NAIFA Continues Work on Senior Protection as FINRA Files Financial Exploitation Rule

FINRA has filed its anticipated rule that should help brokers and advisors protect senior investors from financial fraud. NAIFA has provided input during the rule-making process, including submitting a comment letter on an initial draft of the provision. NAIFA is reviewing the current filing, which must be approved by the SEC before it goes into effect, but generally supported the earlier draft.
“Insurance and financial advisors are often the first to recognize the signs when a senior is at risk of being exploited financially,” said NAIFA President Paul Dougherty. “Regulations that allow advisors to report suspicious activities to financial institutions, which can then investigate further and coordinate with the authorities, will only enhance the many vital services advisors provide their clients.”
Senior financial protection is an issue very important to NAIFA members. A MetLife study estimates that U.S. seniors lose $2.9 billion each year to financial fraud. A separate study by Allianz found that senior fraud victims lost an average of $30,000 each, and 10 percent lost $100,000 or more.
The Allianz study also found that seniors who regularly speak about their finances with trusted third parties, including financial professionals, are significantly less likely to be fraud victims.
In July 2015, the NAIFA Board of Trustees approved a policy statement that NAIFA should proactively support senior-protection legislation or regulations provided that they contain certain provisions: 
  • A voluntary reporting process where the advisor, upon suspecting attempted fraud on a client, would report the matter to the firm (i.e. broker-dealer or insurer). The firm could then alert the appropriate state authorities, and, at the firm’s discretion, delay a suspicious requested transaction. This process would allow the firm’s legal and compliance personnel to review the questionable transaction with greater scrutiny.         
  • A legal “safe harbor” provision where advisors and their firms would be immune from liability for following the law’s provisions. Advisors and their firms should be encouraged to report potentially fraudulent transactions to protect their senior clients’ assets.
  • A provision that would permit the state insurance department to provide training resources to advisors on how to recognize signs of cognitive decline while clearly acknowledging that advisors are not medical professionals and will not be held responsible for determining a client’s cognitive condition.
In addition to working with FINRA on the current rule and the North American Securities Administrators Association (NASAA) on a model senior protection rule, NAIFA has developed its own model legislation based on the principles spelled out in the NAIFA Board statement.
NAIFA also continues to support the Senior$afe Act, federal legislation that has gained bipartisan support.
  • Posted October 21, 2016 IN

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