As it continues its efforts to protect Americans from financial abuse, FINRA (Financial Industry Regulatory Authority) has turned its attention to the financial exploitation of the elderly and other vulnerable members of the investing public. These two new rules are:
- Financial advisors must now make every reasonable effort to get the name and contact information of a trusted person for a senior customer; and
- Financial advisors must now place a temporary hold and not disperse funds, if the adviser thinks that the senior investor may be the victim of financial exploitation. If this happens, the adviser must contact the trusted contact, while the funds are on hold.
Wealth Advisor says in its recent article, “These new rules will help protect seniors against fraud,” that the regulations are now in effect.
FINRA’s Securities Helpline for Seniors was the impetus for the enactment of these rules. More than 12,000 calls were made to the helpline on fraud and exploitation in the past three years, the self-regulator said. They recovered $5.3 million in voluntary reimbursements to customers.
Research shows that financial abuse is the second most frequently-reported type of abuse against the elderly. The most common is psychological abuse, according to a recent study of people 60 and older published in the journal Lancet Global Health.
The new rules should have a great impact on the safety of the elderly and their assets, because it may reduce the risk of the elderly losing funds they won’t be able to get back.
Advocates for the elderly say still more needs to be done, such as mandating that the financial industry develop personnel training, so staff know what to look for and can be proactive before a possible breach.
The FINRA rule stipulates that the absence of a trusted contact person’s name or information doesn’t keep an adviser from opening or maintaining an account, provided he or she has tried to obtain the information of a trusted contact. The advisers will also have to update the contact information regularly, along with the customer’s records.
Advisors are cautioned to be aware of the signs of elder abuse, which may include aggressive family or friends, or a sudden personality change where the person seems more fearful about new people. Another red flag—a senior who makes an abrupt change to a financial document and will not discuss their reasons for the change. If the person wants to wire money to people you have never heard of, or asks to put a new name on a joint account, there also may be elder abuse occurring.
Reference: Wealth Advisor (February 12, 2018) “These new rules will help protect seniors against fraud”