Senior & Vulnerable Adult Protection

Protecting senior investors and vulnerable adults from financial exploitation is a critical regulatory priority. NASAA and FINRA have established specific rules to help firms identify and respond to suspected exploitation.

NASAA Model Act to Protect Vulnerable Adults

The NASAA Model Act provides a framework for states to adopt rules protecting seniors and vulnerable adults from financial exploitation.

Key Definitions

Adoption by States

As of 2025, Idaho became the latest state to adopt the Model Act. NASAA's review found the Model Act has been "overwhelmingly successful" at protecting investors.

Trusted Contact Person

Purpose

A trusted contact is a resource for the firm when:

• Financial exploitation is suspected
• Client shows signs of diminished capacity
• Client cannot be reached about account activity
• There are concerns about the client's welfare

Key Points

When to Contact

Firms may contact the trusted contact person to:

• Confirm client's contact information
• Inquire about client's health status
• Identify legal guardian, executor, or agent with authority
• Discuss concerns about possible exploitation

Temporary Holds on Disbursements

When Permitted

A firm may delay a disbursement from a client's account when:

Duration of Holds

FINRA Rule 2165

FINRA Rule 2165 (Financial Exploitation of Specified Adults) aligns with NASAA, permitting:

• Holds on disbursements
• Holds on securities transactions (in some cases)
• Up to 25 business days total hold period
• Required notification to trusted contact

Red Flags for Financial Exploitation

Signs of Potential Exploitation

Signs of Diminished Capacity

Reporting Requirements

Mandatory Reporting (Many States)

Qualified individuals who reasonably believe exploitation has occurred, been attempted, or is being attempted must:

• Promptly notify Adult Protective Services
• Promptly notify state securities regulator
• Maintain documentation of observations and actions

Safe Harbor Protections

Documentation Requirements

Best Practices

Proactive Measures

• Request trusted contact designation early in relationship
• Document client's baseline cognitive function and behavior
• Train all staff on warning signs of exploitation and diminished capacity
• Establish clear procedures for escalating concerns
• Review accounts of senior clients more frequently

When Concerns Arise

1. Don't ignore warning signs
2. Document observations immediately
3. Involve compliance department
4. Contact trusted person if appropriate
5. Consider placing temporary hold
6. Report to APS and/or regulator when required
7. Protect client assets while investigation proceeds

On the Exam: Know that temporary holds can be placed for up to 15 business days (with possible 10-day extension) when exploitation is suspected. The trusted contact is NOT the same as power of attorney—the trusted contact has no authority over the account.

Key Takeaways

• Trusted contact persons provide additional protection layer
• Firms may place temporary holds (15 business days) on suspicious disbursements
• Extension possible with regulatory notification (additional 10 days)
• Mandatory reporting requirements exist in many states
• Safe harbor protections for good-faith actions
• Documentation of all observations and actions is essential