NASAA Legislation – Protecting Vulnerable Adults from Financial Exploitation

Bill ReillyElder financial abuse is on the rise, and will likely increase as the Boomer generation continues to age. Investors over the age of 50 control a majority of the nation’s wealth, making them ripe for recruiting as clients, and unfortunately, targets. Investors protected under state adult protective services are also at risk, as well as the broker-dealers and investment advisers representing these groups.

On January 22, 2016, The North American Securities Administrators Association, Inc. (“NASAA”) passed a model act to protect vulnerable adults from financial exploitation. Only Delaware, Missouri and Washington have enacted legislation or regulations with similar provisions.

According to the NASAA Model Act, broker-dealers and investment advisers will be allowed to delay disbursements from a client’s account for up to 15 days if there is reasonable belief that exploitation is or might be occurring. This delay also allows all parties to determine whether the disbursement is appropriate and in the best interest of the client. The Act is intended to protect broker-dealers, investment advisers and their registered representatives and investment adviser representatives from civil or administrative liability that might arise from the delay.

The NASAA Act also requires broker-dealers, advisers and representatives to report to the state securities regulator and adult protective services any suspected financial exploitation no more than two business days after it may have occurred, been attempted or is being attempted.

Designated third parties may also be notified. Before a third party is selected, the motive of the third party should be vetted by the firm. Under no circumstances should disclosure to a third party suspected of the exploitation be made.

A few last points to consider: Until legislation or regulations are enacted by a state, only the states of Delaware, Missouri and Washington have jurisdiction in this area. FINRA currently has a proposal under consideration which addresses the same issues as the NASAA Model Act.

What You Should Do:

Best Practices:

One of the best ways firms can protect themselves and their vulnerable clients is to assess and improve best practices, and determine suitability of recommendations. Educating employees and clients is a crucial component to preventing vulnerable adult financial abuse. Employees should be trained to:

  • Recognize the investment needs of senior and vulnerable adult investors
  • Recognize red flags of financial abuse
  • Report suspected activity
  • Know and understand state specific requirements

Getting to know your vulnerable clients and their unique needs will also help minimize the likelihood of victimization. Employees should ask questions about their clients’:

  • Time horizon
  • Net worth
  • Liquidity needs (Upcoming expenses such as a grandchild’s college tuition or a known illness)
  • Plans for estate (Is a will or trust already in place? Do they have Power of Attorney?)
  • Special needs
  • Agreement to a third party taking part in discussions before, and in case debilitating issues arise.

Employees should also be trained to recognize and respond to red flags of financial abuse, such as changes in transaction behaviors or personal behaviors, or excessive caregiver interest in financial matters. Employees should also be trained to report suspected activity and establish safe guards to minimize suspected abuse activities.

Occasionally, vulnerable investors require more frequent and enhanced contact, such as reminders, follow-up letters summarizing discussions, different font and color choices, and extra time to make investment decisions. Vulnerable clients and their representatives should also be informed of scams, frauds, resources available to them, and the state-specific limits and requirements for their investment strategy.


Not all products are appropriate for vulnerable investors. Long-term investments such as 30-year bonds or annuities don’t always make sense for seniors. Investments with low liquidity rates may not be appropriate to an investor with known health issues.

For further information about the NASAA model act, contact Oyster Consulting Associate Director Bill Reilly at or 850.728.7034. For more information about additional services Oyster Consulting can provide, please call 804.965.5400 and one of our representatives will be happy to assist you.