In addition to these federal efforts, state regulators and legislatures have been at the forefront of addressing these issues. In furtherance of its goal of investor protection, NASAA recently passed “An Act to Protect Vulnerable Adults from Financial Exploitation” (the Model Act). The Model Act provides a model for states to use in drafting legislation to protect individuals whose age may make them vulnerable to abuse. In the last 12 months, some states have incorporated most or all of the Model Act’s provisions, but almost half of the states still have not adopted any of the Model Act’s provisions.
The Model Act’s Reporting Requirement
The Model Act recommends mandatory disclosure to Adult Protective Services and/or state securities commissioners by “qualified individuals” if they reasonably believe that an adult over age 65 (or otherwise deemed a senior by state statute) may be a victim of financial exploitation. Qualified individuals include agents, investment advisors, and those who serve in a supervisory, compliance or legal capacity for a broker-dealer or investment advisor. Second, the Model Act recommends that states allow permissive disclosure to a third party, if the third party has been designated by the eligible adult and so long as the third party is not implicated in the financial exploitation.
The Model Act’s Transactional Hold
The Model Act permits broker-dealers, investment advisors and qualified individuals (financial services professionals), who suspect financial exploitation, to delay disbursements from the senior’s account. The transactional hold would expire either after 15 days or an appropriate time after a review and conclusion that the disbursement would not result in exploitation—whichever occurs first. Upon the request of Adult Protective Services or the Commissioner of Securities, the 15-day hold may be extended to 25 days. If petitioned, courts can delay the disbursement indefinitely.
Immunity Under The Model Act
The Model Act grants immunity to financial services professionals for any reasonable, good faith disclosure and delayed disbursement. Immunity extends to any administrative or civil liability that could otherwise arise for disclosure or delayed disbursement.