recommendations for reform to strengthen investor rights.

University of Toronto, Faculty of Law
Investor Rights and Remedies in Canada , $78,039

Based on the belief that Canada’s remedial regime currently inhibits investors’ ability to access justice, Professor Anita Anand, The J.R. Kimber Chair in Investor Protection and Corporate Governance at the University of Toronto, Faculty of Law, will investigate whether new remedies for investors, including a restitutionary remedy, should be available to investors who suffer from corporate wrongdoing, be it under securities law, corporate law, or criminal law. This legal research project will be undertaken in three stages. Stage one will canvass all remedies available to investors in Canada and in other common law jurisdictions. Stage two will examine legal and economic rationales for remedies and explore whether there are regulatory justifications for countries to adopt additional remedies. The project will focus on restitution because, of all remedies, this is the least available and understood and, therefore, the most infrequently discussed within the securities context. Stage three will focus on sanctions arising from public enforcement proceedings and will examine the relationship between the legal regime for investor remedies and the prevalence of enforcement actions, with a view to determining if strong private investor remedies mitigate the need for regulators to intervene and initiate public proceedings. The research results will benefit not only investors but also regulators and legislators involved in the policymaking process. This project will be the first of its kind to focus on the need for additional or alternative regulation in the area of investor remedies.