Bipartisan Legislation Introduced To Protect Seniors From Financial Abuse And ExploitationPrint Article
- Posted on: Oct 18 2017
On October 12, 2017, the House Financial Services Committee approved legislation that would provide legal protection for financial advisers who report the financial abuse and exploitation of senior Americans to authorities.
The bill, which was unanimously approved by the committee, will go to the House floor for a vote. Like the current bill, the previous version of the Safe Act received broad bipartisan support during the last Congress. Congressman Bruce Poliquin (R-ME) and Congresswoman Kyrsten Sinema (D-AZ) reintroduced the Senior Safe Act earlier in the year.
The Senior Safe Act encourages individuals and financial institutions to report suspected instances of financial fraud and abuse of elder Americans. It also incentivizes firms to train employees to identify and stop financial abuse and exploitation before it happens. The bill helps law enforcement track down financial criminals who target seniors by enabling banks, credit unions, investment advisors, broker-dealers, and other financial service providers to communicate with appropriate agencies when they suspect financial fraud and exploitation of seniors.
In particular, the bill provides that:
- a supervisor, compliance officer, or legal advisor for a covered financial institution (g., a credit union; a depository institution; an investment adviser; a broker-dealer; an insurance company; an insurance agency; and a transfer agent) who receives training regarding the identification and reporting of the suspected exploitation of a senior citizen (at least 65 years old) will not be held liable for disclosing such exploitation to a covered agency (e.g., a state financial regulatory agency, including a state securities or law enforcement authority and a state insurance regulator; the Securities and Exchange Commission; a law enforcement agency; and a state or local agency responsible for administering adult protective service laws) if the individual made the disclosure in good faith and with reasonable care; and
- a covered financial institution will not be held liable for such a disclosure by such an individual if the individual was employed by the institution at the time of the disclosure and the institution had provided such training.
Financial fraud and exploitation of the elderly is too common an occurrence. According to the U.S. Department of Justice, financial exploitation of senior adults is one of the most frequently reported forms of elder abuse. A recent survey from the North American Securities Administrators Association (“NASAA”) found that three in 10 state securities regulators had reported an increase in complaints from victims of financial fraud and exploitation. (Here.)
As the incidence of financial exploitation and abuse increase, so do the costs to its victims. An oft-cited study by the MetLife Mature Market Institute, the National Committee for the Prevention of Elder Abuse, and the Center for Gerontology at Virginia Polytechnic Institute and State University, titled “Broken Trust: Elders, Family & Finances,” estimates that about one million seniors lose approximately $2.6 billion annually from financial exploitation and abuse. (Here.) In 2011, MetLife updated its estimate to at least $2.9 billion. Other, more recent studies, estimate the losses to exceed $36 billion a year, 12 times the MetLife estimate.
Last October, the Financial Industry Regulatory Authority (“FINRA”) announced that it had submitted proposed rule changes to the Securities and Exchange Commission (“SEC”) to help member firms detect and prevent the abuse and financial exploitation of senior and vulnerable adult customers. (This Blog wrote about the proposed rule changes here.)
On March 30, 2017, FINRA announced that the SEC approved the proposed rule changes. In connection with the announcement, FINRA issued Regulatory Notice 17-11 (here), and set February 5, 2018, as the effective date for the new rules.
The changes approved by the SEC involve two key protections for seniors and other vulnerable investors. First, member firms will be required to make reasonable efforts to obtain the name and contact information of a trusted contact person for a customer’s account. Second, member firms will be permitted to place a temporary hold on the disbursement of funds or securities when there is a reasonable belief of financial exploitation and abuse.
Earlier this year, Senators Susan Collins and Claire McCaskill introduced the Senior $afe Act in the Senate. The act derives from Maine’s Senior Safe program, a collaboration by state regulators and legal organizations to educate bank and credit union employees about elder fraud and financial exploitation.
Jaye Martin, the Director of Maine’s Legal Services for the Elderly, said the program has been very successful.
“Hundreds of financial institution managers and employees have been trained, and we are really seeing an increase in the number of seniors that are getting help before it’s too late,” Martin said.
The Senior $afe Act attempts to address one of the biggest impediments to the reporting of financial fraud and exploitation – privacy laws. Under current law, it is difficult to report financial fraud, even if a financial advisor or institution suspects such wrongdoing.
“One of the biggest problems we’ve had with financial institutions is making these reports,” said Diane Menio, executive director of the Center for Advocacy for the Rights and Interests of the Elderly, at a Senate hearing.
As long as employees have been trained and reports have been made in good faith to the appropriate regulatory authorities, the Senior $afe Act would offer protection against civil lawsuits.
“If we can better protect our seniors from fraudsters in some of the most vulnerable years of their lives, we should use every tool at our disposal to do so,” Senator McCaskill said. “We’ve got to give financial professionals the ability to combat fraud when they see it—while protecting the privacy of their customers.”
On August 2, 2017, Senators Amy Klobuchar (D-MN) and John Cornyn (R-TX) announced that their bipartisan legislation to protect seniors from neglect and financial exploitation passed the Senate. The Court-Appointed Guardian Accountability and Senior Protection Act is intended to crack down on elder abuse by strengthening oversight and accountability of guardians and conservators.
“While most court-appointed guardians and conservators are undoubtedly professional, caring, and law-abiding, there are some who use their position of power to exploit seniors,” Senator Klobuchar said. “This bipartisan legislation would strengthen oversight and accountability for those entrusted to with the well-being of seniors, and will protect those who are most vulnerable.”
“This bill strengthens support for our nation’s senior citizens by ensuring they get the court-appointed care they need, while also protecting them from exploitation and fraud,” said Senator Cornyn. “I’m proud to join Sen. Klobuchar in standing up for enhanced oversight to ensure this critical program helps, not harms, America’s senior citizens.”
The Court-Appointed Guardian Accountability and Senior Protection Act makes state courts eligible to participate in an existing program designed to protect seniors. Under the program, state courts would be able to apply for funding to assess the handling of proceedings relating to guardians and conservators, and then make the necessary improvements to their practices. For example, the courts could conduct background checks on potential guardians and conservators, or implement an electronic filing system in order to better monitor and audit conservatorships and guardianships.
Financial exploitation and abuse of seniors is a problem that spans every community and social condition. It is underrecognized, underreported, and underprosecuted. Government efforts to empower financial advisors and institutions to detect, prevent and stop the financial abuse and exploitation of seniors is an important step in addressing the problem. However, government action is not enough. Vigilance by seniors and the persons charged with overseeing their assets and property is the best way to help detect and stop financial abuse and exploitation before it results in financial ruin.
This Blog will continue to follow the legislation discussed in this post.