Elder Financial Exploitation White Paper

Transcript

1 U.S. SECURITIES AND EXCHANGE COMMISSION Office of the Investor Advocate Elder Financial Exploitation Why it is a concern, what regulators are doing about it, and looking ahead 1 BY STEPHEN DEANE JUNE 2018

2 CONTENTS Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i . . . . . . i Why are the elderly in particular vulnerable to financial exploitation? And why is this problem likely to get worse? i Quantifying the Scope of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Given the significance of the problem, what are regulators doing about it? ii Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction: What Is Elder Financial Exploitation Why the Elderly? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Cognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial and Retirement Trends 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Scope of the Problem 7 Conclusions: The Significance of the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 What We Don’t Know How many people have experienced elder financial exploitation? 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What are the financial costs to victims and to society at large? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 What are the causes of elder financial exploitation? Who are perpetrators, and why do they commit specific types of exploitation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 What are the most effective treatments? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fragmentation and the Lack of Data 13 What Regulators Are Doing About It: Legal and Regulatory Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Looking Ahead Financial Innovations and IT Advances 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reform Proposal: Building an Integrated and Systemic Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Appendix 1: The Gaps in our Knowledge: A Closer Look at Two Seminal Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 The 2011 MetLife Study of Elder Financial Abuse: At Least $2.9 Billion in Costs to Victims 23 . . . . . . . . . . . . . . . . . . . . . . . . The National Elder Mistreatment Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Appendix 2: Ethical Dilemmas:“When Helping Hurts” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Appendix 3: SEC and FINRA Actions to Protect Senior Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 The SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 FINRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

3 i Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead • The overwhelming majority of incidents of elder finan - EXECUTIVE SUMMARY cial exploitation go unreported to authorities. For every documented case of elder financial exploitation, 44 went Why are the elderly in particular vulnerable to unreported according to a New York state study. financial exploitation? And why is this problem Elder financial exploitation is emerging as the most • likely to get worse? prevalent form of elder abuse, according to some but not Three interrelated sets of factors are at work: health- all studies. related effects of aging; financial and retirement trends; We do not have a good estimate of total national finan • - and demographic trends. cial costs to the victims. In the state of New York, Cognitive decline is a key factor, whether brought a rigorous study estimates victims’ annual losses at on by disease or other changes in the aging brain even $109 million. The harm to victims, however, goes well without the presence of disease. When cognitive decline beyond monetary loss. begins, financial impairment is often one of the earliest There are also substantial public costs in investigating • signs for patients, families, and doctors. Physical decline and intervening in cases of elder financial exploitation. and dependency are also risk factors for elder financial In New York State alone, those costs are estimated at exploitation. more than $14.5 million. So, too, is the wealth of older generations, which makes them targets for financial exploitation. Paradoxi - The magnitude of these numbers has led some promi - cally, though, the elderly poor are at even greater risk of nent experts to call elder financial exploitation “a burgeon - financial exploitation. 2 3 ing public health crisis” and “a virtual epidemic.” Financial and pension trends further compound the That said, there are large gaps in data and empirical - problem. The shift from defined benefit to defined con research, leaving key questions unanswered. It is easier to tribution plans has placed responsibility onto the elderly say why elder financial exploitation is expected to grow themselves to manage their retirement savings—ironically, than to quantify how big the problem is right now. just at a time in their lives when their ability to do so may become impaired. Given the significance of the problem, what are Retirees are also taking on more student debt (often for regulators doing about it? their children’s or grandchildren’s benefit). When that trend Recent legal and regulatory developments have given collides with elder financial exploitation, what will be the financial professionals more tools to combat elder financial impact on victims, lenders, and the economy at large? exploitation. These include two Financial Industry Regula - Now add in demographic trends, with dramatic tory Authority (FINRA) rule changes that took effect in increases in the elderly population threatening to spur February 2018, as well as adoption in 13 states of new parallel growth in elderly financial exploitation. laws based on a Model Act. These measures include provisions allowing designated financial firms to place a Quantifying the Scope of the Problem temporary hold on disbursements from the accounts of A mosaic of research studies shows the dimensions of certain clients when financial exploitation is suspected. elderly financial exploitation: These developments are significant in several ways. - They demonstrate momentum in combatting elder finan The previous-year prevalence of elder financial exploita • - cial exploitation. They recognize the critical role of finan - tion ranges from 2.7 percent to 6.6 percent, according to cial firms and professionals who find themselves on the various studies, though this most likely underestimates front lines. And, they suggest difficult policy choices when the true number. Disclaimer: The U.S. Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publica- tion or statement of any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author’s colleagues upon the staff of the Commission. The author prepared this White Paper as a part of an occasional series of White Papers of the Office of the Investor Advocate.

4 ii Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead Have we as a society done enough to address elder the need to protect the elderly appears to come into conflict with their rights to privacy and autonomy. - financial exploitation? Some thought leaders are advo cating much deeper reforms that would allow us to treat (This paper focuses on policies and rule-making, but describes other SEC and FINRA activities, including elder financial exploitation in a far more comprehensive, integrated and systemic way. The new system would foster public education, exams, and enforcement, in Appendix Three: SEC and FINRA Actions to Protect Senior Investors.) communication among firms within the financial indus - try to build an early-warning system of elder financial Looking Ahead exploitation. The system also would build bridges of cross- communication between the financial services and health Advances in information technology hold both posi - services industries to protect the health and the wealth tive and negative potential implications for combatting of the elderly. The conclusion to this paper explores the elder financial exploitation. Online or electronic financial formidable challenges to building such a system as well as services and products may offer new platforms for perpe - trators of elder exploitation. But financial innovations and the major benefits it would promise. emerging technologies, such as artificial intelligence (AI), - also present opportunities to detect, prevent, and even pre dict the risks of elder financial exploitation.

5 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 1 money for an emergency). The toll-free Fraud Hotline INTRODUCTION: WHAT IS ELDER 9 number is 1-855-303-9470. As the list indicates, the FINANCIAL EXPLOITATION elderly are targeted for a wide variety of scams. A number of the scams involve deceptive “promises of goods, Elder financial exploitation touches all of us. We may 10 services or financial benefits that do not exist.” have aging parents or other relatives who could become Financial exploitation is recognized as one of five victims. We also may have relatives, colleagues, customers, forms of elder abuse. The others are psychological abuse, - friends or neighbors who show signs of diminished capac 11 physical abuse, sexual abuse, and neglect. It is not uncom - ity or financial exploitation. And all of us could become at mon for more than one type of elder abuse to occur at the risk as we grow older. same time. This is one reason that elder abuse is a complex Elder financial exploitation is a significant problem phenomenon that often demands a comprehensive and now and is expected to become worse with the aging of multidisciplinary approach to prevent or treat it: America. It has gained increasing attention from financial regulators, firms and professionals, with new measures [Elder abuse is] a complex cluster of distinct but introduced over the past year at both the national and related phenomena involving health, legal, social state levels. service, financial, public safety, aging, disability, - There are multiple definitions of elder financial ex protective services, and victim services, aging ploitation. A helpful, simple one defines it as the “ illegal or 4 services, policy, research, education, and human improper use of an older adult’s funds, property, or assets. ” rights issues. It therefore requires a coordinated - financial exploita A more detailed definition refers to “ multidisciplinary, multi-agency, and multi- tion of an older person by another person or entity, that 12 system response. occurs in any setting (e.g. home, community, or facility), either in a relationship where there is an expectation of trust and/or when an older person is targeted based on age 5 WHY THE ELDERLY? ” or disability. Some definitions distinguish between two types of Why are the elderly in particular vulnerable to finan - elder financial exploitation: financial abuse, in which a cial exploitation, and why is this problem likely to get relationship of trust has been violated by family members, worse? Three interrelated sets of factors are at work. The - friends, or others; and elder fraud, such as scams perpe 6 first set is health-related. The aging process can bring trated by strangers. about cognitive and physical changes that elevate the risks Examples of elder financial exploitation include of elder financial exploitation. The changes can include stealing an older adult’s cash, withdrawing money from cognitive impairment, poor physical health, functional the victim’s bank account, cashing the victim’s checks or impairment, and dependency on others, all of which are using his credit cards without authorization. Other forms of associated with elder financial exploitation as well as exploitation include transferring property deeds, misusing a 7 other forms of elder abuse. power of attorney, and identity theft. The second set of factors are related to financial and Elder financial abuse was one of the top-ten consumer retirement trends. The wealth or assets that the elderly scams targeting seniors in 2017, according to the U.S. Sen - 8 have accumulated through life can make them a target of ate Special Committee on Aging. The committee main - financial exploitation. Moreover, pension trends increas - tains a Fraud Hotline as a resource for seniors and others ingly have shifted responsibility to the elderly themselves affected by scams, and it tracks consumer frauds reported to manage their retirement savings and investments. to it. Other top-ten scams included IRS impersonation Both of the first two sets of factors are linked to the scams (impersonating an IRS agent and falsely accusing third: the demographic trends that are propelling steep seniors of owing back taxes and penalties in order to scam rises in the elderly population (box 1). The aging trend them); sweepstakes scams, including a Jamaican lottery lends a special urgency to the problems of elder financial scam; computer scams; romance scams; and grandparent exploitation as well as the other forms of elder abuse. scams (impersonating a grandchild who claims to need

6 2 Elder Financial Exploitation: Why is it a concer n, what regulators are doing about it, and looking ahead Aging and Demographic Trends: The Surging Elderly Population BOX 1. The number of elderly (ages 65 and older) already has increased dramatically and is projected to continue to grow at a steep pace. By the 2010 Census, the elderly population had reached new records, both in terms of numbers (40.3 mil- 13 lion) and their share of the overall population (13 percent). In 2014, the elderly population had grown by 10 million in 14 10 years. With the aging of the baby boomers, an average of 10,000 Americans has been turning 65 every day and will continue at that rate until the year 2030. By then, one in five persons in the U.S. is projected to be 65 or older and their 15 16 numbers are projected to reach 74 million. By 2050, the elderly population in America is expected to reach 88 million; 17 by 2060, more than 98 million. - In a telling sign of our expanding longevity, we no longer speak of the elderly solely as a single segment of the pop ulation, but distinguish between the “young-old,” comprising those between 65 and 85 years old, and the “oldest-old,” those age 85 and up. The “oldest-old” are the fastest growing segment of our overall population. Between 2012 and 2050, the “oldest-old” segment is expected to increase by 12 million, with its share of the total elderly U.S. population 18 (ages 65 and older) projected to rise from 14 percent to 22 percent. That trend has particular significance for elder financial exploitation: individuals in the “oldest-old” age group are at the highest risk for developing Alzheimer’s dementia; and dementia, in turn, is a documented risk for elder financial exploitation. Cognition outperformed younger participants on a multiple-choice test of Acquired Financial Knowledge, a finding that the Cognitive decline is a key factor that makes the elderly 19 Sometimes, researchers suggested could be due in part to the experi - more susceptible to financial exploitation. ence conferred by age. diseases of the brain cause the cognitive decline. Yet the A distinguished committee of the Institute of Medicine decline can occur even in the absence of disease. The aging brain is associated with a decline in something explains the impact of the aging brain on financial deci - called fluid intelligence. Fluid intelligence enables us to sion-making as follows: hold multiple distinct pieces of information in our mind It reflects a balance between fluid and crystallized and to apply rules or logic to them to reach a decision. intelligences. In financial terms, fluid intelligence These skills are used, for example, to learn a new card game. These are also the very skills needed to take in vari - refers to the abilities to manipulate and transform ous bits of financial information; analyze that information financial data, while crystallized intelligence based on such things as principles, risk tolerance, or rules involves knowledge and experience with financial of thumb; and make financial decisions. Thus, a decline products. Older adults with declines in their fluid intelligence are more likely to experience declines in fluid intelligence can make it more difficult to manage 20 in financial capacity, but these declines may money and make financial decisions. This explains why be offset by greater degrees of crystallized - the elderly are at risk of making financial mistakes, reach intelligence, particularly financial knowledge ing unsound financial decisions, and falling prey to finan - 21 and experience. cial exploitation. Not all forms of intelligence decline in the aging brain. Even while fluid intelligence declines, something called Despite enhanced knowledge, however, older persons can fall prey to deception and scams if they experience a crystalline intelligence remains intact or increases. This refers to a person’s store of knowledge, and it would be - decline in their ability to judge trustworthiness and riski 22 reflected in the growth of an elderly person’s vocabulary ness. Imagine you’re walking home late at night and can or knowledge of a particular topic, including financial top - choose between two paths: the main street or a dark alley ics. In one research study, older participants significantly that would be a shortcut. You will probably instinctively

7 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 3 avoid the dark alley. Or imagine watching an adver - that these age-related declines in the ability to doubt tisement with dubious or far-fetched claims. You may - “provide a compelling rationale why highly knowledge instantly distrust the ad. It is as if a personal antenna goes able and intelligent older people are often susceptible to 28 up to keep you on guard against people and things that deception and fraud.” seem too risky, deceptive or suspicious. Other researchers describe changes in the emotional and time perspectives among the elderly. As older adults Now imagine that you had lost that antenna, that ability begin to feel their remaining time is limited, they appear to sense that something is just not right. That may be a to become more focused on the present and on positive good way to understand research findings that older per - or happy emotions, in contrast to future and stress-based sons may become too trusting and fail to recognize false 23 emotions. Again, that could make them more vulnerable claims, suspicious intentions and signs of riskiness. 29 “[R]esearch has found that older adults are dispro - to scams or other forms of financial exploitation. Cognitive impairment may also be caused by various portionally credulous,” according to one research paper, diseases of the brain, including Alzheimer’s disease, other which continued, “This finding has obvious and forms of dementia, and mild cognitive impairment (MCI). direct implications for older persons’ vulnerability to 24 financial fraud.” MCI is less severe than dementia and has been described as an intermediate stage between cognitive aging without A study of healthy, community-dwelling older adults 30 disease and dementia. Unlike persons with dementia, found that many of them displayed troubling behaviors, those with MCI do not show significant changes in Activi such as believing deceptive and misleading advertisements - 25 31 ties of Daily Living (ADLs). and buying falsely advertised products. Researchers also In other words, MCI does speak of a “doubt deficit,” in which false and far-fetched not interfere with daily life or independent function. claims fail to prompt doubt in older adults and others who Like dementia, however, MCI involves cognitive 26 impairment–either memory impairment alone, or com are overly credulous. Similarly, such persons may be - unable to infer the intentions of others, including those bined with other verbal or executive function impairments, 27 32 One research paper suggests with the intent to deceive. such as language, thinking and judgment. Researchers FIGURE 1 . The Aging Brain: Cognitive Aging and Alzheimer’s Disease

8 4 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead also have found significant impairments in applying financial concepts and completing related tasks, such BOX 2 . Diminished Financial Capacity as understanding and using a bank statement as well as 33 understanding bills and preparing to pay them by mail. Cognitive impairment and diminished financial - Even at an early stage of MCI, a person can be vulner capacity are not the same thing, though the first able to financial abuse. The cognitive changes can impair a often leads to the second. Financial capacity has 34 person’s ability to recognize a scam or fraud. At least one been defined as “the capacity to manage money organization dedicated to combatting elder financial abuse and financial assets in ways that meet a person’s 35 focuses its efforts on assisting persons with MCI. needs and which are consistent with his/her values About 15 percent to 20 percent of persons 65 or older 48 and self-interest.” A decline in that ability is called have MCI, and about a third of persons with MCI develop 49 It can impaired or diminished financial capacity. dementia within five years, according to the Alzheimer’s significantly weaken a person’s financial judgment 36 Association. In 2002, an estimated 5.4 million people in and render him unable to understand the conse - the United States age 71 years or older (22.2 percent) had quences of investment decisions. Persons with 37 Some persons cognitive impairment without dementia. cognitive impairment may be unable to protect with MCI can be in an early stage of Alzheimer’s, but themselves from financial exploitation or even without a diagnosis of dementia yet. 50 recognize that they are being exploited. Alzheimer’s disease is no doubt the most famous disease of the brain. (Others include vascular disease, 38 These diseases Parkinson’s, and Lewy Body disease.) person at that stage would retain financial capacity - impair cognitive skills–such as memory, language, com 39 despite cognitive decline that could manifest itself in –that make munication, problem solving, and judgment 40 other ways. (See box 2.) them particularly vulnerable to abuse. Dementia is a 41 Nonetheless, financial impairment is often one of the and documented risk factor for financial exploitation, earliest clinical signs of cognitive decline. It strikes at an Alzheimer’s disease is a relentlessly progressive form of early stage of decline, even before the patient and his fam - - dementia that inevitably leads to a complete loss of finan 42 ily are aware of it. Indeed, the ability to manage finances cial capacity. is one of the first Instrumental Activities of Daily Liv - The risk of dementia rises with age. Nearly half of ing (IADLs) to decline in MCI and Alzheimer disease. those over the age of 85 have Alzheimer’s disease or (IADLs also include managing medications, using the another kind of dementia. This age group is also the fastest 51 43 telephone, and shopping.) growing segment of our population. This is crucial, for at least two reasons. First, if the cog - In 2017, an estimated 5.5 million Americans were nitive decline remains undetected, a patient can deplete his - estimated to have Alzheimer’s with a diagnosis of Demen family’s lifetime savings–either because of bad financial tia. More than 96 percent of that group (5.3 million people) 44 - decisions or elder financial exploitation–before other fam consisted of persons age 65 or older. As the U.S. popula - 52 ily members can stop it. On the other hand, diminished tion ages, the number of those with Alzheimer’s dementia 45 financial capacity can serve as an early warning to alert is also expected to grow. By 2050, the number of people patients, their loved ones, and their doctors of impending age 65 and older with Alzheimer’s disease is expected to cognitive decline. This suggests that closer communication - more than double, to 13.8 million, absent medical break 46 and coordination between financial services professionals throughs to prevent or cure the disease. and health care professionals could yield significant Diseases such as Alzheimer’s are progressive, and benefits for the welfare of the elderly. (See Looking the risk of financial exploitation and other forms of elder 47 Ahead for more on these potential synergies.) Nonetheless, it is abuse rise as the disease progresses. Poor physical health and functional impairment are - possible for a person to maintain financial skills and judg also associated with a greater risk of abuse among older ment at the initial stage of cognitive decline and even 53 persons (not limited to elder financial exploitation). through a moderate stage of dementia. In that case, a

