Episode 92: The Continued Regulatory Focus on Senior Investor Protections

On Episode 92 of the CCO Buzz podcast, we discuss Senior Investor Protections, which is a topic that should be assessed and evaluated annually.


CCO Buzz: Hello and welcome back to the CCO Buzz. Can you believe it? We are nearing the end of the year, and this is one of the few remaining episodes we have for 2021. With all the preparation for next year in mind, it’s a great opportunity to start reflecting on the changes, challenges, and regulatory updates of the year, and to make sure we’ve made the right business decisions or created strong enough policies and procedures for all the nuances in the industry that affect your compliance program.

Today we’re joined by our very own Compliance Consultant. He joins us to discuss his upcoming Risk Management Update on Senior Investor Protections, which is a topic that should be assessed and evaluated annually. Senior investor protections are not a new focus area for the SEC as we’ve seen the topic on many of their recent annual examination priorities. But also, as technology and client demands increase and transform- so should your approach to senior investor protections within your compliance program.

So with that, let’s begin…

Can you provide a bit of background as to why senior investor protections are a consistent focus area for regulators?

Core Compliance: Sure. Being an investment adviser of any investor/client is founded on trust. Clients are trusting their adviser with their financial health, like you would your doctor. While investors aren’t in “pain” or suffering from a money ailment, Investment advisers are tasked and trusted with their clients’ nest eggs, which they’ve, you know, saved and built over the years and decades of hard work. And while every client deserves an investment adviser’s highest duty of care, regulators are taking steps to add additional protections to those clients who most often are the targets of financial abuse, scams, and manipulation, which are senior citizens.

CCO Buzz: Understanding this, in your opinion how has regulatory focus on senior investor protections in the industry increased over the years?

Core Compliance: Well, over the last half decade or so the industry has received increased regulatory guidance and rulemaking structured around protecting seniors and other venerable adults from financial exploitations.

For example early in 2016, the North American Securities Administrators Association (or “NASAA”) adopted a model rule for member-states and territories to provide not only context for reporting suspected financial exploitation of seniors, but also a method for reporting potential cases.

And then later in 2018, the Securities and Exchange Commission (“SEC”) provided guidance within The Senior Safe Act after inclusion in, and passage of, the Economic Growth, Regulatory Relief, and Consumer Protection Act. It’s similar to the NASAA model rule, but it also provides [an] additional framework regarding reduced liabilities among firms and their associated persons that enact provisions of the Senior Safe Act, namely employee training of senior investor protections.

And with these regulatory requirements in place, its no wonder why examiners include a firm’s senior investor protections as part of an examination. In fact, a February 2019 report from the Consumer Financial Protection Bureau’s Office of Financial Protection for Older Americans estimated that from 2013 to 2017 financial institutions reported over $6 billion dollars in suspicious activities targeting older adults, with $1.7 billion of that being reported in 2017 alone.

CCO Buzz: Wow, I can see why that area of focus is such a high priority for regulators and the industry. But understanding the rule and program implementation can differ from firm to firm, as firms have their own individual business model. As a former regulator, can you share with us what regulatory expectations firms’ compliance programs should be aiming to meet?

Core Compliance: Of course, yes. I go over this in depth throughout my article, but, you know, I don’t mind sharing a few high-level areas here with the listeners.

While the SEC, FINRA, and NASAA have provided clear expectations of investment adviser compliance programs with respect to protections of senior investors, each jurisdiction may vary in program adequacy and expectations.

However, five of the most common elements regulators expect a firm to have in place include:

  1. Policies and procedures for identifying and reporting warning signs;
  2. Increased supervisory oversight for servicing of at-risk senior clients;
  3. Steps and methods for gathering a trusted contact;
  4. Providing ample and ongoing training to firm personnel; and
  5. Clear and complete records for all communications and contact with and regarding at-risk senior clients.

But there’s so much more to consider than these main 5 items. Having them in your policies and procedures and your compliance program isn’t enough. As a former regulator, we want to not only see that this portion is established, but also whether the systems firms have in place are adequate and followed, as well as their overall efficacy to protection and client service.

There are a multitude of resources available to firms regarding their senior investor protection protocols, like NASAA’s website devoted to this topic at www.ServeOurSeniors.org.

And earlier this year, the SEC, FINRA and NASAA launched a comprehensive training program for the securities industry to assist in training “associated persons about how to detect, prevent, and report financial exploitation of senior and vulnerable adult investors.”

As an industry, there are numerous avenues for guidance when it comes to strengthening your senior investor protections.

CCO Buzz: Thank you. I know I found that to be a great starting point and I can’t wait to read more in your upcoming article. But before we wrap-up, is there anything else you’d like to add?

Core Compliance: Thank you. Yes, it is important for firms to recognize that as their clients continue to expand in age and service, they also need to be proactive in their methods for their duty of care, specifically regarding protecting their senior investors. Seniors and the elderly are ideal targets of scammers, criminals, [and] ill-intended caregivers or family. And again, much like a doctor or a nurse cares for and recognizes health risks, investment advisers care for and recognize financial health. And, I would add, it’s investment advisers who are often best positioned with the knowledge and tools to recognize the red flags of potential financial exploitation of the seniors and venerable adults.

CCO Buzz: Creating and maintaining a healthy and robust compliance program is essential to a firm’s duty of care. At Core Compliance, we’re here to assist in implementing a complete compliance program, as well as assessing your senior investor protections. For assistance, you can call us at (619) 278-0020 or visit us at www.corecls.com for more information.

Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn, or Twitter @CoreCls. Thank you, and we hope you tune-in to next week’s episode of the CCO Buzz.



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