If a client asks their investment dealer to change their account beneficiary, does the dealer need to tell the beneficiary? Firms will be relieved by the Ontario Court of Appeal’s decision in Fair v. BMO Nesbitt Burns Inc., 2022 ONCA 711, which confirmed the answer is no (with some qualifications).
In this case, the client Lloyd Fair changed the beneficiary on his TFSA and RIF account from his wife Anne to his children from an earlier marriage. He did not tell Anne, who held other accounts in her own name at BMO naming Lloyd as beneficiary. BMO also did not inform Anne of this change, although it did mail statements showing the new beneficiaries to Lloyd and Anne’s address.
After Lloyd died, BMO followed his children’s request to be paid the proceeds from his RIF and TFSA. Anne then commenced litigation against BMO and the children, taking the position that BMO owed her a duty to disclose her replacement as beneficiary. BMO brought a motion for summary judgment on the basis that no such duty existed. The Superior Court and Court of Appeal agreed.
Both levels of court emphasized that Lloyd and Anne’s accounts were not joint. Each held separate accounts, notwithstanding that they each (initially) named the other as beneficiary.
On appeal, Anne raised the fact that BMO had previously shared information about Lloyd’s accounts with her (and vice versa). She said this supported the existence of a duty to disclose the beneficiary change. The Court of Appeal disagreed, pointing out that Lloyd had consented to the earlier information sharing, but not to sharing the change in beneficiary. The Court also concluded that the performance of Lloyd’s investments was not material to the performance of Anne’s investments.
So investment firms should consider the following questions when deciding whether disclosure is necessary:
- Is it a joint account?
- Has the client consented to disclosing a beneficiary change?
- Is the change material to the investments of the beneficiary, if they are also a client of the investment firm?
As reassuring as this decision may be, a dealer’s duties to their clients will always depend on the facts.