9 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 5 According to one national study of elder abuse, “Older As the authors of a 2014 New York study on elder financial exploitation observe: adults who needed assistance with activities of daily life or who reported poor health were more likely to be targets Older adults are more likely to have financial [of financial exploitation by family members], a finding that echoes past research on fraud and financial abuse of resources than their younger counterparts, and 54 this, in combination with the higher prevalence Other studies also find associa impaired older adults.” - of social isolation, cognitive impairment, and tions linking functional impairment and poor physical 55 health with a greater risk of elder abuse. other factors, renders them uniquely susceptible to 61 A New York state study quantified the links between financial exploitation. conditions of dependency and documented cases of elder The wealth of older generations is an important factor in financial exploitation: - explaining why the elderly in particular are targets of finan cial exploitation, but it is not the whole story. Paradoxically, • More than three-quarters of the reported victims (76 percent) had at least one serious health impairment, - the elderly poor are at even greater risk of financial exploi including physical or mental impairment, dementia, and tation. (See box 3.) Nonetheless, there is a wealth of data 56 highlighting the assets belonging to the elderly: drug/substance abuse. • More than half (58 percent) routinely required assistance 57 • Total Financial Assets: Americans over the age of 50 in at least one daily activity. currently account for 77 percent of financial assets in the • More than one-third of the cases (35 percent) involved 58 United States, according to the Securities Industry and victims who lived with the perpetrators. 62 Financial Markets Association (SIFMA). • A more recent study, also in New York State, found Retirement Assets: As of Dec. 31, 2017, retirement 63 and accounted for assets reached $28.2 trillion that having disabilities involving one or more Activities of Daily Living or Instrumental Activities of Daily Living 43.8 percent of all household financial assets in the 64 - United States for householders aged 65 and older. were significantly associated with lifetime financial exploi • Total Household Net Worth: In 2011, the net worth of tation, and having more than one IADL was associated 59 households headed by someone aged 65 or older totaled with past-year prevalence. 65 approximately $17.2 trillion. The authors of the latter study offered an explanation for the connection between dependence and exploitation: • Median Household Net Worth: By 2013, households - when a person needs assistance with Instrumental Activi headed by someone aged 65 or older had a median net worth of $202,950, including $80,000 in ties of Daily Living, such as shopping or preparing meals, retirement accounts. the person providing assistance may gain greater access to the elderly person’s finances. That in turn could open the 60 door for the provider to engage in exploitation. It’s not just the size of retirement accounts that make them particularly important in understanding elderly financial exploitation. A shift in the fundamental nature Financial and Retirement Trends of retirement accounts makes the elderly responsible for Willie Sutton was a bank robber. Legend has it that, managing their retirement assets on their own. This shift when asked why he robbed banks, he replied, “That’s has come about because of a trend away from defined ben where the money is.” - The same logic can be applied to the elderly: they efit pension plans, which are managed by the employer, can become targets because of the retirement savings and toward defined contribution retirement plans, such as 401(k)s, which are controlled by the individual investor. and other assets they have spent decades building up.

10 6 Elder Financial Exploitation: Why is it a concer n, what regulators are doing about it, and looking ahead Elderly Financial Exploitation of the Poor BOX 3. If assets attract thieves, one might expect elder financial exploitation to be limited to, or at least skewed toward, the wealthy. But that is emphatically not the case. Far from reducing the risk, poverty appears to increase the risk of elder financial exploitation. “Thus, somewhat counterintuitively, it was not those with the greatest resources who were most likely to be 66 financially exploited, but those with the least,” according to a 2014 New York study. The study found poverty strongly associated with elder financial exploitation. What can explain this surprising finding? First, even in conditions of poverty, seniors may have something that an abuser wants: an apartment to live in, equity in a home, or a regular source of income, such as Social Security or a pension. Second, one wonders whether, and to what extent, reverse causality could help to explain the association. Does living below the poverty line drive financial exploitation, or, conversely, does the financial exploitation impoverish the elderly victims? Causality cannot be inferred from the study findings, as the authors note, because factors such as 67 poverty were assessed at the same time as the assessment of elderly financial exploitation. Third, there may be other confounding factors that explain the paradoxical association between poverty and elderly financial exploitation. A combination of three potential confounding factors comes to mind: sharing the home with large numbers of others; the absence of a spouse; and financial exploitation committed by non-spousal family members. Studies find that living with a larger number of household members other than a spouse is associated with an increased 69 68 risk of abuse, especially financial and physical abuse. Living with a spouse, in contrast, lowers the risk. Several stud- 70 ies also find that family members are the most common perpetrator of elder financial exploitation. Thus, it may be that the risk of elder financial exploitation increases among the poor when 1) the victim’s spouse is not there to protect the elderly person, and 2) other household members, including family members, commit the financial exploitation. Finally, the disproportionate numbers of victims who live below the poverty line suggests that the poor as a group may be less able to protect themselves from elderly financial exploitation. In a defined benefit (“DB”) plan, the employer guaran - than half, from 40 percent in 1992 to 17.2 percent in 2016, tees the pension and typically manages it, both while the according to the Employee Benefit Research Institute. employee is working and after he or she has retired. The Meanwhile, over the same period, the share with a DC employer decides how to invest the assets and typically only plan rose from 37.5 percent to 66.5 percent. (The share with both DB and DC plans also fell, from 22.5 provides the retiree a steady stream of retirement payments. 71 Under a defined contribution (“DC”) plan, in contrast, it is the percent in 1992 to 16.2 percent in 2016.) employee, not the employer, who shoulders direct responsi - With a defined benefit plan, a perpetrator could only take bility for managing the retirement assets. While the employee a periodic retirement payment. That does not make persons is working and accumulating retirement assets, the employee with DB plans safe from exploitation. Indeed, there are cases decides how much to contribute to his retirement assets and in which perpetrators regularly take a person’s social security - how to invest them. When the employee retires, the retire or other retirement payments. Nonetheless, the perpetrator can ment assets shift from an accumulation phase to a decumula - only take one payment at a time. With a defined contribution tion phase, but the retiree retains responsibility for managing plan, however, the perpetrator can attempt to take the entire his account. He or she controls the retirement account, decid - lump sum all at once. The holder of a DC plan shoulders the ing how to invest it and now also deciding whether and how responsibility of how to dispose of his or her nest egg: where much to draw down each month. This in turn can make them to invest the remaining balance and how to spend it down. tempting targets to others. The retired person may turn to others–whether a relative, The trend from defined benefit to defined contribution friend, or investment adviser–to determine how to make those plans has been unfolding for the past 25 years. Among decisions. This may give a wrongdoer an opening to gain families with an active participant in an employment- access to the full amount of the retirement assets–whether by based plan, the share with a DB only plan fell by more manipulation, deceit, threats, or other such means.

11 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 7 This trend is particularly ironic in light of the cognitive could make the sum more systemically dangerous aging issues described above. Just when the demands of - than its individual parts. It may be that the prob financial management should be lightened, they may - lem of elder financial exploitation is not fully con instead grow heavier for retirees who begin to experience tained but could spill over into the larger economy. cognitive aging. The sheer size and complexity pose a challenge 77 It’s not just the asset side of household balance sheets for industry and regulators alike. that causes concern. On the liability side, older persons are increasingly taking on more student debt. Seniors are To summarize, it helps to think of financially exploita - the fastest growing segment of the student debt market, tion in terms of two types of risk. First, there is the risk that according to a CFPB report citing Federal Reserve data. an elderly person becomes the target of attempted financial From 2005 to 2015, the number of Americans age 60 or exploitation. Second, once targeted, a person may be less older with one or more student loans jumped four times, able to protect himself. from about 700,000 to 2.8 million, according to a CFPB Like Willie Sutton’s bank robbers, a perpetrator of 72 - The average amount of debt among older bor analysis. elderly financial exploitation may be attracted to the rowers nearly doubled in those 10 years, from $12,000 victim’s wealth or assets, even relatively humble assets such to $23,500. About three-quarters of the older borrowers as a regular Social Security check. Unlike banks, however, with student loans used them to finance their children’s the elderly may be unable to protect themselves. Banks 73 or grandchildren’s college education. (Similarly, a - can fortify their defenses with safety vaults, security sys New York Fed analysis finds that debt held by borrowers tems, and armed guards. The elderly, in contrast, may have between the ages of 50 and 80 increased by roughly defenses that have become significantly weaker in older age. 74 60 percent from 2003 to 2015). Thus, the elderly face both types of risk: the risk of The New York Fed analysis calls this the graying of being targeted in the first place, and the risk of being American debt and sees it as positive for the economy: unable to protect their assets once they are targeted. This older borrowers generally enjoy stronger average credit double vulnerability helps to explain why the elderly in history, higher credit scores, comparatively stable income particular face higher risks of financial exploitation. 75 streams, and greater experience in handling credit. Add in demographic and financial trends, from the “Hence,” the New York Fed analysis concludes, “the aging aging of America to the shift in retirement plans and of the American borrower bodes well for the stability of responsibilities, and the problem of elder financial exploita - 76 outstanding consumer loans.” tion becomes even greater and more urgent. This combina - But could that stability be shattered by elder financial tion of factors makes clear why elder financial exploitation 78 exploitation? On an individual level, stealing financial And, as dis - has been called the crime of the 21st century. - assets from the elderly would make it harder, if not impos cussed below, it explains why some experts warn that elder sible, for them to pay off their student debts. And, would financial exploitation is a burgeoning public health crisis. bad actors further exploit the elderly by encouraging them to take on additional debt? Could there also be more systemic spill-over effects on the economy at large? THE SCOPE OF THE PROBLEM That is the question that the head of Federal Reserve Bank of Philadelphia raised at a recent conference on aging, cogni - - Ironically, it is easier to say why elder financial exploita tion and financial health. Patrick T. Harker, President and tion is expected to grow than to quantify how big a problem Chief Executive Officer of the Philadelphia Fed, observed: it is right now. Our knowledge suffers from a scarcity of research and researchers, and the studies that do exist have Not only does that have the potential to spill some significant limitations. Nonetheless, we have enough over to the real economy, it’s poised to become a data to build a mosaic that shows the scope of the problem. multigenerational problem... We can seek to measure the extent of elderly financial exploitation along several dimensions, beginning with its While each of these factors—student debt, prevalence. To put those prevalence rates in context, we can retirement costs, eldercare—might not be crisis compare them to the corresponding rates of other types of inducing in and of itself, the interconnectivity elder abuse. It is also important to measure the extent that

12 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead 8 elder financial exploitation goes unreported to authorities, Those numbers, however, are almost surely underes - thus making our picture of reported levels merely the tip of timates, as some of the authors point out about their own 81 An important reason for that stems from research studies. the iceberg. We must also consider the costs of elder financial limitations on study samples. Several studies were based on exploitation, both financial and non-financial, to the victims and to society. Finally, we can look for quantitative evidence interviews of elderly persons who were cognitively intact and lived in the community, such as their own homes. This to confirm the expectation that elder financial exploitation will approach excluded those with dementia or other cognitive increase alongside the growth in the elderly population. impairments and those living in institutional settings such The data lead to two conclusions. First, the numbers are as compelling as they are alarming. They have led some as nursing homes. Yet those excluded subpopulations of the 82 In addi elderly are among the most at risk of exploitation. - prominent experts to call elder financial exploitation “a 80 79 burgeoning public health crisis” and “a virtual epidemic.” tion, some studies were limited solely to financial exploitation committed by family members, thus excluding other types of Second, for all the data points found in various studies, - perhaps the larger point is how much we do not know. There perpetrators, such as more distant relatives, friends and neigh bors, romantic partners, caregivers, strangers, and others. is a glaring lack of adequate research into numerous key questions involving elder financial exploitation, from solid - Taken as a whole, the studies demonstrate the signifi cance–some say alarming significance—of financial exploi - national statistics on costs, to the causes of abuse, to empiri - cal evidence of the most effective treatments. tation. Nonetheless, apples-to-apples comparisons between - surveys are elusive, because they differ in numerous ways, Start with prevalence. It can be measured either as the per - centage of the elderly who have experienced financial exploi - including sampling and interviewing techniques, methodol tation in the past 12 months (past-year prevalence), or at any ogy and survey questions, geographic location, and the age 83 time since age 60 (lifetime prevalence). As described below, range of survey sample. various studies put past-year prevalence in the range of 2.7 With those caveats, here are brief summaries of five percent to 6.6 percent and lifetime prevalence at 4.7 percent. studies, two of which are nationwide (the Acierno and TABLE 1. Summary of Prevalence Studies The National Elder Financial Elder Mistreatment Under the Radar The South Carolina - Elder Mistreatment (Self-Reported in the United States Exploitation Mistreatment Study Study Component)* of Older Adults* Study Lead Author Laumann Acierno Amstadter Lachs Peterson Date Published 2008 2010 2011 2011 2014 Past-Year 3.50% 5.2% 6.60% 4.21% 2.7% Prevalence Lifetime Not reported Not reported Not reported 4.79% 4.7% Prevalence Region Covered National National South Carolina NY State NY State Type(s) of Family Family Family All types All types Perpetrators members members members Studied only only only Age Range of 57 to 85 60+ 60+ 60+ 60+ Sample Number of 3,005 5,777 902 4,156 4,156 Respondents Status of Vast majority Cognitively Had cognitive Cognitively Cognitively Respondents cognitively intact and capacity to intact and intact and intact; living in consent to community community community community participation; dwelling dwelling dwelling community residing Contact Method In-home + Telephone Telephone Telephone Telephone questionnaire * The Lachs and Peterson reports were both based on the same underlying research. The Lachs paper reported frequency counts of quantitative data 84 only (based on answers to closed-end questions), whereas the Peterson paper also analyzed respondents’ narrative accounts in their own words.

13 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 9 Laumann studies) and three are statewide (two in New York it was the first to examine elder abuse in a southern state 96 and one in South Carolina). with a significant rural population. It was based on tele - The 2010 National Elder Mistreatment Study researched phone survey of a representative sample of persons age 60 97 and older who were cognitively intact. the past-year prevalence of incidents of elder financial - The overwhelming majority of incidents of elder finan mistreatment committed by a family member. It found a cial exploitation go unreported to authorities: they slip past-year prevalence rate of 5.2 percent. The most common type of financial mistreatment consisted of family members’ “Under the Radar,” to cite the apt title of the 2011 New York study. It found that, for every documented case of spending money without the elderly person’s permission, elder financial exploitation, 43.9 went unreported. This according to the study. (Here and throughout, the study means that a mere 2 percent of incidents were reported to dates refer to the date of publication, not the date of field 85 authorities. The study arrived at that number by undertak testing or survey work.) - The study was based on a nationally representative sam - ing two research components: a Self-Reported Prevalence Study, in which researchers conducted a phone survey ple of adults ages 60 and over, and it was limited to those of New York residents over 60; and a Documented Case who were cognitively intact, lived in the community, and 86 were willing to participate in a telephone interview. Study, in which researchers collected and analyzed the - Cau tion is advised, however, in accepting the accuracy of the data on all elder abuse cases reported to all state agencies 98 By comparing the and programs over a one-year period. study’s prevalence statistics for elder financial exploitation, 87 according to Dr. Acierno, the lead author of the study. For results, the study came up with the ratio of 44 to 1. details, see Appendix One: The Gaps in our Knowledge: Some studies compare the prevalence of financial 99 exploitation to that of the other four basic types A Closer Look at Two Seminal Studies. of elder abuse (physical abuse, psychological or verbal abuse, An earlier national survey, the Laumann study, found a past-year prevalence of 3.5 percent for financial mis - sexual abuse, and neglect). Though the studies overall 88 100 - two recent reports identify finan treatment by a family member. provide mixed results, The sample consisted of cial exploitation as the most prevalent type of elder abuse. persons aged 57 to 85 who lived in the community (not in 89 The research nursing homes) and were cognitively intact. “Financial exploitation is the most common and least - ers used a combination of in-home interviews conducted studied form of elder abuse,” according to a research - article published in 2014 in the Journal of General Inter between July 2005 and March 2006 and questionnaires that 90 101 respondents were asked to fill out on their own and mail in. nal Medicine. Similarly, according to a comprehensive review of elder abuse published in 2015 in the New A 2014 Peterson study in New York State found rates England Journal of Medicine, “recent studies suggest of 2.7 percent for past-year prevalence and 4.7 percent for - financial exploitation is emerging as the most prevalent lifetime prevalence (since age 60) of elder financial exploi 102 91 The most common form of such exploitation con form of abuse.” tation. - A 2017 joint publication of three federal entities–the sisted stealing or misappropriation of money or property, Consumer Financial Protection Bureau, the U.S. Department accounting for more than three-fourths of past-year and 92 lifetime prevalence. The study examined exploitation of Treasury, and the Financial Crimes Enforcement Network (FinCEN)–also asserts that elder financial exploitation is the committed by any perpetrator, whether a family member 103 or not. The authors describe the underlying research as most common form of elder abuse in the United States. “one of the largest and most methodologically rigorous The Acierno study found a higher prevalence for finan - 93 studies of elder abuse conducted to date.” cial exploitation than for any of other forms of elder abuse that it studied (emotional, physical, sexual mistreatment (The researchers previously reported partial results in the 94 study Under the Radar . Under the Radar and potential neglect). Whereas reported frequency counts of quantitative data only (based on answers Likewise, the Self-Reported Study component of the to closed-end questions), the Peterson report also analyzed - Under the Radar study in New York–the part that inter 95 ) respondents’ narrative accounts in their own words. viewed the elderly directly–found that financial exploitation was the most prevalent form of mistreatment that respon A 2011 study in South Carolina found a prevalence - rate of 6.6 percent for financial exploitation committed by dents said had taken place in the preceding year. That family member in the previous year. The study noted that finding, however, stood in contrast with the Documented

