Regulators Offer Training to Securities Firms in the Fight to Detect, Prevent and Report of Financial Exploitation of Seniors and Vulnerable Adults

• Posted on: Jun 16 2021

On June 14, 2021, this Blog wrote about FINRA’s fight against the financial exploitation of seniors and vulnerable adults (here), in particular, the effort to amend FINRA’s Rule 2165 (“Financial Exploitation of Specified Adults”). Among other things, Rule 2165 permits a member firm to place a temporary hold on the disbursement of funds or securities from the account of a senior or vulnerable adult customer when the member reasonably believes that financial exploitation may be, is likely to be, or is occurring. Under the proposed amendments, member firms would be: (a) given additional time to address suspicious activity in the customer accounts of seniors and vulnerable adults, and allow adult protective services agencies, state regulators and law enforcement to conduct investigations into such activity; and (b) allowed to place a temporary hold on the disbursement of funds or securities or a transaction in securities for an additional 30-business days if the member firm reported the matter to a state regulator or agency or a court of competent jurisdiction.

The proposed amendments to Rule 2165 coincide (whether intentionally or not) with World Elder Abuse Awareness Day, which was commemorated on June 15, 2021. World Elder Abuse Awareness Day was launched on June 15, 2006, by the International Network for the Prevention of Elder Abuse and the World Health Organization at the United Nations. The purpose of the day is to provide an opportunity for communities around the world to promote a better understanding of abuse and neglect of older persons by raising awareness of the cultural, social, economic and demographic processes affecting elder abuse and neglect.

In recognition of World Elder Abuse Awareness Day, the U.S. Securities and Exchange Commission (“SEC”), the North American Securities Administrators Association (“NASAA”), and the Financial Industry Regulatory Authority (“FINRA”) announced on June 15, 2021 (here) a new resource intended to assist securities firms in implementing the training requirements of the Senior Safe Act.

The training program, “Addressing and Reporting Financial Exploitation of Senior and Vulnerable Adult Investors,” can be used by firms to train associated persons on how to detect, prevent, and report financial exploitation of senior and vulnerable adult investors. The presentation serves as a resource for firms implementing the requirements of the Senior Safe Act and certain state training requirements relating to senior investment protection.

The Senior Safe Act was modeled after a Maine statute with a similar name, the Senior$afe Program. That program was the result of a joint effort between regulators and the financial and legal communities to help financial and banking advisors identify and prevent the financial abuse and exploitation of seniors and vulnerable adults. Like the Senior$afe Program, the Senior Safe Act was intended to “empower and encourage our financial service representatives to identify warning signs of common scams and help prevent seniors from becoming victims.”

The Senior Safe Act was included as Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law on May 24, 2018. The Senior Safe Act addresses barriers financial professionals face in reporting suspected senior financial exploitation or abuse to authorities. Specifically, the Senior Safe Act protects “covered financial institutions” – which include investment advisers, broker-dealers, and transfer agents – and their eligible employees, affiliated persons, and associated persons from liability in any civil or administrative proceeding for reporting a case of potential exploitation of a senior citizen to a covered agency.

The immunity established by the Senior Safe Act is provided on the condition that employees receive training on how to identify and report exploitative activity against seniors before making a report. In addition, reports of suspected exploitation must be made “in good faith” and “with reasonable care.” This immunity applies to both individuals and firms.

This Blog wrote about the Senior Safe Act here and here. In particular, we wrote about the immunity established under the Senior Safe Act here.

“By partnering with FINRA and NASAA to offer this training program, we can help educate financial professionals on how to identify and report financial abuse of older adults,” said SEC Chair Gary Gensler. “I encourage all investors to use the education resources on Investor.gov to ensure they are working with a registered investment professional.”

“We are pleased to work collaboratively with our counterparts at the SEC and FINRA to provide this important training resource in the hope that it will promote greater and earlier detection and reporting of suspected financial exploitation of older Americans,” said Lisa A. Hopkins, NASAA President and Senior Deputy Commissioner of Securities and General Counsel with the West Virginia State Auditor’s Office.

“FINRA has a longstanding commitment to protecting senior investors through various regulatory programs and initiatives,” said Robert W. Cook, FINRA President and CEO. “FINRA is pleased to collaborate with NASAA and the SEC to provide this free resource to firms as we collectively work to support implementation of the Senior Safe Act and better protect senior and vulnerable adult investors.”

The training presentation can be found on: 

NASAA’s website at https://www.nasaa.org/industry-resources/senior-issues; 

NASAA’s Serve Our Seniors website at http://serveourseniors.org/about/industry; 

The SEC’s website at https://www.investor.gov/additional-resources/information/seniors; and

FINRA’s website at https://www.finra.org/rules-guidance/key-topics/senior-investors. 

In a separate press release about World Elder Abuse Awareness Day (here), NASAA focused on the obligation of “financial professionals and the public to be on the lookout for signs of elder financial abuse, including potential exploitation by guardians.” A guardian has a legal obligation to act in the best interest of a protected individual. Guardians often are granted extensive access and control of a protected individual’s assets. Financial abuse or exploitation by guardians typically occurs when the guardian improperly uses the protected individual’s funds, securities, property, or other assets.

“A trusted guardian can be a wonderful resource. But sometimes guardians may take advantage of the people or assets in their care,” said Lisa A. Hopkins, NASAA President and West Virginia Senior Deputy Commissioner of Securities. “Taking the time to understand the warning signs of guardian financial abuse and the steps that can be taken to report such abuse are key to helping those who cannot help themselves.”

As explained in NASAA’s press release, the association developed resources to help identify the red flags of fraud and suspected financial abuse by legal guardians. One such resource is “Guarding the Guardians”, a publication that provides examples of exploitation and information on how to report suspected elder financial abuse. Examples of suspected guardian abuse include:

• The guardian takes money from the protected individual’s investment portfolio for personal use.
• The guardian overcharges for a caregiving service.
• The guardian does not take the protected individual to medical appointments or purchase their necessary medication.

The publication, as well as other resources to help seniors, can be found on NASAA’s Serve Our Seniors website (www.serveourseniors.org).