As the Professional Issues Committees reported in the January newsletter, the NASAA was considering (and has now approved) guidelines for protecting seniors from exploitation by giving advisors latitude to investigate what they suspect to be fraud on a senior client before transferring funds. For the 2016 legislative session, Minnesota's Department of Commerce under Commissioner Mike Rothman has proposed the Minnesota Safe Seniors Financial Protection Act that closely mirrors the NASAA guidelines.
The act would cover adults over age 65 as well as younger vulnerable adults. If an advisor, broker-dealer or other financial professional has reason to believe that an act of fraud is being perpetrated against a senior or vulnerable adult they are compelled to report their concerns to the Commerce Dept. and the Minnesota Adult Abuse Reporting Center. The advisor can also disclose this information to a third-party such as a designated family member.
Advisors will be then be permitted to delay a disbursement of funds. They must report to the Commerce Dept. and the Minnesota Adult Abuse Reporting Center and delay in disbursing funds with 2 business days. Within 7 days, the advisor must report on the findings of any internal review of the suspected exploitation. The delay expires in 15 days if the advisor cannot confirm during the time allowed that this is an exploitation situation.
The act protects advisors seen as acting in good faith and exercising reasonable care in delaying disbursements and reporting their concerns.
It is definitely a change in the advisor/senior client relationship that brings with it a few questions. Are advisors going to be liable for making disbursements that do turn out to be exploitation? Will regulators allow advisors to set up protocols for delaying any unusual disbursements until they have checked with the senior's/vulnerable adult's contact person?