RIA Compliance and Practice Management Blog

NASAA Adopts New Elder Financial Abuse Model Rule for RIA Firms

Posted by RIA in a Box

Mar 1, 2016 9:00:00 AM

NASAA Elder Financial Abuse Model RuleOn January 22, 2016, the North American Securities Administration Association (NASAA) members voted to adopt the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation.

The act gives state regulators and industry participant’s not only new tools to help detect and prevent financial exploitation of vulnerable adults, but will also provide an avenue for industry professionals, investment advisers, broker-dealers, securities regulators and adult protective agencies to work together to further protect vulnerable citizens from financial exploitation.

The model rule seeks to bring forward any qualified individual as defined under the act as any agent, investment adviser representative or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser in order to further protect eligible adults as defined under the model rule as any person 65 years of age or older; or a person subject to any Adult Protective Services statute.

In summary:

  • Qualified individuals are required to promptly report to Adult Protective Services and state regulators, should they have reasonable belief, of any exploitation, past exploitation, or attempted exploitation of an eligible adult.
  • Qualified individuals are authorized to notify third-parties previously designated by the eligible adult. If the third party is suspected to be involved in the financial exploitation of an eligible adult, then qualified individuals are not required to notify such a third party.
  • Qualified individuals are provided immunity under the act as an incentive to encourage investment advisers and broker-dealers to report any potential exploitation as soon as possible.
  • Broker-dealers or investment advisers are permitted to withhold disbursements from an account of an eligible adult or an account on which an eligible adult is a beneficiary of for up to 15 business days if financial exploitation is suspected.
  • Broker-dealers or investment advisers are provided immunity from any administrative or civil liability as a result or reporting the financial exploitation of withholding disbursements.
  • Broker-dealers or investment advisers must provide access to and relevant records to the suspected or attempted financial exploitation to securities regulators or adult protective agencies.

The NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation can be adopted by legislation or regulation by NASAA members in their respective states should they choose to do so in the near future. In general, many NASAA model rules do ultimately serve as a basis for new state regulations. As such, as registered investment adviser (RIA) compliance consultants, we recommend that the Chief Compliance Officer (CCO) of all investment advisory firms review this new model rule in detail to prepare for the implementation of new policies and procedures related to elder financial abuse that will likely need to be implemented in the near future.

For the full text of the Rule please click here.


Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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