My father-in-law, Mike, has been very successful in life. He earned an engineering degree from Georgia Tech, did a post-college stint with the Army Corp of Engineers, worked with one of the largest publishing companies in the world, and ultimately co-founded his own business he ran for four decades. In fact, he will still remind me over an occasional cocktail that he and his partner at one time had the largest independent magazine publisher’s rep business in the country.
Once an astute investor knowledgeable about the economy and financial markets, Mike long ago delegated his financial affairs to professionals. I don’t know his net worth and have no intention of asking, but I suspect he built up a nice nest egg before he retired.
Based on statistics related to adults 65 years or older, did you know that Mike has a 1 in 20 chance of being a victim of financial exploitation? [Financial Exploitation of Older Adults: A Population-Based Prevalence Study, Journal of General Internal Medicine (2015)] If he dies before his wife, Betty, she is more than twice as likely to be financially exploited, simply because she’s 65 years or older and a female. [The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders (June 2011)]
What exactly is “financial exploitation”? There are many definitions, but according to the National Adult Protective Services Association, financial exploitation occurs when a person misuses or takes the assets of a senior or other vulnerable adult for his or her own personal benefit. These assets are generally taken through deception, false pretence, coercion, harassment, duress and even threats. The effects of financial exploitation of an elderly person or other vulnerable adult can be devastating, resulting in feelings of shame, guilt, anger, loss of trust and depression. It can also lead to severe financial harm, if not destitution, as, like Mike, the victim is usually retired and cannot replace the assets that were taken from them. It is estimated by various sources that financial abuse costs elders billions of dollars annually.
Financial abuse has become a serious issue in this country. In fact, a widely-heralded report released in 2011 and still relevant today, The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders, coined the phrase “The Crime of the 21st Century” to describe the financial exploitation of the elderly in the United States. According to the study…“Elder financial abuse continues to decimate incomes both great and small, engenders health care inequities, fractures families, reduces available health care options and increases rates of mental health issues among elders. Despite growing public awareness from a number of high-profile financial abuse victims, it remains underreported, under-recognized, and under-prosecuted.”
While financial exploitation can occur many different ways and be perpetrated by many different types of people, Finra, the self-regulatory organization for the U.S. securities industry, is specifically interested in protecting money and securities its member firms hold in accounts for seniors and other vulnerable adults from this type of abuse.
On February 5th of this year, the Securities and Exchange Commission approved Finra’s request to amend Finra Rule 4512 (Customer Account Information) and release new Finra Rule 2165 (Financial Exploitation of Specified Adults) to provide member firms with a way to quickly respond to situations in which they reasonably believe that financial exploitation has occurred or will be attempted. The new and amended rules go into effect on February 5. 2018.
Finra believes its member firms and registered representatives will be able to better protect its customers from financial exploitation if they are able to: (1) notify a “trusted contact person” of the customer when there is concern that the customer may be the victim of financial exploitation and (2) place a temporary hold on a disbursement of funds or securities from the customer’s account under these circumstances. FINRA feels these measures, which are not currently permitted activities under FINRA rules, would assist members in thwarting the exploitation of these high-risk individuals before potentially devastating losses occur.
Since Finra is specifically interested in protecting money and securities in the accounts of their elderly customers, Finra more-narrowly defines financial exploitation to mean:
• the wrongful or unauthorized taking, withholding, appropriation or use of a “specified adult’s” funds or securities; or