Protecting Senior Investors: Government and Third Party Reporting

By Michael Williford, Fall 2016 Student Intern

The NASAA guide also addresses some of the reporting requirements brokerages are subject to under various state laws. The guide explains that nearly all states have existing laws that include mandatory requirements when there is a suspicion of elder abuse. Some of those state laws include mandatory reporting requirements for elder exploitation that apply specifically to broker dealers or investment advisers, such as the Georgia law I discussed on Monday. Even if your state’s laws don’t include provisions designed specifically for investment professionals, laws designed to protect seniors may apply financial institutions as a whole or a brokerage’s employees, all of whom owe duties to their elderly clients. NASAA’s guide reminds us that the Model Act contains a mandatory obligation to report suspected exploitation where there is a reasonable belief an elderly investor is being financially exploited.

NASAA strongly encourages broker-dealers and investment advisers to adopt a voluntary reporting system even if they are not legally obligated to report suspected exploitation, because efficient reporting of exploitation is an important step in preventing it. NASAA specifically recommends that firms adopt written policies that would trigger an internal reporting requirement by broker-dealers or investment advisers, all while being mindful of the limitations that a state may impose on non-mandatory reporting, such as limitations on the scope of what information can be reported in the absence of a mandatory reporting requirement. Ultimately, however, NASAA strongly recommends that “firm’s reporting policies and procedures should outline the facts and circumstances that could result in the development of a reasonable belief that financial exploitation has occurred, is occurring, or may occur. The presence or observation of the red flags identified could form the basis for this belief, and might serve as a good starting point for such policies.” The guide also recommends that firms adopt clear escalation procedures when brokers or advisers spot the red flags that would trigger a firm’s internal reporting requirements.

You may be able to help an elderly loved one take greater control of their investment assets by helping them ask their broker about his or her firm’s response to the NASAA guide and by inquiring about what internal procedures are in place to help protect elderly investors, as well as what duties your loved one is owed by his or her broker.