Protecting Senior Investors

February 06, 2018

On Jan. 24, 2018 the United States House of Representatives passed the Senior Safe Act.  The Senior Safe Act (referred to as “the Act,” formerly H.R. 3758) encourages financial services firms to train employees  to spot elder abuse, while granting limited immunity to individuals at financial institutions who report such abuse to law enforcement or regulators in accordance with the Act.

In a similar vein, on February 5, 2018 FINRA will make effective rules designed to protect Senior Investors. The first, FINRA Rule 4512, requires firms to make a reasonable effort to obtain the contact information of a trusted contact person. In addition, FINRA Rule 2165 now permits a member to place a temporary hold on the disbursement of funds or securities if they have reasonable belief in the financial exploitation of a client.

Some state securities regulators have already recognized an investment adviser’s unique position when it comes to combating abuse and financial exploitation of elderly and vulnerable adults. To date, thirteen states have adopted laws or investment adviser regulations based on NASAA’s Model Act to Protect Vulnerable Adults from Financial Exploitation. Regardless of the authority under which an investment adviser acts to report elder abuse or delay a disbursement, it must take care to strictly follow the applicable law or rule; otherwise the investment adviser firm and its employees risk losing the immunity granted by the law or rule and could be subject to costly lawsuits or arbitration claims.

So, what can your investment adviser firm do to serve older or vulnerable clients? RIA Compliance Consultants recommends that an investment adviser firm consider the following:

  • Adopt policies and procedures designed to address issues that may arise when assisting elderly clients
  • Address how your investment adviser firm monitors and meets the changing needs of clients as they approach retirement age
  • Adopt policies and procedures designed to handle situations in which a client exhibits diminished capacity or financial competence
  • Provide regular training to all staff, including back office personnel, on recognizing and preventing financial abuse of the elderly and other vulnerable clients.

While this list provides a good start, there is so much more your investment adviser firm can do. RIA Compliance Consultants has developed a sample WSP/CoE sections that investment adviser firms can incorporate into their compliance manual. Click here to view this WSP/CoE Section Update. This update section is included with Silver, Gold, and Platinum packages. Additionally, we developed an Elder Abuse and Vulnerable Adult Module in our RIA Express Compliance Review Tool. Click here to view the RIA Express Compliance Review Subscription in our online store.

If you would like more information regarding the RIA Express Compliance Review Subscription or any of our compliance support services, contact your consultant or click here to schedule an introductory call.

Posted by Grant Parr
Labels: Seniors, Uncategorized