Chapter 4: Communication with Customers and Prospects - D. Financial Exploitation of Vulnerable Adults

Question 1

Financial Exploitation of Vulnerable Adults

Answer 1

The NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation was adopted in 2016 to cover broker/dealer agents and investment adviser representatives who service customers aged 65 or older or those adults who would be subject to the provisions of a state’s adult protective services statute. Some key provisions of the Model Act are:

1. Mandatory Reporting — Qualified individuals (agents and IARs) who reasonably believe that financial exploitation may have occurred or is being attempted must promptly notify their state securities regulator.
2. Notification — Disclosure to third parties (individuals other that the agent, IAR or the customer) is permitted if they were previously authorized by the customer. Of course, if the agent or IAR suspects that the third party is the one exploiting the customer, then notification may not be made.
3. Delayed Disbursements — The act allows broker/dealers and investment advisers with the authority to delay disbursing funds from an eligible adult’s account for up to 15 business days if the broker/dealer or investment adviser reasonably believes that a disbursement would result in the financial exploitation of the eligible adult. If the broker/dealer or investment adviser delays a disbursement, it must notify people authorized to transact business on the account (unless these individuals are suspected of the financial exploitation), notify the state securities regulator and the adult protective services agency, and undertake an internal review of the suspected exploitation. Under the Model Act, the securities regulator or adult protective services agency may request an extension of the delay for an additional 10 business days. Extensions beyond that could be ordered by a court.