Broker-dealers must carefully consider their suspicions before reporting, McBride said.
“Not everything that sounds suspicious is fraudulent or exploitative,” McBride said. “The law protects broker-dealers acting in good faith on behalf of their clients, but never defines what ‘good faith’ is.”
Since broker-dealers are not doctors, they must also carefully vet the mental statuses of their clients.
“When it’s a client that you’ve seen over several years, you can tell when there’s a change and a concern about mental capacity,” Long said. “We can only ask that representatives report what doesn’t feel right, what they’re seeing and what they’re hearing. We can’t ask them to diagnose the client.”
At Wells Fargo Advisors, representatives’ suspicions are first reported to the Elder Client Initiative, which then decides whether to bring the matter to state regulators and client family members.
The law doesn’t cover investment advisors, meaning an advisor reporting suspicious activity or delaying the execution of client requests may be held liable for resulting losses or any other damages.
“My view is that it should and probably will be applied to investment advisors and other financial professionals,” Long said. “It bears noticing that the large firms like Wells Fargo were here first, we were the ones who came together with regulators and social service professionals to advocate for this law. This benefits the clients and the industry at the same time.”
State legislators have proposed similar bills in Nebraska and Indiana.
“Our goal was to create something that the rest of the country could emulate, and that’s what we’ve done,” Kander said.