People 60 years and older were involved in 171,230 fraud complaints tracked by the Federal Trade Commission in 2014, more than double the number in 2010, although some of that jump could come from improved reporting.
To help curb the problem, a coalition of state securities regulators in September proposed a model state law that would require financial advisers, including brokers at large investment houses and independent advisers, as well as their supervisors, to report suspected elder financial fraud to both a state securities regulator and an adult protective-services agency. The legislation would mandate prompt reporting by a financial adviser who “reasonably believes that financial exploitation” of an older person “may have occurred, may have been attempted, or is being attempted.” The bill gives brokers and advisers civil immunity from privacy violations for reporting suspected fraud, and allows them to put a temporary hold on suspicious account disbursements. Supporters say advisers and brokers are well-positioned to raise early warnings about exploitation that can leave elderly victims with scant money left for necessities and little time to rebuild savings. But financial-industry trade groups are pushing back against a key part of the North American Securities Administrators Association’s proposal. They say its reporting mandate would overburden state agencies, while some financial advisers worry they could be sued if they miss an abuse case.
Roughly 40% to 50% of all “red flags” about suspicious activity turn out to be false, according to an Oct. 29 letter to NASAA from the Securities Industry and Financial Markets Association, the main Wall Street trade group. A voluntary reporting system would allow firms to check out such reports internally before going to authorities, it said. Some financial firms already have in-house units that monitor for elder confusion or abuse. Laws requiring professionals such as social workers to report elder abuse are common. Roughly half of the states also mandate elder fraud reporting by certain financial professionals. But the laws don’t always extend specifically to financial advisers. Kansas’ law doesn’t generally treat brokers as mandatory reporters, according to the state’s securities commissioner. Meanwhile, Ohio’s law requires lawyers to report suspected elder financial exploitation, but not financial advisers.
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