State Regulators Want Advisers to Escalate Their Efforts to Protect Elderly Clients

Protecting senior investors from financial exploitation has long been a primary focus of state regulators who say most state advisers still lack adequate procedures to do so.

On September 21, 2021, the North American Securities Administrators Association (NASAA) released its 2021 Investment Adviser Coordinated Exams report that included results of 1,206 examinations of 289 state-registered investment advisers across 42 NASAA jurisdictions from Jan. 1 to July 7. Most of the exams were conducted remotely due to the coronavirus pandemic.

The exam sweep found deficiencies in registration, books and records, contracts, supervision and compliance, and advertising. It also found nearly 59% of state-registered investment advisors do not have policies and procedures in place to address the financial exploitation of seniors or vulnerable persons.

Additionally, 23.5% of respondents reported their firm did not have training available for suspected financial exploitation of vulnerable investors, with slightly over 8% reporting that training content “was not maintained by the advisor.” 

“The results of this multi-state coordinated initiative show that investment advisers must make improvements in recognizing and reporting cases of suspected abuse,” said NASAA president Lisa Hopkins. “Our hope is that this data will foster greater and earlier detection and reporting of suspected financial exploitation of older Americans.”

A Growing Concern for Regulators

Senior financial exploitation can be a significant drain on victims. The 2016 Investor Protection Trust Elder Investment Fraud Survey found that nearly one of every five citizens over the age of 65 has been victimized by a financial fraud perpetrated by strangers, con artists, or even by family members and caregivers whom the elderly have placed their trust.

A 2019 report by the Consumer Financial Protection Bureau titled “Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends” reported over 180,000 suspicious activities targeting older adults, involving more than $6 billion and noted that financial exploitation by scammers, family members, and caregivers is widespread, with an average of $34,000 in investor losses.

In 2016, the state regulators’ group adopted a Model Act to protect vulnerable adults from financial exploitation. The measure has been adopted in 32 states. It applies to broker-dealers and investment advisers and includes mandatory reporting of suspected abuse. It also provides a safe harbor for brokers and advisers to withhold disbursements from accounts of clients who may be victims. The Financial Industry Regulatory Authority (FINRA) has adopted a similar rule for brokerages it oversees.

On September 14, 2021, NASAA released a report about the Model Act to encourage more states to adopt the measure.

The report includes recommendations for successful implementation of the Model Act and similar laws such as the importance of ongoing training for potential reporters and agency staff, promoting the use of a trusted contact, and approaching cases of suspected financial exploitation in a multi-disciplinary manner. These recommendations are designed to strengthen ongoing efforts and collaboration by industry and government agencies in preventing and detecting senior financial exploitation.

Aligning Interests with Senior Investors

The NASAA Model Act has five core features that clarify and more closely align the interests and responsibilities of financial professionals, regulators, and law enforcement agencies regarding the reporting and prevention of senior financial exploitation:

  • A mandatory reporting requirement applicable to qualified individuals of broker-dealers and investment advisers
  • Notification to certain third parties of potential financial exploitation with advance consent of the investor
  • The authority to temporarily delay the disbursement of funds
  • Immunity from civil and administrative liability for reporting, notifications, and delays, and
  • Mandatory record-sharing in cases of exploitation with law enforcement and state adult protective services agencies.

Educating and training employees is essential to the effective reporting of financial exploitation. The U.S. Securities and Exchange Commission (SEC), FINRA, and NASAA announced in July they had joined forces to offer a program to help securities firms implement training requirements of the 2018 Senior Safe Act.

Firms can use the program, “Addressing and Reporting Financial Exploitation of Senior and Vulnerable Adult Investors,” to train associated people on how to detect, prevent, and report such exploitation. In many cases, complying with the act can protect certain financial institutions, including advisors and broker-dealers, from liability in civil or administrative proceedings, provided they report their suspicions.

More information about NASAA’s other senior investor initiatives by visiting NASAA’s Serve Our Seniors website at (please link to this here).

A Call to Action

Given changing demographics, state and federal regulators have prioritized the need to protect senior investors. Don’t wait for them to come knocking before your firm initiates a review of your related policies and procedures. Core Compliance & Legal Services has specialized and experienced personnel who can help. Contact us at (619) 278-0020 or visit us online at to learn how we can help.

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