March 1, 2017

Highlighting industry efforts to protect the nation's senior investors


Financial Literacy: A Way to Address the Problem of Financial Exploitation?
Adults over the age of 65 hold about a third of the nation's wealth, and this proportion will increase as our society continues to grow older. While many older adults will reap the benefits of funds painstakingly accumulated over a lifetime of hard work, some will fall victim to scam and fraud and suffer a disastrous loss of financial independence. Financial exploitation of older adults is a serious problem that can have far-reaching repercussions, negatively affecting not only the victim, but also family members, caregivers, and their communities.

Continue reading Dr. Duke Han, PhD, ABPP-CN, post on SIFMA’s Pennsylvania + Wall.

Member Firm Case Study: A Sweetheart Scam
An 83-year-old client, Tom, met his wife on  Approximately three months after they were married, the wife began calling the branch to change Tom’s IRA beneficiaries and move the rest of Tom’s assets into a joint account with herself as co-owner. When the Financial Advisor received an IRA change of beneficiary form with the client’s trust removed and the client’s wife written in as both the primary and contingent beneficiary, the Advisor called the client’s house. Tom’s wife answered the phone and told the Advisor that, not only did they want to change the IRA beneficiaries, but they also wanted to transfer the assets in Tom’s trust account into a joint account between the wife and Tom. The Advisor told the wife that he would need to speak with Tom, so the wife put Tom on the phone – Tom told the Advisor not to do anything at this time. Within 10 minutes, the wife called the Advisor back with Tom on the line. Tom told the Advisor to make the changes that the wife had requested.   

Continue reading this true story of a member firm’s efforts to protect its client(s) from exploitation on SIFMA’s Senior Investors Resource Center.  All names, dates and locations have been changed.


Federal Update

FINRA Report & Hold Proposal.  On February 3, the SEC issued an order approving the amendments to FINRA Rule 4512 (Trusted Contacts) and the adoption of new FINRA Rule 2165 (Report & Hold), including Amendment No. 1.  SIFMA had provided comments commending both FINRA and the SEC for working with the industry to combat the burden of financial exploitation, made several suggestions for improvements to the rule, and highlighted the importance of expanding the Proposed Rule to include temporary holds on transactions. 

Senior$afe Act.  On January 24, Senators Collins and McCaskill introduced the Senior$afe Act of 2017 (S.223). The bipartisan bill would put in place a plan to help protect American seniors from financial exploitation and fraud by providing support to regulators, financial institutions, and legal organizations to educate their employees about how to identify and prevent financial exploitation of older Americans. The bill was originally introduced in the 114th Congress and currently has 18 cosponsors.

Elder Protection and Abuse Prevention Act. On January 20, Senator Grassley (R-Iowa) reintroduced the Elder Abuse Prevention and Prosecution Act (S.178). The bipartisan bill would prevent elder abuse and exploitation and improve the justice system’s response to victims in elder abuse and exploitation cases. The bill was originally introduced in the 114th Congress and currently has 13 cosponsors.


State Update

AlabamaHB 304, which would establish the Elder Abuse Protection Order and Enforcement Act, was introduced and referred to Judiciary February 23. 

ArizonaSB 1364, placed on 2nd reading Feb. 1, would create a study committee to examine the state’s current system of preventing, investigating and prosecuting elder abuse cases and examine existing barriers, services and resources available to address elder abuse. 

Colorado.  SIFMA is working with the CO Dept. of Regulatory Agencies on 2017 Report & Hold draft legislation; it has not yet been introduced.

ConnecticutHB 7029, to permit financial institutions which suspect financial exploitation to delay or refuse to execute transactions or disbursements without fear of liability, was heard in committee on Feb. 14.  SIFMA submitted testimony encouraging the committee to amend the bill to include BDs & IAs.

HawaiiHB 432, to make financial exploitation of an elder by a caregiver a felony, passed its 1st committee and had a hearing in its 2nd Feb. 28.

IndianaHB 1526, the Securities Commissioner’s bill to add ‘investment advisor’ to the state Report & Hold law, passed the House Feb. 7.  SB 345, which would amend the definition of ‘financially endangered adult’ within the Report & Hold to remove the age-related qualification, passed the Senate Feb. 7.  If SB 345 is enacted, the law will only apply to those individuals age 18+ who are incapable (by reason of mental illness, intellectual disability, dementia or other physical or mental incapacity) of managing or directing the management of their property.

KansasSB 72, to require officers of financial institutions to promptly report suspected abuse, neglect and exploitation of vulnerable adults, was heard in committee Feb. 16.

KentuckyHB 83, a Report & Hold bill, was referred to committee Jan. 3. 

MarylandHB 1149 / SB 951 contain Report & Hold language.  SIFMA is working with the Securities Commissioner on harmonization with the FINRA rule.  The Senate bill was heard Feb. 23; the House bill has a hearing Mar. 10. 

MinnesotaSF 919, a NASAA Model Report & Hold bill which has not been amended to reflect the newly-approved FINRA rules, was referred to Aging Feb. 13.

MississippiHB 386, which would have required persons who make reports to DHS about suspected abuse, neglect, or exploitation of a vulnerable person to provide their name, address and phone number, died in committee Jan. 31.

MississippiHB 753, which would expand the authority of the Dept. of Human Services when investigating the abuse of vulnerable persons, passed the House Feb. 10 and was transmitted to the Senate Feb. 14.

