Brokerage Firms and Elder Abuse Prevention
Elder abuse is a national problem. Because of the baby boom in the 1940’s and 50’s, many baby boomers are now reaching retirement age. In fact, they are the fastest growing age group in American society today. Unfortunately, more seniors mean more financial fraud and abuse.
Often family members or caregivers will befriend an older person in the hopes of gaining access to their money. We have seen a steady rise in cases involving forged wills and undue influence. The latter involves coercing someone with diminished capacity to amend their will or add them to financial accounts.
Bankers and stockbrokers need to be more vigilant to the signs of elder abuse. Sudden withdrawals from an account are big red flags.
Brokerage firms claim they are in a legal “catch-22.” If they see potential fraud and don’t act, they can be held responsible yet if they wrongfully refuse to honor a transaction they can also be sued.
The SEC has been slow to weigh in and provide guidance to both stockbrokers and the compliance departments of brokerage firms. That hasn’t stopped the North American Securities Administrators Association from stepping forward. The NASAA represents the 50 states and Canadian provincial securities agencies.
A proposal from the NASAA would offer brokers qualified immunity when reporting suspected elder abuse. Their proposal also permits a 10 day hold on the disbursement or transfer of funds. This time gives brokers the ability to reach out to state regulators or adult protective services.
The qualified immunity and holding period provisions go a long way to insuring that the elder abuse is reported and that the customer’s money is protected. Once funds are disbursed, they become much harder to claw back.
It’s not just the states that are getting involved. The Financial Industry Regulatory Authority – FINRA – has issued their own proposal. FINRA wants a 15 day holding period. During that time, stockbrokers would need to reach out to the customer’s “trusted contact.” (Customers over 65 or who are otherwise “vulnerable” would have the option of naming trusted contacts.)
In the event the broker suspects that the “trusted contact” is the person engaging in the financial exploitation, the broker would be allowed to contact other family members.
One problem with the FINRA proposal is the lack of a definitive immunity provision. Some brokers will be reluctant to hold back a customer’s funds for fear of being sued.
The two main differences in the proposals relate to immunity and how suspected elder abuse is to be reported. The NASAA proposal is better in that offers immunity. A broker who has a good faith belief that a customer is being exploited can’t be sued for holding a disbursement for 10 days.
The FINRA proposal is good in that allows older customers to designate a trusted contact. In our experience, so many adult protective service agencies are understaffed that we question whether these agencies could investigate in just 10 days.
Nothing is final and both the SEC and Congress could still weigh in.
We have successfully filed claims for financial elder abuse. If you or a loved one lost $250,000 or more because of financial exploitation or fraud by a stockbroker, give us a call. Most case can be handled on a contingent fee basis meaning no legal fees unless we recover money for you.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are always confidential.
MahanyLaw – America’s Fraud Recovery Lawyers