Three states make elder-financial-abuse reporting mandatory starting Friday

Alabama, Indiana and Vermont are the first of likely many states to require adviser action against exploitation, while giving them immunity

Jun 30, 2016 @ 1:44 pm

By Mark Schoeff Jr.

Laws in Alabama, Indiana and Vermont that go into effect Friday, July 1, will require financial advisers to alert state authorities of suspected financial abuse of the elderly and other vulnerable adults.

The measures were approved earlier this year by each state's legislatures and signed into law by their governors. In addition to mandatory reporting in situations involving people older than 65 or who are disabled, they also allow advisers to stop the disbursement of funds from client accounts and give advisers immunity from civil liability.

In Louisiana, elder-protection legislation signed into law on June 16 will go into effect on Jan. 1, 2017.

Each of the measures tracks to varying degrees a model rule approved earlier this year by the North American Securities Administrators Association Inc. The organization, comprised of state regulators, has made protecting seniors from financial exploitation a priority.

“This law will help our investment advisers and brokers to partner with us in Vermont to tackle this problem that is pervasive,” said Michael Pieciak, Vermont deputy securities commissioner.

An Indiana adviser welcomes his state's new law because it gives him “more tools” to help clients who may be fraud victims.

“That's exactly the kind of thing we applaud,” said Michael Kalscheur, a senior financial consultant at Castle Wealth Advisors. “I now have a legal [leg] to stand on. That's a great additional benefit we can use to help protect people.”

Before the NASAA model rule came out, three other states had enacted elder financial abuse laws: Delaware, Missouri and Washington.

On the federal level, Sen. Susan Collins, R-Maine, has written legislation that would give advisers immunity for reporting senior exploitation.

The Financial Industry Regulatory Authority Inc. and the Securities and Exchange Commission also have targeted elder financial abuse in their examinations and enforcement.

The focus on this issue is a natural result of the burgeoning number of retirees and their wealth, said Joseph Borg, director of the Alabama Securities Commission. He made an analogy to Willie Sutton, a notorious thief who once said he robbed banks “because that's where the money is.”

“Guess where the money is these days,” Mr. Borg said. “It's with the folks over 65. It's the senior population that has the assets.”

Finra and the states have diverged on the way to address the problem. A proposed Finra rule does not require reporting but rather allows advisers to designate a third party who they can inform of suspected problems.

But Mr. Borg said the Alabama law for advisers had to be consistent with other state statutes that require the reporting of physical and emotional abuse of seniors.

“It made no sense in my state to make it voluntary,” he said. “If it was mandatory for them, it had to be mandatory for us.”

The provision that allows advisers to stop cash flows out of an account also was crucial, according to Mr. Pieciak.

“The second that money is gone, it's very hard to get it back,” he said.

Many state legislatures had so-called short sessions this spring. More of them may take up senior financial abuse laws in 2017.

“We hope to see the broad adoption of legislation consistent with the NASAA model when state legislative sessions convene next year,” NASAA spokesman Bob Webster wrote in an email.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Schwab's Clark: How next-gen can position themselves for success

How can the next generation position themselves for success in the industry? Our student correspondent from Texas Tech, speaks with Bernie Clark to find out.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print