Senior and Vulnerable Adult Client Protection: A Continuing Issue for the Securities Industry and Regulators
If you are waiting until February 5th to implement procedures to protect senior and vulnerable adults because that is when the FINRA rule is effective, you may be risking a violation of current state regulations. In June and August 2017, the North American Securities Administrators Association (“NASAA”) published findings from a review of broker-dealer activity and a survey of the NASAA membership regarding the effectiveness of firm and regulatory efforts to address the protection of these investors. Although these findings centered solely on broker-dealers, investment advisers must also comply with state regulations for senior clients.
The June 2017 release, NASAA Study Examines Broker-Dealer Senior Practices and Procedures, presents findings from 62 examinations of 39 unique firms, mostly “larger” broker-dealers, conducted on their senior-related practices and procedures. The study provides information about firm supervisory procedures, training, escalation and reporting of senior issues, resolution of senior issues, and use of trusted contact forms.
The report’s recommendations included:
- Clear definitions of “seniors” and “vulnerable adults” considering states that have adopted the NASAA Model Act on Senior and Vulnerable Adults;
- Dedicated staff resources responsible for senior-related issues;
- Guidance for communications with seniors and other senior-specific policies and procedures;
- More frequent updates of account documentation for seniors, including investment objectives;
- Heightened suitability review for seniors triggered by red flags such as investments in higher risk or complex products, account concentrations, or significant changes to account activity;
- Training regarding senior issues including the identification;
- Use of a trusted contact form and other resources to assist senior investors;
- Proper escalation protocols, including clear and specific escalation instructions for registered representatives and other firm personnel, and the designation of decision makers for reporting concerns outside of the firm;
- How and when to report matters to adult protective services, law enforcement, or state securities regulators;
- When to delay account disbursements as a result of escalated concerns.
The NASAA August 2017 Pulse Survey: Senior and Financial Exploitation surveyed the NASAA membership about the urgency and effectiveness of preventing senior financial exploitation. The survey time frame was July 24-August 4, 2017, with 36 jurisdictions responding. Responses included:
- Awareness that senior financial exploitation was increasing
- Fraud perpetrated against seniors was not decreasing
- Most cases are not detected “until too late”
- Steps taken by regulators to diminish fraud included:
- Investor education & senior outreach
- NASAA Model Act to protect senior and vulnerable adults
- Adoption of regulations to permit disbursement holds
- Industry must “step up” efforts to prevent senior fraud
- Seniors most likely to fall victim to fraud
Oyster Consulting provides specific written policies and procedures to comply with the upcoming FINRA regulations and evolving state securities and adult protective services regulations, a matrix defining client disbursement hold time frames and reporting requirements to state regulators, testing of your policies and procedures, training programs on senior client issues and expert witness testimony. For more information about how Oyster can help your firm,
SAVE THE DATE for our next webinar:
Senior & Vulnerable Adults: Protecting Your Firm and Your Clients
January 10, 2018 3:00pm EST
Registration link coming soon.
You can also complete our contact form or call us at (804) 965-5400 and one of your associates will be happy to help you.