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State-Registered Advisors Lack Policies to Protect Seniors: NASAA Report

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What You Need to Know

  • NASAA President Lisa Hopkins hopes the report's findings will foster greater and earlier detection of senior exploitation.
  • Deficiencies related to cybersecurity significantly declined in 2021.
  • The report included results of 1,206 coordinated examinations of state-registered investment advisors.

Nearly 59% of state registered investment advisors do not have policies and procedures in place to address the financial exploitation of seniors or vulnerable persons, the North American Securities Administrators Association’s just-released exams study found.

The NASAA 2021 Investment Adviser Coordinated Exams report included results of 1,206 coordinated examinations of state-registered investment advisers by state securities examiners.

“The results of this multi-state coordinated initiative show that investment advisers must make improvements in recognizing and reporting cases of suspected abuse,” said Lisa Hopkins, NASAA president and West Virginia senior deputy commissioner of Securities in a statement. “Our hope is that this data will foster greater and earlier detection and reporting of suspected financial exploitation of older Americans.”

The Securities and Exchange Commission, the Financial Industry Regulatory Authority and NASAA announced in July that they had joined forces to offer a program to help securities firms implement training requirements of the Senior Safe Act.

Firms can use the program, “Addressing and Reporting Financial Exploitation of Senior and Vulnerable Adult Investors,” to train associated people on how to detect, prevent and report such exploitation.

Despite a worldwide coronavirus pandemic, Hopkins said, state securities regulators “quickly adapted” to conduct the mostly virtual exams in 42 U.S. jurisdictions between Jan. 1 and July 7, 2021.

The data revealed that 289 investment advisors were examined by the states. Of those examined, some 68% were one-person firms.

Registration (44%) came in as the No. 1 deficiency, followed by books and records (41.7%) and contracts (30.5%).

Supervision and compliance (29.5%) was fourth while advertising (19.7%) rounded out the top five areas of deficiencies.

Deficiencies related to cybersecurity significantly declined in 2021 (5.3%) from 2019 (26%), the last time the examinations were conducted, according to the report.

“Cybersecurity has been a priority for NASAA, and we are pleased to see the decrease in deficiencies in this category,” said Michael Huggs, Mississippi Securities Division director, in a statement. “I believe the investment adviser industry is getting the message of how important cybersecurity is and is starting to implement policies and practices as well as taking advantage of the free cybersecurity checklist offered by NASAA to help assess their cybersecurity practices.”

Melanie Senter Lubin, Maryland’s securities commissioner, was elected on Aug. 12 to serve a one-year term as NASAA’s president. She will assume the role on Sept. 21.