Over the past several years, there has been a significant amount of movement within the financial services industry to develop policies, rules, and regulations that help safe guard the senior investor community. In 2014, the U.S. Securities and Exchange Commission (“SEC”), in coordination with FINRA, released a report on a recent senior investor initiative they had conducted. The exams that comprised the report focused on issues of suitability of investments for seniors, disclosures, account documentation, diminished capacity, and senior financial exploitation. This initiative showed that the SEC was taking an interest in senior protections and that investment advisers must follow different policies and procedures when recommending securities to and working with senior clients.
Since then there have been numerous regulatory developments on senior investor protections. For example, FINRA issued two new rules on the topic which went into effect in February of 2018. Rule 2165, which permits a broker-dealer to place temporary holds on disbursements of client accounts where there is a reasonable belief that senior financial exploitation is occurring. An amendment to FINRA Rule 4512 requires broker-dealers to make a reasonable effort to get trusted contact information from a client upon opening a brokerage account or updating brokerage account information. This trusted contact is intended to assist the broker-dealer in administering the client’s brokerage account, protecting assets, and responding to possible exploitation. Many states also have laws on the books that currently require broker-dealers and investment advisers to notify an adult protective services agency if they suspect exploitation is occurring or that provide immunity to firms that report potential exploitation.
Concerns of senior exploitation have culminated in recent federal legislation under the Senior Safe Act. The Act was just recently passed by Congress and provides legal immunity for “covered financial institutions” (banks, investment advisers, broker-dealers, insurance agents, etc.) when they make a disclosure to a government agency about suspected senior financial exploitation. Immunity is subject to firms meeting several different requirements such as proper training of employees and appropriate reporting procedures. The legislation was passed with the intent to encourage firms to report potential cases of senior financial exploitation. The Senior Safe Act doesn’t override any state laws providing greater protections either. If a state has passed a law with such protections, the state requirements are still applicable to the firms under their jurisdiction. In essence, the Senior Safe Act just helps establish a baseline for granting immunity.
In response to these recent regulatory shifts RIA Compliance Consultants has developed sample training materials to help an investment adviser firm employee identify and report (through the investment adviser firm’s chief compliance officer or supervisor) suspected. The training materials are available at no additional cost to our Silver, Gold and Platinum Package clients in an Annual Compliance Package and can be purchased by others for $250 by clicking here.
In light of the recent passage of the Senior Safe Act, RIA Compliance Consultants also updated our WSP/CoE Section entitled “Protecting Elderly and Vulnerable Clients with Diminished Capacity” to help guide investment adviser firms through the process of identifying exploitation, setting up trusted contacts, working with senior investors, and reporting suspected exploitation. All these materials are available for purchase here.
In addition, we have our annual investment adviser compliance conference on August 22 – 23, 2018 in Omaha, Nebraska. At the conference a host of different investment adviser compliance issues, including senior investor protections, will be discussed in detail. We are currently selling discounted early bird spots to the two-day conference for $295. You can purchase a spot at the conference or find more information about it here.
Posted by Grant Parr