14 10 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead Case Study component, which tallied cases received by of the most comprehensive studies to quantify both the local authorities and documented by them. This compo - financial and the non-financial costs of financial exploita - 110 The study included the larg tion of vulnerable adults.” nent found that psychological abuse was the most common - form of mistreatment reported by agencies. One possible est number of Adult Protective Services (APS) financial 111 exploitation cases to date in any single state. explanation of this inconsistency could be that elder finan - Researchers began by reviewing more than 900 actual cial exploitation is reported to authorities less frequently APS cases of verified financial exploitation throughout the than other types of abuse. Thus, it is underrepresented in - official statistics and does not show up as the most preva state (estimating losses for APS cases it did not review). lent form of elder abuse in state administrative data. These cases involved elderly victims as well adults 18 or The Laumann national study found that financial older who, because of physical or mental impairment, were 112 The researchers estimated unable to protect themselves. exploitation was the second to verbal mistreatment as the 113 104 that actual losses–verified by APS–totaled $109 million. Similarly, the South most prevalent form of elder abuse. Carolina survey found that financial exploitation by family The researchers then adjusted the estimate in two 114 members was second to emotional abuse as the most com ways. - First, they limited the cases solely to victims who mon form of abuse. were seniors (age 60 and older). Second, they expanded the estimate to include not only APS cases but also the far No assessment of the scope of elder financial exploita - greater number of incidents that were not reported to APS. tion would be complete without an estimate of the costs. The researchers noted that many incidents of elder financial Start with the monetary costs imposed on the victims. The truth is that we simply do not have a good estimate of total exploitation go unreported to APS: the Under the Radar study found a ratio of nearly 44 cases of elder financial national financial costs to the victims. exploitation to every 1 referred to APS, and a 1998 National It is often said that victims of elderly financial exploi - 105 Center on Elder Abuse study put that ratio at 10 to 1. To This number tation lose at least $2.9 billion per year. comes from a widely cited MetLife Study of Elder Finan account for these unreported incidents, the researchers - cial Abuse, which was based on a review of newsfeed multiplied their baseline data of elder financial exploitation articles of elderly financial exploitation over a three-month by 10 for a low-end estimate and multiplied by 44 for a period in 2010. By putting a single, compelling number on high-end estimate of victims’ annual losses. This produced the estimate ranging from nearly $352 million (low-end) to the victims’ losses, this study succeeded in focusing atten - - more than $1.5 billion (high-end). This estimate sought to tion on the problem. The accuracy of that number, how capture the total universe of elder financial exploitation in ever, hinges on numerous assumptions and extrapolations 106 the state, whether it or not the incident was reported to APS. that the researchers made to fill in gaps in the data. Among other significant results, the study found that The Elder Justice Roadmap recognizes the lack of 107 quantitative data on costs, vulnerable adults between the ages of 18 and 59 accounted and instead describes the impact in more general terms: for 19 percent of the victims, or nearly one in five. The study also found that a mere 5 percent of victims partially or completely recovered the items or funds taken from Financial exploitation causes large economic them. That figure suggests how devastating the financial losses for businesses, families, elders, and losses can be. And they hit victims who can least afford government programs, and increases reliance on 108 it: victims of any age may not have the income stream to federal health care programs such as Medicaid. recover their losses, and elderly victims face the additional likely burden of a shortened time horizon. Though we don’t have a solid estimate of the cost of - The harm to victims, however, goes well beyond mon financial exploitation at the national level, we do have one for the state of New York. The 2016 study, “The New York etary loss. The study found that “financial exploitation State Cost of Financial Exploitation” estimated that seniors was associated with a wide range of negative outcomes (age 60 and older) suffered annual losses ranging from for the victims, including emotional pain (29 percent), 109 nearly $352 million to more than $1.5 billion. financial impoverishment (19 percent), guardianship The New York State Office of Children and Family (nine percent), and health concerns (six percent) and 115 Services, which conducted the study, described it as “one eviction (four percent).”

15 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 11 122 - (The Connecticut data encompassed Moreover, elder abuse in general (though not necessar rate accelerating. all forms of elder abuse, of which financial exploitation is ily elder financial exploitation in particular) has also been just one component.) Public costs are likely to rise further linked to a higher risk of mortality. “[S]tudies have shown if, as expected, incidents of elder abuse increase with the that victims of elder abuse are at increased risk for death, 123 aging of the population. after adjustment for any chronic illness they may have,” according to the Lachs article in the New England Journal At the national level, we do not have hard numbers or 116 of Medicine. rigorous studies demonstrating growth in elder financial 124 As we have seen, the elderly are often targets precisely We do, however, have some exploitation over time. anecdotal evidence, including observations by at least two because of their vulnerabilities, such as health problems, large brokerage firms. They have seen rising numbers of cognitive decline, and social isolation. These same factors incidents of suspected elderly financial exploitation in can make the elderly the least able to cope from the losses recent years, though it is possible that the increase could when elder financial exploitation does occur (and possibly - less likely to report abuses). This brings us full circle, sug partially be attributed to heightened sensitivity among gesting that a grim and self-reinforcing dynamic is at work. financial professionals who spot the red flags and report 125 them internally within their firms. Quantifying the costs in terms of dollars and cents, or even in terms of health and mortality, fails to capture its We also have a national source of data that could play a larger significance. Elder financial exploitation attacks the more important role in the future in tracking the growth of 117 - elder financial exploitation. This source consists of Suspi victim’s dignity and quality of life. In the words of the - cious Activity Reports (SARs) received by the U.S. Trea MetLife study, “Elder financial abuse invariably results in 118 sury Department’s Financial Crimes Enforcement Net - losses of human rights and dignity.” work (“FinCEN”). Financial institutions, including banks Elder financial exploitation also imposes costs on - and broker dealers, are required to file Suspicious Activi society, including public costs to render assistance to the ties Reports with FinCEN in certain cases. The reports are victims. Quantifying the public costs, however, remains elusive. As with the costs to victims, we do not have a confidential, but FinCEN provides summary statistics of national estimate of the total costs to the public, but we do the number (though not the dollar amount involved) of have estimates at the state level. reports filed. The most compelling estimates again come from the In 2013, FinCEN released a new electronic filing form “The New York State Cost of Financial Exploitation.” This that included a specific check box indicating that the filer 126 Two years earlier, study estimated the annual public costs at more than $14.5 suspects elder financial exploitation. FinCEN issued an advisory highlighting the issue of elder - million. That amount comprises nearly $6.3 million in ser financial exploitation to financial institutions. The alert vice agency costs, such as APS investigations, plus nearly included a list of potential red flags and instructions on how $8.3 million in public benefit costs, such as food stamps to report suspected elder financial exploitation through a or Supplemental Nutrition Assistance Program benefits (SNAP), Medicaid or Medicare coverage, and health and SARS filing (at that time, through a narrative portion of the 119 127 Studies in three other states– housing-related benefits. In 2017, FinCEN joined with the U.S. Treasury report). Utah, Wyoming, and Oregon–also examine the costs, with Department and the Consumer Financial Protection Bureau 120 128 in issuing a memorandum to reiterate that message. varying degrees of rigor and precision. - The number of SARS filings of suspected elder finan Finally, there is quantitative evidence that elder finan - cial exploitation has increased rapidly in recent years, cial abuse is growing as the population ages, with most of 129 the data at the state level, in New York and Connecticut It’s not clear, rising to nearly 60,000 reports in 2017. however, how much of this reflects actual growth in cases in particular. of suspected elder financial exploitation. The increasing According to the New York State Cost of Financial number of SARS filings could instead largely reflect Exploitation Study, the number of state APS referrals financial institutions’ growing familiarity with the new involving allegations of financial exploitation jumped 121 Similarly, more than 35 percent between 2010 and 2014. checkbox along with their increased awareness of the Connecticut saw an increase of 28 percent in reported need to detect and report elder financial exploitation. cases of elder abuse over the same period–with the growth

16 12 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead Going forward, however, as familiarity with the the fields of child abuse and domestic violence. The need for more research is urgent and it is an checkbox grows, it seems reasonable to expect that any upward trend SARS filings on suspected elder financial area that calls out for a coordinated, systematic exploitation will reflect increases in actual cases of approach that includes policy-makers, researchers 132 suspected exploitation. and funders. The gaps are reflected in a set of national research pri Conclusions: The Significance of the Numbers - - orities proposed in “The Elder Justice Roadmap” (“Road Any attempt at finding the meaning behind the num - bers must come with caveats. The various studies point map”). The report distills the collective wisdom of 750 to major gaps in our knowledge (as explored in the next stakeholders and experts from a wide variety of disciplines - section). Reported numbers, moreover, most likely under and fields on how to combat elder abuse. The initiative estimate the extent of elder financial exploitation. was funded by the U.S. Department of Justice with support 133 Nonetheless, the weight of the evidence presents a com - from the Department of Health and Human Services. - As the Roadmap priorities make clear, a number of fun pelling picture that is disconcerting if not alarming. It is a damental questions remain unanswered, including these: picture that has led some prominent medical doctors and public health experts to warn that elder financial exploita - 130 and “a burgeoning How many people have experienced elder financial tion represents “a virtual epidemic” 131 exploitation? public health crisis in need of immediate attention.” Take the Peterson study, which found a lifetime preva - There appear to be few national studies published in the past 10 years on elderly financial exploitation. Two of lence of elder financial exploitation of nearly 5 percent. The the most prominent—the Laumann study of 2008 and the study explains what that rate means from the perspective of public health: Acierno study of 2010—are both dated and had significant 134 design limitations. If a new disease entity were discovered that The studies were restricted to incidents of elderly financial exploitation committed by family members, and - afflicted nearly one in 20 adults over their older life times and differentially struck our most vulnerable - the interviews were limited to cognitively intact individu subpopulations, a public health crisis would likely als who lived in the community. “Unfortunately, we simply do not know for certain - be declared. Our data suggest that financial exploi how many people are suffering from elder abuse and tation of older adults is such a phenomenon. 135 One of the research pri neglect,” the NCEA observes. - In sum, the quantitative evidence from empirical orities that the Roadmap recommends is to determine rates 136 of elder financial exploitation. research studies reinforces the qualitative conclusions based in large part on demographic and financial trends. Elder financial abuse is a major problem today. It is What are the financial costs to victims and to society at large? likely to grow significantly worse. And it demands our What is the annual total dollar amount of the losses urgent attention. suffered by victims of elder financial exploitation? The near-ubiquitous answer, repeated at conferences and in speeches and articles, is “at least $2.9 billion.” This esti - WHAT WE DON’T KNOW mate is based on a single study: the 2011 MetLife Study of Elder Financial Abuse. (The researchers’ predecessor As the discussion above makes clear, there is a great work, the 2009 study “Broken Trust: Elders, Family, and deal that we do not know about elder abuse in general and elder financial exploitation in particular. The National Finances,” put the cost to victims at $2.6 billion.) Center on Elder Abuse (NCEA) observes: Recall that the MetLife Study based its estimated costs to victims solely on newsfeed articles over a single three- month period in 2010 (just as the predecessor study based Experts have reported that knowledge about elder abuse lags as much as two decades behind its estimate on a three-month period in 2008). Therefore,

17 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 13 those estimates would have failed to capture any incidents istics of victims and/or perpetrators (such as substance of elder financial exploitation not reported in the news abuse, mental illness) and contextual factors (such as poverty, isolation, dependence or disability, family articles and, as a result, most likely significantly under - 138 violence) in elder abuse cases.” estimated the costs to victims. Apart from the reliance on newsfeeds, there are also other reasons to question the What are the most effective treatments? accuracy of the estimated cost of $2.9 billion (or the earlier There are significant research and data gaps on estimate of $2.6 billion). See Appendix One: The Gaps in effective strategies to prevent and intervene in cases our Knowledge: A Closer Look at Two Seminal Studies 139 for details. of elder abuse. “There have been no large, high-quality randomized, At the time, the 2010 Study and the predecessor controlled studies of specific and discrete inventions in 2008 publication represented a creative way with limited cases of elder abuse—a situation that has been identified resources (newsfeed articles) to focus public attention on a - as leading to a critical knowledge gap in the field,” accord single, compelling number. Thanks to that number, the stud - 140 ies succeeded in raising the visibility of problem of elder ing to Dr. Lachs, the prominent gerontologist. As a result, those on the front lines often find them - financial exploitation. That was particularly important at the time, when frustrated experts and practitioners bemoaned selves without the tools or resources to detect elder abuse or the most appropriate ways to respond to it. Referring to the general lack of attention to a problem that was all significant gaps in data and research, the Administration around them. In this respect, one can say that the studies on Community Living in the Department of Health and made lemonade from the lemons of insufficient data. Human Services has observed: A decade has passed since those pioneering studies, and yet we suffer from the same lack of data. We have - These conditions perpetuate the absence of uni not filled in the gaps with authoritative research. We still cannot give a definitive answer to the question of the form approaches, guidance, and training across the total annual costs incurred by the victims of elder finan allied industries working to prevent and address - - adult maltreatment, resulting in APS investiga cial exploitation. 142 tions that are difficult to conduct... Nor can we say how much of the cost is borne by the - American public through case investigations, interven tions, prosecutions and assistance to the victims of elder - Similarly, the Roadmap makes clear, “Comprehen sive data collection is critical to inform efforts to detect, financial exploitation. As we have seen, researchers have respond to, and prevent elder abuse, to shape policy, and produced a rigorous estimate of the costs to the state of 143 New York, but we have not established similar estimates to allocate resources where they’re most needed.” for most other states or for the nation as a whole. Fragmentation and the Lack of Data Acknowledging that the “cumulative toll of elder abuse 137 the Roadmap recommends has not yet been quantified,” In an age of big data and predictive analytics, the gaps as one of its research priorities to identify the costs and in our knowledge may seem surprising. But big data and predictive analytics rely on copious amounts of data, and consequences of elder financial exploitation. - there is a paucity of data on elder abuse, along with short ages of researchers and empirical research studies. This What are the causes of elder financial exploitation? Who are perpetrators, and why do they commit has been one of the biggest obstacles to understanding and 144 specific types of exploitation? treating elder financial exploitation. The existing studies point to a number of risk factors At least until now, there has been no nationwide sys - for elder financial exploitation. Nonetheless, substantially tem to collect and report APS data on cases of elder abuse. more research is needed to identify causes of various Instead, a highly fractured system has emerged, with each - types of financial exploitation and to gain a better under state maintaining its own system to collect and store data. standing of why perpetrators commit those actions. Thus, This has had a significant impact on our ability to under - stand elder abuse, as the NCEA makes clear: one of the Roadmap research priorities is to “Conduct a - long-term (longitudinal) study examining the character

18 14 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead at the state or local level, as a national system it is frag - [L]ongstanding divergences in the definitions and data elements used to collect information on elder mented and unequal, both within and across states,” the Department of Health and Human Service’s Administra abuse make it difficult to measure elder abuse - 147 nationally, compare the problem across states, tion on Community Living has observed. - counties, and cities, and establish trends and pat While fragmentation affects treatment for all forms of terns in the occurrence and experience of elder elder abuse, the impact on elder financial exploitation may 145 abuse. be particularly pronounced. Financial exploitation is the most common form of elder abuse and yet the least stud - ied, according to the Peterson study. Financial exploitation This fractured system stands in sharp contrast to the of older adults “was explored only minimally in the initial data collected for decades on child abuse and domestic 148 with research instead emphasizing more studies,” violence, leading some experts to point to the National “traditional” forms of elder abuse (e.g., physical, sexual, Child Abuse and Neglect Data System as a model for 146 149 collecting and reporting on incidents of elder abuse. emotional abuse/neglect). It’s not just a question of siloed data systems. Frag - In a similar vein, a retired manager of federal research mentation permeates state and local responses to elder grants recalled to me how he had struggled for years to abuse, including types of services provided, populations find funding for research on elder financial exploitation. served, eligibility requirements to receive such services, Often he had to make do by persuading researchers to response times, and education and training of caseworkers. include a few questions on that topic within studies that had focused on other forms of elder abuse. “Because the APS system is designed and administered . A Big Step Forward: Creating a National APS Data System BOX 4 The National Adult Maltreatment Reporting System (NAMRS) promises to become the first comprehensive national reporting system for data reported to state adult protective services (APS) programs. That is a major step forward. The U.S. Department of Health and Human Services’ Administration for Community Living leads the initiative, with the voluntary participation of states and territories. Data collection began in 2017, with submissions from 54 of 56 states and territories (48 states, the District of Columbia, and the five territories). Of them, 44 entities provided either case-specific or aggregated APS data, while the others provided information about state agency policies and 150 practices. To accommodate states or territories that were unable to provide case-specific data, the system allowed instead for the submission of aggregated data on key statistics. An earlier, two-year pilot program identified these priorities for NAMRS: Defining Abuse, by creating a clear definition of vulnerable adult abuse and neglect. • Learning about Victims and Abusers, including demographic information about clients and their • relationships to alleged perpetrators. • Describing and Informing APS Practice, which eventually will provide insight into APS practice, case outcomes, and types of interventions. Affecting State and National Policy Issues, by providing data on macro-level issues, which could impact • state or national policy. In August 2017, ACL released the first in a promised series of reports on the data received from the states. The first release provided an overview of the types of information and data submitted by participating states and territories. Future reports, among other topics, will describe victim and perpetrator demographics and a summary of case- specific data on investigations of maltreatments, clients, victims, services, and perpetrators. For more on NAMRS, see https://www.acl.gov/programs/elder-justice/national-adult-maltreatment-reporting- system-namrs.

