Senior Financial Protection

The Issue
Some states have recently enacted measures designed to protect seniors from becoming victims of financial fraud and exploitation – especially those seniors suffering from mental decline.  These state laws typically call for financial advisors to report possible financial fraud or exploitation of a senior client to their firms, and the firms can then report the potential fraud to the state securities commissioner or appropriate state authority.  Some of these state laws also permit the firm to delay the suspicious transaction for a specified number of days in order to provide authorities the time to investigate.  These laws also provide advisors and firms with immunity from liability for taking steps to protect their client’s financial assets by following the provisions of the law. 
NAIFA Position
NAIFA generally supports state legislation intended to protect seniors from financial fraud and exploitation.  In July 2015, the NAIFA Board of Trustees approved a policy statement which recommends that the NAIFA federation proactively support legislation of this nature provided that it contains certain provisions: 
  • A voluntary reporting process where the advisor, upon suspecting attempted fraud on a client, would report the matter to the firm (i.e. broker dealer or insurer).  The firm could then alert the appropriate state authorities, and, at the firm’s discretion, delay a suspicious requested transaction. This process would allow the firm’s legal and compliance personnel to review the questionable transaction with greater scrutiny.         
  •  A legal “safe harbor” provision where advisors and their firms would be immune from liability for following the law’s provisions.  Advisors and their firms should be encouraged to report potentially fraudulent transactions to protect their senior clients’ assets.      
  •  A provision that would permit the state insurance department to provide training resources to advisors on how to recognize signs of cognitive decline while clearly acknowledging that advisors are not medical professionals and will not be held responsible for determining a client’s cognitive condition.