Elder Abuse

FINRA Releases Annual Regulatory and Examination Priorities Letter, Part I

January 12, 2017 | Elizabeth Dalziel

On January 4, 2017, the Financial Industry Regulatory Authority (“FINRA”) published its Annual Regulatory and Examination Priorities Letter (“Priorities Letter”). The Priorities Letter notifies firms about issues that FINRA intends to examine in 2017. It is also intended to let firms know which of these issues are relevant to their businesses so that the firms can improve their compliance with FINRA rules and their risk management programs.

According to the Priorities Letter, FINRA draws its examination priorities from both observations made in the course of regulation and suggestions from a variety of outside sources. Evidence has shown that many FINRA-registered firms have found past Priorities Letters helpful in making sure their business is in compliance with FINRA rules. Finally, FINRA assures readers of the Priorities Letter that in formulating an examination, FINRA looks to factors such a firm’s “business model, size and complexity of operations, and the nature and extent of a firm’s activities against the priorities outlined in this letter.”

FINRA intends to prioritize the following issues in 2017. Continue reading ›

FINRA Proposes Rule Designed to Combat Financial Exploitation of Seniors and Other “Specified Adults”

November 23, 2016 | Elizabeth Dalziel

In October 2015, the Financial Services Industry Regulatory Authority, Inc. (“FINRA”) requested comments on a proposal (“Proposal”) to amend its Customer Account Information Rule (“Rule 4512”) and to adopt a new Financial Exploitation of Specified Adults Rule (“Proposed Rule 2165”). Based on a study published in 2011 and a survey published in 2013, FINRA determined that financial exploitation of seniors and other vulnerable adults is a serious and growing problem that must be addressed. As of now, a small number of states have already enacted legislation that is designed to help detect and prevent financial exploitation of seniors. As discussed previously, the North American Securities Administrators Association (“NASAA”) recently adopted a model act that is intended to provide states with guidance for drafting legislation or regulations to protect seniors and other vulnerable adults from financial exploitation.

FINRA, however, believes there needs to be a uniform, national standard regarding a financial institution’s obligations in helping to prevent financial exploitation of seniors and other vulnerable adults. Thus, FINRA first published its Proposal in October 2015 and requested comments on it. After receiving 40 comment letters from both individuals and institutions, FINRA filed the Proposal with the Securities and Exchange Commission in October 2016. The SEC began a comment period on November 7, 2016, and it will end on November 28, 2016.

The proposed amendments to Rule 4512 and Proposed Rule 2165 pertain to the accounts of “Specified Adults.” A “Specified Adult” is defined as “a natural person age 65 or older or a natural person age 18 or older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests.” Thus, the Proposal applies to accounts held by seniors and other vulnerable adults.

Aging Clientele and the Role of the Registered Investment Adviser

October 14, 2015 | Alison Burns

The Investment Advisers Act of 1940 requires that investment advisers exercise a fiduciary responsibility toward clients. Traditionally, this duty extends to protecting clients against fraud and abuse. But how does this fiduciary duty change when faced with an aging population? It’s no secret: the average age of the American population is increasing. Baby Boomers dominate the world of investment management. In 2008 the SEC staff reported Boomers hold 50% of total U.S. household investment assets. This poses special duties and challenges on today’s registered investment advisers and broker-dealers.

NASAA (the North American Securities Administrators Association) has as of September 29th 2015, proposed a new model law that incorporates best broker-dealer and investment adviser practices for dealing with suspected financial exploitation of seniors and diminished capacity investors. That proposal is available here.
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State Investment Adviser and Securities Regulators Hold Annual Conference

October 6, 2015 | Steve Parker

Parker MacIntyre attorneys Steve Parker and Bryan Gort attended the 2015 annual conference of the North American Securities Administrators Association (NASAA) held last week in San Juan, Puerto Rico. As usual, the conference provided valuable guidance and updated information on areas of importance to state-registered investment advisers, as well as federal notice filed broker-dealers and SEC registered investment advisers.

Of interest to state-registered investment advisers are proposed amendments to Part 1B of Form ADV that would attempt to capture an RIA’s use of social media and information on the use of third-party compliance professionals.

NASAA also presented the findings of its 2015 coordinated investment adviser examination review, compiled from the results of over 1100 investment adviser examinations. Once again, books and records deficiencies was the leading category, with 78% of all examined entities having deficiencies in that area. Within that category the failure to maintain adequate client suitability data was the leading deficiency, accounting for 10% of the deficiencies noted within the books and record category.
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SEC Commissioner Calls for Greater Cooperation Between State and Federal Securities Regulators

June 4, 2012 | Steve Parker

Commissioner Luis A. Aguilar of the Securities and Exchange Commission (SEC) spoke at the recent NASAA/SEC Rule 19(d) Conference in Washington D.C. He addressed the importance of cooperation and collaboration between federal and state securities regulatory agencies in order to improve investor protection. Commissioner Aguilar also expressed a desire to have a continuing collaborative relationship between the SEC and the North American Securities Administrators Association (NASAA). “I continue to be interested in exploring more opportunities and avenues for the SEC and NASAA to partner and leverage our collective resources to protect investors,” Commissioner Aguilar said, “At a time when regulators are under greater constraints than ever, it makes sense for us to come closer together to further our common goals.”

Commissioner Aguilar discussed four areas in which the SEC and NASAA have worked together to improve investor protection. These areas include the transition of advisers to state regulation, crowdfunding, financial exploitation of the elderly and the creation of the Investor Advisory Committee.
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Insurance Agent Convicted of Selling Complex Annuity to Elderly Woman

May 4, 2012 | Steve Parker

An independent insurance agent, Glenn Neasham, was convicted on a felony-theft charge in March for selling a complex indexed annuity to an 83-year old client in a California court. He was sentenced to spend ninety days in jail. Prosecutors claimed that Mr. Neasham’s client had exhibited signs of dementia and was not capable of consenting to the transaction.

This case has stirred fear among insurance and securities agents. The state’s then-insurance commissioner stated in 2010, after Mr. Neasham’s arrest, that agents “who steal from vulnerable seniors will not get away with their shameful tricks.” Agents are attracted to indexed annuities because they receive high commissions, which can be 12% or more of the invested amount. As a result of this case and heightened regulatory scrutiny, agents will have to think twice before selling indexed annuities to the elderly. The $14,000, or 8%, commission that Mr. Neasham received was a factor used against him to prove his criminal intent.
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