19 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 15 accounts of certain customers, if the broker reasonably Data is necessary to inform policies on elder abuse– believes that financial exploitation of the customer has and to justify the need for adequate funding and other resources. That can lead to a Catch-22: data and research occurred, is occurring, has been attempted or will be attempted. The rule covers customers who are age 65 and are needed to justify the allocation of resources, but those older as well as those who are 18 or older and who, the resources are needed to collect the data and conduct the - research in the first place. broker-dealer reasonably believes, have a mental or physi Fortunately, there is a federal initiative underway cal impairment that prevents them from protecting their own interests. to build a national data system of APS data. Called The rule allows—but does not require—broker dealers the National Adult Maltreatment Reporting System to place a hold on disbursements if they suspect financial (NAMRS), it seeks to become the first comprehensive exploitation. If a brokerage firm places such a hold based national reporting system for data reported to state adult on reasonable suspicion, the rule provides the firm with a protective services (APS) programs. (See box 4.) Since NAMRS is designed to capture APS data, it will safe harbor from other FINRA rules. That means that the not collect information on incidents of elder abuse that are broker-dealer would not be held liable if compliance with not reported to APS. That appears to be a large number: as this rule conflicted with other FINRA rules, such as a 156 - we have seen, only one in every 44 incidents elder finan requirement to follow a customer’s instructions. The hold can remain in effect for up to 15 business cial exploitation is reported to APS in New York State. days, and the firm can extend the expiration date for an Thus, a considerable number of incidents will fall outside additional 10 business days following an internal review. the NAMRS database. Nonetheless, the development of a national database will be a major step forward, promising State agencies, such as Adult Protective Services or a state 157 securities regulator, also can extend the hold. to address some of the data and research shortcomings FINRA’s other rule change (Amendment to Rule described above. 4512, “Customer Account Information”) requires firms to make reasonable efforts to obtain the name and contact information for a trusted contact person when a retail WHAT REGULATORS ARE DOING ABOUT IT: customer’s account is opened and when the account infor LEGAL AND REGULATORY REFORMS - mation is updated. (The rule applies to individual clients, not institutional investors.) Firms are required to ask for On February 5, 2018, two FINRA rules took effect to the information, but customers are not required to provide allow brokerage firms to respond quickly to protect cus - 151 One it. If the customer declines to do so, the firm can still open tomers from suspected elder financial exploitation. 158 of the rules allows broker-dealers to place a temporary the account. If a firm places a hold on a customer’s account, the hold on disbursements from a client’s account when elder 152 financial exploitation is suspected. firm must notify the trusted contact unless the firm rea - The other rule seeks to facilitate communication between a firm and a custom sonably believes that the trusted contact is engaged in the - er’s trusted contact to address possible financial exploita financial exploitation. - 153 (For other FINRA activities to protect senior The trusted contact person is intended to be a resource tion. investors, see Appendix Three: SEC and FINRA Actions for broker-dealers, according to the FINRA release. For to Protect Senior Investors.) example, the rule also allows, but does not require, the Meanwhile, more than a dozen states have adopted firm to communicate with the trusted contact when the - laws that would permit certain financial firms to pause brokerage is concerned that the customer is being finan 154 The disbursals when financial exploitation is suspected. cially exploited but the firm has not yet decided to place 159 state laws are patterned on the Model Act, which was a temporary hold on a particular disbursement. - In addi adopted two years ago by the North American Securities tion, the firm can contact the trusted contact and disclose Administrators Association (NASAA), the association of the customer’s account information to inquire about the 155 state securities regulators. customer’s health status. FINRA explicitly states that a FINRA Rule 2165, “Financial Exploitation of Speci brokerage firm may communicate with the trusted contact - fied Adults,” permits broker-dealers to place a temporary if it suspects that the customer may be suffering from hold on disbursements of funds or securities from the Alzheimer’s disease, dementia or other forms of dimin -

20 16 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead ished capacity. The firm also could contact the trusted NASAA adopted its Model Act to Protect Vulnerable contact to confirm the identity of a legal guardian, execu - Adults from Financial Exploitation in January 2016. As 160 tor, trustee, or holder of a power of attorney. its name implies, the Model Act has no force of law on its Brokers may only communicate with persons whom own, but can serve as a model for state laws or regulations. the customer already has designated as trusted contacts. A total of 13 states have passed laws based in whole or Nothing in these or other FINRA rules permit contact with part on the Model Act. All 13 of those state laws contain a anyone not listed as a trusted contact, even if the person is provision allowing for a delay on disbursements if financial a close relative of the customer. exploitation is suspected, and eight of the state laws are Being designated a trusted contact would not in itself nearly identical to the Model Act. Meanwhile, three other confer authority to transact business on an account. The states have been considering legislation based on the Model rule would, however, allow persons already authorized to Act. Before it was adopted, three states already had similar 162 - transact business on an account—such as joint account laws on their books. holders, trustees, or individuals with powers of attorney— Like the FINRA Rule, the Model Act permits pauses 161 to be designated as trusted contacts. of disbursements upon reasonable suspicion of financial exploitation. Specifically, the Model Act provides broker- Even before the rule took effect, some firms had taken dealers and investment advisers with the authority to delay - the initiative to ask customers for the names of trusted con disbursement of funds from an eligible adult’s account tacts. This had been considered an industry best practice, if the broker-dealer or investment adviser reasonably but it had not been universally followed. Now that it is believes that such disbursement would result in the finan - mandatory, this best practice will become standard practice 163 cial exploitation of the eligible adult. for all broker-dealer firms. FINRA adopted the rule changes in October 2016, Note that this only applies to pauses on disbursements the SEC approved them in February 2017, and they took from the account, not to transactions within it. For exam - ple, if a customer ordered a broker to sell shares of a stock, effect 12 months later, on Feb. 5, 2018. The SEC oversees neither FINRA Rule 2165 nor the Model Act would permit FINRA, which regulates broker-dealers. TABLE 2. Comparison of FINRA Rule Changes and NASAA’s Model Act - FINRA - NASAA Model Act to Protect Rule 2165, “Financial Rule 4512, Explloitation of Vulnerable Adults from “Customer Account - Specified Adults” Financial Exploitation Information” Applies to Broker-dealers Broker-dealers Broker-dealers and investment advisers Permits delay of disbursements N/A Ye s Ye s Permits delay of transactions N/A No No Requires asking for trusted contacts Ye s N/A No Requires notifying trusted contacts/designated N/A Ye s No third parties if hold is place on disbursement Requires reporting to state APS and securities N/A No Ye s commissioner and sharing relevant records with them* Requires record retention Ye s Ye s Implied Requires training N/A Ye s No Provides safe harbor from other FINRA Rules N/A Ye s N/A Provides civil and administrative immunity No No Ye s * Whenever there is either 1) a reasonable belief of financial exploitation of the vulnerable adult or 2) the disbursement is delayed

21 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 17 the firm to refuse to execute the transaction or to delay possible that a state could adopt it or apply it differently 168 164 FINRA said it may consider extending the safe harbor it. and a court could interpret it differently. 165 The safe harbor provisions in FINRA Rule 2165 would to transactions in securities in future rulemaking. provide a defense against an action by FINRA itself, but Disbursement of money or securities out of the account would not provide immunity from a civil lawsuit by a can have far more severe consequences than a transaction - within the account. Disbursement can have a devastat disgruntled customer or a legal representative of one. Nonetheless, it might be expected that a broker-dealer’s ing impact, as when, for example, fraudsters persuade the elderly to empty their entire retirement or brokerage legal defense might point to the safe harbor provisions to account and send it overseas. There the money vanishes argue that the actions were reasonable. without a trace, leaving no way to recover it. The sale of a Another key difference relates to mandatory reporting. The FINRA rule contains no reporting requirements, even security, in contrast, would be less damaging, because the 169 proceeds would remain in the customer’s account. if a firm places a hold on disbursements, though it does 170 require that broker-dealers retain relevant records. Nonetheless, it is possible to envision circumstances of The financial exploitation in which a transaction results in harm Model Act, in contrast, makes reporting mandatory. If there is a reasonable belief that financial exploitation of an eli - to the victim, even if the assets remain in the account. For gible adult may have occurred, been attempted, or is being example, depending on the circumstances, surrendering or attempted, the state securities regulator and Adult Protec - cashing out an annuity could incur substantial penalties. tive Services must be notified promptly. This requirement The victim would suffer a financial loss, even if the cash proceeds remained in the account. holds true whether or not a pause is placed on disbursals Despite the similarities between the FINRA rules and from the customer’s account. In addition, if there is a pause on disbursals, any persons authorized to transact business the Model Act, there are some important differences on the account must also be notified, unless they are the between them. One basic difference results from FINRA’s ones suspected of the financial exploitation. status as the self-regulatory organization for broker-deal - It’s also important to understand limitations on both the ers: the FINRA rules apply only to broker-dealers, while - FINRA rules and the Model Act. As we have seen, they the Model Act also would apply to state-registered invest permit pauses only for disbursements, not from transac - ment advisers (but not to investment advisers registered 166 with the SEC). tions. In addition, pauses would be permitted only in cases of suspected financial exploitation, but not in instances of In another key difference, only the Model Act confers suspected diminished financial or cognitive capacity unac - immunity from civil and administrative liability. Unlike companied by financial exploitation. Imagine, for exam - the states, FINRA lacks authority to provide immunity. ple, that a customer were making bad financial decisions The Model Act would confer immunity from admin - not because she was being exploited, but solely as a result istrative or civil liability for delaying a disbursement and of Alzheimer’s disease or other cognitive impairment. In for reporting suspected financial abuse to governmental this case, neither the FINRA Rule 2165 nor the Model Act agencies and designated third parties (who are analogous would allow the broker to place a hold on disbursements to the “trusted contacts” in the FINRA rule). To gain that from the account. Acknowledging this limitation, FINRA immunity, the broker, investment adviser, or qualified indi - observed that diminished capacity is an important issue for vidual must act in good faith, exercise reasonable care and 171 future consideration. comply with the provisions of the Model Act. Qualified - Note, moreover, that FINRA Rule 4512 does permit individuals would include broker-dealer agents, invest ment adviser representatives, and those acting in a super - the broker to call the customer’s trusted contact to dis - visory, compliance or legal capacity for broker-dealers and cuss if it has concerns that the customer may be suffering 167 investment advisers. from diminished capacity. Once alerted to that concern, The Model Act is intended to apply to enforcement the trusted contact might follow up directly to assist the actions brought by state regulators, not to civil cases individual in addressing the health issues. Such a scenario could unfold, for instance, where the trusted contact is a brought by the firm’s customers, according to Joseph Brady, Executive Director of NASAA. He noted that he son or daughter who lives in another state and had been was referring to the intent of the Model Act, and that it was unaware of the suspected cognitive decline.

22 18 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead Finally, both the Model Act and the FINRA rules focus advance of information technology and related emerging - technologies, from artificial intelligence to distributed led only on a subset of one or two financial institutions: either ger technology. This can cut both ways, with both positive broker-dealers (FINRA), or broker-dealers plus investment and negative potential implications for combatting elder advisers (the Model Act). Other types of financial institu - financial exploitation. - tions, such as banks, are not covered. That raises the ques Start with the negative potential implications. We tion of how comprehensive the measures will prove to be. already see widespread growth in online financial accounts Their limitations notwithstanding, the FINRA and - NASAA measures are of major significance, for several as well as call centers that field calls from banking or bro kerage clients. Customers can now choose from a variety reasons. First, they demonstrate momentum in combatting of ways to withdraw or transmit money from their accounts elder financial exploitation. State and national authorities - electronically, ranging from online bill-pay options to credit have recognized the importance of elder financial exploita tion, and they have taken action to address it. and debit cards linked to a brokerage or bank account. These electronic and online transactions, while not anony Second, the measures recognize the critical role that - financial firms and professionals can play in combatting mous, are far removed from in-person meetings at a local elder financial exploitation. The financial industry finds bank or with a personal financial adviser. When an elderly person visits a bank in person, the itself on the front lines. Broker-dealers and investment teller–especially one who knows the regular customers– is advisers often have a unique vantage point thanks to the in a position to recognize red flags of possible financial long-standing relationships they have developed with their 175 So, too, are financial advisers who have exploitation. clients. Financial professionals may be the first to spot known their clients for years. Those personal ties are warning signs of financial exploitation, or to notice erratic severed, however, when a customer–or a fraudster imper - behavior or other indications that could suggest a decline 173 sonating the customer—withdraws cash or executes in their customers’ cognitive capacity. In addition, financial firms may have software and trading instructions online or on the phone. Suppose, for - instance, that an imposter calls in to a brokerage call cen algorithms in place to parse a customer’s age, transaction patterns, and other information to detect suspicious trans - ter and claims to be a customer who is 80 years old. The actions as soon as they occur. By providing new tools to - imposter’s voice may sound nothing like that of an octoge financial firms and their employees, FINRA and NASAA narian, but if the caller is able to answer all of the security are recognizing them as essential allies in the fight against questions correctly, what is the call center employee to do? 174 - financial exploitation. Is suspicion based on the sound of a person’s voice a suf Finally, the FINRA Rules and Model Act, while resolv - ficient basis to refuse a request for cash? (Hint: see below.) ing a number of important policy questions, speak to the As more and more people use online services, this broader issue of striking the right balance when values and problem is likely to grow. It might be objected that elderly rights come into conflict. For example, the need to protect persons are less likely to use online accounts, call centers, the elderly from exploitation can come into conflict with and related products and services. That may be true for their right to privacy, to have access to their accounts, many in the old-old category, but there are plenty of per - sons past the age of 65 who do use online services. More and to make their own financial decisions. These make - for challenging policy choices and ethical dilemmas, as over, even if the elderly person does not use electronic we explore in the conclusion and Appendix Two: Ethical services, a perpetrator who steals the elderly person’s Dilemmas: “When Helping Hurts”. identity may do so. In sum, new technologies may offer new platforms and venues for those intent on exploiting the elderly. LOOKING AHEAD On the other hand, IT advances present the promise of new tools to detect, prevent, and even predict the risks of elder financial exploitation. Today, financial firms Financial Innovations and IT Advances already deploy IT technology to detect suspicious patterns The expected trends in elder financial exploitation, and or transactions. Other current and emerging tools, such our responses to them, will evolve in a world that is itself changing. One significant change involves the continuing as two-method verification, voice recognition, and face

23 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 19 recognition, could be used to foil attempts by imposters to - pected money laundering or suspicion of terrorist financ 178 In addition, exceptions to the privacy provisions of ing. steal money from the account of victims. the Gramm-Leach-Bliley Act generally permit financial - In the future, we may also be able to put artificial intel ligence (AI) and predictive analytics to use in combat - institutions to disclose nonpublic personal information ting elder financial exploitation. AI deploys computers to about consumers to local, state, or federal agencies for the purpose of reporting suspected financial abuse of sort through great quantities of data and, without being 179 older adults. explicitly programmed to do so, to find patterns and make 176 Nonetheless, broker-dealers, investment advisers and predictions that have eluded the human mind alone. Conceivably, AI could be used in the future to identify other financial institutions generally do not communicate combinations of risk factors for elder financial exploitation directly with each other about suspected elder financial 177 (or other forms of exploitation). exploitation. For example, if a broker suspected that This could enable us to take actions to prevent abuse before it happens. elderly financial exploitation was being attempted against a customer, the firm would not communicate its suspicions It will, however, take more than technical advances to the customer’s bank or other third-party financial insti - to get to that stage. It will also take data, and lots of it: tutions. Some thought leaders argue that it should. characteristics and circumstances of victims, perpetrators, elderly persons who do not become victims, and so on. Where will the data come from? A new set of far-reaching Creating a regulatory environment proposals holds the promise to provide that data and to ‘‘ whereby financial institutions can more harness AI and other digital advances to combat elder financial exploitation. easily share data among themselves could be an important component of a Reform Proposal: Building an Integrated and Systemic Approach more comprehensive strategy to bridge Some thought leaders advocate building a new set of the communication gap and reduce the capabilities to treat elder financial exploitation in a far frequency and severity of financial more comprehensive, integrated and systemic way. The - new system would develop two new networks of commu losses for older adults. nication: first, an early warning system of communication ’’ among brokerage firms, investment adviser firms, banks, , Discussion Paper: —LARRY SANTUCCI Can Data Sharing Help Financial Institutions and other players within the financial services industry; Improve the Financial Health of Older Americans? - and second, a bridge of cross-communication and collabo ration between the financial services and health services - Imagine a burglary alarm set-up consisting of uncon industries. The conclusion of this paper examines what this nected components in each room: the alarm would sound - system would like look and considers some of the formi only in the specific room that the burglar entered, and we dable obstacles and potential drawbacks that would need would have to wait for him to step into another room to to be overcome to achieve it. trigger that room’s alarm. Nowhere would we have an Many of us keep our money and financial assets at integrated system, in which an attempted intrusion in any more than one financial institution. We may have a bank room would set off an alarm throughout the house. account, a credit union account, a brokerage account, a Analogously, proponents argue, we need to build a mutual fund account, an investment adviser account, a - coordinated communication system among financial insti 529 plan education savings plan, other financial accounts, tutions to protect against elder financial exploitation. If one or some combination thereof. Because of privacy laws and institution suspected an attempt to exploit a customer, it other reasons, however, communication between separate would set off an early-warning system for all of the cus - financial firms is quite limited. tomer’s other financial institutions. In addition, the system There are some exceptions. Financial institutions are - could warn against signs of a customer’s diminished finan permitted to communicate directly with each other and cial capacity or cognitive decline. - share personal consumer information in matters of sus

24 20 n, what regulators are doing about it, and looking ahead Elder Financial Exploitation: Why is it a concer The heart of the system would consist of a database that could help financial institutions in deciding when and and communications hub, which would be run by a neutral how to intervene in cases of suspected financial exploita - entity, possibly a government agency. The system would tion or cognitive decline. And social workers could play an have the ability to identify all the financial institutions - important role in investigating and intervening as appropri serving each individual customer and to link them in a ate in individual cases of suspected financial exploitation. virtual network. If any one financial institution submitted Thus, there is a natural symbiosis among professionals in a report communicating suspected elder financial exploita - these three fields, a symbiosis that could accrue to the tion (or diminished financial capacity), the system would benefit of their patients/customers/clients. - distribute the warning to all of the customer’s other finan Dr. Jason Karlawish has been a leading advocate of cial institutions. Any one of them could submit an inquiry such a vision. He calls it “whealthcare,” a term that sug - about a customer or suspicious pattern, and that inquiry gests the integration of medical and financial services to would be distributed to all the other financial institutions protect and preserve both the wealth and the health of that serve that customer. older adults. He explains: The idea of just such a system was broached in a recent Discussion Paper of a center within the Federal Reserve We expect the financial system will preserve 180 Bank of Philadelphia. - The paper describes an industry our wealth, and that healthcare will preserve our wide data sharing system to enable financial institutions health and, as they do this, that they have little - “to act as a single, unified consumer protection tool, inde need to work together. And yet, our aging brains pendently learning about their customers’ financial behav - are intimately entwined into the financial system. ior, but acting jointly to protect the consumer’s assets The failure to integrate the care of our wealth and when they are being exploited.” our health is why cognitive impairment is dis - Significant obstacles would need to be overcome to covered too late. We need a system that delivers build such a system. Regulators and legislatures might whealthcare. need to make changes in law and regulation, including those governing the right to privacy. Financial institutions Cognitive impairment is not simply a medical would need to develop new policies and practices, change problem. It’s a public health problem, and the embedded cultures, and develop new standards on how to banking and financial services industries are at its handle notifications from unaffiliated firms of suspected - front lines. America must think outside the bio 181 elderly financial exploitation. We as a society would medical box to envision a system that cares for our 183 need to think through the implications of such a system health and our wealth. for the rights of the elderly to privacy and autonomy. - (The Discussion Paper examines these challenges in Such a system could not only facilitate communica tion between doctors and financial professionals, but also detail.) Before considering them further, however, we hold the key to supplying essential data to understand the explore a concept for even more far-reaching reform. causes of elder financial exploitation and the best ways to Financial institutions and professionals are not the only ones on the front lines; so, too, are doctors and some prevent or treat it. Financial institutions hold vast amounts 182 So why not build a system of cross- social workers. of transactions data involving their customers, data that is likely to include a treasure trove of signs of possible elder communication between financial services and healthcare services, linking bankers, brokers and investment advisers financial exploitation and cognitive decline. For example, with medical doctors and social workers. This would entail a variety of erratic or unusual banking transactions, as well significant synergistic benefits. As we have seen, changes as changes in banking patterns, can serve as possible signs 184 in financial behavior often serve as the first sign of the of financial abuse of older adults. As we have seen, missing data hampers research and onset of cognitive decline. Thus, financial institutions have limits our understanding of the causes of elder financial invaluable information–and, increasingly, the technology - to capture, store, and report it–that doctors can use to iden exploitation and how best to prevent and treat it. That tify symptoms, detect risks, and treat patients. Likewise, data may be hiding in plain sight, in the form of financial doctors can render the medical judgments and diagnoses transaction data. The data could allow us to make real-time

