NASAA Coordinated Exams Focus on Broker-Dealer Policies and Procedures for Senior Investors

WASHINGTON, D.C. (September 12, 2016) – Preliminary findings of coordinated examinations of broker-dealer firms by state securities regulators show that while improvements have been made in how firms interact with their elderly clients, some firms lack formal written procedures on key areas related to senior investors.

“The preliminary findings from the coordinated examinations indicate that efforts to highlight the need for procedures that focus on senior investor matters have been successful at effecting change, but continued progress is necessary to best serve our aging population,” said NASAA President and Maine Securities Administrator Judith Shaw.

The 2016 NASAA coordinated examination initiative, which included 62 exams, focused largely on activity in senior client accounts at the examined firms. NASAA Broker-Dealer Section Chair and Missouri Securities Commissioner Andrew Hartnett said the coordinated exams were designed to gather information from the firms on policies, procedures, and training related to seniors and other potentially vulnerable customers. The preliminary results are available on the NASAA website here.

The coordinated examination initiative focused on whether the subject broker-dealer had implemented written procedures specific to four key issues: the suitability of recommendations to senior investors; communications with seniors; escalation protocols in the case of suspected elder abuse; and escalation practices in response to signs of diminished capacity. About 39 percent of the exams resulted in findings that the firm had established written procedures addressing all four of these areas. However, 20 percent of the exams found that the firm had not established written procedures addressing any of the four areas.

Highlights of the preliminary findings include:

  • About 62 percent of the exams found that the broker-dealer had established a formal committee or designated at least one person to focus on senior investor issues.
  • There appears to be limited development of “trusted contact forms” at firms, and very limited use of the forms even after they are developed.
  • Only 24 percent of exams involved a firm that requires verification of senior clients’ profile information more frequently than every 3 years.
  • Potentially unsuitable recommendations to senior investors were identified in 10 percent of the exams.
  • Though many firms do not permit the use of “senior designations,” those that do may need to improve related controls and procedures.
  • At most offices where any complaint had been filed, the majority had been filed by senior clients.

“The preliminary findings indicate that many broker-dealers are taking valuable steps to develop procedures that are mindful of the common issues facing senior clients, however, they also identified areas where improvement is needed,” Shaw said.

For more information:
Bob Webster | Director of Communications
202-737-0900

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