New SEC rule could protect vulnerable adults from exploitation

There is a fine line to tread when a concerned person observes what appears to be financial exploitation of a person with cognitive impairment. Under the law, an adult is presumed to be “competent” unless and until a Court has entered an Order declaring him or her to be incapacitated. As dementia develops, there can be a long distance between the onset of impaired judgment with impaired resistance to suggestion, and the point of actual incapacity.

Third parties who interact with the customer — such as people working in banks and brokerages,  insurance agents etc. — may observe disturbing behavior. They may observe that their customer is now accompanied by somebody who seems to be telling them what to do or is doing the speaking for the customer. There may be a sudden new pattern of  changing the title or beneficiary of assets. These observations can put the financial professional in a tricky position. Reporting is optional, not mandatory, for such professionals under the New Jersey Adult Protective Services Act, N.J.S.A. 52:27D-409. ” 4.a.(1) A health care professional, law enforcement officer, firefighter, paramedic or emergency medical technician who has reasonable cause to believe that a vulnerable adult is the subject of abuse, neglect or exploitation shall report the information to the county adult protective services provider.      (2) Any other person who has reasonable cause to believe that a vulnerable adult is the subject of abuse, neglect or exploitation may report the information to the county adult protective services provider.”

Recently, the SEC adopted new FINRA rules (Financial Industry Regulatory Authority) designed to give some tools to financial professionals who are seriously concerned about these kinds of problems. The rules will become effective February 5, 2018. FINRA Rule 2165 is called Financial Exploitation of Specified Adults. It allows members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief that financial exploitation of these customers is going on. In addition, two amendments to FINRA Rule 4512 (Customer Account Information) now require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. Many readers may have received such notices from your investment managers.

We have been involved in cases over the years where the first person to realize that something suspicious was going on was a banker or investment manager. Those alerts let to the placement of court-ordered protective arrangements which safeguarded the assets and protected the individual against further exploitation. The new rules should prove to be a helpful “arrow in the quiver” towards preventing financial exploitation of aged and infirm people in our communities.

Call us to discuss elder care planning and litigation …….. 732-382-6070 

Share This

Leave a Reply

Your email address will not be published. Required fields are marked *