We all do what we can to prevent fraud, but sometimes it still occurs, and seniors are often the target. This year, several laws were passed that will give financial advisers and firms more leeway when it comes to protecting the money of vulnerable customers.
Until recently, there has only been so much that a financial firm could do if it suspected fraud. In fact, According to Investment News, when Fidelity Investments froze the assets of an elderly woman in Atlanta last year because they suspected someone was taking advantage of her financially, they ended up in a legal battle because of it. The woman claimed that she could not pay for medical bills and necessary home repairs while her funds were inaccessible.
The new rules help to reduce the risk of this type of situation by allowing advisers and firms to take necessary measures to ensure that their client’s money is safe if fraud is suspected.
The Senior Safe Act is a federal law that was signed this year. It protects advisers and firms that report senior abuse to regulators. It also mandates a training program and that someone is designated to manage client interventions.
The Financial Industry Regulatory Authority (FINRA) has also put the new Rule 2165 into place. It lets broker-dealers place a temporary hold on a client’s disbursement of funds if they have reason to believe that exploitation is likely to occur or is already occurring. The hold can last from 15-25 days. It is intended to allow enough time for an investigation into the possible fraud or theft and for firms to contact adult protective services or a trusted person in the victim’s life. A different FINRA rule already requires broker-dealers to obtain that trusted person’s contact number when an account is first opened or when it is updated.
In addition, thirteen states across the nation have already passed legislation based on a model law created by the North American Securities Administrators Association, with an additional ten more states expected to join that list within the next few months.
Despite these new laws and safeguards, firms still risk being sued for freezing assets. While the situation is improving, it still is not ideal.
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