25 21 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead measurements of the prevalence of financial exploitation mation from any one financial or medical provider ended and the amounts of money involved. Or to detect incipient up residing in multiple databases across financial and 188 cognitive decline. Again, to quote Dr. Karlawish: medical institutions. One potential solution to these security concerns, which the Federal Reserve Discussion Paper suggests, - Consumers’ interactions with banks and invest - ment firms–from logon to logout at the computer would be to consider using the same secure communica or the cash machine–are a real world dataset tion and database system that financial institutions already describing brains engaging in financial tasks. use to submit SARS. Under this scenario, the Treasury - - Researchers can use these data to better under Department’s FinCEN, which administers that SARS sys tem, would manage the elder exploitation system as well. stand the aging brain, particularly changes in Another potential solution would be to draw on emerg - social cognition that impair the abilities to judge ing distributed ledger technology. A permissioned block risks and whether to trust other people, changes chain would house a single repository of data, obviating that lead older adults to be victims of scams. the need for duplication by separate financial institutions, Perhaps even more significantly, financial transactions while limiting access to a select group of approved (or data could serve as a key source to supply the voracious data “permissioned”) institutions. And, in theory at least, it requirements of AI. If the financial data were supplemented would be impossibly difficult for anyone to alter the data. with health histories of individuals who are elderly and have Arguably, however, the technical hurdles would be secondary to even more fundamental challenges involving suffered financial exploitation, the combination potentially could lead to even more powerful predictive analytics. - our basic values. Efforts to protect the elderly from exploi tation could quickly come into conflict with the rights of Armed with that knowledge, we could predict the likelihood that a person could be subject to financial exploitation or the elderly to privacy and autonomy. We as a society would need to rethink those values and establish priorities other forms of elder abuse in the future, and we could take 185 proactive steps to prevent that from happening. to resolve these potential conflicts. If you view privacy as a fundamental right that cannot be compromised, it could be difficult to accept a system [O]ne of the greatest challenges in in which personal information about an individual–their financial decisions, transactions, or concerns over their ‘‘ addressing elder abuse is navigating the behavior or cognitive capacity–would be relayed to a web right balance among autonomy, safety, of financial or medical providers. On the other hand, one can regard privacy as a means to a higher end; i.e., the and privacy goals. —THE ROADMAP well-being of the individual. In this view, intrusions on ’’ a person’s privacy must be weighed against the risks of financial exploitation. In general, risks can be measured as There is already some interaction between the financial 186 a combination of two factors: the probability of something and medical fields, but nothing on this grand a scale. To bad happening, and the magnitude of the harm if it did. The develop such a system one would need to overcome an - risks are high on both counts when it comes to elder finan - array of daunting obstacles, beginning with privacy con 187 cial exploitation: the likelihood of abuse is relatively high, cerns. The right to privacy is embedded in laws regulat - and the impact can be devastating on the victim’s finances ing both personal financial and medical information, and and their health. Therefore, one may well conclude that those laws would need to be changed to enable the cross- giving up a limited measure of privacy would be worth it to communication and sharing of information embraced prevent or minimize the risks of elder financial exploitation. by Dr. Karlawish’s vision of whealthcare. The same considerations obtain when we consider - A database and communication system linking finan the rights to autonomy, including the right of the elderly - cial and health care professionals also would raise daunt to make their own financial decisions. One banker was ing security risks. Any centralized database of financial recently quoted in the press as stating his belief that data would offer a tempting target for hacking, theft and customers “have the liberty to make dumb financial abuse. Data security risks also would be magnified if infor -

26 22 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead 189 - decisions.” ble, ethical dilemmas. This issue transcends financial regu That is a reasonable viewpoint if one - latory policy choices and is therefore beyond the scope assumes that the customer is not being exploited or suf fering from diminished financial capacity. It is a ques of this paper, but is described in Appendix Two: Ethical - tionable attitude, however, if it keeps a financial firm or Dilemmas: “When Helping Hurts”. professional from intervening to protect an elderly person Conclusion from financial exploitation or self-inflicted financial harm - brought on by cognitive decline. Exploitation (or bad To recap, elder financial exploitation is already consid ered a public health crisis and is expected to grow dramati - financial decisions resulting from cognitive decline) may cally along with the aging of America. Financial and result in a far greater assault on the individual’s sense of pension trends will only exacerbate the problem. autonomy, self-identity and dignity. We have seen recent signs of momentum in addressing In sum, it is right to begin by asking, “Where do elder financial exploitation. Both NASAA’s Model Act attempts to protect the elderly end and where does an and FINRA’s recent rule changes allow certain financial overly intrusive paternalism begin?” In view of the con - firms to place a temporary hold on disbursements from the sequences of elderly financial exploitation, however, we accounts of customers when financial exploitation is rea - may end up asking instead, “Where does the right to self- sonably suspected. The new measures also reflect renewed determination end, and where does the right to self-harm emphasis on communication. or self-destruction, whether witting or unwitting, begin?” It is a central truth of elder abuse that it is a complex Nonetheless, we must ask whether we as a society have - phenomenon that demands a comprehensive, multi-disci - done everything we can and should do to address the chal 190 lenge. Would the data sharing system described above, fos - That explains why multi-disciplinary plined response. tering communication and coordination within the financial teams are considered to be one of the most effective and 191 - promising ways to treat elder financial exploitation. industry and between the financial and health care indus The tries, justify the trade-offs it would entail and the reforms system described here–facilitating communication and required to overcome legal and other obstacles? If not that, - coordination between financial and health care profession then what alternatives do we have to build the safety net that als–represents one more way to build a comprehensive, multi-disciplined and effective response. is needed to protect the elderly from financial exploitation? No system, however, will be a panacea. Cases of elder - abuse can present excruciatingly difficult, if not impossi

27 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 23 study based its annualized estimate solely on the larger of APPENDIX 1: THE GAPS IN OUR KNOWLEDGE: those two numbers. A CLOSER LOOK AT TWO SEMINAL STUDIES An analysis of articles from April through June of 192 (The 2010 found victims’ losses totaled of $530 million. Two of the most commonly cited statistics regard - previous report, Broken Trust, based on newsfeeds for the ing elder financial exploitation suggest its scope: it costs period of June through August of 2008, found a cost of - victims at least $2.9 billion a year, and its past-year preva nearly $397 million, which the researchers extrapolated to lence is 5.2 percent of the elderly. Yet both those numbers, an annualized estimate of $2.6 billion.) and the studies upon which they are based, are open to But the researchers also analyzed reported financial serious questions. The monetary costs come from a review losses during the winter holiday months of November of newsfeed articles, not a representative survey. And the 2010 through January 2011, and here they found losses to prevalence statistic comes from a widely cited national 193 victims of nearly $38 million –a full order of magnitude study whose lead author himself says he does not trust less than the spring number. The researchers took the the numbers. spring number ($530 million), while ignoring the winter The purpose of this appendix, it must be emphasized, number ($38 million), to produce an annualized estimate is in no way to criticize the study authors. They displayed of $2.9 billion. They used their analysis of winter months ingenuity and perseverance in launching pioneering stud - only to investigate whether the holiday season and family ies, finding impactful results with limited resources, and visits led to higher incidents of elder financial exploitation. succeeding in focusing public attention on the problem. What could explain such a gaping difference between The purpose instead is to illustrate the gaps in our knowl - - the losses in the two periods? The single biggest compo edge and the need for more research. nent of the spring number consisted of Medicare and 194 Medicaid fraud, which amounted to $306 million, or The 2011 MetLife Study of Elder Financial Abuse: 58 percent of the total of $530 million for that three-month At Least $2.9 Billion in Costs to Victims period. One of the news articles that spring reported on What is the total amount of annual monetary losses several cases of Medicare and Medicaid fraud and a incurred by victims of elder financial exploitation? The state-wide bust. In the winter period, in contrast, there near-ubiquitous answer, of at least $2.9 billion,” comes were no reports of Medicare and Medicaid fraud, bringing from the 2011 MetLife Study of Elder Financial Abuse. the dollar amount for those three months down to zero. (The researchers’ previous study, the 2009 Study “Broken That raises the question of which period was more Trust: Elders, Family, and Finances, reported an estimate - representative of the average losses. Was one of the num of $2.6 billion.) bers an outlier? Would an average of the spring and winter It has been widely noted that this number probably reported losses come closer to the typical amount? With underestimates the losses, because it relies solely on these questions left unanswered, it seems hard to have con - - amounts reported in newsfeed articles. The methodol fidence in either number, and thus also for the annualized ogy would fail to capture cases of exploitation that were estimate of $2.9 billion. not reported in the newsfeeds. As a result, the annualized One might also question why losses resulting from estimate could significantly underestimate the true extent Medicare and Medicaid fraud were included in an esti - of victim losses. That’s why the Study says that the annual mate of the financial losses to elderly victims. Medicare figure is “at least” $2.9 billion. and Medicaid fraud are not defined in the 2011 MetLife But there are also other methodological issues that - Study, but the glossary to the 2009 Broken Trust publica raise questions as to the reliability of this estimate. It is - tion offers this definition of Medicare fraud: “Manufactur worth reviewing two such issues, not to criticize the two ers bill Medicare for merchandise or service that was not seminal studies, but reflect on the continuing problems of 195 needed or was not ordered.” The glossary offers several insufficient data and lack of knowledge regarding elder examples, all involving fraudulent billing to insurers, not financial exploitation. - to the elderly victims. The Broken Trust report also repro First, the 2011 MetLife Study actually found a huge duces an excerpt from a news article reporting how one difference in the total dollar losses of elder financial doctor performed needless surgeries on elderly patients exploitation in two separate three-month periods. Yet the

28 24 n, what regulators are doing about it, and looking ahead Elder Financial Exploitation: Why is it a concer after concocting false diagnoses of cancer, and then billed Dr. Acierno explained that the interviewers framed the Medicare and Medicaid for the operations. That represents survey questions in the context of financial exploitation a heinous crime against the elderly (and fraud against and of actions by family members that the respondents did the government), but, again, it’s unclear why the dollar not want. This also explains why Dr. Acierno considered amount of the fraud would be classified as financial losses the findings dependent on context and perception. He borne by the elderly victims. - added that when he began the study, there was no consen sus on a definition of financial exploitation. Therefore, he The National Elder Mistreatment Study - told his funders that he would provide data on the compo This is one of the most frequently cited studies in nents listed above, allowing the funders to pick and choose financial exploitation literature. Yet the lead researcher, among components based on any future definition. Ron Acierno, told me he did not trust the numbers— Moreover, Dr. Acierno continued, the researchers were because they were based on responses that were highly challenged to classify certain family actions that were dependent on context and the perceptions of the elderly open to differing interpretations. He cited as an example respondents. That dependence on context and perceptions an elderly mother who gives her son twenty dollars to buy will become clearer in considering how the study classi - her groceries. He returns one and a half hours later with fied responses. the groceries, which cost $17, and does not give her back The overall finding of 5.2 percent past-year prevalence the remaining $3. Some would argue that this amounted to of financial mistreatment by family members consisted of theft and, therefore, constituted elderly financial exploita - the following components: - tion. Others would disagree, viewing the $3 as compen sation for the son’s time. Dr. Acierno concluded that the 3.4% Family member spent money without permission methodology for financial exploitation was less clear-cut 0.5% Family member did not make good decisions than for other types of elder abuse. He credited the regarding their finances subsequent work of another scholar, Kendon J. Conrad, Family member did not give copies of 0.7% with advancing a conceptual framework for elder financial transactions financial exploitation. 0.5% Family member forged signature 0.3% Family member forced respondent to sign a document APPENDIX 2: ETHICAL DILEMMAS: Family member stole money 0.7% “WHEN HELPING HURTS” (The components add up to more than 5.2 percent because they were not mutually exclusive). “An all-too-common and especially heartbreaking I asked Dr. Acierno why the first three components scenario is when the abuser is an adult child with mental would be considered forms of elder financial exploitation. - illness or a substance abuse problem,” observes Jean Cal Take the first component, whether a family member spent lahan, Director of the Brookdale Center for Healthy Aging the elderly person’s money without permission. Surely, I at City University of New York. argued, what mattered was whether the money was spent She offers a case in point in a short but powerful in the best interests of the elderly person. Turning to the article titled, “When Helping Hurts: Confronting Ethical 196 second component, it did not seem reasonable to consider it The article describes a case Dilemmas in Casework.” involving an 89-year-old woman called Mrs. A, who lives financial exploitation merely because a family member did not make good financial decisions. As for the third compo - with her 59-year-old son. The son is mentally ill, and he is financially dependent upon his mother and financially nent, I recalled that, in the final years of my mother’s life, I made financial decisions for my mother and did not give her exploits her. According to neighbors, the son would - scream at his mother throughout the day, and they sus transaction receipts or statements. She would not have been interested in them and would have just put them in a drawer pected that he was neglecting her basic needs. According (as she had with similar documents she had received in to the article, there was evidence that the son was living earlier years). Moreover, accumulating financial statements off his mother’s Social Security income and was not pay - ing the rent on their apartment. The son regularly brought would have been a security risk, given the number of care - givers, aides, and others who visited her apartment daily. his mother to the bank to withdraw her monthly income

29 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 25 and appeared loud and aggressive to her, according to a bank teller. SEC Investor Bulletins . BOX 5 Authorities took steps to remove the son from the home, while seeking to arrange assistance for the son by a SEC Investor Bulletins relevant to seniors include:. mental health agency. But the outcome was not what Investor Bulletin and Consumer Advisory: • Mrs. A wanted: Planning for Diminished Capacity and Illness (modified Feb. 6, 2017), https://www.sec.gov/ Despite her advanced age, frail condition, and the oiea/investor-alerts-bulletins/ib_illness.html. This abuse she had endured, she still felt an obligation - is a joint publication of the SEC and the Con to care for her son at home. While counselors sumer Financial Protection Bureau’s Office of explained to Mrs. A that living with her son was Older Americans. seriously compromising her own health and well - Updated Investor Alert for Seniors: Five Red • being, this may be one of those cases in which a (July 18, 2016), Flags of Investment Fraud simple happy ending is not possible. Many older https://www.sec.gov/oiea/investor-alerts-bulle - people in similar situations report they continue to tins/ia_fraud5redflags.html. experience a different kind of suffering, one that’s • Help for Adult Protective Services (APS) no less painful. Workers Encountering Senior Investor Fraud (May 9, 2017), https://www.sec.gov/oiea/inves - Ms. Callahan concludes by emphasizing “the ethical tor-alerts-and-bulletins/ib_aps_seniorfraud. dilemmas at play: how to help the victim of abuse while minimizing the negative repercussions to a perpetrator who is also needy, and the difficulty of balancing the victim’s 197 safety with that person’s right to make choices in life.” hosted events for World Elder Awareness Day each year 200 In addition, since the inaugural summit in June 2015. individual SEC staff members have spoken on the topic 201 of elder financial exploitation. APPENDIX 3: SEC AND FINRA ACTIONS TO Examinations form the second leg of the SEC efforts PROTECT SENIOR INVESTORS to protect senior investors. Each year, Commission staff The SEC conducts a National Exam Program of broker-dealers and - investment advisers. The 2018 annual priorities document The SEC’s efforts to combat elder financial exploita tion largely fall within the broader goal to protect senior states, “We will review how broker-dealers oversee their interactions with senior investors, including the ability of investors, including those nearing retirement and those 202 who are already retired. The SEC’s efforts are based on the firms to identify financial exploitation of seniors. Exam programs can serve to raise awareness of senior three E’s: education, exams and enforcement. Seniors are a key audience for the SEC’s education issues among broker-dealers and investment advisers. A case in point is the National Senior Investor Initiative, efforts, which emphasize outsmarting investment fraud. Commission staff engage in dozens of outreach events for which the Commission and FINRA jointly launched in 2013 and culminated with the publication in 2015 of a seniors each year at public libraries and other settings. The 203 198 investor and outreach staff works with the enforcement The regulators conducted 44 broker-dealer joint report. staff to promote awareness aimed at preventing fraud. examinations, including a review of the training that firm representatives received on issues relating to aging, such The SEC also produces a variety of publications that as diminished capacity and elder financial exploitation. explain how scam artists work, how to avoid fraud, and how to deal with diminished financial capacity. (See box The report provided information to broker-dealers “to 5.) Both the SEC’s main website (sec.gov) and its site for - facilitate a thoughtful analysis with regard to their exist ing policies and procedures related to senior investors and retail investors (investor.gov) devote pages to seniors. - senior-related topics and whether these policies and pro SEC Commissioners and the SEC Investor Advocate 199 The SEC has have given speeches to highlight the issue. cedures need to be further developed or refined.” By the