MississippiHB 1003, which would have required BDs to immediately file a report with the Dept. of Human Services if senior financial exploitation is suspected, died Feb. 9.  

MississippiSB 2911, a Report & Hold bill, passed the Senate Feb. 7 and House committee Feb. 23.

MontanaHB 24, a Report & Hold bill initially based on the NASAA model, passed the House Feb. 15, passed the Senate Feb. 20, and was returned to the House for concurrence.

MontanaHB 139, which would revise terminology related to protective services, was tabled in committee Jan. 20.

New MexicoHB 326, Report & Hold legislation comparable to the NASAA model, was referred to 2 House committees Feb. 6, passed one committee, and was heard in House Judiciary Feb. 27.  SIFMA submitted comments.

New MexicoHB 325, which was sent to 2 committees and was reported out of one, would increase penalties for certain violations of the NM Uniform Securities Act, including violations involving persons over the age of 60.  

New York StateS. 1093, a Report & Hold proposal applicable to banks, was placed on the Senate Calendar Feb. 14.

New York StateS. 2442, to establish a financial exploitation outreach & training program and fund, was referred to Banks Jan. 13.

New York State.  The Executive Budget included a transaction-focused Report & Hold provision that applies to banks; it includes relatively tight time-frames.  The Executive Budget has been introduced as A. 3008-A and S. 2008-A.

North DakotaSB 2322, a Report & Hold bill similar to the NASAA Model, passed the Senate Feb. 2 before new rules were approved by the SEC.  It was referred to House committee Feb. 20.

OregonSB 95, a Report & Hold bill which has not been amended to reflect the newly-approved FINRA rules, had a hearing Feb. 13 with SIFMA and several others requesting amendments; a work session is scheduled for March 8. 

OregonHB 2622, to authorize banks to refuse certain financial transactions with a reasonable belief of financial exploitation, had a Judiciary hearing Feb. 15; a work session was held Feb. 28.

TennesseeHB 304, introduced Jan. 31, is based on the NASAA Report & Hold model, but reporting would be voluntary, not mandatory.

Texas.  SIFMA is part of a broad coalition working on senior investor protection Report & Hold legislation that would apply to financial institutions, BDs and IAs.  The proposal is under review by relevant committee chairmen and legislative counsel. 

TexasHB 916, referred to committee Feb. 21, would require financial institutions to report suspected financial exploitation to both APS and law enforcement within 24 hours, would provide immunity to good faith reporting, and has penalties up to $5k for failure to report. 

TexasHB 959, referred to committee Feb. 27, would impose criminal penalties on those who commit financial exploitation and would impose civil penalties up to $100k on financial institutions for failure to report.

VirginiaHB 1945, to broaden the definition of adult exploitation for the purposes of social services laws, passed both Houses as of Feb. 14.

VirginiaHB 2073, to add the offenses of obtaining money by false pretense, and financial exploitation of mentally incapacitated persons to both the list of criminal violations that a multi-jurisdiction grand jury may investigate and the list of prohibited practices under the VA Consumer Protection Act and make them eligible for grand jury, passed both Chambers and was signed by the governor Feb. 23.  The new law (Chapter 195) is effective July 1.

Washington StateSB 5099, which would increase penalties and reduce barriers to prosecution for seniors-related crimes, passed Law & Justice with amendments Feb. 14, passed Ways & Means Feb. 23, and was sent to Rules Feb. 24.

Washington StateHB 1153, to create the crimes of theft from a vulnerable adult in the 1st and 2nd degree, passed the House with amendments Feb. 27.

Washington StateHB 1402/SB 5577 would prohibit a guardian from restricting an incapacitated person’s right to communicate or associate with any person without good cause to believe there is a need to do so to protect the incapacitated person from financial exploitation.  HB 1402 was amended and reported out of committee Feb. 21 and SB 5577 passed two committees with amendments and was sent to Rules Feb. 23.

Washington StateSB 5349, to require the state to establish elder justice center demonstration programs, was referred out of committee Feb. 24.

Report & Hold Laws.  With no enactments yet this year, the total number of states with Report & Hold laws remains at six (Washington State, Missouri, Delaware, Indiana, Alabama and Louisiana). Vermont also has a more limited Report & Hold regulation.  All are currently effective. 


Upcoming Events

Mark Your Calendar: Regional Senior Investor Protection Workshop
Join SIFMA on May 2 in Philadelphia for our second Senior Investor Protection Regional Workshop! Following the success of our first workshop event last fall, this interactive program provides attendees with the opportunity to take a deeper-dive into the causes of cognitive decline, learn how to identify decline and exploitation, and learn practical ways to establish an effective client protection program.

SIFMA's C&L Annual Seminar: Extracurricular and Professional Development Opportunities
SIFMA’s C&L 2017 Annual Seminar maximizes attendees’ experience by providing a variety of networking and professional development activities throughout the event. From updating your professional headshot to preparing school supply kits for a local charter school and networking with your peers, there is something for everyone! The seminar also offers 9+ CLE credits that can be applied in more than 40 states. Be sure to complete your CLE credit form prior to the event for a discounted rate.

Last Chance for Early Rate: SIFMA Private Client Conference Scottsdale: April 5-6, 2017
SIFMA’s Private Client Conference convenes leaders from across the private wealth management industry to examine the most topical issues facing the business. Join us in Scottsdale, AZ for a new program focusing on financial advice amidst rapidly changing technology, regulations, and demographics.


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