CFP Board joins industry support for bill to protect seniors from fraud

 The CFP Board is one of 11 industry associations to sign a joint letter urging the senate to pass the Financial Exploitation Prevention Act, which aims to give mutual fund companies and their transfer agents the authority to delay redemptions when they suspect elder financial abuse. 

The letter, dated Nov. 21, was sent to senators Bill Hagerty (R‑TN) and Ruben Gallego (D‑AZ), who reintroduced the bipartisan legislation in September. The legislation to delay transactions would primarily apply to investments around mutual funds.

“Reports estimate that one in five Americans over the age of 65 has been a victim of financial exploitation,” reads the letter. “This legislation provides an important safeguard between financial transactions by allowing a registered investment company or transfer agent to delay redemption of a security if it reasonably believes such redemption was requested through the exploitation of a security holder who is a senior or unable to protect their own interests.”

Other groups to sign the letter in support of the bill include the American Securities Association, Financial Planning Association, Financial Services Institute, Finseca, Investment Adviser Association, Investment Company Institute, Insured Retirement Institute, National Association of Insurance and Financial Advisors, National Association of Personal Financial Advisors, and Securities Industry and Financial Markets Association.

“More seniors and vulnerable individuals can avoid becoming a victim should the Financial Exploitation Prevention Act become law,” said John Jennings, director of government and political affairs at the Insured Retirement Institute. “Both industry and government must continue to work together to stay ahead of financial predators and preserve the hard earned savings workers and retirees have built. “ 

The latest internet crime report from the FBI found that Americans aged 60 and older lost $4.88 billion in fraud incidents in 2024, a 43% increase from 2023 as advances in AI and cryptocurrency fuel scams targeting seniors. The FBI’s number of complaints (147,127) received from victims 60 and older also marked a 46% increase from 2023, while an AARP report found $28 billion per year is stolen from US adults 60 and older. 

“More importantly in this bill, each link in the financial chain needs the ability to stop a transaction from taking place, pending a review with the SEC or similar body,” Ben Simerly, advisor at Cleveland-based Lakehouse Family Wealth, told InvestmentNews. “One of the biggest concerns in the financial community is the narrow room advisors have to prevent financial exploitation. As it stands currently, we can report a concern, but then we are bound to simply hope, pray, and execute the transaction, whether we believe it to be legitimate or not.”

According to the CFP Board, the proposed Financial Exploitation Prevention Act would enable the SEC to “make legislative and regulatory recommendations to address the financial exploitation of seniors and other vulnerable adults.” The bill would also authorize state regulators, courts, and administrative agencies to delay redemptions to conduct their own investigations.  

The Investments & Wealth Institute (IWI), which provides a number of certifications for financial advisors, told InvestmentNews that "rules consistent with the protection of seniors are important tools to stem the tide of such exploitation.”  

“These types of rules exist under FINRA’s regulatory framework, and we would expect similar results under the SEC’s jurisdiction,” Rob Frankel, general counsel at IWI, said in a statement provided to InvestmentNews. “There are of course risks involved with delaying redemptions – namely, the firm is wrong, and no exploitation is occurring, but we surmise that the SEC will take those risks into account in deriving its recommendations.”

Simerly, a certified financial planner at Lakehouse Family Wealth, added he has “no doubt" that unintended consequences can come from the proposed Financial Exploitation Prevention Act. “I suspect the first two parts of this bill that will be abused will be government overreach in the movement of funds. The second will be fund companies delaying distributions in the event of a firm's financial distress,” said Simerly.

“The key here, however, is that if one of these firms or a regulator gets out of line, a lawsuit can correct their behavior, and the client's money is likely safe in the meantime,” he added. “In the current scenario, the client's hard-earned savings are gone forever, often with no recourse to be had.”