March 8, 2018

Securities and Exchange Commission Investor Advisory Committee Meeting – Discussion Regarding Efforts to Combat the Financial Exploitation of Vulnerable Adults



Gregory J. Dean, Senior Vice President of Government Affairs, FINRA

In his testimony, Dean discussed the Financial Industry Regulatory Authority’s (FINRA’s) work to combat the financial exploitation of vulnerable adults. Dean noted that there are new products and markets today that didn’t exist ten years ago, and due to the required minimum distribution (RMD), it is important for seniors to understand what information they need to make financial decisions. Dean highlighted that education is a key component of combating exploitation and explained some FINRA tools, including an online component, printed materials about avoiding fraud, and traditional outreach. Dean explained that through a partnership with the American Library Association, FINRA has three traveling exhibits on financial decision-making that have appeared at more than 50 libraries around the country.

Dean explained how FINRA is partnering with the Securities and Exchange Commission (SEC), state partners, the North American Securities Administrators Association (NASAA), Adult Protective Services (APS), and law enforcement agencies to address financial fraud. Dean also discussed the new FINRA Rule 2165 on report and hold and 4512 on trusted contact, which went into effect on February 5th and addressed two important components of combatting fraud. Dean also highlighted the success of the FINRA senior helpline, which has fielded more than 12,000 calls from all 50 states.

Robert E. Roush, Director, Texas Consortium Geriatric Education Center

In his testimony, Roush discussed the research and education being conducted on cognitive impairment. Roush explained how the Texas Consortium Geriatric Education Center conducts programs throughout the country to educate doctors and healthcare workers to raise awareness about mild cognitive impairment (MCI). According to Roush, individuals with MCI can make “four times the amount of financial errors as their peers who don’t have MCI.” Roush explained that through continuing medical education programs, they are reaching tens of thousands of medical professionals to explain that their senior patients may be vulnerable to exploitation and that there are ways they can help. Roush highlighted that 10,000 Americans turn 65 every day, and that there is a need to inform older Americans that they can be vulnerable to fraud through no fault of their own. 

Judith M. Shaw, Maine Securities Administrator and Co-Chair of the Maine Council for Elder Abuse Prevention

In her testimony, Shaw discussed her experience as the securities regulator in Maine, the nation’s oldest state by median age. Shaw said that the exploitation of older adults has far-reaching effects and “demands a holistic, community-based solution,” noting that financial exploitation is often accompanied by other forms of elder abuse. Shaw said communities must form new safety nets for the most vulnerable, and it is “imperative” to approach the problem by working with those on the frontlines, encouraging reporting, and establishing protocols for referrals to community-based resources that can help reduce losses.

Shaw highlighted the Maine Senior Safe Training Program, a private-public partnership that assesses how to increase detection and reporting of financial exploitation. The program aims to address misinformation about the role and operation of APS, the jurisdiction of APS and law enforcement, and the privacy and liability concerns about reporting exploitation. She continued that the program consists of brochures for consumers, as well as training and materials for financial professionals. Shaw noted that the program encourages financial institutions to develop relationships with local law enforcement, and internal protocols for addressing red flags. Shaw also discussed the development of model legislation by NASAA, which emphasizes mandated reporting and permits a 15-day hold on suspicious disbursements, among other provisions.

Shaw also discussed the Senior Safe Act, which is currently being considered by the Senate as part of a larger regulatory relief bill. She explained that the Senior Safe Act encourages financial institutions to report suspected elder financial exploitation by providing qualified immunity from liability who, in good faith and with reasonable care, disclose suspected exploitation to a regulatory or law-enforcement agency

Question & Answer

Senior Safe Act

Committee member Damon Silvers stated that sometimes even legislation with bipartisan support can be slow to pass. Because of this, Silvers asked if provisions of the Senior Safe Act could be enacted by the SEC through rulemaking instead. Shaw responded that she did not know enough about the SEC’s rulemaking authority to be able to give legal advice or guidance on this issue. However, Shaw stated that when she looked into doing something similar at the state-level in Maine, she came to the conclusion that it would not be favorable to enact such provisions on immunity via rulemaking.


Silvers asked the panel to what degree they had witnessed issues around suitability in the context of developments in capital markets. Shaw said that she has found suitability to be an issue, as she has come across, in the process of examinations, representatives who do not understand the complex instruments they are selling. Dean stated that FINRA’s rules on suitability should help combat this with regards to the broker dealer community, and that suitability is one of the top issues FINRA is planning on looking at in 2018.

Combatting Fraud

Committee Assistant Secretary Nancy LeaMond discussed how she heard the target age for scams was lowering, and that more people in their early-to-mid 50’s have become major targets. She asked panel members to what extent they had seen voluntary efforts from banks and credit unions to aid in the process of combatting this elder abuse. Shaw responded that she has received overwhelming support on combatting the issue, most of which is voluntary.

Committee member Jennifer Merietta-Westberg stated that because fraud is an issue that is not only affecting the elderly population, she could see a benefit for one national hotline/helpline number. She asked panel members what they thought of this. Shaw stressed her support for collaboration, stating that she thinks there is value in having multiple partners with different areas of expertise working together, as opposed to only one national hotline or helpline. Dean agreed with Shaw, noting successes in FINRA having its own hotline while working in tandem with both state officials and the SEC to combat the issue.

Committee member Lisa Fairfax asked how the information learned in combatting financial exploitation of elders can be used and applied to other areas of investor populations to combat financial fraud. Dean discussed that he believed FINRA taking a multi-tiered approach to the issue could be very useful in combatting fraud in other areas, citing success in using different forms of disseminating information, from web-based platforms to library programs, as an example. He also stated that he believes the information FINRA hopes to gain from its partnership with the Stanford Center on Longevity to test effectiveness of fraud prevention materials will also come in handy and can be applied to other investor populations. Shaw responded as well, stating that educational materials detailing identification of red flags and characteristics of scam artists can be applied to all populations.

Cognitive Decline

Committee Secretary Craig Goettsch asked Roush if there was a test for MCI, to which Roush responded there is. Goettsch also asked the panel what else could be done to combat the issue in the education space. Dean responded that he believes the financial situation for senior investors is very complex in general, as it can be confusing for an elderly person to know what to do with payments from multiple avenues coming together all at the same time.


Committee Chairman Anne Sheehan asked if Shaw feels hopeful that other states will adopt the NASAA Model Act, in addition to the 15 states that have already done so. Shaw responded that she believes there is a lot of momentum for adoption, and that things may simply be slower in some states because they have different legislative sessions, for example.

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