NASAA Board Releases Proposed Model Act to Protect Vulnerable Adults from Financial Exploitation for Comment

The North American Securities Administrators Association announced that its Board of Director has approved to release for comment a proposed model act to tackle the problems faced by brokerage firms, investment adviser firms, and their representatives when dealing with signs that older senior investors, or other vulnerable adults, may be suffering from financial exploitation. The proposed model is called “An Act to Protect Vulnerable Adults From Financial Exploitation.”

If approved, the act would mandate that qualified investment advisers and brokerage firm employees notify their securities regulator, as well as Adult Protective Services, if they have reason to believe that a vulnerable adult has been subject to financial exploitation. They would also be able to notify a third party that had been previously designated by that client of their suspicions, as long as that person is not the one suspected of the exploitation. The act would let qualified firm employees provide records related to the attempted/suspected exploitation to the authorities.

Brokerage firms and investment advisers who fulfill the requirements of the act would be granted immunity from civil or administrative liability related to the elder financial fraud. Also, advisers and broker-dealers would be granted the authority to delay account disbursements if they thought that something untoward was happening.

A vulnerable adult in such scenarios would be someone who is age 60 or older or an adult who is vulnerable in other ways that could prevent him/her from being able to self-protect from exploitation. NASAA’s proposal comes soon after the one that was issued by the Financial Industry Regulatory Authority.

Under FINRA’s proposal, brokers would be allowed to get the contact information of a trusted third party who would be told about any suspect financial activities involving the client. Brokers would also be allowed to freeze the client’s money if they believe that person was being bilked. The self-regulatory organization’s rule would only be applicable to its member brokerage firms and would not apply to investment advisers.

Financial exploitation can be perpetuated by a securities industry professional, a family member, a caregiver, or a friend. The Securities and Exchange Commission said that about five million senior investors become victims of financial fraud and abuse every year. The SEC, FINRA, and NASAA have noted a number of products that seem to be regularly involved in such scams, including: charitable gift annuities, “high return” investments, “risk-free” investments, bonds, certificates of deposits, promissory notes, leaseback contracts, and sale contracts.

Common tactics noticed in numerous senior financial fraud scams include unsuitable investment recommendations, churning, high-pressure sales tactics, free lunch seminars, prime bank scams, pump and dump scams, variable annuities, and recommendations that seniors cash in and invest their retirement money.

Other signs of possible securities fraud include the involvement of unregistered securities investments, promises of interest and principal and high returns, bogus fund custodians, complex investments that are too confusing to comprehend, and unlicensed financial representatives.

Please contact our elder financial fraud law firm today. Shepherd Smith Edwards and Kantas, LTD LLP works with investors and their families to recoup their losses.

NASAA Board Approves Release for Comment of Proposed Model Act to Protect Vulnerable Adults from Financial Exploitation, NASAA, September 29, 2015

FINRA Board Approves Rulemaking Item to Protect Seniors and Other Vulnerable Adults from Financial Exploitation, FINRA, September 17, 2015