News
June 6, 2019

One Year Later: Regulators Issue Guidance to Financial Professionals and Firms About the Senior Safe Act

Advisory

On May 23, 2019, the Securities and Exchange Commission (SEC), North American Securities Administrators Association (NASAA), and Financial Industry Regulatory Authority (FINRA) issued a fact sheet to provide guidance to financial professionals and firms about the Senior Safe Act (SSA) and its immunity provisions, which were passed a year ago.1 The fact sheet breaks down how financial professionals and firms may qualify for civil and administrative immunity after reporting suspected senior financial exploitation or abuse to authorities under the SSA.

Background on the SSA

The SSA was passed on May 24, 2018, as Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, and was among several steps taken by regulators to address the fact that financial professionals and firms are in a good position to detect signs of financial exploitation and diminishing capacity, particularly among its senior clients aged 65 and older.2 In passing the SSA, federal lawmakers and regulators recognized the balancing act financial professionals and firms face when seeking to comply with obligations to protect clients' privacy while also conforming with moral duties, or regulatory obligations in some states, to report suspected senior financial exploitation to authorities. The objective of the SSA is to provide protection to certain financial professionals and firms who report suspected senior financial exploitation to authorities regardless of whether the report was made pursuant to state requirement or on the reporter's own volition.

Refresher on How to Qualify for SSA Immunity

Unlike some state regulations and laws, the SSA does not mandate the reporting of suspected senior financial exploitation. Rather, it provides immunity from civil and administrative liability to certain financial professionals and firms, referred to by the SSA as "covered financial institutions," that report suspected senior financial exploitation to authorities. The SSA defines these covered financial institutions as credit unions, depository institutions, investment advisers, broker-dealers, insurance companies, insurance agencies, and transfer agents (Covered Financial Institutions).3 It extends immunity protection to employees of these institutions that serve as i) supervisors or in a compliance or legal function, or ii) as a registered representative, investment adviser representative, or insurance producer affiliated or associated with the institutions (Eligible Employees).4

Covered Financial Institutions and Eligible Employees qualify for immunity protection under the SSA as long as i) the institution administers training to Eligible Employees on how to identify and report exploitative activity against seniors, and ii) any report of suspected exploitation is made "in good faith" and "with reasonable care" by a trained Eligible Employee.5 To qualify for immunity, the Covered Financial Institution must administer the training within one year of an Eligible Employee's hire date, maintain training records for the duration of that employee's employment at the institution, and be the employer of, or affiliated or associated with, the Eligible Employee at the time that employee makes a report.6 Further, the report must relate to exploitation, which is defined in the SSA as "the fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or a fiduciary, that (i) uses the resources of a senior citizen for monetary or personal benefit, profit, or gain; or (ii) results in depriving a senior citizen of rightful access to or use of benefits, resources, belongings, or assets."7

Takeaways Based on the Fact Sheet

In announcing the publication of the fact sheet, the SEC, NASAA and FINRA each stated that their intent is to broaden awareness about the SSA throughout the securities industry and to encourage firms, including RIAs and broker-dealers, to train their employees on how to detect and report suspected financial exploitation.8 The regulators reiterated that protecting senior investors is a "top priority" for them. This means that financial professionals and firms should also be thinking about best practices for protecting their senior clients. In addition to ensuring compliance with individual states' reporting requirements, firms should consider developing policies and procedures that provide for training employees in accordance with the SSA, create a process for reporting suspected exploitation up the chain to Eligible Employees, and provide guidelines on when and how to contact the affected client and/or the client's family.

Notably, the fact sheet highlights that the SSA's immunity protection applies only to reports made to government authorities, referred to as "covered agenc[ies]." The SSA does not provide immunity for reports of suspected exploitation or abuse made to third parties, including a client's family. Often contacting a client's family member without first obtaining the client's consent is a violation of privacy requirements, and if done without immunity protection, would leave a financial professional or firm open to potential civil and administrative liability. However, while the SSA does not provide a solution for this issue, there are ways that financial professionals and firms can build in protections for the client early in the relationship that would permit contact with a family member in the event of suspected exploitation or abuse or diminishing capacity. For example, as part of the onboarding process, a client can be asked to complete an authorization form that designates a trusted contact person as someone who may be contacted with these kinds of suspicions but who otherwise does not have authority to transact on the client's behalf.

The SSA is a helpful tool for financial professionals and firms seeking to provide the highest level of service to their senior clients. Detecting financial exploitation and reporting it to the authorities with the assurance of immunity eliminates a potential roadblock to accomplishing that goal. Therefore, ensuring compliance with the requirements to qualify for SSA immunity is in everyone's best interest.

© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. SEC, NASAA, and FINRA Issue Senior Safe Act Fact Sheet to Help Promote Greater Reporting of Suspected Senior Financial Exploitation, (May 23, 2019),

  2. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303.

  3. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303(a)(1)(D).

  4. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303(a)(2)(A)(1).

  5. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303(a)(2)(A)(2); 303(b)(1)-(2).

  6. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303(b)(1)-(2).

  7. Economic Growth, Regulatory Relief, and Consumer Protection Act § 303(a)(1)(G).

  8. SEC, NASAA, and FINRA Issue Senior Safe Act Fact Sheet to Help Promote Greater Reporting of Suspected Senior Financial Exploitation, (May 23, 2019).

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