State regulators work on uniform approach to elder financial abuse

New measures are aimed at encouraging brokers to notify authorities when they suspect someone is trying to scam one of their clients.

State securities regulators are working on a recommendation for how states can best protect senior citizens from financial exploitation.

Three states – Missouri, Washington and Delaware – have recently enacted laws targeting elder abuse.

The measures allow brokers to notify state and local authorities when they suspect that someone is trying to scam one of their clients and also enable financial professionals to suspend the execution of transactions for a certain time period. They also give brokers immunity from liability for reporting abuse.

As more states consider similar statutes, the North American Securities Administrators Association is trying to provide guidance. The group is aiming to present a document, which could be a model rule or legislation, for its members to consider at its annual conference in Puerto Rico in September.

“We hope to come up with perhaps a more cohesive approach – one that can address the challenges that the industry is facing and can protect older investors, while at the same time respecting the independence of our seniors,” said Judith Shaw, securities administrator in Maine and NASAA president-elect, in an interview. “NASAA is really taking a thoughtful and holistic approach to this issue.”

The organization has made combatting financial abuse of senior citizens a top priority, and established an advisory committee on the issue last fall.

More than a third of state enforcement actions involve elderly citizens, Joseph Brady, NASAA executive director, told an audience at an Insured Retirement Institute conference in Washington on Tuesday.

Protecting seniors involves privacy laws and other complicated issues. An especially sensitive topic is whether a broker can contact a non-governmental third party, such as a family member.

“Those matters are critically important to us, and we’re very focused on that,” Mr. Brady said.

He said that NASAA is working with the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc., both of which have targeted senior financial abuse, as well as industry groups.

The Securities Industry and Financial Markets Association, the major financial industry trade group, endorsed the Missouri law and encouraged other states to follow the model it provides.

“Persons working for broker-dealers are often firsthand witnesses to potential exploitation, and this legislation will give them the ability to help protect senior investors from those who wish to take advantage of them,” said Kim Chamberlain, SIFMA managing director and associate general counsel, in a statement shortly after the Missouri measure was enacted earlier this month.

Mr. Brady predicts that more states will join the three that have passed elder-abuse laws.

“Legislation doesn’t ever happen in isolation,” he said.