Brokerages also want authority to place holds on clients' accounts when there is concern about a client's mental capacity, or improper influence by third parties, at least until the firm can locate someone to help make decisions, Gibson said. Washington state passed such a law in 2010, which can serve as a model for other states, Gibson said.
The industry, however, still may have work to do after NASAA's upcoming guidance, which will include broad suggestions. State securities regulators, generally, are not inclined to penalize firms that try to prevent clients from becoming victims, Solov said. But regulators can't save firms from private lawsuits by clients alleging privacy violations and other offenses, she said.
Protecting vulnerable clients begins years before their mental decline, brokerage executives said at the Financial Industry Regulatory Authority's annual conference last week. Some firms have clients fill out a form that names a person whom may be contacted in the event of questionable account activity. But some clients balk at the suggestion, executives said.