30 26 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead time the examinations were completed, firms were paying described earlier are but two examples of a wide array of 204 activities, ranging from rulemaking to operating a helpline increased attention to the accounts of senior investors. Enforcement constitutes the third leg of SEC efforts for seniors; from examining broker-dealers to taking enforcement actions against regulatory violations; and to protect seniors. Deterrence through strong enforcement from engaging in public education and outreach to training action has been an important part of the SEC’s efforts to broker-dealer professionals on seniors issues. protect senior investors from fraud. The SEC’s Division of FINRA operates a Securities Helpline for Seniors, Enforcement places a priority on protecting the elderly in which seniors can call toll-free to receive neutral, knowl - its investigations and actions. Moreover, it recently formed edgeable assistance on topics such as these: understand the Retail Strategy Task Force to develop proactive, data- - driven approaches to identifying large-scale misconduct ing how to review investment portfolios or account statements; concerns about the handling of a brokerage impacting retail investors, including senior investors. account; and investor tools and resources from FINRA, The Commission has a long history of bringing cases . (As noted earlier, the U.S. Sen BrokerCheck® including - to protect senior investors. In 2018 alone, the Commis - ate Special Committee on Aging also provides a toll-free sion has filed multiple cases involving fraudulent conduct Fraud Hotline as a resource for seniors and others affected perpetrated against senior investors. For example, on April by scams. See Box 6.) 6, 2018, the SEC charged two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, Since its launch on April 20, 2015, the Helpline has $1.4 million fraud targeting retirees. The SEC’s complaint received more than 12,000 calls from residents of all 50 states, the District of Columbia, Puerto Rico, and several alleges that, from 2010 to 2017, a Ponzi scheme lured at 209 other countries. The average age of callers is 70 years - least 30 elderly victims to invest approximately $2.4 mil 210 old, and has ranged from 17 to 102. When FINRA’s lion of their retirement savings with baseless promises - initial assessment suggests serious misconduct by a securi and claims of outsized investment returns. In addition, the ties industry professional, FINRA opens an investigation. SEC’s complaint alleges that, beginning in 2015, a second fraud used misrepresentations and empty promises to con In addition, FINRA refers about one out of every 12 calls - vince a group of predominantly elderly victims to invest to other entities, including the SEC, state agencies, Adult 205 - roughly $1.4 million. Protective Services, and for certain non-investment ques 211 - On the same day that it made that announcement, the To date, the Helpline has led to volun tions, to AARP. 212 SEC also issued an Investor Alert to help seniors spot red tary reimbursement of more than $5 million to investors. 206 The SEC’s Office of Inves - flags of Ponzi schemes. The FINRA Investor Education Foundation plays a tor Education and Advocacy (OIEA) and the Division of central role in FINRA’s senior investor education and Enforcement’s Retail Strategy Task Force jointly issued outreach efforts. For more information, see the Senior the Investor Alert. Investors section of the FINRA website, available at http://www.finra.org/industry/senior-investors. Similarly, on March 29, 2018, the SEC charged the pastor of one of the largest Protestant churches in the country and a self-described financial planner in a scheme to defraud elderly investors by selling them interests in . BOX 6 Fraud Hotline Resources defunct, pre-Revolutionary Chinese bonds. The SEC FINRA Securities Helpline for Seniors complaint alleges that the two men raised at least 001-844-57-HELPS (844-574-3577) • $3.4 million from 29 mostly elderly investors, some of www.finra.org/seniorhelpline • 207 whom liquidated their annuities to invest in this scheme. U.S. Senate Special Committee on Aging FINRA Toll-free Fraud Hotline FINRA’s decade-long focus on senior investors has 1-855-303-9470 • increased steadily in light of investor protection concerns 208 and demographic trends. The FINRA rule changes

31 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 27 FINRA also offers several online training programs for individuals using high-pressure sales tactics as part of a broker-dealer employees on seniors-related topics, includ - pump-and-dump scheme,” the letter states. ing how to spot red flags and protect senior investors from As a top priority, FINRA will continue to identify high- 213 - risk firms and individual brokers and to mitigate the poten financial exploitation. FINRA’s 2018 Regulatory and Examination Priorities tial risks that they can pose to investors, including senior 215 Letter highlights several of its initiatives to protect seniors, investors. Among other things, FINRA will evaluate rollovers of qualified plans into non-qualified accounts for including a focus on microcap fraud schemes that target 214 216 senior investors. senior investors. “FINRA investigations have identified senior investors who have been victimized by unregistered Acknowledgement: I am grateful to SEC Investor Advocate Rick Fleming for encouraging me to write this paper and for his thoughtful comments on it. In researching and writing this paper, I also benefited from the observations and insights of many people, both within the Commission and outside it. Any mistakes in this paper, however, are solely my own. In particular, I would like to express my appreciation to these individuals: Ron Acierno, Ryan Bender, Leila Bham, Joseph Brady, Michael Canning, John Fahey, Lourdes Gonzalez, Blake Hylton, Arthur Kaplan, Jason Karlawish, Naomi Karp, K. Jeremy Ko, Judith Kozlowski, Jennifer Leete, Ronald C. Long, Suzanne McGovern, Thomas M. Mierswa, Jr., Mahtom Molayem, Brian Mulford, Carrie Mulford, Kathleen M. Quinn, Sidney Stahl, Morgan Tangney, Pamela B. Teaster, Stephanie Whittier Eliason, and the SEC Office of Public Affairs Design Team.

32 28 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead March 2016 from National Institute of Aging (A division of NIH) , ENDNOTES and the 2017 Alzheimer’s Report. Earlier sources projected an elderly population of 83.7 million in 2050. See , e.g. , A May 2014 report from 1 Stephen Deane is the Engagement Adviser in the Office of the Investor Advocate. He advises the Investor Advocate on topics of the Census bureau . UlAtIon op p , See concern to investors, including elder financial exploitation. 17 Mark Mather, Fact Sheet: Aging in the United States , , sec , r eference b Ure AU https://www.sec.gov/biography/ ( Jan. 13, 2016), https://www.prb.org/aging- Biography: Stephen Deane . (last visited May 29, 2018). unitedstates-fact-sheet/ deane-stephen lzhe IM er ’ s A ss Janey C. Peterson et al., ’ n , supra note 17, at 25 (citing JM o rt MA n et Al . , Financial Exploitation of Older Adults: A 18 A 2 . he , A AU Ure b Us ens U. s. c o lder p op UlAtIon In 29(12) J G en . I ntern . M ed n A GI nG n : t AtIon Population-Based Prevalence Study, . 1615, 1620 https:// the U nIted s tAtes (2014) Urrent p op UlAtIon r eports (2014), , c e nG . J. of 3 Mark S. Lachs & Karl A. Pillemer, Elder Abuse , census.gov/content/dam/Census/library/publications/2014/demo/ n ew 373 p25-1140.pdf (2015). . 1947, 1947 ed M ). Keith Jacks Gamble et al., The Causes and Consequences of 4 U. s. G ov ’ t A cco Unt AbIlIty o ff . , GA o-11-208 , Elder Justice: 19 olle c enter Ge Stronger Federal Leadership Could Enhance National Response c oston b , Financial Fraud Among Older Americans for https://www.gao.gov/new.items/ , 4 tbl.1 (2011), to Elder Abuse (2014) http://crr.bc.edu/wp-content/ r Ment Ire et r ese Arch d11208.pdf (finding that “decreasing cognition uploads/2014/11/wp_2014-13.pdf . Ice r oAdMA p : A e M ArIe -t herese c onnolly ., t he Al et is associated with higher scam susceptibility scores and is predictive lder J Ust 5 of fraud victimization”). Marie-Therese Connolly et al., , Ice Ust , J eAlth h GI nG Mer e See also to espond r to nItIA tIve I tAkeholder s An oc IA l c rIsIs 24 (2014). end f InAnc AtIons IA l MM eco , r AU Ure . b rot . p In f er UM ons c note 5, at 3; supra And s on And for f InAnc IA l I nst ItUtIons eport p revent InG And 6 Marguerite DeLiema & Kendon J. Conrad, Financial exploitation of r to e lder f InAnc IA l xplo ItAtIon 9 (2016), http://files. e r espond older adults , in e lder AbUse : r ese Arch InG , p rAct Ice , And p ol Icy 141, Ifesp consumerfinance.gov/f/201603_cfpb_recommendations-and-report- re G of An Ater l See also (XinQi Dong ed., 1st ed. 2017). 141 , I nc . et r Al ., U nder the r AdAr : n ew y ork s tAte e lder for-financial-institutions-on-preventing-and-responding-to-elder- ochester er UM p c [hereinafter financial-exploitation.pdf rev Alence s tUdy 8 (2011) (citing R.J. Bonnie & R.B. rot A , AU Ure . b bUse . p In f ons n AtIon Al r ese Arch c oUnc Il , Elder Mistreatment: Abuse, Wallace, Recs. and Report]. Joyce Lee, Neglect and Exploitation in an Aging America 39-41 (2002)) (“[T] Penn Memory Center, Federal Reserve Challenge 20 here has recently been more consensus, promulgated by a National Financial Leaders to Take Steps to Protect Wealth of Older M , enter c eMory http://www.whealthcare.org/2017- enn p , Adults Academy of Sciences Panel, on a definition [of elder mistreatment] that includes the notion of a trusting relationship in which the trust of conference (last visited Apr. 10, 2018) (“The decline of fluid the older victim is violated.”) [Hereinafter “ U nder the r AdAr . ”] intelligence, the ability to learn new things, is one characteristic 4 , at 4 . t Unt AbIlIty o ff . , supra 7 U. s. G ov A of aging, Dr. Karlawish said. Both this ‘cognitive aging’ and ’ cco note rAU IG ht f ., f on c neurodegenerative diseases like Alzheimer’s disease can lead to th Ate en : s d InG , 115 GI nG A on . oMM c IA l pec s. s 8 G I ttee oMMI c GI nG A s ’ AtIon n Ur o InG ArGet t s cAM s 10 op t IfIes dent problems of ‘higher cortical function,’ which can make tasks of daily living such as managing money and making sound financial s en (Comm. Print 2018). Iors Id. 9 decisions more difficult.”) 21 10 . o f M ed ., c oGnItIve A GI nG : p ro Gress I n U nderst And InG A nd See Larry Santucci , Discussion Paper: Can Data Sharing Help I nst UnItIes ct Ion Financial Institutions Improve the Financial Health of Older f 233 (Dan G. Blazer et al. eds., 2015). or A pport o Americans? 8 (Nov. 2017) (stating some legal definitions classify 22 “An additional but relatively understudied determinant of financial capacity is the ability to judge trustworthiness and risk, which may be this type of scam as elder fraud and distinguish it from elder processed differently as people age.” ). Id. financial exploitation). 11 “An additional but relatively understudied determinant of financial 23 supra Lachs & Pillemer, note 3, 1947-48, tbl.1. Al Ion Gress on c , olello c J. Irsten k 12 capacity is the ability to judge trustworthiness and risk, which may be The Elder , Ice erv s Arch ese r Justice Act: Background and Issues for Congress (2014) (citing Id. processed differently as people age.” et onnolly c herese -t ArIe M 24 Erik Asp et al., Benefit of the Doubt: a new view of the role of the : A p oAdMA r Ice Ust J lder e he ., t Al Mer nItIA tIve I tAkeholder s prefrontal cortex in executive functioning and decision making e , Ice Ust , J eAlth h GI nG , An to espond r to InAnc Ience And s oc IA l c rIsIs 24 (2014)). IA l f ront Iers In n eUrosc f , May 24, 2013, at 5 (citations omitted). . on e lder A bUse , America’s Growing Elderly The role of the ventromedial prefrontal Bryan P. Koestner et al., 13 See n At ’ l c tr 25 Iers https://ncea.acl.gov/whatwedo/research/statistics. cortex in purchase intent among older adults , f ront Population, In A GI nG (citing c Arr w html n eUrosc Ience , Aug. 3, 2016, at 8 (citations omitted). erner , U. s. c ens Ie Us b Ure AU , t lder o he A. p op UlAtIon : 2010 (2011)) (last visited Apr. 11, 2018). note 29, at 3, 5 (citations omitted). supra Erik Asp, 26 And h UMA n s erv ., A p rof Ile of o lder at 3 (citations omitted). Id. 27 14 U. s. d ep ’ t of h eAlth A at 5. Id. 28 Mer IcAns : 2015 at 1 (2015). The population of Americans age 65 years or older grew from 36.2 million in 2004 to 46.2 million in 2014. In one psychological test, a set of pictures is shown to a group of 29 15 , older adults and a group of younger ones. Some of the pictures are A lzhe IM er ’ s A ss ’ n 2017 Alzheimer’s Disease Facts and Figures 24 GI nG positive (daffodils or a smiling person) while others are negative (2017) (citing JM o rt MA A n , A AU Ure b Us ens U. s. c , . Al et n he : t AtIon n (a baby crying, a wounded child after bomb). Individuals are then Urrent , c tAtes s nIted U the In UlAtIon op p lder o http://census.gov/content/dam/Census/ r eports , (2014), UlAtIon op p asked to recall what they have seen. The younger adults remember library/publications/2014/demo/p25-1140.pdf ), https://www.alz.org/ the negative and positive pictures with equal facility. The older documents_custom/2017-facts-and-figures.pdf. adults remember the positive pictures as well, or nearly as well, as Al h e et (2016). ., U. s. c ens Us b Ure AU , A n A GI nG w orld : 2015 16 w An do the younger adults. But the older adults have a poorer memory This source is referenced by A A March 2016 Article from NIH , of the negative pictures. This consistent finding offers empirical

33 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 29 verification that the aging brain seems to prefer positive images and Capacity, and Testamentary Capacity , in Forensic Neuropsychology: in-the-moment emotions and to avoid negative ones. This preference A Scientific Approach 401-37 (G. J. Larrabee ed., 2d ed., 2011). could translate into financial behaviors and make older adults more Widera offers a similar definition: “the ability to independently vulnerable to scams. I am indebted to Dr. Jason Karlawish for this manage one’s financial affairs in a manner consistent with personal explanation. Telephone Interview with Dr. Jason Karlawish, Physician self-interest.” Widera et al., note 48, at 698 (citing Daniel C. supra and Professor of Med., Med. Ethics and Health Pol’y, and Neurology, Marson et al., Financial Capacity in 1 Encyclopedia of Psychology , U. of Penn and Penn. Memory Ctr. (Mar. 9, 2018). and the Law 313-16 (Brian L. Cutler ed., 1st ed. 2008)). c :// 30 Mild Cognitive Impairment (MCI) , M Ayo www . , lInIc https 49 s ec , Investor Bulletin and Consumer Advisory: Planning for ItIons IM pAI rMent MA yocl InIc . or G / dIse - Ases - cond / / MI ld - co GnItIve https://www.sec. (Jun. 1, 2015), Diminished Capacity and Illness (last visited Jan. 30, 2018). Ms - sy -20354578 syc / ses cAU Mpto (last modified gov/oiea/investor-alerts-bulletins/ib_illness.html ’ ss tbl.7 (stating ADLs include 34 at , note 17 supra , n 31 A s ’ er IM lzhe A Feb. 6, 2017). bathing, dressing, grooming and feeding). ff ., supra note 4, at 12 (stating the AbIlIty Unt cco A t ’ ov U. s. G 50 o Ayo 32 lInIc , supra Persons with MCI, along with their c M note 36 . GAO was referring to elder abuse in general, not necessarily financial family and friends, may notice some slippage in memory or mental exploitation in particular). function, though the changes generally do not significantly interfere Eric Widera et al., supra note 48, at 699. 51 A with a person’s day-to-day activities. See also A IM er ’ s lzhe , n ’ ss ny , Money Woes Can Be Early Clue to Alzheimer’s Gina Kolata, 52 supra note 17 . es (Oct. 30, 2010), https://www.nytimes.com/2010/10/31/health/ IM t Impaired Financial Abilities in Mild Cognitive H.R. Griffith et al., 33 healthspecial/31finances.html. , 60(3) n 449, Gy eUrolo Impairment: A Direct Assessment Approach note 3, at 1950. supra Lachs & Pillemer, 53 454-55 (2002). Ron Acierno et al., 54 Prevalence and Correlates of Emotional, Physical, supra note 21, at Ure rot , . p In f er UM ons c 34 9. AU . b Sexual, and Financial Abuse and Potential Neglect in the United http :// 35 EIFFE Prevention Program , I nvestor . www p rotect , Ion M States: The National Elder Mistreatment Study, . Ub p of . J. 100(2) A - sen Iors (last Ion . or G / Investorprotect - yo Urself /? fA = protect protect h 292, 296 (Feb. 2010). eAlth visited Apr. 10, 2018) (“The Elder Investment Fraud and Financial Lachs & Pillemer, note 3, at 1950. 55 supra Exploitation Prevention Program . . . educates healthcare and legal h UA nG & A lAn l AwItz , o ff . 56 c hIldren & f AMI ly s erv ., t he y UfAn of professionals to recognize when their older clients may be vulnerable f of ost c tAte s ork y ew n ItAtIon xplo e s tUdy 32, (2016). IA l InAnc to or victims of financial abuse, particularly those with MCI, and then 57 Id. at 34. to refer those persons to appropriate state authorities for assistance or at 58 9. Id. further screening.”). 59 Peterson et al., supra note 2, at 1615, 1618, 1620. . “A A lzhe IM er ’ s A ss ’ n , supra note 17, at 10 (citations omitted ) 36 Id. at 1621. 60 systematic review of 32 studies found that an average of 32 percent Id. at 1615. 61 of individuals with MCI developed Alzheimer’s dementia in 5 years.” Senior Investor Protection sIfMA , https://www.sifma.org/explore- 62 , . Id. ) (citations omitted issues/senior-investors/ (last visited May 30, 2018). See 37 Prevalence of Cognitive Impairment Brenda L. Plassman et al., Retirement Assets Total $28.2 Trillion in Fourth Quarter 2017 63 , Al ed I Als nn A , 148(6) without Dementia in the United States . M ntern nst I https://www.ici.org/ I Ment nvest c oMpAny ItUte , (Apr. 19, 2018), 427 (Mar. 2008). research/stats/retirement/ret_17_q4 supra , n ’ ss A s ’ er IM lzhe A see also note 23; supra Karlawish, See 38 Wealth, Asset Ownership, & Debt of Households Detailed Table 1: 64 note 17. . www :// https tbl.2, , Gov Ure b Us ens s. c U. Tables: 2013, / . Us cens AU n 39 Abuse of Adults with Dementia, , bUse A lder e See . tr c l ’ At on dAtA we / Mo de Ml ht . Ip ownersh - Asset - Alth /2013/ we / Alth tAbles / https://ncea.acl.gov/whatwedo/research/statistics.html (last visited excel 1” hyperl Ink to downlo Ad Able fIle ; then open “ t ( follow note 17, Apr. 11, 2018); see also A lzhe IM er ’ s A ss ’ n , supra at 5. tAble 2). bUse Abuse of Adults with Dementia, , A lder e on . tr c l ’ At n ee S 40 rot at 9. 65 note 21, supra , AU Ure . b c . p In f er UM ons ( last visited https://ncea.acl.gov/whatwedo/research/statistics.html note 2, at 1620. supra Peterson et al., 66 ). Apr. 11, 2018 67 Id. at 1621. supra Lachs & Pillemer, . 1950 note 3, at 41 68 Id. at 1615, 1618 tbl.1. 42 Eric Widera et al., Finances in the Older Patient With Cognitive Id. 69 J]AMA ”, 305(7) [ Impairment: “He Didn’t Want Me to Take Over at 1618, 1620. Id. 70 698, 705 (Feb. 16, 2011). Craig Copeland, Overview of Older Americans Assets, Income, 71 tr c l At n See 43 Abuse of Adults with Dementia, , bUse A lder ’ on . e Mployee e , and Spending: Aging, Cognition, and Financial Health supra note 46 (citations omitted). Arch ese r It enef b ItUte nst I at 3 (Nov. 28, 2017), https://www. at 18 (stating the other 200,000 s 44 A lzhe IM er ’ A ss ’ n , supra note 17, philadelphiafed.org/-/media/consumer-finance-institute/events/2017/ persons have younger-onset Alzheimer’s). aging/resources/1-Copeland-RoadAhead.pdf. Id. at 24 . 45 72 CFPB Warns Student Loan Servicing Problems Can Jeopardize Long- Id. 46 (showing earlier estimates, based on higher projections of Term Financial Security for Older Borrowers: Growing Concerns population growth, projected the number to triple to 16 million). as Number of Older Student Loan Borrowers Quadruples, Amount , supra 47 n At ’ l c tr . on e lder A bUse , Abuse of Adults with Dementia of Debt Per Senior Borrower Doubles in Last Decade , c ons UM er note 46. AU f https://www.consumerfinance.gov/ (Jan. 5, 2017), Ure . b In . p rot 48 Naomi Karp & Ryan Wilson, AARP Public Policy Institute, about-us/newsroom/cfpb-warns-student-loan-servicing-problems-can- Protecting Older Investors: The Challenge of Diminished Capacity 1 jeopardize-long-term-financial-security-older-borrowers/ . Assessing Civil Competencies (2011) (citing Daniel C. Marson et al., Id. 73 in Older Adults with Dementia: Consent Capacity, Financial

