Guarding Grandma’s Assets

Author: NICSA

Almost 37 percent of seniors are affected by financial abuse in any given five-year period (1)—an alarming statistic considering that only 1 in 44 cases is reported (2)

“This really underscores the need for better protection, preventative measures, tools and processes to combat this problem,” Nick Nichols, Vice President, Risk and Compliance Intelligence Group, DST Systems, Inc., explained to NICSA members on #WebinarWednesday.

Nichols moderated the Aug. 9 discussion, “Protecting Vulnerable Shareholders”, which focused on how firms can identify and protect vulnerable investors (NICSA members can replay an archived version of the webinar here.

Joseph Brady, Executive Director, North American Securities Administrators Association, Inc., detailed his association’s role in protecting the vulnerable.

“The issue of senior financial exploitation has been a part of NASAA’s mission since its existence,” Brady said. “One of the more recent and visible efforts was the adoption of the NASAA Model Act by our members.”

According to Brady, the NASAA Model Act is designed to provide tools to protect vulnerable adults—defined as those age 65 and up or subject to a state adult protective services law—from financial exploitation. It mandates that reports are sent to the state securities regulator and adult protective services agency when financial exploitation has been attempted or occurred.

The act authorizes disclosure to third parties in cases where an eligible adult has previously been designated as such, and requires that disclosures may not be made if that third party is suspected of financial exploitation. Finally, it authorizes a delay of up to 25 business days in disbursing funds upon suspicion of financial abuse.

The act was approved in 2016. While three states had “report and hold” laws prior to 2016, an additional 13 states have now enacted laws based on NASAA’s model.

Regulatory Requirements
Effective February 5, 2018, FINRA Rule 2165 (Financial Exploitation of Specified Adults) will “permit members to place temporary holds on disbursements of funds or securities from accounts of specified customers where there is a reasonable belief of financial exploitation of these customers,” and “require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for the customer’s account.” (3)

While the regulations do not specifically apply to transfer agents, Crissie Wisdom, AML Compliance Officer, Fraud Prevention Manager, Invesco, said TAs have a sense of obligation to help combat this epidemic.

“It’s difficult to recall a time when I was disappointed that a new and potentially cumbersome regulation didn’t apply to me or my institution, but that’s really where we found ourselves,” Wisdom said. “We want to comply … we view this as the right thing to do. Most TAs already hold assets if we suspect fraud and rely on the terms of the fund’s prospectus to protect us in our decisions to do so, and we’re really just expanding on that and taking some additional steps to document our processes and train our staff.”

Programs such as Senior$afe™ Training are available to do just that. Though the program was originally launched by the Maine Council for Elder Abuse Prevention for banks and credit unions, NASAA customized it for client-facing broker dealers as well as investment and advisor staff.

“The Senior$afe™ Training program is a comprehensive program addressing the issue with the understanding that it takes a lot of different resources to fill the gaps,” Brady said.

The program teaches employees to identify warning signs, recommends action steps for front-line staff and suggests internal reporting protocol.

Best Practices
Firms without a targeted program should first define who they consider “vulnerable”—and what they’re going to do to protect them, Wisdom said.

NASAA’s offers practical tips and guidelines for recognizing financial exploitation, Brady said. “We’ve also done surveys of the industry to understand policies and procedures related to how firms handle issues with seniors and their accounts.”

Common red flags, Wisdom said, include a caller who doesn’t sound the age indicated on the account, a caller who seems coached on what to say, a written request that is signed with an unsteady hand, and inconsistent shareholder stories.

Once you’ve trained your staff and start identifying potential fraud, document everything, Wisdom said. “If you’re holding up someone’s redemption, you need to document it so you have a very good reason for having done it.”

In addition to front-line training, Nichols said that DST Systems, Inc. is investing heavily from the technology perspective. “The good news is, there’s a lot of data out there on shareholder activity,” he said.

DST is monitoring shareholder behaviors to identify activities that are out of the norm, Nichols said. “When there is an incident or any activity that warrants inspection, we are working on technology that can ‘learn’ from it…it’s about leveraging technology to become ‘reactive’ rather than ‘proactive,’ because once dollars go out the door, it’s really hard to get them back.”

Nichols reminded listeners that it’s not just about technology—it’s about technology and training. Technology helps monitor both successful and attempted fraudulent acts, but it’s essential “that the information is shared across your businesses so you’re not subject to the same type of—or a very similar—scam in various areas of your organization,” Nichols said.

1. The True Link Report on Elder Financial Abuse (2015). Retrieved from
2. National Adult Protective Services Association, “Elder Financial Exploitation” (2017) Retrieved from
3. FINRA (March 2017). Financial Exploitation of Seniors. Retrieved from


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