Last week, the Florida House of Representatives unanimously approved an amendment to the securities laws to be titled the and Act for the Protection of Vulnerable Investors. The proposed law is designed to protect vulnerable investors, including persons who are more than 65 years old, but younger persons are included as well. Under the proposed bill, a vulnerable adult is a person 18 years of age or older whose ability to perform the normal activities of daily living or to provide for his or her own care or protection is impaired due to a mental, emotional, sensory, long-term physical, or developmental disability or dysfunction, or brain damage, or the infirmities of aging.
This provision is similar to other “hold and report” laws which have recently been adopted by many other states. These laws protect brokerage firms from being sued for freezing accounts and notifying a trusted contact and authorities where they have a reasonable belief of “financial exploitation” of a vulnerable investor by another. The proposed legislation applies where money or securities are taken out of an account or trades are made in the brokerage account of a vulnerable investor.
The Florida House of Representatives unanimously approved the legislation, and it is widely believed that the bill will pass the Florida Senate. The proposed legislation currently is pending before the Rules Committee of the Florida Senate and must receive approval from that committee before it goes to the full Florida Senate for a vote.
Under the proposed Protection of Vulnerable Investors law, a securities dealer or investment adviser may place a hold of up to 15 business days on a transaction or distribution if it reasonably believes that financial exploitation of a vulnerable adult has occurred or been attempted, or is occurring or will be attempted. The proposed legislation permits a brokerage firm to extend the hold for up to 10 additional business days if the firm’s review of the underlying conduct continues to support the hold. The identical bills pending in the Florida House of Representatives and Florida Senate require the firm, within three business days, to report the initial hold to the Florida Office of Financial Regulation (OFR), as well as all persons authorized to transact business in, and any designated trusted contact for, the vulnerable investor’s account. The firm also must notify OFR of any extension of the original hold.
FINRA Also Has Rules to Protect Elderly or Vulnerable Investors
The brokerage industry’s own regulators have put similar safeguards into place to protect elders or mentally incapacitated customers from financial exploitation.
The Financial Industry Regulatory Authority (FINRA) allows broker-dealers to put a hold of up to 15 days on the disbursement of funds from seniors’ accounts if they believe that an individual is being financially exploited. Another recent attempt to prevent elder abuse is “trust contact” forms. Firms are now required to ask their retail clients to provide the name and trusted contact and provide information for a person who can be contacted in the event of suspected financial exploitation.
The 2018 Senior Safe Act protects brokers and their firms from liability when reporting possible exploitation to the authorities. This federal law protects covered investment professionals from liability where that person reports on the potential exploitation of a senior (defined as not younger than 65 years) to a covered agency. The immunity established by the Senior Safe Act is provided on the condition that (1) certain employees receive training on how to identify and report exploitative activity against seniors before making a report, and (2) reports of suspected exploitation are made “in good faith” and “with reasonable care.”
To help advisors detect elder financial abuse, the Securities Industry and Financial Markets Association (“SIFMA”) released a senior investor protection tool kit that helps financial professionals detect the signs of undue influence, power of attorney abuse, and other fraud.
You can Protect Elderly or Vulnerable Family Members
These regulatory protections are helpful to prevent and detect fraud, but there are additional steps elder investors can make to protect themselves and their loved ones.
Create a durable power of attorney. A durable power of attorney allows the investor to assign someone to oversee their finances in the event they’re incapacitated.
Create a revocable trust. A revocable trust can be established so that in the event of incapacity a co-trustee can help pay bills and protect assets.
Discuss responsibilities with family. While it may be difficult, it is helpful to have discussions with relatives so that they are well aware of what accounts exist and who will be responsible in case of incapacity. If a trusted contact is designated, tell that person and let them know what bills they will be required to take care of. You might also consider having a trusted relative receive duplicate statements online or via email so they know what is happening in the account.
Protect Yourself – Get an Investor Fraud Lawyer to Represent You or Your Family
If you or a loved one has been the victim of investment fraud, then you need an experienced, aggressive securities fraud attorney to zealously pursue your case against the perpetrators. We invite you to contact securities attorney Melanie Cherdack.
Because she has been in the trenches as a former Wall Street attorney, investor fraud lawyer Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment loss. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk due to the actions of others.
If you have lost money due to investment fraud or simple broker negligence, it is crucial to hire a lawyer who fully understands this area of law. Former Wall Street securities attorney Melanie S. Cherdack represents individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499.