Protecting Vulnerable Adults: A Decade of Lessons from NASAA and FINRA

How NASAA and FINRA Rules Are Safeguarding Seniors

As the financial industry approaches a decade since the adoption of the NASAA Model Act (January 2016) and FINRA Rule 2165 and Rule 4512 (February 2018, with Rule 2165 amended in March 2022), it’s clear these measures have strengthened protections for vulnerable adults against financial exploitation. These rules authorize firms to delay disbursements, notify trusted contacts, and report suspected exploitation—steps that have proven effective in reducing losses to fraud. Since 2016, 39 NASAA jurisdictions have adopted some form of the Model Act for broker-dealers and investment advisers, while the FINRA rules apply specifically to broker-dealers. (It should be noted the Act provisions relate to broker dealer and investment advisers, the FINRA rules relate only to broker dealers.)

Regulatory Protection Provisions for Vulnerable Adults

Mandatory Reporting Requirements

Qualified individuals who reasonably believe that financial exploitation of an eligible adult may have occurred, been attempted, or is being attempted, must promptly notify the state securities regulator in a state where the client resides. Additionally, regardless as to whether the state where the client resides has adopted some form of the Act or not, the firm must /may be required to report the fraud/exploitation to the state Adult Protective Services agency (“APS”). In order to determine which states have adopted the provisions of the Act or whether the APS requires mandatory/voluntary reporting requirements please refer to the NASAA website.

Trusted Contact Notifications and Limitations

The provisions authorize disclosure to third parties only in instances where an eligible adult has previously designated the third party, a trusted contact,  to whom the disclosure may be made. Importantly, the Act directs that disclosure may not be made to the third party if the qualified individual suspects the third party is responsible for the financial exploitation.

Authority to Delay Disbursements

The Act and FINRA rule provides broker-dealers and investment advisers (states only) with the authority to delay disbursing funds from an eligible adult’s account generally for up to 15 business days if the broker-dealer or investment adviser reasonably believes that a disbursement would result in the financial exploitation of the eligible adult. If the broker-dealer or investment adviser delays a disbursement, it must notify people authorized to transact business on the account (unless these individuals are suspected of the financial exploitation), and undertake an internal review of the suspected exploitation. Under the Act the securities regulator may request an extension of the delay for an additional 10 business days. Extensions beyond that could be ordered by a court. Since states may vary on the number of business days for disbursement holds and extensions thereof, firms should review each state’s provisions and the FINRA rule for disbursement hold timeframes before proceeding.

Regulatory Immunity for Good-Faith Actions

The provisions provide immunity from administrative and civil liability for qualified individuals, broker-dealers, or investment advisers who, in good faith and exercising reasonable care, comply with the provisions of the state regulation and FINRA rule.

Recordkeeping Obligations

Firm records must be maintained related to suspected financial exploitation and provided to regulators upon request.

Enforcement Trends and Reporting Data

2023 NASAA Enforcement Report

A review of the 2023 NASAA Enforcement Report showed that in 2017, states reported the receipt of approximately 500 reports of suspected vulnerable adult financial exploitation, 1,102 in 2020, 1,428 in 2021and 2,761 in 2022, opening nearly 550 investigations.

FINRA Examination Priorities for Senior Investors

The 2025 FINRA Annual Regulatory Oversight Report highlights effective practices for broker-dealers, including the use of trusted contacts, proactive monitoring of account activity, and prompt reporting to regulators and APS agencies.

Oyster recommends the review of the Senior Investors and Trusted Contact Persons Section of the 2025 FINRA Annual Regulatory Oversight Report, which details examination findings and effective practices for broker dealers relating to protecting vulnerable adults.

Best Practices for Protecting Vulnerable Adults

It is clear the provisions of the Act and FINRA Rules relating to protecting vulnerable adults based upon disbursement holds, use of trusted contacts, reporting to state securities regulators and reporting to APS agencies are effective tools to limit financial exploitation.

Securities industry firms should also:

• Encourage the use of technology to monitor vulnerable adult account activity.
• Continue long-accepted practices, such as in-person meetings, virtual meetings, and phone calls with clients and their family members, to enhance account protections.
• Comply with regulations and use best practices to determine suitability.
• Educating employees and clients.

Support for Stronger Client Protections

At Oyster Consulting, our team of regulatory compliance experts help broker-dealers and investment advisers implement effective policies and procedures to protect vulnerable adults from financial exploitation. Our team brings decades of regulatory, compliance, and operational expertise to:

• Assess your current practices against NASAA Model Act provisions and FINRA Rule requirements.
• Develop and update procedures for reporting, disbursement holds, and trusted contact notifications.
• Leverage technology to monitor account activity and detect unusual transactions.
• Prepare for examinations by regulators, ensuring records and processes meet industry standards.

By combining compliance know-how with practical solutions, Oyster Consulting helps firms protect their clients, meet regulatory obligations, and preserve trust.