New law to help protect seniors from exploitation

Missouri lets brokers delay trades when financial abuse is suspected

Published: August 13, 2015 04:45 PM

A Missouri law that goes into effect later this month could help protect older investors and adults with certain disabilities from financial exploitation. The Senior Savings Protection Act, effective August 28, will enable certain brokerage employees to delay investment trades requested by people ages 60 and up, and adults ages 18 to 59 with certain disabilities, if they think completing the trades would result in financial exploitation. 

The investment professional must then notify the Missouri Department of Health and Senior Services; the state's commissioner of securities; and individuals connected with the account or the vulnerable adult, including family members, conservators, guardians, and those with powers of attorney. 

The delay can only last up to 10 days. The law protects the professionals from civil lawsuits resulting from the trading delay if they act in good faith. The law doesn't apply to all disabled adults; rather, it focuses on people with physical or cognitive disabilities that might interfere with good financial decision-making, said Ron Long, director of regulatory affairs and elder client initiatives for St. Louis-based Wells Fargo Advisors. His company and three other brokerages pushed for the legislation.

Consumer Reports Retirement Planning Guide offers advice on creating a safe and secure retirement.

The law also allows for brokers to contact relatives or other people close to the senior who aren't even named on the account, Long explained. That could be crucial if a guardian or person with power of attorney is the one actually doing the exploitation, a common occurrence. "This law allows a firm suspecting misconduct to have the eyes of a regulator and adult protective services agency to look at a situation at the time of or soon after financial misconduct occurs," Long said. "It is that extra scrutiny that often is missing in the majority of financial abuse cases."

Brokers can't act spontaneously in blocking trades; they must first check with a compliance officer, legal department or supervisor. The law only applies to employees of broker-dealers, though Long said he thought other types of financial entities could be subject to similar regulations in future years. 

The law doesn't require brokers to report abuse. Rather, it offers guidelines in the event they do. It also mandates that, by September 2016, the state's commissioner of securities set up a training website for those professionals, including how to identify elder financial fraud, and how to report it. 

Delaware and Washington have similar statutes.

The Department of Labor has proposed that broker-dealers be subject to fiduciary standards that require financial advisers to act in their clients' best interests. Consumers Union, the advocacy arm of Consumer Reports, supports that initiative. But Long maintained that new fiduciary standards would not prevent adult financial exploitation, because the rules relate to investment recommendations, not to actions an investor takes on his or her own.

"The fiduciary rule does not say a client must act in her own best interests," Long noted. "No fiduciary rule will allow an adviser to say, 'I know you want to sell this XYZ stock, Mary, to use the proceeds to gamble in Las Vegas. But as your fiduciary, the law requires me to prohibit you from doing it because it is not in your best interest.'"

— Tobie Stanger (@TobieStanger on Twitter)

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