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.
