Lawmakers and Financial Industry Regulatory Authority (FINRA) have been focused on enacting strengthened legislation and rules to protect the growing elderly population. In many states and according to FINRA, seniors are defined as individuals over the age of 65. Baby boomers, now defined as senior citizens, control over 70 percent of the nation’s disposable income and it is estimated that, by 2029, their financial assets will peak at $26 trillion.
On May 24, 2018, President Trump signed into law the Senior Safe Act of 2018, which revises many of the provisions of Dodd Frank relating to credit unions, community banks and small regional banks. The purpose of the Act is to prevent senior financial abuse and encourage banks to report misconduct. The Act further encourages the development of training and education to help employees identify circumstances that may constitute financial abuse of seniors. This legislation follows new and/or strengthened legislation addressing elder financial abuse enacted in many states.
In 2018, FINRA enacted Rule 2165, relating to “Financial Exploitation of Senior Investors.” Rule 2165 encourages brokerage firms to place temporary freezes on brokerage accounts where the brokerage reasonably suspects that abuse is, has or will occur. The brokerage firm must initiate an internal review and make a determination whether a temporary hold should be implemented and/or extended as necessary to prevent misconduct. In the arbitration setting, Rule 2165 will very likely be used against brokerage firms that fail to detect financial abuse of the elderly.
FINRA has clearly expressed its expectations that brokerage firms “more quickly and effectively address suspected financial exploitation of seniors and other specified adults” and detect “potentially abusive or unscrupulous sales practices or fraudulent activities targeting senior investors.”
Common signs of elder financial abuse include:
• Large, unexpected withdrawals or distributions
• Unusual spending activity out of the brokerage account
• New or unfamiliar people involved in the account
• Unusual trade activity being directed by individuals with power of attorney
Elder financial abuse can be difficult to identify. Often, it is perpetrated by people closest to the senior investor. According to a 2014 study conducted by the Journal of General Internal Medicine, it is estimated that nearly 58 percent of bad actors are family members, 17 percent are friends and neighbors and 15 percent are paid home care assistants. This means that the misconduct is principally committed by people within the senior investor’s circle of trust.
In order to reasonably protect yourself and those closest to you from becoming a victim of elder financial abuse, it is good practice to do the following:
• Regularly review your account statements and trade confirmations for suspicious activity
• Regularly speak with your Financial Advisor
• Look for signs that your loved are physically or mentally unable to monitor their financial affairs. If necessary, arrange for limited guardianship or the creation of a trust in which the trustee is a financial institution
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration matters. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. Simply put, he knows how the other side evaluates cases, which gives you a competitive advantage.
If you have experienced investment losses, and you have questions or concerns regarding your relationship with your Financial Advisor, contact the Wolper Law Firm at 800.931.8452 or firstname.lastname@example.org for a free, confidential consultation and case evaluation.
Other Frequently Asked Questions:
- Are Brokerage Firms Responsible For Investment Losses Caused By A Financial Advisor’s Misconduct?
- Financial Advisor Expungement: Past, Present & Future
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- How Do Arbitrators Determine Suitability?
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- What Are A Stock Broker’s Legal Obligations to Me?
- What Are The Benefits And Risks Of Using Margin In A Brokerage Account?
- What Are the Most Common Types of Broker Fraud or Negligence?
- What Laws Protect Against Elder Financial Abuse?