Canada/U.S. issues with Powers of Attorney for Property and Canadian Investments
No matter how carefully a Power of Attorney for Property is drafted, appointing a U.S. resident to act as your attorney may result in the attorney being unable to process transactions with respect to Canadian Investments.
I recently came across an issue in relation to grantors of powers of attorney for property who are Canadian residents and Canadian citizens with family in the United States. The issue relates to U.S. securities laws that serve to prohibit cross border dealings in securities by unregistered foreign brokers, even apparently with respect to Canadian investments. For purposes of this discussion, (I will call the grantor Albert). To illustrate the issue, let us say that Albert appoints a family member (who I will call Peter) who is a U.S. resident and citizen as his attorney for property. Let us also assume that Albert’s Power of Attorney for Property is properly drafted, signed and witnessed, is effective immediately, usable immediately and continues in the event of incapacity.
Let us now assume that Albert has investments in Canada with a Canadian investment company and has been dealing with a properly licensed and registered Canadian Broker-dealer authorized to conduct business anywhere in Canada, but, not elsewhere (the “Canadian Broker”). Assume also that Albert has very little money in the bank and no other major assets anywhere in the world. Now let us assume that Albert is incapable with respect to property and needs Peter to step in to assist. The issue is whether the Canadian Broker could take any instructions from Peter who is a U.S. resident and would be primarily also be calling from the U.S. The concern for the Canadian Broker is if he accepts Peter’s instructions to, for example, draw money from Albert’s investments to pay for Albert’s nursing home care, would he be breaking the law? The risk for Albert is that Peter would not be able to act on Albert’s behalf at all.
There is a general prohibition that is subject to some narrow exceptions. The general prohibition under U.S. law is such that a Canadian Broker, also often called a Financial or Investment Advisor is not allowed to take instructions even by phone from a person in the United States unless registered in the U.S. for that purpose. Each state in the United States has different rules about this, but, the fact is that if your attorney is in the wrong state, or if your Canadian Investments do not fit within one of the exceptions, your Power of Attorney for Property might turn out to be of no use to you.
Until the issue is resolved or clarified, it will be important for people when choosing their attorney for Property who are thinking of appointing a U.S. resident as their Attorney to contact their Financial Advisors to find out where the Financial Advisor stands on this issue and in case the Financial Advisor is unable or unwilling to risk taking instructions from a U.S. resident attorney, find an alternate person to appoint who is a Canadian resident.