What is the brokerage firm's role in detecting and preventing financial
abuse of seniors?
As our population continues to grow older, the financial abuse of senior
customers of brokerage firm has become a critical issue. Brokerage firms
have an affirmative duty to monitor senior customers’ accounts in
order to detect and prevent potential financial abuse of senior customers.
And, if a brokerage firm fails to develop, implement, and maintain reasonable
policies and procedures that aim to detect and prevent potential financial
abuse of senior customers, then the brokerage firm should be held legally
responsible and required to pay for the losses that the senior customer
Elder financial abuse comes in many forms. Oftentimes it involves a loved
one or caregiver taking advantage of a senior customer. Sometimes it’s
perpetuated by a third party who inserts themselves into the customer’s
life and begins taking control over the investor’s financial affairs.
In other instances, it may even be the financial advisor who is engaging
in the misconduct. The motive in these cases is always the same –
the schemer wants to rob the senior investor their hard earned savings.
For many years now, regulators and investor advocates have been warning
brokerage firms about the need take on the issue of financial abuse head
on. In 2012, the U.S. Government Accounting Office called senior financial
abuse “an epidemic. ”Our law firm has certainly seen an increase
in these types of cases in recent years.
When dealing with senior investors, brokerage firms must be on the lookout
for well-known red flags indicating potential financial abuse. These include
such things as the unexplained disappearance of cash; writing checks to
cash, taking loans, giving large gifts, or entering into other uncharacteristic
financial transactions; not paying routine bills or expenses; and changing
power of attorney or beneficiaries on insurance or investment accounts.
Frequent targets may include people who are suffering bereavement from
the loss of a loved one, as well as elderly investors who are suffering
from diminished capacity.
When a financial advisor becomes aware of suspected financial abuse of
an elderly customer, the brokerage firm must immediately take steps to
protect the customer, including putting temporary holds on the accounts,
talking in detail with the customer, and reporting the suspected abuse
to the appropriate local authorities.
If you or someone you care about has lost money as a result of the financial
abuse of a senior investor, please give us a call today for a complementary