New Ways to Prevent Elder Financial Abuse
Under the new rule, the request for a trusted contact must be made when opening accounts for new clients. For existing clients, the request can be made when the firm routinely reaches out for updated information. (The broker is only required to ask for a name; the client does not have to provide one.)
The Finra regulation also allows brokers to place a hold on withdrawals from the account of a client when they have a reason to believe there is financial exploitation. The initial hold lasts 15 business days, but it can be extended an additional 10 business days.
“This rule has the potential to help by giving financial professionals the confidence they need to step in to prevent abuse,” says Barbara Roper, director of investor protection at the Consumer Federation of America, an advocacy group.
Broader government efforts to combat elder fraud are also underway. In 2014, the North American Securities Administrators Association, a group of securities regulators, released a model rule that mandates that both brokers and financial advisers report suspected abuse of the elderly or other vulnerable adults, such as those with disabilities, to state authorities. The rule also allows them them to stop withdrawals from those accounts.
The NASAA model rule also protects brokers and advisers from liability if they stop account disbursements, says Joseph Borg, Alabama securities commissioner and NASAA president. To date, 13 states, including Maryland and Texas, have enacted versions of the model rule, and more states are likely to do so this year, Borg says.
On the federal level, a bipartisan bill now in Congress, the Senior Safe Act, would enable the employee of any financial institution, including banks and insurers, to report concerns about elder financial abuse without fear of being held liable for disclosing private information. The bill was passed by the House last week.
Still, you can’t rely on government legislation alone to protect your family’s finances. In the end, the most effective way to prevent elder abuse is to set up your own safeguards. Here are three key steps to consider.