To mark the one-year anniversary of the passage of The Senior Safe Act (the “Act”), the Securities and Exchange Commission (“SEC”), the North American Securities Administrators Association (“NASAA”), and the Financial Industry Regulatory Authority (“FINRA”) issued a fact sheet providing general information regarding the Act for the benefit of broker-dealers, investment advisers, and transfer agents about the benefits of the Act (the “Fact Sheet”).[i]
Generally, the Act provides immunity to investment advisers, broker-dealers, transfer agents and their respective eligible employees from liability in civil and administrative proceedings when eligible employees report the potential exploitation of a senior citizen to a covered agency.[ii] This protection is helpful when a firm or individual wants to report suspected financial exploitation, but fears that sharing nonpublic personal information when making a report could violate a privacy requirement.
Immunity under the Act is conditioned on employees receiving training on how to identify and report exploitative activity before making a report and that such reports are made in “good faith” and “with reasonable care.”[iii] The Fact Sheet notes that eligible employees include those who serve as supervisors in a compliance or legal function, or who serve as registered representatives, investment adviser representatives, or insurance producers affiliated or associated with the institution.[iv]
The Fact Sheet contains a reminder that the Act does not mandate that any employee be trained, but instead conditions both individual immunity and firm immunity on training. Individual immunity of the reporting employee is conditioned on the employee completing training, and firm immunity is conditioned on all eligible employees having completed training.[v] In each instance, the Act requires the training to instruct employees on how to identify and appropriately report suspected exploitation (including common signs of financial exploitation), discuss the need to protect the privacy and integrity of each customer, and to be appropriate to the respective person’s job responsibilities.[vi] Current employees should be trained as soon as practicable (new employees within one year of being hired) and records of such training should be maintained and made available to the agencies upon request.[vii]
The Fact Sheet is the latest action taken in a broad regulatory effort by federal and state regulators to better protect an aging investor population in the United States. To support our investment adviser and broker-dealer clients, we have created and curated a state-by-state survey of regulations related to the protection of elderly investors, which is available upon request.
If you have any questions about the contents of the recent legislative and regulatory efforts to protect elderly investors, including the Senior Safe Act, or about the regulation of investment advisers and broker-dealers generally, please feel free to contact us.
By the Investment Management and Broker-Dealer Team at Kilpatrick Townsend & Stockton
[i] SEC Press Release, SEC, NASAA, and FINRA Issue Senior Safe Act Fact Sheet to Help promote Greater Reporting of Suspected Senior Financial Exploitation (May 23, 2019), https://www.sec.gov/news/press-release/2019-75; NASAA, SEC & FINRA, Senior Safe Act Fact Sheet (May 23, 2019), https://www.finra.org/sites/default/files/senior_safe_act_factsheet.pdf.
[ii] Under the Act, a “senior citizen” is defined as someone age 65 or older, and a “covered agency” includes state securities regulators, law enforcement, or adult protective services, the SEC, FINRA, or federal law enforcement. Id.
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