Elder abuse prevention by advisers depends on their firms' response to new rule

SEC approves Finra regulation to curb financial exploitation, but requirements are slim

Feb 15, 2017 @ 12:00 pm

By Mark Schoeff Jr.

+ Zoom

Regulators are putting the ball in the court of financial firms when it comes to stopping the finanacial abuse of senior citizens.

Earlier this month, the Securities and Exchange Commission approved a Finra rule designed to protect seniors and other vulnerable adults. The measure requires firms to make a reasonable attempt to collect information for a trusted third-party contact for investors and allows brokers to halt disbursements from accounts of clients they think are being taken advantage of.

"These measures will assist members in thwarting financial exploitation of seniors and other vulnerable adults before potentially ruinous losses occur," the Feb. 3 SEC order states.

The rule will take effect in February 2018.

Now it's up to firms to follow through.

"The rule's impact will depend on how forward firms are in utilizing this additional tool, but I do think we will see many firms take the necessary steps to do so, especially given the emphasis that the SEC, Finra and the states have placed on elder financial exploitation," said Nick Losurdo, associate at Morgan Lewis & Bockius.

But the rule promulgated by the Financial Industry Regulatory Authority Inc. lacks teeth, according to Ben Edwards, professor of law at Barry University.

"It doesn't actually require firms to do anything," he said. "There's no disclosure to the public to identify the firms that actually commit themselves to protect seniors if they suspect exploitation."

State rules

Nicole Iannarone, assistant clinical professor at Georgia State University, said the Finra rule allows brokers to put a hold on accounts of potential abuse victims but doesn't include penalities for those who fail to take that action.

"We think it's great they're taking this step. We'd love them to go further," said Ms. Iannarone, director of the Georgia State Investor Advocacy Clinic.

As the SEC approves the Finra rule, several states will consider this year approving their own rules that would require financial advisers to report suspected senior financial abuse to authorities. Those regulations are likely to be based in part on a model rule developed by the North American Securities Administrators Association.

"We'll likely see additional states adopt the NASAA model rule, or a variation thereof, as we go further into the year," Mr. Losurdo said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

Building a practice for tomorrow's tomorrow

Advisers: it is time to take a long view of your practice. Check out some tips and strategies on how to do it (and why) with Tom Stefaniak of Pinnacle Wealth Management.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

Finra's stats reveal an industry in decline

The broker-dealer regulator reports fewer entities under its watchful eye.

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print