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Industry Spotlight > Broker Dealers

BDs Step Up Fight Against Elder Financial Fraud

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Broker-dealers are taking steps to fight elder financial abuse, with 90% having either a dedicated team or at least some type of internal process for addressing senior issues and 95% offering training on signs of such abuse, according to a study by the North American Securities Administrators Association 

The just-released study, prepared by the NASAA Broker-Dealer Section’s Investment Products and Services Project Group, presents findings of a survey of the senior-related practices and procedures of 61 BDs throughout the United States.

Other findings of the study found:

  • More than half (54%) of broker-dealers lacked a formal policy defining senior customers;
  • 34% of the broker-dealers had a dedicated team responsible for senior-related issues;
  • Almost all (94%) of the BDs had a formal process to internally report concerns regarding diminished capacity and/or elder financial abuse.

Data collected for the study show BDs reported nearly 2,300 cases of suspected senior-related fraud or exploitation to authorities in 2015, with another 219 cases reported during the first two months of 2016. Responses to the study were received in April and May 2016.

The vast majority of these cases involving escalated external reports to other agencies (45%) involved customers in the 81-90 year age group. Reporting by firms to adult protective services occurred in at least 62% of internally escalated cases, but less frequently to local law enforcement (4%) or state securities regulators (less than 1%).

The report also found that 94% of the BDs had a formal process to internally report concerns regarding diminished capacity and/or elder financial abuse, while 81% indicated they had a decision-maker responsible for reporting concerns to agencies or authorities outside of the firm.

Approximately 72% of the broker-dealers reported having an escalation procedure in place for diminished capacity or elder financial abuse or exploitation. Of the 18 firms that had a formal seniors-related policy, 100% had escalation procedures for elder financial exploitation while 89% had similar procedures for diminished capacity. Sixty-seven percent of the 43 firms without a formal seniors-related policy had an escalation procedure for elder financial abuse or exploitation, and 63% of those same 43 firms had an escalation procedure for diminished capacity.

Less than half (41%) had developed a form for customers to identify an emergency or trusted contact person.

Last January, NASAA approved a Model Act to Protect Vulnerable Adults from Financial Exploitation. States that passed the Model Act or similar legislation or regulations include Alabama, Arkansas, Delaware, Indiana, Louisiana, Maryland, Mississippi, Montana, New Mexico, North Dakota, Texas, Vermont and Washington.

As of May 1, 2017, states that saw bills or regulations similar to the Model Act introduced in their legislatures include Alaska, Colorado, Kentucky, Michigan, Minnesota, New York and Oregon.


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