The North American Securities Administrators Association (NASAA) urges legislators to enact more laws and take more steps to increase protection for senior investors.
NASAA reiterates its ongoing concerns about the potential financial exploitation of seniors and vulnerable adults while also recommending additional protections in a recently released legislative commentary on NASAA’s Senior Model Act.
“Through this legislative commentary, we hope to encourage states to continue to adopt report and hold laws based on the Model Act,” said Lisa A. Hopkins, NASAA President and West Virginia Securities Commission General Counsel and Senior Deputy Commissioner of Securities, in announcing the commentary’s release. “We believe adopting these types of laws and implementing the recommendations outlined will go a long way to increasing protection for senior and vulnerable adult investors.”
NASAA has long advocated for the protection of senior investors. The new legislative commentary comes from a year-long review of the efficacy and implementation of state laws modeled on or influenced by NASAA’s Senior Model Act, which the association adopted in 2016.
“NASAA has been a leading proponent of protections for senior investors,” said Margie Webber, director of regulatory compliance for RegEd. “Their efforts have helped curtail financial exploitation across the country and they continue to push for new laws and regulations.”
Progress in protections
NASAA’s model act provides state regulators and industry participants with information about the need to protect seniors and vulnerable adults as well as tools and suggested regulations for deterring, reporting, or addressing financial exploitation. Thirty-four states have adopted statutes based on or similar to the model act’s provisions, including three states in 2021. Two more states have pending legislation that includes similar provisions.
Key provisions of the model act include:
- Mandatory reporting of financial exploitation committed or attempted
- Notification of reporting only to third-parties previously designated by the senior or vulnerable adult, except if that third-party is suspected of financial exploitation
- Delayed disbursements of funds from an eligible adult’s account for up to 15 business days “if the broker-dealer or investment adviser reasonably believes that a disbursement would result in the financial exploitation of the eligible adult”
- Immunity from administrative and civil liability for qualified individuals, broker-dealers, or investment advisers who comply with the act’s provisions in good faith
- Requirement that broker-dealers and investment advisers comply with requests for information from agencies or law enforcement in cases of suspected or attempted financial exploitation
In its year-long retrospective review of the Model Act and its impact, NASAA determined that no amendments were necessary. “The information derived from the review indicated that the Model Act and similar report and hold laws have been overwhelmingly successful at protecting investors. Securities regulators in several states reported that report and hold laws are being used to delay disbursements, and in some states, transactions in cases of suspected and attempted financial exploitation. No state securities regulator reported concerns of systematic inappropriate use of these holds,” NASAA wrote in its recently released legislative commentary.
However, NASAA did recommend ways to make the model act more effective. “These recommendations are designed to strengthen ongoing efforts and collaboration by industry and government agencies in preventing and detecting senior financial exploitation,” NASAA wrote.
NASAA’s recommendations include:
Approaching cases of suspected financial exploitation in a multi-disciplinary manner
Creating a network of agencies and resources would help investors who may experience financial exploitation and other harmful acts, says NASAA, which offers a taskforce toolkit to assist its members with starting a partnership with other state and provincial agencies dedicated to preventing senior financial exploitation, generating resources, educating the community, and advocating for the needs of older and vulnerable victims.
The Model Act’s provision that allows firms to contact a third-party previously designated by the client, such as a trusted contact person, is an effective, yet often underutilized tool in assisting investors who face financial exploitation, according to NASAA. Jurisdictions should continue to encourage firms and associated persons to discuss the merit of appointing a contact person with clients, NASAA says.
Providing ongoing training for potential reporters and agency staff
Ensuring that state securities regulators, adult protective services agencies, firms, and anyone who encounters financial exploitation know the relevant rules is crucial, NASAA says. Therefore, the association supports comprehensive education and training, including through resources such as elderly abuse prevention training for the securities industry that NASAA, FINRA, and the SEC recently released together.
“NASAA wants to protect seniors from financial exploitation but it knows that it needs broad support. It also recognizes that it will take an ongoing effort,” RegEd’s Webber said.
Firms can be particularly helpful through their work with clients, which makes the ongoing training that NASAA recommends even more important. “Financial professionals are ideally positioned to protect seniors and can do so through proper policies, procedures, and training,” Webber said.
RegEd can help firms protect seniors through its compliance education and regulatory technology solutions for the securities industry. RegEd’s compliance management platform includes the following solutions (among others).
- Education and Training Solution Suite – Advanced learning management technology streamlines the creation of a firm’s annual compliance program, simplifies course enrollment, provides access to timely course materials, and efficiently tracks course completion.
- Policies and Procedures Management Solution – An enterprise workflow, work-process, and task management solution enables comprehensive, end-to-end administration and oversight of all elements of a firm’s policies and procedures.
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