August 27, 2019 Articles

2019 Midyear Update on Senior and Vulnerable Investor Legislation

States are increasingly providing firms with more effective options for fighting financial exploitation of senior and vulnerable investors.

By Lawrence E. Fenster and Daniel Strashun

Three years after the North American Securities Administrators Association (NASAA) passed an Act to Protect Vulnerable Adults from Financial Exploitation, 24 states have adopted the model act or similar protections through legislation or regulation (referred to as “report and hold laws”). In 2019, the state legislatures of Arizona, Maine, and Virginia have passed these laws, while California, New Hampshire, New Jersey, and Washington, D.C. have pending report and hold legislation.

The model act requires broker-dealers and state-registered investment advisors to report suspected financial exploitation of senior and vulnerable investors to state agencies. It also permits firms to temporarily withhold the disbursement of funds when exploitation is suspected. In addition, the model act allows firms to communicate with a contact person designated by the customer, when needed, as part of its investigation into the suspected exploitation. States adopting report and hold laws have made six primary changes to the model act.

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