NASAA Study Examines Broker-Dealer Senior Practices and Procedures

Study Shows How Firms Can Help to Guard Senior Investors From Harm

WASHINGTON, D.C. (June 15, 2017) — A new study from the North American Securities Administrators Association (NASAA) released in recognition of World Elder Abuse Awareness Day offers an inside look at the dangers seniors face from financial fraud and exploitation, and broker-dealer procedures to help protect senior clients.

The study, prepared by the NASAA Broker-Dealer Section’s Investment Products and Services Project Group, presents findings of a survey of the senior-related practices and procedures of more than 60 broker-dealer firms throughout the United States. The study includes information about firm supervisory procedures, training, escalation and reporting of senior issues, resolution of senior issues, and use of trusted contact forms.

“Being face-to-face with clients puts financial services professionals on the frontlines when it comes to stopping suspected cases of senior financial fraud and exploitation. As the U.S. population ages, the financial industry can help detect and report financial crime and abuse of the elderly and other vulnerable adults,” said Mike Rothman, NASAA President and Minnesota Commissioner of Commerce.

Data collected for the study show responding firms reported nearly 2,300 cases of suspected senior-related fraud or exploitation to authorities in 2015. The vast majority of these escalated external reports (45 percent) involved customers in the 81-90 year age group. Reporting by firms to adult protective services occurred in at least 62 percent of internally escalated cases, but less frequently to local law enforcement (4 percent) or state securities regulators (less than 1 percent).

The study also collected examples of how broker-dealers prevented or resolved senior issues. More than half of the examples involved attempts by family members or third parties to access senior customers’ accounts or funds or other potential forms of unauthorized access. In one example, a broker-dealer contacted adult protective services because an elder client on a church ministry trip met a prisoner (serving a long sentence for murder) and was attempting to add the prisoner as a beneficiary to her million-dollar account. Additional senior-related schemes broker-dealers said they thwarted or reported include:

  • A client who believed someone needed assistance to collect a $7 million settlement delayed due to identity theft.
  • A client who thought a large inheritance was coming from China due to the death of a business partner, but instead was educated by the broker-dealer on advance fee scams.
  • A client who tried to send $200,000 in a $4.5 million sweepstake scam, but instead the broker-dealer contacted the client’s son.
  • A client who wanted to send a wire transfer to a European woman needing money to come to the United States.

The study found that while more than half (54 percent) of the responding firms lacked a formal policy defining senior customers, 90 percent had either a dedicated team or at least some type of internal process for addressing senior issues. In addition, nearly all (95 percent) provided some type of training on senior issues, with the most common topic being recognizing signs of elder financial abuse. Also, 94 percent had a formal process to internally report concerns regarding diminished capacity and/or elder financial abuse. Most firms (81 percent) indicated they had a decision-maker responsible for reporting concerns to agencies or authorities outside of the firm. Less than half (41 percent) had developed a form for customers to identify an emergency or trusted contact person.

Included in the study is a checklist of recommended areas of consideration for firms working toward improving their senior-related policies and procedures. The full study is available in the Broker-Dealer section of the NASAA website (nasaa.org) and in the Industry section of NASAA’s Serve Our Seniors website (serveourseniors.org).
— NASAA —

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