Recently released results from a sweep exam show that state-registered investment advisers must do more to prevent and address financial abuse of elderly investors, regulators say.
“The results of this multi-state coordinated initiative show that investment advisers must make improvements in recognizing and reporting cases of suspected abuse,” said Lisa A. Hopkins, NASAA President and West Virginia Senior Deputy Commissioner of Securities, in announcing its findings of deficiencies in policies to protect seniors and vulnerable persons. “Our hope is that this data will foster greater and earlier detection and reporting of suspected financial exploitation of older Americans.”
NASAA’s push for state-registered IAs to do more came just a week after it urged legislators to enact more laws and take more steps to address the financial abuse of elderly investors. “These recommendations are designed to strengthen ongoing efforts and collaboration by industry and government agencies in preventing and detecting senior financial exploitation,” NASAA wrote in pushing for more protection for senior investors in a recently released legislative commentary on NASAA’s Senior Model Act.
In pushing both state-registered IAs and legislators to do more, NASAA has demonstrated that it considers financial abuse of elderly investors to be a multi-faceted problem that requires multiple solutions, said Margie Webber, director of regulatory compliance for RegEd. Additionally, NASAA has also advocated for 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 jointly.
“NASAA knows that enacting state laws and establishing policies and procedures within firms are not enough. State-registered investment advisers must also ensure that staff is properly trained and that policies and procedures are followed,” Webber said.
Coordinated exams find deficiencies among state-registered investment advisers
The recently released results of the coordinated sweep exam by state regulators showed that state-registered investment advisers largely lack policies, procedures, and training for preventing or handling financial abuse of elderly investors. Specifically, in 1,206 routine investment adviser examinations that were conducted from Jan. 1 to July 7 and covered 10 categories of compliance, state examiners found the following deficiencies related to protecting seniors and vulnerable persons:
- 58.53% of state-registered IAs did not have policies or procedures for suspected financial exploitation
- 23.5% of state-registered IAs did not provide training regarding suspected financial exploitation of vulnerable persons
- 17.72% of state-registered IAs either did not have supervision and compliance in place for the protection of vulnerable clients or such measures were inadequate
- 8.29% of advisers did not maintain training content for protecting vulnerable persons
- 7.83% of advisers failed to provide training in the protection of seniors and vulnerable persons to all appropriate personnel
- Based on the exam findings, NASAA recommended that state-registered investment advisers add policies or procedures for seniors and vulnerable persons to include training of personnel. “Establishing policies and procedures and training staff to follow them are of great importance to state examiners,” Webber said.
State securities regulators have regulatory oversight responsibility for investment advisers with assets under management of $100 million or less. Of the asset-managing investment advisers included in this year’s coordinated examinations, 67% had assets under management between $30 million and $100 million and 33% had assets under management of less than $30 million, according to NASAA.
Compliance technology can help state-registered IAs
RegEd helps state-registered IAs protect against financial abuse of elderly investors 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.
Schedule a consultation to learn more about how RegEd’s enterprise compliance solutions improve efficiency and mitigate risk.
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Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with enterprise-grade solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation, and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables clients to cost-effectively comply with regulations and continuously mitigate risk.
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