Section 1. Short Title
Section 2. Definitions
Section 3. Governmental Disclosures
Section 4. Immunity for Governmental Disclosures
Section 5. Third-Party Disclosures
Section 6. Immunity for Third-Party Disclosures
Section 7. Delaying Disbursements
Section 8. Immunity for Delaying Disbursements
Section 9. Records
NASAA Model Legislation or Regulation to Protect Vulnerable Adults from Financial Exploitation | Adopted January 22, 2016
Legislative Text & Updated Commentary
for the 2018 Legislative Session
Section 2. Definitions
In this act, unless the context otherwise requires:
(1) “Agent” shall have the same meaning as in [insert state code section].
(2) “Broker-dealer” shall have the same meaning as in [insert state code section].
(3) “Eligible adult” means:
(a) a person sixty-five years of age or older; or
(b) a person subject to [insert state Adult Protective Services statute].
(4) “Financial exploitation” means:
(a) the wrongful or unauthorized taking, withholding, appropriation, or use of money, assets or property of an eligible adult; or
(b) any act or omission taken by a person, including through the use of a power of attorney, guardianship, or conservatorship of an eligible adult, to:
(i) Obtain control, through deception, intimidation or undue influence, over the eligible adult’s money, assets or property to deprive the eligible adult of the ownership, use, benefit or possession of his or her money, assets or property; or
(ii) Convert money, assets or property of the eligible adult to deprive such eligible adult of the ownership, use, benefit or possession of his or her money, assets or property.
(5) “Investment Adviser” shall have the same meaning as in [insert state code section].
(6) Investment Adviser Representative” shall have the same meaning as in [insert state code section].
(7) “Qualified individual” means any agent, investment adviser representative or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser.
Relevant definitions of terms used throughout the Model Act are found in Section 2. The definition of “eligible adult” includes any natural person who, at the time of the suspected financial exploitation, is 65 years or older or is subject to the provisions of a state’s adult protective services (“APS”) statute.[i]
The term “qualified individual” consists of those persons charged with certain responsibilities and provided certain immunities under the Model Act. Qualified individuals include “agents” and “investment adviser representatives” (or similar terms) as defined in a jurisdiction’s securities laws. Qualified individuals also include persons serving in a supervisory, compliance, or legal capacity for a broker-dealer or investment adviser. Qualified individuals may be registered in any capacity with the jurisdiction or physically located in the jurisdiction. A broker-dealer or investment adviser employing or supervising such qualified individuals also may be registered or located in the jurisdiction.[ii]
The term “financial exploitation” is intended to be interpreted broadly and to include any unlawful or unauthorized taking, withholding or deprivation of beneficial ownership rights in any money, assets or property in which an eligible adult has a lawful property interest. The elements of wrongfulness in the definition of financial exploitation are intended to be subjective, not objective, standards – i.e., it is “financial exploitation” within the meaning of the Model Act if a qualified individual subjectively believes that an unlawful or unauthorized taking, withholding or deprivation of beneficial ownership rights has occurred, regardless of whether that person’s belief is objectively correct. (Objective considerations are reflected in the Model Act’s operative provisions.)
[i] The decision to affix the age at 65 reflects a desire to maximize the Model Act’s consistency with related proposals that are now being developed by Congress, FINRA, and some state legislatures. As originally proposed, the Model Act would have applied to adults 60 years or older or those adults that would be subject to the provisions of a state’s APS statute. Some commenters suggested adjusting the age to 65 to bring the Model Act in line with other frameworks aimed at protecting seniors from financial exploitation (including existing state definitions, federal legislation such as the proposed Senior$afe Act, and FINRA Regulatory Notice 15-37), and the Seniors Committee and NASAA ultimately agreed.
[ii] As proposed for public comment, the Model Act used the term “qualified employee,” however this term was revised in the final version of the Model to make clear that the Model Act does not only apply to employees of a broker-dealer or investment adviser, but also to any independent contractors that may be fulfilling any of the roles described in the definition. The use of the term also reflects the determination that requiring individual agent and adviser level reporting is appropriate given these individuals often have closer relationships with their clients and customers than does any firm or institution. Some commenters suggested that the Model Act limit the definition of qualified individual to only those employees of a broker-dealer or investment adviser that serve in a supervisory, compliance, or legal capacity, arguing that the duties of qualified employees and the decisions qualified employees must make regarding the sensitive issues surrounding potential financial exploitation are better suited for more senior, experienced personnel. Commenters also expressed a concern about multiple reports involving the same vulnerable adult. Other commenters felt the reporting personnel should be expanded. While the Committee considered these comments, the Committee ultimately determined that requiring individual agent and adviser level reporting is appropriate given these individuals often have closer relationships with their clients and customers.