On October 3, 2019, the SEC Retail Task Force held a roundtable on combating elder investor fraud. The roundtable examined the multiple dimensions of elder investment fraud, including the social, physiological and economic factors that contribute to elder financial exploitation. The roundtable also discussed the preventative and remedial measures that regulators, broker-dealers, investment advisors, and others can take to identify and combat elder investor fraud. In his keynote remarks, Chairman Jay Clayton noted the SEC's ongoing commitment to combating elder investment fraud as an essential part of the SEC's mission to educate and empower investors so they can plan for a financially secure future. Chair Clayton noted that the National Council on Aging found that elder financial abuse costs Americans $36.5 billion annually.
The roundtable's first panel examined contributing factors to elder exploitation, such as cognitive decline, capacity issues, social isolation, and institutional vulnerabilities that create entry points for fraudsters and other unscrupulous actors. Lisa Bleier, Managing Director and Associate General Counsel at the Securities Industry Financial Markets Association (SIFMA) advises firms to focus on noticing changes in the behavior of their clients. Bleier highlighted how social isolation can play a role in exploitation, as well as cognitive indicators such as an inability to make basic mathematical calculation, frequent account password resets, or repeatedly asking for the same trade. Commissioner Elad Roisman stated, "Investor protection is fundamental to the SEC's mission and rests at the core of the decisions I make as a commissioner." He further noted that "elder financial fraud is by no means limited to brokerage and retirement accounts. Opportunities for fraud exist in deposit accounts and other areas where assets are held."
Jeanette Wingler, Associate General Counsel of the Financial Industry Regulatory Authority, Inc. (FINRA) highlighted various tools that FINRA has put into place to help address elder investor fraud, including a senior helpline, educational resources for training purposes and FINRA Rules 2165 and 4512. Rule 2165 allows a securities firm to place a temporary hold on disbursement of funds or securities from the account of a specified adult if the firm has a reasonable belief that a questionable request has been made regarding financial exploitation of a customer. Rule 4512 requires firms to make reasonable efforts to implement a "trusted contact" system into their customer accounts. Ms. Wingler noted that FINRA recently launched a retrospective rule review to solicit comments about these rules.
Judith Shaw, Securities Administrator at the Maine Office of Securities, highlighted additional developments targeted to combat elderly investor fraud, such as the North American Securities Administrators Association's "Model Legislation to Protect Vulnerable Adults from Financial Exploitation" that essentially codifies FINRA Rules 2165 and 4512 at the state level for broker-dealers and investment advisers. Additionally, the Senior Safe Act provided immunity from liability in any civil or administrative proceeding for reporting potential exploitation of a senior citizen.
Originally published in REVERSEinquiries: Volume 2, Issue
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Originally published November 05 2019
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