34 30 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead Meta Brown et al., The Graying of American Debt, f ed . r es . Edward O. Laumann et al., Elder Mistreatment in the United States: 88 74 http:// n.y.: l s treet e cono MI cs (Feb. 24, 2016) of 63(4) , Prevalence Estimates From a Nationally Representative Study Ank b Iberty oc . s cI . s sychol . b. p erontol J. G libertystreeteconomics.newyorkfed.org/2016/02/the-graying-of- https:// (2008). s252 . s248, cI . s www.ncbi.nlm.nih.gov/pmc/articles/PMC2756833/ . american-debt.html . Nonetheless, default rates are strikingly high one segment of older 75 at S249 (“Older adults deemed by interviewers to be too impaired 89 Id. borrowers: those who are age 65 and older and have federal student to give formal consent were excluded from the study. Consequently . . . loans. More than one in three (37 percent) of these borrowers the vast majority of respondents were cognitively intact.”). were in default in 2015, and an additional 5 percent became 90 Id. note 2, at 1615, 1618 91 Peterson et al., subject to offset from any federal payment, including federal tax supra . 92 Stealing or misappropriation of money or property accounted for refunds and Social Security benefits. (Federal student loans are treated differently from private student loans. Federal student 77.8 % of the one-year period prevalence and 78.4 % of the lifetime note 2, at 1617. loans remain even if after bankruptcy, and the debt is subject to supra prevalence. Peterson et al., 93 Id . at 1616. offsets. In contrast, federal benefits such as Social Security are re G of An Ifesp l generally protected from collection for defaulted private student 94 note 7, at 3, 28, supra et al., . nc , I ochester r Ater AwItz loans.) The 5 percent who were subject to offsets generally present h UA nG & l , supra note 62. See generally tbl.5. note 2, at 1621, 1623 supra . 95 a distinct profile. Most took out took on federal student loans for Peterson et al., Ananda B. Amstadter et al., Prevalence and Correlates of Elder themselves, not their children or grandchildren. Most of those who 96 Mistreatment in South Carolina: The South Carolina Elder are 50 years and older took out the loans twenty years earlier or , 26(15) J. INTERPERSONAL VIOLENCE 2947, Mistreatment Study more, at traditional mid-career working ages. Thus, they appear to 2950 (Oct.2011). have carried their student debt with them into older years, rather at 2968. 97 Id. than taking out federal student loans, or co-signing for private nG UA h 98 See ov ’ t note 62, at 36 (stating system-wide date was supra , AwItz l & U. s. G student loans, for their children or grandchildren. o collected from all agencies and programs responsible for serving Social Security Offsets o-17-45, ., GA ff at 10-13 AbIlIty Unt cco A rot see also (2016); ons , AU Ure . b . p In f er UM c elder abuse victims in New York State, including Adult Protective Snapshot of Older Services (APS), Area Agencies on Aging, law enforcement, District Consumers and Student Loan Debt at 11-13 (Jan. 2017). note 80. supra Meta Brown et al., Attorney offices, community-based agencies, and others. The Study 76 Opening Address at the Conference on Aging, 77 extrapolated where necessary to fill in missing data.). Patrick T. Harker, . r 99 supra note 3, at . 373 Cognition, and Financial Health , f ed Lachs & Pillemer, es . b Ank of p hIlA . 2-3 e lder A bUse , What is Known About the Incidence and At 100 ’ l c n tr . on (Nov. 28, 2017), https://www.philadelphiafed.org/-/media/ Prevalence of Elder Abuse in the Community Setting? publications/speeches/harker/2017/11-28-17-aging-cognition- https://ncea. , ) . ( acl.gov/whatwedo/research/statistics.html financial-health.pdf?la=en last visited Apr. 11, 2018 . s M . et al., t he M et Ife I tUdy of e lder supra Peterson et al., 101 AtUre note 2, at 1615. M Ife l et M 78 nst Arket l f . 373 note 3, at supra Lachs & Pillemer, 102 AtIon red p And , AtIon esper , d AsIon cc o of es rIM : c bUse A IA l InAnc , U. s. d ., and As re t the of A t ’ ep AU Ure . b rot . p In f er UM ons c 103 GAI nst A Mer IcA ’ s e lders 5 (2011). the Fin. Crimes Enf’t Network (FinCEN), Memorandum on 79 Peterson et al., supra note 2, at 1620. note 3, at Financial Institution and Law Enforcement Efforts to Combat 80 Lachs & Pillemer, supra 1947 . 81 See, e.g., id. at 1949. https://www. Elder Financial Exploitation (Aug. 30, 2017), note 60, at , 296 fincen.gov/sites/default/files/2017-08/8-25-2017_FINAL_ (“Generalization of our results to 82 supra Acierno et al. CFPB%2BTreasury%2BFinCEN%20Joint%20Memo.pdf what may be the group most at-risk for mistreatment, the cognitively . impaired elderly, is not appropriate.”). note 99, at S251 (examining three non-financial supra Laumann et al., 104 83 See, e.g., Ananda B. Amstadter et al., Prevalence and Correlates of and non-emotional types of abuse, including physical, sexual, and Elder Mistreatment in South Carolina: The South Carolina Elder potential neglect). supra AwItz l & nG UA Mistreatment Study, 26(15) J. INTERPERSONAL VIOLENCE 105 , 8. (“Drawing on accounts of at , note 62 h 2947, 2948-9 (Oct. 2011); U.S. GOV’T ACCOUNTABILITY OFF., financial exploitation reported in the media, one frequently cited study GAO-11-208, Elder Justice: Stronger Federal Leadership Could estimated victim losses nationwide to be around $2.9 billion. See Fin. Indus. Reg. Auth. SR-2016-039, C.F.R Vol. 82, No. 26 (2017) Enhance National Response to Elder Abuse, 10 (2011), https://www. (stating “the elderly are estimated to lose up to $2.9 billion per year gao.gov/new.items/d11208.pdf; NAT’L CTR. ON ELDER ABUSE, Ken Bentsen, President See also from scams.”); citations omitted. Challenges in Elder Abuse Research, https://ncea.acl.gov/whatwedo/ Opening Remarks at SIFMA Senior Investor sIfMA research/statistics.html (last visited Apr. 11, 2018) (referring to “the and CEO, , eGI s n ’ oMM . c . l use of different operational definitions, administrative data, samples, onn c Forum (October 13, 2015); Study on GI nG A of Best Practices for Reporting and Identification of Abuse, Neglect, or methods used among elder abuse prevalence studies”). . Exploitation and Abandonment of Older Adults 9 (January 1, 2016); 84 Peterson et al., supra note 2, at 1623 ., note 60, at 292. Acierno et al Comm. on the Pub. Health Dimensions of Cognitive Aging, Bd. on 85 supra Health Sciences Policy, Inst. of Med., Cognitive Aging: Progress in (“[W]e required interviewers to proceed with questioning 296 at Id. 86 only if they had no doubt about the ability of respondents to Understanding and Opportunities for Action 234 (Dan G. Blazer, understand and respond to questions. Our data therefore reflect Kristine Yaffe, Catharyn T. Liverman eds., 2015); Nick Leiber, responses of a cognitively intact, community-residing subpopulation How Criminals Steal $37 Billion a Year from America’s Elderly, of older adults.”). b loo Mber G (May 3, 2018), https://www.bloomberg.com/news/ 87 Phone Interview with Dr. Ron Acierno, Professor and Associate Dean features/2018-05-03/america-s-elderly-are-losing-37-billion-a-year- for Research, College of Nursing Faculty, Medical University of . (providing a significantly higher estimate of $36.5 billion). to-fraud South Carolina (May 24, 2018).

35 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 31 See infra Appendix One: The Gaps in Our Knowledge: A Closer Lachs & Pillemer, 130 106 supra note 3, at 373. 131 Peterson et al., supra Look at Two Seminal Studies. note 2, at 1615, 1620. bUse A lder e on . tr c l ’ At n 132 107 Connolly et al., supra note 5, at 1, 4 (“The cumulative toll of elder https://ncea.acl.gov/ , Statistics/Data , . (last visited Apr. 11, 2018) whatwedo/research/statistics.html abuse has not yet been quantified but is estimated to afflict more than 5 million people and cost many billions of dollars a year.”). 133 note 5, at 4. supra Connolly et al., 108 . We lack quantitative data for both elder abuse in general and elder Id Other studies or research on investment or consumer fraud have 134 r Ied ppl A See, e.g., relevance to elderly financial exploitation. financial exploitation in particular. Arch ese nG And ons at 43-44. Ult InG , llc , “Financial Fraud and Fraud Susceptibility , note 62 supra , 109 h UA c & l AwItz Id https:// FINRA Research Report in the United States,” 7. 110 (2013), . at www.saveandinvest.org/sites/default/files/Financial-Fraud-And- 111 Id. Fraud-Susceptibility-In-The-United-States.pdf In New York State, APS provides protective services to adults Id. ; Mark Egan et 112 , 18 and older who, because of physical or mental impairment, al., The Market for Financial Adviser Misconduct J oUrn Al of are unable to protect themselves from abuse, neglect, financial p ol ItIcAl e cono My Sept. 2016, https://papers.ssrn.com/sol3/papers. exploitation or other harm, and have no one else willing and able to cfm?abstract_id=2739170 ; DeLiema, Marguerite, Gary Mottola, and assist responsibly. Martha Deevy, “Findings from a Pilot Study to Measure Fraud in the at Id. 113 https:// 2017), Stanford Center on Longevity Report ( United States,” 11, 41-43. papers.ssrn.com/sol3/papers.cfm?abstract_id=2914560 114 Id. at 41-44. ; Pak, Karla 115 and Doug Shadel, “AARP Foundation National Fraud Victim Study,” at 37. Id. 116 373 supra note 3, at https://assets.aarp.org/rgcenter/econ/ . The article cites two Lachs & Pillemer, AARP Research Report (2011), . fraud-victims-11.pdf studies. One includes analysis of financial exploitation along with At n 135 A e on bUse , What is known about the incidence and other forms of elder abuse. The other article does not include . tr c l lder ’ supra . note 111 , prevalence of elder abuse in the community setting? financial exploitation. note 5, at 1, 24. Connolly et al., 136 Peterson et al., supra 117 supra note 2. 137 at 4. l Id. 118 M et Ife M AtUre M Arket I nst . et al., supra note 84, at 4. at 1, 24. 138 Id. 119 h UA nG & l AwItz , supra note 62 , at 11. t ’ ep U. s. d 139 onn eGI s . c oMM ’ n on A GI nG , supra note 117, at 9. , Admin. for Cmty. Living, . ervs s n UMA h And eAlth . l h of 120 c l 11. 121 h UA nG & Final National Voluntary Consensus Guidelines for State Adult AwItz , supra note 62 , at September, 2016, 4-5 https:// (2016), Protective Services Systems 122 c onn . l eGI s . c oMM ’ n on A GI nG , supra note 117, at 9 (stating the www.acl.gov/sites/default/files/programs/2017-03/APS-Guidelines- number of referrals to Connecticut’s Protective Services for the . Document-2017.pdf Elderly Program increased by almost 28% between 2010 and 2014). note 3, at supra Lachs & Pillemer, 140 A cco Unt AbIlIty 373. 123 o U. s. G ov ’ t ff The U.S. . note 3, at 18 supra ., Government Accountability Office (GAO) projects that, if the note 5, at 1, 24. 141 Connolly et al., supra ep ’ U. s. d 142 t , supra note 151, at 9. number of APS investigations of elder abuse tracks the growth of the . ervs s n UMA h And eAlth h of elderly population in a sample of 33 states, then the number of such 143 Connolly et al., supra note 5, at 28. Id. 144 investigations will rise 28 percent by 2020 and 50 percent by 2030, (“The dearth of academic researchers studying elder abuse issues impedes knowledge development in the field. As a result, there are few from a baseline of 2008. Note that this refers to all forms of elder data to inform and guide practitioners, policy-makers, and trainers.”) abuse, not just elder financial exploitation. Additionally, according tr c l ’ At n See 145 to the study, stronger federal leadership could enhance national How Is Elder Abuse Defined for , bUse A lder e on . Research Purposes?, https://ncea.acl.gov/whatwedo/research/ prioritization of elder abuse oversight. he , t AU Ure b Us ens s. c , U. erner w A. Ie Arr c (citing statistics.html To be considered conclusive, such studies would have to be repeated 124 o over time and would have to use the same methodology and . (2011)) (last visited Apr. 11, 2018) : 2010 UlAtIon op p lder note 5, at 1, 28. Connolly et al., 146 t ’ ov U. s. G See also definitions of such terms as the elderly and elder financial exploitation. supra Unt cco AbIlIty A ff . o , supra note 4, at 4 tbl.1 ; Broken Trust: The two brokerages are Morgan Stanley Wealth Management 125 and Wells Fargo Advisors. Telephone Interview with Thomas M. Combating Financial Exploitation of Vulnerable Seniors: Hearing before S. Special Comm. on Aging, 2 and 7 (Feb. 4, 2015) (testimony Mierswa, Jr., Executive Director, Legal and Compliance, Morgan Stanley Wealth Management (May 25, 2018); Thomas M. Mierswa, of Kathleen M. Quinn, Exec. Dir., Nat’l Adult Protective Serv. Ass’n) (“What is a very rarely acknowledged phenomenon, federal Jr. Executive Director, Legal and Compliance, Morgan Stanley investment in addressing both child abuse and domestic violence has Wealth Management, Yale Alumni Breakfast, co-sponsored by Yale Law School’s Center for the Study of Corporate Law and its resulted in significantly reducing the incidence rates of both.”). ep Art Ment of h eAlth And h UMA n s erv Ices , Responding to Solomon Center for Health Law and Policy, in New York City (Sep. U. s. d 147 https:// Maltreatment: State Adult Protective Services Systems, 2016); Ronald C. Long, Director of Elder Client Initiatives, Wells www.acl.gov/sites/default/files/programs/2017-03/APS-Guidelines- Fargo Advisors, LLC, remarks at various conferences and personal Document-2017.pdf , 4 (last visited May 30, 2018) (“This uneven communications to the author (2017-2018). Ure . b rot . p access especially affects services to racial and ethnic minorities, f er UM ons c note 114. 126 supra et al., AU In t the of t ’ ep U. s. d See 127 In As re ., f . c rIM es e nf ’ t n etwork , Advisory and those with limited English-speaking skills. Fragmentation to Financial Institutions on Filing Suspicious Activity Reports hinders cross-jurisdictional cooperation, information sharing, and https://www.fincen. 1 (2011), Regarding Elder Financial Exploitation investigation. There exists a lack of standardized service provision . gov/resources/advisories/fincen-advisory-fin-2011-a003 across states and localities, contributing to the absence of critical c f er UM note 114. 128 ons supra et al., AU Ure . b rot . p In supports for victims (e.g., reporting hotlines, shelters, and counseling) 129 https://www.fincen.gov/ Report generated on the FinCEN webpage, and the system at large.”). reports/sar-stats (last visited May 19, 2018). 148 Lachs & Pillemer, supra note 3, at 373.

