More Elder Investor Protections

Since we last blogged about rules for elder investor protection (or, more generally, protection for those with diminished capacity), there have been a few new developments. At the end of September, the North American Securities Administrators Association (NASAA) proposed its own rule for dealing with elder investors as part of its announcement that Maine Securities Administrator Judith M. Shaw would be taking over as the organization's president. 

The NASAA board approved for comment a proposal titled "An Act to Protect Vulnerable Adults From Financial Exploitation" that would:

• Require notification of Adult Protective Services and the appropriate state securities regulators if a qualified employee believes that financial exploitation of a vulnerable adult has occurred (or has been or is being attempted). The qualified employee may also contact a previously designated third party, if that third party is not suspected of being involved in the exploitation.
• Empower broker-dealers or advisors to delay disbursements from the account of a vulnerable adult, if financial exploitation is suspected.
• Create an allowance for qualified employees to provide records relevant to the suspected or attempted financial exploitation to the relevant authorities.
• Grant broker-dealers and advisors immunity from administrative or civil liability for actions taken under the act.

“Qualified employee” is defined as "any agent, investment adviser representative or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser."

Shaw, who previously served as co-chair of the Maine Council for Elder Abuse Prevention, made the following statement: “As the Administrator of a geographically large and rural state with the oldest population in the country, I believe a community-based and holistic approach to the growing problem of elder financial exploitation is critical. Working together we can and will close the holes in our safety net of support and protection for vulnerable adult investors."

Elsewhere, the proposed FINRA rule on elder investors we blogged about previously is now up for comment, in Regulatory Notice 15-37. The comment period for the FINRA rule expires November 30th. With both FINRA and NASAA proposing their own rules, industry participants will likely soon have to navigate a new regulatory landscape when dealing with elder clients.