NAIFA Suggests Changes to Model Act on Senior Protection

Fred Joseph, president of the North American Securities Administrators Association (NASAA), has said financial fraud involving older Americans is becoming “the crime of the 21st century.” Seniors are often targets of scammers and other fraudsters because they are thought to have significant savings or investments and they are seen as soft targets unlikely to report financial crimes, according to the National Council on Aging. Dementia and cognitive impairment can make segments of the senior population particularly vulnerable.
The first line of defense for a target of financial exploitation may often be the would-be victim’s financial advisor. A scammer, for instance, may ask a senior to take unscheduled disbursements from retirement or other accounts, which may raise red flags for advisors. NAIFA believes that there is an important role for insurance and financial advisors in the effort to protect older Americans from financial exploitation. State laws should allow advisors to report suspected exploitation while protecting both advisors and their clients from potential liability and other consequences.
NAIFA this week submitted comments to NASAA strongly supporting efforts to protect seniors, especially those suffering mental decline, from becoming victims of financial exploitation.
NAIFA’s comment letter applauds NASAA for developing model legislation, “An Act to Protect Vulnerable Adults from Financial Exploitation,” and “supports the intent of the Model Act.” NAIFA also raised several concerns about the draft and offered suggested revisions.
Specifically, NAIFA believes NASAA should revisit the section of the Model Act that would make it mandatory for advisors to report suspected cases of financial exploitation of senior clients. Mandatory reporting could open advisors to liability not covered by the immunity provisions of the Model Act and would likely lead to over-reporting of transactions that do not actually involve financial exploitation. NAIFA believes voluntary reporting would better protect advisors and their clients. Voluntary reporting would diminish the liability issue and reduce cases in which clients’ disbursements would be unnecessarily delayed.
NAIFA is also concerned that the Model Act would allow advisors to report suspected cases of financial exploitation directly to state regulators or law enforcement. While advisors can play a pivotal role in protecting their senior clients from exploitation, fraud-detection specialists at broker-dealer or investment advisory firms are better suited to determine if specific transactions warrant notification of the authorities. NAIFA’s comment letter suggests that NASAA change the draft Model Act so that an advisor may notify the broker-dealer or investment advisor firm if he or she suspects financial exploitation of a senior client. Compliance and legal personnel at these firms would then decide whether to notify state or local authorities.
“We believe these changes to the Model Act will ensure that any suspected financial exploitation of a senior client is first subject to careful review by qualified personnel at broker-dealers and investment advisers who can then make a determination to report suspicious requests for disbursements to authorities and/or delay a requested disbursement for a reasonable period of time,” NAIFA said in its comment letter.
  • Posted October 28, 2015 IN

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