New Jersey became the latest state to pass a law to protect senior citizens from financial exploitation when Gov. Phil Murphy signed it into law January 13.
The law, known as the Safeguarding Against Financial Exploitation Act, which is similar to laws already passed by about half the states, is designed to safeguard seniors from being defrauded. The law is being considered in many other states as well.
It requires financial advisors and broker-dealers to report abuse to the proper authorities, including the New Jersey Bureau of Securities and any appropriate county protective services offices. Advisors who make such reports are protected from liability. They also have to notify anyone who was designated by the client, unless that person is the one suspected of fraud. The New Jersey law also allows the advisor or broker-dealer to withhold payment from an account if he or she suspects financial abuse until the situation is investigated.
“Unfortunately, it’s not uncommon for senior citizens to be taken advantage of by people seeking to take their money, property, assets or identities,” said Assemblyman John McKeon, a Democrat and one of the primary sponsors of the law, in Insurance News Net. “These crimes often go unreported and untracked. The good news is financial exploitation can be prevented with the right protections in place.”
In some states the law requires the advisor to report suspected abuse and in others it allows them to report, but in all cases the person making the report is protected from legal action. Most states also enable the advisor to withhold approval of a transfer of money or sale of assets for a certain amount of time.
The Financial Planning Association and the National Association of Insurance and Financial Advisors have pushed for protective legislation for seniors for several years.
Studies have estimated financial exploitation costs seniors nearly $3 billion a year, but those estimates are probably low since much of the abuse is not reported, the studies concluded.