Over the last several years, I have unfortunately been involved in a few cases involving elder abuse. These matters have involved physical abuse, mental abuse, emotional abuse, sexual abuse, neglect, and financial exploitation of the elderly. Specific types of financial exploitation have involved cashing checks without authority, forging signatures, misusing or stealing funds, misuse of a power of attorney or coercing an elderly person into signing a contract dealing with investment matters and contracts for services such as household improvements.
On February 5, 2018, various rules came into effect which are designed to reduce the financial exploitation of seniors and establish various standards to protect those individuals. These rules have been established by the Financial Industry Regulatory Authority. Specifically, investment companies can now place a hold on a disbursement of assets if they have a belief that the senior is being financially exploited. Additionally, investment advisors are also now required to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. These rules will only apply to new accounts established after the effective date of February 5, 2018, or current accounts that are updated at a later date.
Of course with a number of matters, there is always gray areas where there may be uncertainly as to what to do based on the specific factual situation. This will probably be the case with these rules as well. For example, as a result of these various changes, investment advisors are required to determine when it is appropriate to place a temporary hold on a transaction made by the senior. If the advisor has a reasonable belief financial exploitation of the senior may occur, they are required to put a call into the trusted contact or place a hold on the transaction. After the temporary hold is placed, this will provide time for further investigation to take place and communication to occur with the trusted contact.. In some situations, there also may be certain circumstances where the temporary hold is extended.
During the course of working with a client, the advisor also must determine who can serve as the senior’s trusted contact. The trusted contact must be an individual who is 18 years of age or older. The rule does not require any other stipulations to be selected as the trusted contact. The purpose of the trusted contact is intended to be as a resource to the financial advisor For example, when a situation occurs that the financial advisor may question, they can communicate with the trusted advisor to confirm it is a legitimate financial transaction.
Hopefully, these new rules will reduce financial exploitation of seniors. Time will only tell whether or not these rules will accomplish this or simply increase the paperwork required for advisors and create confusion on whether to contact the trusted advisor or not in various transactions for financial advisors. If you have any questions regarding these matters, please contact your financial investment advisor.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.