States are increasingly wading into the fight to combat elder financial abuse, the top state securities regulator said Thursday.
The North American Securities Administrators Association released a model rule two years ago that mandates that advisers report suspected abuse to certain state authorities, allows them to stop disbursements from seniors' accounts and gives them protection from liability.
To date, 13 states have
passed a version of the model act, and roughly 10 more states are expected to follow suit this year, said Joseph Borg, NASAA's president and the securities commissioner in Alabama.
"We know it's going to be introduced in a number of state legislatures," Mr. Borg said at an event in New York focused on financial wellness and aging. AARP,
Bank of America Merrill Lynch, the New York Academy of Medicine and the Global Coalition on Aging sponsored the event.
Some states may be waiting to see what happens at the federal level before taking action, Mr. Borg said. Legislation similar to NASAA's model rule is currently working its way through Congress. If there's no further congressional action this year on that bill, the
Senior Safe Act, some states may feel compelled to take up NASAA's rule, Mr. Borg said.
The
Financial Industry Regulatory Authority Inc. has a
similar rule going into effect next month. The NASAA model act requires mandatory reporting by advisers, whereas the federal legislation and the Finra rule are voluntary.
Such policy decisions come amid increasing recognition that fraud targeting seniors is a widespread problem that financial institutions such as broker-dealers and advisory firms can help prevent.
"It's a universal, global problem," said Tina Gabriel, director of financial crime investigations at People's United Bank.
Seniors lose billions of dollars in aggregate each year as a result of such financial exploitation, though the full scope of elder financial abuse isn't yet clear because of a dearth of reported data, panelists said.
"This is a developing issue. This is all new," Mr. Borg said.
Jason Karlawish, a professor of medicine, medical ethics and health policy at the University of Pennsylvania, said firms need to change to address potential problems posed by aging and cognitive impairment, which puts clients more at risk of being exploited.
For example, a client whose financial literacy has clearly deteriorated — a telltale sign of cognitive decline — may need a different adviser who's trained to handle such issues and communicate with a client in an appropriate way, he said.
"It's a business opportunity, quite frankly," Mr. Karlawish said. "I think you see some coin here," he added, referring to financial institutions.
(More:
Legislation to combat elder financial abuse advances in the Senate)
