The problem of elder financial abuse is being tackled at the federal level. It's about time. After proposals by the North American Securities Administrators Association and Finra to provide immunity for financial services providers that reported suspected elder financial abuse, or delayed disbursement of funds to prevent it, two senators have introduced legislation to encourage financial advisers and financial institutions to report suspected financial abuse of elders.
The legislation should be quickly passed in Congress and acted upon by those providing financial services to the nation's 40 million seniors, many of whom are ripped off to the tune of an estimated $2.9 billion a year.
Called the Senior$afe Act of 2015, the proposal — initiated by Susan Collins, R-Maine, and Claire McCaskill, D-Mo. — consists of several features. First, to promote and encourage reporting of suspected elderly financial exploitation, the bill would incentivize certain financial services employees to report any suspected exploitation by making them immune from any civil or administrative liability arising from such a report, provided that they exercised due care, and that they make these reports in good faith.
Second, to get that immunity, the proposal would require that financial institutions provide training to key employees on how to report senior financial exploitation as soon as practicable, or within one year, so that the employees have the knowledge and training they need to spot “red flags” associated with financial exploitation.
Those employees would include supervisory personnel; employees who come into contact with a senior citizen as a regular part of their duties; and employees who review or approve the financial documents, records, or transactions of senior citizens as a part of those duties.
The institutions that would be covered by the bill include banks, broker-dealers, investment advisers and credit unions.
Even though 12 states mandate that financial institutions report suspected elder abuse to the Adult Protective Services Association, and another 14 require “all persons” report such suspicions, only one in 44 elder financial exploitation cases is ever reported, according to APS.
APS notes that victims and families lose lifetime savings, and almost one in 10 financial abuse victims have to turn to Medicaid as a result of those savings being stolen.
In September, NASAA released a model act on the reporting of elder financial abuse that states might follow. It would mandate that suspected elder abuse be reported to state securities regulators and state adult protective-services agencies when a qualified employee of a financial institution has “a reasonable belief” that financial exploitation of an eligible adult has been attempted or has occurred. It provides immunity for such reporting if done in good faith and with “reasonable care.”
The model act goes further than the Senior$afe Act in that it provides broker-dealers and investment advisers with the authority to delay disbursing funds if they suspect disbursement would result in the exploitation of an eligible adult.
The Financial Industry Regulatory Authority Inc. also has proposed a rule that would permit qualified persons of financial firms to place temporary holds on disbursements of funds or securities from the accounts of elders where there is reasonable suspicion of financial exploitation.
However, such holds might create legal problems for the firms delaying disbursement of such funds, unless it is specifically authorized by federal law.
The Senior$afe Act seems like a win-win for financial advisers and their elder clients.
The Act would provide a needed layer of protection for senior investors, most of whom can ill afford to lose any of their savings to fraud, and it would be another valuable service for financial advisers to provide those clients.
Together, the actions of NASAA, Finra and, hopefully, Congress and President Barack Obama, will finally help stem the tide of elder financial abuse by freeing advisers to play a major role when they spot or suspect something suspicious.