By Michael Williford, Fall 2016 Student Intern
NASAA recommends that brokerages develop policies and procedures designed to detect the financial exploitation of seniors, in addition to simply identifying older, potentially at-risk investors. Among the signs that should help brokers identify at risk investors who may be actively being exploited, NASAA recommends brokers watch for specific behaviors that indicate an elderly investor is being taken advantage of; these behaviors may trigger reporting obligations under existing state laws and the NASAA Model Act, where it has been adopted.
The signs of exploitation that NASAA identified in its discussions with securities industry experts, advocates for the elderly, and adult protective services professionals include unusual and repeated cash withdrawals or wire transfers—this could be a sign that an investor has fallen prey to boiler room type scam, which we’ve discussed before on this blog. In addition, the sudden appearance of new and unknown friends, business associates, or even relatives should also be viewed with a skeptical eye. Nervousness or anxiety when conducting telephonic financial transactions or when visiting a financial services office are also suspicious behavior that may indicate a pattern of exploitation. Having little or no knowledge about their own financial status can be a sign that an elderly investor is no longer in control of his or her finances. If a person interferes when you try to speak to a loved one about your loved one’s financial status, it could be a sign that the individual is being exploited, as are sudden changes in important legal and financial documents such as powers of attorney, account beneficiaries, wills, or trusts; as are unexplained or unusual windfalls accompanied by a reluctance to discuss the details. We all have some sense of what normal financial activity looks like for the elderly investors in our lives. If you see a large departure from that behavior in combination with any or all of the factors outlined above, talk to your state’s human services department. There are almost always divisions of regulators devoted to helping protect seniors from the kind of exploitation at issue here.