I previously wrote on why the Safe Seniors Financial Protection Act introduced in the Minnesota State Legislature is a positive step forward for Minnesota. I am now pleased to report that the Senate Version of this bill, SF 919, passed with unanimous support in a Senate vote today. (The House version of the bill, HF3833, also passed in April with a definitive vote of 144-8.) That means the Act will now move to Governor Dayton’s desk for signature and seems poised to become law in Minnesota.
In summary, the Act will provide immunity from civil and administrative liability for covered financial advisers that do any of the following with respect to an “Eligible Adult” (an adult 65 or older, or who is deemed vulnerable under Minnesota’s adult protective services statutes):
I strongly believe that this new law will be a win-win-win-win for Minnesotans. Here is why:
A Win for Seniors and Vulnerable Adults
Most importantly, this is a win for those the law is meant to protect: Minnesota’s seniors and vulnerable adults. It is no secret that the world is full of scam artists using cold calls and spam email to troll for victims. We have all heard examples: the IRS agent calling to threaten arrest; the Costa Rican lottery winnings waiting to be claimed; the Nigerian Prince looking to spread his wealth; the grandchild in distress needing money; the real estate broker offering to help resell a timeshare. The list goes on. Plus, financial exploitation does not always involve a stranger on the other end of the telephone. Sadly, many senior victims of financial exploitation are taken advantage of by members of their own family or others who are close to them.
Whether a stranger or a family member, bad actors often specifically target seniors for two reasons. First, seniors may be less savvy at spotting fraud than members of younger (and perhaps more cynical) generations. This is particularly true of seniors or other vulnerable adults experiencing diminished mental capacity. Second, fraudsters gravitate to where the money is. Seniors have money. Money that has been saved for retirement over a lifetime. Money they hope to pass down to children and grandchildren. When seniors lose this money in a fraud, the results are often devastating.
Financial advisers play an important, trusted role in their clients’ lives. They often have unique insights into how changes in a client’s mental health or family dynamics might affect the client’s financial decisions. By incentivizing these trusted advisers to pay more attention to and act on signs of financial abuse or exploitation, the Act will help senior and vulnerable clients get even more out of their relationship with their financial advisers.
A Win for Industry
Second, the Safe Seniors Financial Protection Act is a win for financial services professionals. Financial advisers work within a highly regulated industry. Federal and state securities laws, FINRA rules, insurance regulations, and other potentially applicable laws create a complex web of regulation financial services professionals must navigate. Rarely are these regulations enforced with a carrot rather than a stick. Slipups in compliance can lead to private lawsuits, regulatory fines and censures, and, in a worst-case scenario, criminal charges.
This Act, however, incentivizes those who comply by offering civil and administrative immunity to investment advisers and broker dealers who choose to report suspected financial exploitation, who delay a suspicious disbursement to first investigate its legitimacy, or who contact a trusted third party previously designated by the client. (This is not carte blanche immunity applicable to any potential civil or administrative liability-- rather, the Act protects advisers from liability stemming from taking one of these protected actions.) Thanks to a change in the bill introduced this year that makes the reporting provision of the law permissive rather than mandatory – making the bill look more like a carrot than an additional stick – several industry organizations that opposed this law in previous legislative sessions now formally support it.
A Win for Regulators
Third, the Safe Seniors Financial Protection Act is a win for regulators. As frauds targeting seniors have proliferated, regulators have become increasingly vocal and focused on the need to protect seniors from fraud and financial exploitation. The Securities and Exchange Commission (“SEC”), FINRA, the North American Securities Administrators Association (“NASAA”), and the Minnesota Department of Commerce have all named senior protection as a top priority for several years running.
However, regulators and law enforcement officials struggle to address this problem proactively rather than reactively. They simply lack the resources and reach (some might say for good reason) to have eyes and ears on every financial transaction. Many fraudulent transfers are made to overseas accounts, or to bad actors who quickly spend their ill-gotten gains. Many fraudsters are never caught or prosecuted. Even when they are, they rarely have the ability to return what they took.
This Act allows regulators to partner with professionals in the industry, who collectively are those eyes and ears out in the community who can identify potential fraud or exploitation early. By receiving reports from industry professionals, regulators will be better able to proactively address problems before seniors are irreparably harmed.
A Win for State Legislators
Finally, and not to be overlooked, this Act is a win for our legislators. In an era where true bipartisanship seems to be fading further and further from memory, this bill has brought together members of both major political parties to achieve a common goal. The Senate bill is authored by two Republicans and three members of the DFL: Senators Housely, Hoffman, Eken, Newton and Pratt. The House bill is authored by seven Republicans and three members of the DFL: Members Schomacker, Halverson, Barr, R., Loonan, Theis, Kresha, Lillie, Rosenthal, Davids, and Newberger.
There are certain things we can all agree upon. Protecting our seniors and vulnerable adults is one of them.