36 32 Elder Financial Exploitation: Why is it a concern, what regulators are doing about it, and looking ahead supra 149 Peterson et al., note 2, at 1615-16. 169 See Comment Letter, Rick A. Fleming, Investor Advocate, U.S. Sec. A dUlt M Altre AtMent r eport InG s yste M , FFY 2016 Data 150 n AtIon Al and Exch. Comm’n, Re: File No. SR-FINRA-2016-039: Notice of 4 (2017), Report - Release 1 https://www.acl.gov/sites/default/files/ Filing of a Proposed Rule Change to Amend Rule 4512 (Customer programs/2017-08/NAMRS2017_Report_Release-1.pdf . Account Information) and Adopt FINRA Rule 2165 (Financial Exploitation of Specified Adults) (Dec. 28, 2016), https://www.sec. 151 Notice of Filing of Partial Amendment and Order Granting Accelerated Approval of the Proposed Rule Change to Amend Rule gov/comments/sr-finra-2016-039/finra2016039-1447952-130092.pdf ). The SEC Office of the Investor Advocate, among others, had 4512 and Adopt FINRA Rule 2165, 81 Fed. Reg. 10,059 (February 3, 2017). argued that it should have: 152 If a firm’s suspicion of elder financial exploitation is strong Id. enough to warrant a pause on a disbursement, it should trigger Notice of Filing of Partial Amendment and Order Granting 153 an obligation to report that suspicion to state and Accelerated Approval of the Proposed Rule Change to Amend Rule note 163. local authorities, such as the state securities commission 4512 and Adopt FINRA Rule 2165, supra . s A ss 154 ’ n , NASAA Model Legis. to Protect Vulnerable ec and Adult Protective Services (“APS”)... A safe harbor for n. A ’ r M . A dM Adults from Fin. Exploitation: Legis. Text & Updated Commentary broker-dealers demands counterbalancing safeguards for investors. [p. 3] for 2018 Legis. Session 3 (2018) http://serveourseniors.org/ In a Response Letter submitted to the SEC, FINRA noted that wp-content/uploads/2017/12/NASAA-Model-Act-and-Updated- some states mandate such reporting by financial institutions, including Commentary-for-2018-Session.pdf . 155 broker-dealers. The letter also expressed FINRA’s belief that it might . Id be beneficial to contact relevant state agencies: Notice of Filing of Partial Amendment and Order Granting 156 Accelerated Approval of the Proposed Rule Change to Amend Given the varying and evolving reporting requirements under note 163, at 10,062 Rule 4512 and Adopt FINRA Rule 2165, supra state law, FINRA believes that states are well positioned to determine whether a broker-dealer or any other entity (“when members exercise discretion in placing temporary holds on disbursements of funds or securities from the accounts of specified has satisfied its reporting requirements under state law... adults under the circumstances denoted in the Rule.”). Even where a state may not require such reporting, FINRA believes that members may find it beneficial to contact fInr , Frequently Asked Questions Regarding FINRA Rules A 157 relevant state agencies, such as state securities regulators or http://www.finra.org/ Relating to Financial Exploitation of Seniors, industry/frequently-asked-questions-regarding-finra-rules-relating- state or local adult protective services, to assist in resolving (last visited May 30, 2018). Q.2.1. , financial-exploitation-seniors matters involving possible financial abuse.” Response Letter Notice of Filing of Partial Amendment and Order Granting 158 to Rule SR-2016-039, fInr A , https://www.sec.gov/rules/sro/ finra/2017/34-79964.pdf Accelerated Approval of the Proposed Rule Change to Amend Rule note 163, at 10,061 n.22. Notice of Filing of Partial Amendment and Order Granting supra 170 4512 and Adopt FINRA Rule 2165, 159 Id. at 10,060. Accelerated Approval of the Proposed Rule Change to Amend Rule 160 note 163, at 10,060. Rule supra 4512 and Adopt FINRA Rule 2165, Id. at 10,061. at 10,060. 2165 requires broker-dealers to retain records related to compliance 161 Id. n. A , 162 with the Rule. That includes, among other things, 1) requests for M . s ec . A dM ’ r note 166, at 3. supra n ’ ss A The Model Act would require placing the funds in a Id. 163 disbursement that may constitute financial exploitation, 2) the finding of a reasonable belief of financial exploitation underlying the decision . temporary escrow 164 fInr A , to place a temporary hold on a disbursement; and 3) the internal review note 169, at Q.1.1. supra 165 Notice of Filing of Partial Amendment and Order Granting of the facts and circumstances of the suspected financial exploitation. Accelerated Approval of the Proposed Rule Change to Amend Rule Notice of Filing of Partial Amendment and Order Granting 171 supra note 163, at 10,062. Accelerated Approval of the Proposed Rule Change to Amend Rule 4512 and Adopt FINRA Rule 2165, 166 supra note 163, at 10,061.The 4512 and Adopt FINRA Rule 2165, The Model Act would not apply to investment advisers registered FINRA release states that if a customer with diminished capacity with the SEC, according to Joseph Brady, Executive Director, NASAA. He cited the 2002 Uniform Securities Act and the 1956 requests a potentially problematic disbursement, it is likely that the Uniform Securities Act, which exclude federal covered investment firm would have a reasonable belief, at least initially, that financial advisers from the definition of investment adviser. The vast majority exploitation may be occurring. of states have adopted either of those two laws. Email communication supra 172 Connolly et al., note 5, at 1, 15. supra to the author, May 29, 2018. note 21, at 15. 173 c ons UM er f In . p rot . b Ure AU , ss A r ’ dM . A ec . s M n. A 167 supra , at 7 n.33 (“As proposed . note 166 supra , Connolly et al., n ’ note 5, at 17. This is consistent with the advice 174 expressed in a leadership interview for the Roadmap: “Look for for public comment, the Model Act used the term “qualified employee,” however this term was revised in the final version of natural allies outside the field: financial institutions, criminal justice, the Model to make clear that the Model Act does not only apply long-term care, housing, the aging network, victim services. Often to employees of a broker-dealer or investment adviser, but also they know it’s an issue but not how to get involved.” to any independent contractors that may be fulfilling any of the To cite just one example, financial professionals may notice 175 roles described in the definition. The use of the term also reflects suspicious interactions between elderly customers and others who the determination that requiring individual agent and adviser level accompany them, such as a new caregiver, a relative, or friend who reporting is appropriate given these individuals often have closer suddenly begins conducting transactions on behalf of the elder without proper documentation. Elderly customers also may exhibit relationships with their clients and customers than does any firm or institution.”). fear of the persons accompanying them. , email communication 168 Joseph Brady, Executive Director, nAsAA with author (May 29, 2018).

37 Elder Financial Exploitation: Why it is a concern, what regulators are doing about it, and looking ahead 33 – Uncharacteristic attempts to wire large sums of money; or GrAIt See For a definition of AI and its potential in various industries, 176 – Closing of CDs or accounts without regard to penalties. expectations: Non-tech businesses are beginning to use artificial The Interagency Guidance on Privacy Laws and Reporting Mar. 31. 2018, https://www. st , t he MI cono intelligence at scale e , Financial Abuse of Older Adults, issued by eight federal entities in economist.com/news/special-report/21739431-artificial-intelligence- 2013, repeated this list. spreading-beyond-technology-sector-big-consequences (last visited 185 See Spend Some Money to Make Money, Or the Jason Karlawish, Apr. 11, 2018). , f orbes (Jan. 27, 2018), https://www. Opportunities of Whealthcare supra note 5, at 13. See, e.g. , a leadership interview 177 Connolly et al., forbes.com/sites/jasonkarlawish/2018/01/27/spend-some-money-to- quoted in the Roadmap: “Could you create a prediction model? make-money-or-the-opportunities-of-whealthcare/#5f0532e219f7 When a person reaches age X, they get some assessment and (“This system will learn from itself and it will adapt. It will produce education about the likelihood they’ll fall victim to abuse, neglect, or data so that the nation can better estimate the size and contours of exploitation because of the following factors: age, cognitive status, the problem of financial fraud, errors and cognitive impairment. This financial security or lack thereof, and family and social support. If 3 system will provide more intensive whealthcare to clients at risk for of 4 factors are present, their probability of being mistreated by age, developing Alzheimer’s and other brain diseases.”). say 80, is XYZ. So, what factors are ‘treatable?’ What can we do to 186 For example, training programs have been developed to help doctors prevent them proactively from going down that road?” recognize financially vulnerable patients. Furthermore, some leading USA PATRIOT Act, Section 314(b) (2001); 31 CFR 1010.540, 178 experts on elder financial exploitation are themselves medical Voluntary information sharing among financial institutions (2011). Peterson et See doctors specializing in such fields as gerontology. cftc , staff guidance, 179 Interagency Guidance on Privacy Laws and Why Clinicians note 2, at 1615; Robert E. Roush et al., supra al., Reporting Financial Abuse of Older Adults (2013). Need to Know About the Elder Investment Fraud and Financial supra note 10, at 1. The paper contains a disclaimer 180 Santucci, U. s. at 94–97 (2012); AtIons G , 36(2) Exploitation Program ener explaining that the views expressed in it are those of the author and . c xch e And ec s . , Investor Advisory Committee Meeting, n ’ oMM do not necessarily reflect the views of the Federal Reserve Bank of Discussion Regarding Efforts to Combat the Financial Exploitation Philadelphia or the Federal Reserve System. , (March 8, 2018) (archived webcast available at of Vulnerable Adults By what standards should a financial firm judge the veracity and 181 https://www.sec.gov/video/webcast-archive-player.shtml?document_ accuracy of the third-party report and calibrate its actions to respond ) id=030818iac . to it? Would the bank’s report in itself constitute a reasonable basis for The idea of an integrated system of care for individual’s financial the brokerage to place a hold on disbursements from the customer’s and medical wellbeing was raised at a November 2017 conference brokerage account? Aging, Cognition, and Financial Health: Building a Robust titled, “ Financial institutions could also be exposed to new legal and System for Older Americans .” The conference, organized by the business risks, whether or not they chose to act on reports from U. of Penn. Memory Center and the Phila. Fed. Res. Bank, brought unaffiliated firms (for example, by freezing the customer’s account). together financial and health professionals. Some said this conference That, in turn, could give rise to the enactment of new safe harbors for was their first such opportunity to talk to each other, and they were financial institutions, as the Santucci Discussion Paper suggests. See unfamiliar with each other’s terminology and practices. See of U. note 10, at 1. Santucci, supra p , Conference on Ank . b es . r ed . f hIlA p & enter c eMory . M enn 182 Physicians are mandatory reporters of elder abuse in all states that Aging, Cognition, and Financial Health: Building a Robust System have mandatory-reporting laws. Lachs & Pillemer, supra note 3, at (Nov. 28, 2017) for Older Americans http://www.whealthcare. , 373. On page 1953, the article includes a diagram of “Recommended org/2017-conference ; see Karlawish, note 197 (for blog post on supra Strategies for Intervention by Physicians in Suspected Cases of Elder the conference). Abuse.” 187 It might also be observed that newly elevated concerns over privacy Why Bankers, Financial 183 Jason Karlawish and Dan G. Blazer, in online social networks make this is a particularly inopportune to , Forbes (Jul Analysts And Doctors Need To Start Working Together propose new designs to share financial and medical information. https://www.forbes.com/sites/sciencebiz/2015/07/22/ 22, 2015), 188 See Fed. Res. Discussion Paper for a further discussion of the data why-bankers-financial-analysts-and-doctors-need-to-start-working- security risks. together/#bca776541597 . he 189 Not losing it: The Elderly, Cognitive Decline and Banking , t t n etwork , supra note ep U. s. d 184 t of the t re As ., f In . c rIM es e nf ’ ’ https://www.economist.com/news/ e cono MI st (Feb. 11, 2017), , 139 . at 2 business-and-finance/21716598-banks-need-strategies-helping- The Department of the Treasury’s Financial Crimes Enforcement (last visited Apr. 11, 2018) vulnerable-elderly-customers-elderly Network (FinCEN), in its February 2011 advisory, presented a list (observing that the banker’s comment suggests the changes in culture of potential signs of elder financial exploitation that could trigger the needed at some financial institutions). filing of a Suspicious Activity Report (SAR). The list included the Introduction: What is Elder Financial Exploitation. 190 See supra following: 191 “The most promising response to the complex nature of cases of elder Erratic or unusual banking transactions, or changes in banking • abuse has been the development of interprofessional teams.” Lachs & patterns: Pillemer, supra note 3, at 373. For more on multidisciplinary teams, – Frequent large withdrawals, including daily maximum currency supra , GI nG A on n ’ oMM . c onn & nG UA h note 117; see also c eGI s . l withdrawals from supra l AwItz , note 62. – an ATM; Arket M AtUre M Ife 192 note 84, at 7. The precise supra . et al., nst I M et l – Sudden non-sufficient fund activity; number was $530,476,743. Uncharacteristic nonpayment for services, which may indicate – Id. at 11. The number was $37,953,710. 193 a loss of funds or at 8. The number was $306,105,093. Id. 194 access to funds; – – Debit transactions that are inconsistent for the older adult;

38 34 Elder Financial Exploitation: Why is it a concer n, what regulators are doing about it, and looking ahead And nspectIons I oMplIAnce c of . ff o n ’ oMM . c xch e And . ec U.s. s 203 at 7. The 2010 MetLife Study does not define Medicare or Id. 195 xAMInAtIons And , National Senior Investor Initiative: A e fInrA Medicaid fraud. 2, 32 (2015), https://www.sec. Coordinated Series of Examinations Jean Callahan, When Helping Hurts: Confronting Ethical Dilemmas 196 gov/files/sec-finra-national-senior-investor-initiative-report.pdf . in Casework, Elder Abuse Multidisciplinary Teams: Planning for the at 31. Id. 204 12 (2015). Future ’ oMM . c xch e And . ec U.s. s Press Release, 205 SEC Charges Texas , n This article is juxtaposed with another article, “How Are We Id. 197 Company, Principals in Multimillion Dollar Ponzi Scheme Targeting Measuring Success?,” a question and answer with Mark Lachs, a Seniors (Apr. 9, 2018) (accessible at https://www.sec.gov/news/press- geriatrician and leader in the field of elder justice. Asked how to release/2018-63). define success in an individual case, he says that it is highly dependent ’ . c oMM n 206 , Investor Alert: Ponzi Schemes U .s. s ec . And e xch on the individual case. Targeting Seniors (April 9, 2018), https://www.investor.gov/ “Some clients want the abuser removed from their environment additional-resources/news-alerts/alerts-bulletins/investor-alert-ponzi- as the only metric of success, others might like to see the abuser schemes-targeting-seniors . get help, perhaps treatment for a mental health condition,” he says. ec . c SEC Charges , 207 See Press Release, U.s. s ’ . And e xch oMM n “Yet others might want additional home care as a way to protect Prominent Pastor, Financial Planner in Scheme to Defraud Elderly themselves from neglect.” Mark Lachs, How Are We Measuring Investors (March 31, 2018), https://www.sec.gov/news/press- Success? , Elder Abuse Multidisciplinary Teams: Planning for the release/2018-51 (last visited Apr. 11, 2018). Future 13 (2015). 208 fInrA , Report on the FINRA Securities Helpline for Seniors , 1 Lachs suggests developing client-specific metrics and goal (Dec. 2015), http://www.finra.org/sites/default/files/Securities_ attainment scaling based on a person’s progress toward whatever Helpline_for_Seniors_Report.pdf. More than a decade ago, in 2007, outcomes are appropriate for the individual. FINRA published Regulatory Notice 07-43, Senior Investors: FINRA 198 In the Office of Investor Education and Advocacy Office (OIEA). Reminds Firms of Their Obligations Relating to Senior Investors and 199 e See e.g., Luis A. Aguilar, Comm’r, U. s. s ec . And xch . c oMM ’ n , (Sept. 2007), Highlights Industry Practices to Serve these Customers Speech at The American Retirement Initiative’s Winter 2014 Summit . http://www.finra.org/industry/notices/07-43 in Washington, D.C. on Protecting the Financial Future of Seniors . And e xch U 209 ’ n , Investor Advisory Committee Meeting, oMM .s. s ec . c https://www.sec.gov/news/speech/2014- and Retirees (Feb. 4, 2014), Discussion Regarding Efforts to Combat the Financial Exploitation xch e And spch020414laa ; Luis A. Aguilar, Comm’r, U. s. s ec . . , (March 8, 2018), remarks by Gregory J. Dean, of Vulnerable Adults n ’ oMM c , Opening Statement at the Investor Advisory Committee Senior Vice President of Government Affairs, FINRA, archived Meeting on Combating the Financial Exploitation of Older Adults https://www.sec.gov/video/webcast-archive- webcast available at (July 10, 2014), https://www.sec.gov/news/public-statement/2014- player.shtml?document_id=030818iac . 07-10-opening-statement-laa ; Daniel M. Gallagher, Comm’r, U. s . 210 Gregory J. Dean, Senior Vice President of Government Affairs, e And xch . c oMM s n , Opening Remarks to the Investor Advisory ec . ’ FINRA, Remarks before. S. Sec. and Exch. Comm’n Investor https://www.sec.gov/spotlight/investor- Committee (July 10, 2014), Discussion Regarding Efforts to Advisory Committee Meeting, advisory-committee-2012/iac071014-minutes.htm ; Michael S. , (March Combat the Financial Exploitation of Vulnerable Adults e And . ec U. s. s Piwowar, Comm’r, . c oMM ’ xch n , Remarks to the 8, 2018) (archived webcast available at https://www.sec.gov/video/ Securities Enforcement Forum 2014 (Oct. 14, 2014), https://www.sec. ). webcast-archive-player.shtml?document_id=030818iac gov/news/speech/2014-spch101414msp ; Luis A. Aguilar, Comm’r, id .; See 211 fInrA , Report on the FINRA Securities Helpline for Seniors . And e xch . c oMM ’ n , Speech Delivered by Commissioner U. s. s ec 3 (Dec. 2015), http://www.finra.org/sites/default/files/Securities_ Aguilar’s Chief of Staff Smeeta Ramarathnam at The American Helpline_for_Seniors_Report.pdf . Retirement Summit in Washington, D.C. on Why Seniors are More Dean, Remarks note 222. , supra 212 See Vulnerable Now as Targets for Financial Abuse (Mar. 15, 2012), , 213 E-Learning Courses (May 2018), http://www.finra.org/sites/ fInrA https://www.sec.gov/news/speech/2012-spch031512laahtm . default/files/e-learning-course-catalog.pdf. Courses include: Retail The events have been convened by the National Adult Protective 200 Supervision: Sales to Senior Investors, EL-ELC139; Senior Investor Service Association, the National Center for Victims of Crime, and Issues: Diminished Decisional Capacity, EL-ELC158; and Senior the International Network for the Prevention of Elder Abuse, in Investor Issues: Financial Exploitation, EL-ELC247. collaboration with national and international partners. , 1 (Jan. 2018 Regulatory and Examination Priorities Letter 214 fInrA 201 For example, in September 2016, the author of this White Paper 2018), http://www.finra.org/sites/default/files/2018-regulatory-and- helped to organize and participated in a Yale Alumni Breakfast examination-priorities-letter.pdf (accessed May 27, 2018). in New York City on elder financial exploitation. The event was at 2. 215 Id. sponsored co-sponsored by Yale Law School’s Center for the Study of 216 Id. Corporate Law and its Solomon Center for Health Law and Policy. . U .s. s ec . And e xch . c oMM ’ n o ff 202 of c oMpl IA nce I nspect Ions And e xAMI nAtIons , 2018 National Exam Program Examination Priorities 6 (2018), https://www.sec.gov/about/offices/ocie/national- examination-program-priorities-2018.pdf .

39

40 U.S. SECURITIES AND EXCHANGE COMMISSION

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