The government and the financial services industry took steps this year to require people who are in a position to spot elder financial abuse, including brokers, bankers, and financial advisers, to report what they see.
“This rule has the potential to help by giving financial professionals the confidence they need to step in to prevent abuse,” said Barbara Roper, director of investor protection at the Consumer Federation of America, an advocacy group.
A new rule issued by the Financial Industry Regulatory Authority (FINRA), the nonprofit self regulatory organization authorized by Congress to protect investors adopted regulations in February to requires brokers to ask customers, regardless of age, to provide the name of a trusted contact, such as a family member or friend. The broker could reach out to that person if there is reason to believe the client is being exploited financially, such as suddenly withdrawing large sums of money or if the client suffers from cognitive impairment.
The measure allows FINRA member firms to place a temporary hold on a disbursement of funds or securities when there is a reasonable belief of financial exploitation, and to notify the trusted contact of the hold.
“These important changes, developed in collaboration with our members, provide firms with tools to respond more quickly and effectively to protect seniors and vulnerable investors from financial exploitation,” said Robert L.D. Colby, FINRA’s Chief Legal Officer. “With the aging of the population, financial exploitation is a serious and growing problem, and protecting senior investors remains a top priority for us.”
The trusted contact person is intended to be a resource for firms in handling customer accounts, protecting assets and responding to possible financial exploitation of vulnerable investors.
This provision will allow firms to investigate the matter and contact the customer, the trusted contact and, as if appropriate, law enforcement or adult protective services, before disbursing funds when there is a reasonable belief of financial exploitation.
The need for the proposal became clear from discussions with firms and calls into FINRA’s Securities Helpline for Seniors, which has highlighted some of the issues firms are facing when it comes to senior investors. To date, the helpline has fielded more than 12,000 calls, recovered more than $5.3 million in voluntary reimbursements from firms to customers since its launch three years ago.
Congress is also considering enactment of the Senior Safe Act, would enable the employee of any financial institution, including banks and insurers, to report concerns about elder financial abuse without fear of being held liable for disclosing private information. The bipartisan bill has passed by the House and is awaiting Senate approval.
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