As state regulators, Finra and lawmakers place an increasing emphasis on stopping the financial exploitation of the elderly, financial advisers are calling for better coordination and communication to tackle the problem.
Over the last several years, the Financial Industry Regulatory Authority Inc. and individual states have adopted rules that allow advisers to delay disbursements of funds from investment accounts if they suspect an elderly or vulnerable client is being exploited.
A model rule issued by the North American Securities Administrators Association in 2016 that has been enacted in 32 states requires brokers and advisers to report potential abuse to state authorities and provides legal immunity for holding funds.
As advisers are getting used to operating under the Finra and state rules, they’re telling regulators what they'd like to see improved.
“Regulators are moving in the right direction,” Ryan Bertrand, vice president and managing director for advanced markets at Transamerica, said at the InvestmentNews Women Adviser Summit on Nov. 3 in Naples, Florida. “But the missing ingredient is the communication between the regulators and us.”
Bertrand recommended “more orchestration between the regulatory bodies, the firms and the advisers themselves on how this should be approached.”
His sentiment was echoed in a NASAA report about its model rule in September.
“Without regular communication among all parties, including firms, state securities regulators, and [Adult Protective Services], the firms that report this type of wrongdoing may become dissuaded to engage further,” the NASAA report states. “Although client privacy is paramount, firms stated that follow-up by state securities regulators or APS asking if they have any further information or developments to discuss could go a long way to building relationships between parties.”
Michele Kryger, head of the AIG elder and vulnerable client care unit, also said coordination should be improved between government agencies targeting senior exploitation.
In addition, regulators should consider providing more time for advisers to place a hold on accounts in situations where exploitation could be involved, Kryger said. The holding time period is 15 days under the state and Finra rules.
“I would want the regulators to really think practically,” Kryger said on Nov. 2 at the InvestmentNews Retirement Income Summit in Naples. “Listen to us firms on the types of cases and challenges that we’re having. Extend the time frame for delays of disbursement.”
Finra is seeking to amend its rule to add an additional 30 days to the holding period if a member brokerage reported suspected elder abuse to state securities regulators, other state agencies or a court. The broker-dealer self-regulator also wants to allow brokerages to place holds on securities transactions. Finra has submitted the proposal to the SEC, which must approve the change.
Last month, the House approved by voice vote legislation that would allow a registered open-end investment company to delay by up to 25 days the redemption of a security if it thinks the request is related to abuse of an elderly or vulnerable person.
The Financial Exploitation Prevention Act, written by Rep. Ann Wager, R-Mo., codifies a 2018 no-action letter issued by the Securities and Exchange Commission. Its prospects in the Senate are unclear.
More work to prevent senior exploitation also has to be done on the financial firm level, according to a recent NASAA exam sweep. The review showed that most investment advisers lack internal systems to respond to potential abuse.
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