The rule would require BDs and advisors to notify authorities of suspected exploitation.

The North American Securities Administrators Association said Tuesday that Maine Securities Administrator Judith M. Shaw began a one-year term as NASAA’s president, replacing Washington Securities Director William Beatty.

NASAA announced the same day that its Board of Directors approved for comment a proposed model act to address issues faced by broker-dealer and investment advisor firms and their employees when confronted with suspected financial exploitation of seniors and other vulnerable adults.

Shaw said during remarks at NASAA’s 98th Annual Conference in San Juan, Puerto Rico, that “in this age of technology and electronic marketing, borders are virtually nonexistent,” and encouraged state securities regulators to “increase collaboration with our federal partners in both the regulatory and self-regulatory spaces. Opportunities abound.”

State securities regulators, she said, “share the same mission and should be strong partners in the fight to protect investors and generate renewed confidence in the capital markets.”

Shaw, who also served as co-chair of the Maine Council for Elder Abuse Prevention, said collaboration and cooperation was sorely needed in protecting senior investors. “As the Administrator of a geographically large and rural state with the oldest population in the country, I believe a community-based and holistic approach to the growing problem of elder financial exploitation is critical.

“Working together we can and will close the holes in our safety net of support and protection for vulnerable adult investors,” Shaw said.

The proposed model, titled “An Act to Protect Vulnerable Adults From Financial Exploitation,” developed by the NASAA Board-level Committee on Senior Issues and Diminished Capacity, facilitates reporting to regulators and Adult Protective Services and, like a rule floated recently by the Financial Industry Regulatory Authority, allows BDs and advisors to delay disbursement of funds when financial exploitation is suspected.

The act would:

  • Require qualified employees of broker-dealers and investment advisors who reasonably believe that financial exploitation of a vulnerable adult may have occurred, been attempted, or is being attempted, to promptly notify Adult Protective Services and their state securities regulator. These employees also may notify any third party previously designated by the vulnerable adult as long as that party is not suspected of participating in the financial exploitation.

  • Enable broker-dealers or advisors to delay disbursements from an account of a vulnerable adult if financial exploitation is suspected.

  • Allow qualified employees of broker-dealers or advisors to provide records that are relevant to the suspected or attempted financial exploitation to relevant authorities.

  • Provide immunity from administrative or civil liability for broker-dealers and advisors for taking actions permitted under the act.

— Check out NASAA: States Doled Out $579M in Enforcement Penalties in 2014 on ThinkAdvisor.