State securities regulators put out proposal to protect seniors

Proposal would clarify brokers' and advisers' responsibilities in cases of suspected elder abuse

Sep 30, 2015 @ 1:28 pm

By Mason Braswell

With a new proposal announced Tuesday, state regulators are the latest group to tackle the complex legal issues surrounding senior citizens who may be vulnerable to financial exploitation.

The North American State Securities Administrators Association would mandate disclosures to state regulators and adult protective services in instances where there is a reasonable belief that a client who is 60 or older is being taken advantage of. They would also establish scenarios for a broker or adviser to contact a trusted third party or delay disbursing funds if an elderly client appears to be at risk.

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The proposal, “An Act to Protect Vulnerable Adults from Financial Exploitation,” could be adopted as legislation or implemented as regulation following a comment period from Sept. 29 to Oct. 29.

“Working together we can and will close the holes in our safety net of support and protection for vulnerable adult investors,” said Judith Shaw, NASAA's newly elected president and Maine Securities Administrator, in a statement.


The act follows a similar proposal from the Financial Industry Regulatory Authority Inc., which was approved by the board and will also be put out for comments. That proposal similarly would mandate that brokers obtain contact information for a trusted third party who could be notified in case of suspicious activity and would allow brokers to freeze funds in those instances as well.

The Finra rule would only apply to its broker-dealer members, however, whereas the state laws or regulations could apply to both brokers and investment advisers. They would have to be implemented on a state-by-state basis.

“Both regulators are recognizing this area is one that needs their assistance,” said Ronald Long, director of regulatory affairs and elder client initiatives at Wells Fargo Advisors.

Some states have already adopted their own rules. Missouri, for example, passed a law in June that allows brokers to contact a trusted family member whether they're listed on the account or not, according to Mr. Long.

He said that his firm would be looking closely at the NASAA proposal and would likely submit comments. Initially, he felt that there could be more leniency on contacting a third party. The NASAA proposal requires that the client have listed the trusted third party in advance, but clients don't always anticipate needing to have that in place, he said.


Overall, however, he thought the industry was moving in the right direction in tackling these issues. Wells Fargo Advisors has a number in place for advisers to call when they have a possible issue or questions about working with clients who have diminished capacity, and the number of calls averages around 160 to 170 per month, he said.

“Everybody is looking to get engaged and that's altogether positive,” he said.


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